Intelsat Investments 10-Q 2012 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission file number 000-50262

INTELSAT S.A.

(Exact Name of Registrant as Specified in Its Charter)

Luxembourg	98-0346003
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
4, rue Albert Borschette Luxembourg	L-1246
(Address of Principal Executive Offices)	(Zip Code)

+352 27-84-1600

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨    No  x *

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of July 30, 2012, 5,000,000 common shares, par value $1.00 per share, were outstanding.

* The registrant is not required to file this Quarterly Report on Form 10-Q pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, but has filed all reports during the preceding 12 months that would have been required pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed Consolidated Balance Sheets as of December 31, 2011 and June 30, 2012 (Unaudited)		5
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June  30, 2011 and 2012		6
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2011 and 2012		7
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June  30, 2011 and 2012		8
	Notes to the Condensed Consolidated Financial Statements (Unaudited)		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		55
Item 4.	Controls and Procedures		56
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		58
Item 1A.	Risk Factors		58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		58
Item 3.	Defaults upon Senior Securities		58
Item 4.	Mine Safety Disclosures		58
Item 5.	Other Information		58
Item 6.	Exhibits		58
SIGNATURES			60

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INTRODUCTION

In this Quarterly Report, unless otherwise indicated or the context otherwise requires, (1) the terms “we,” “us,” “our”, “the Company” and “Intelsat” refer to Intelsat S.A. and its subsidiaries on a consolidated basis, (2) the term “Intelsat Global” refers to Intelsat Global S.A., (3) the term “Intelsat Global Subsidiary” refers to Intelsat Global Subsidiary S.A., (4) the term “Intelsat Holdings” refers to Intelsat S.A.’s direct parent, Intelsat Holdings S.A., (5) the term “Intelsat Luxembourg” refers to Intelsat (Luxembourg) S.A., Intelsat S.A.’s direct wholly-owned subsidiary, (6) the term “Intelsat Jackson” refers to Intelsat Jackson Holdings S.A., Intelsat Luxembourg’s direct wholly-owned subsidiary, (7) the term “Intermediate Holdco” refers to Intelsat Intermediate Holding Company S.A., Intelsat Jackson’s former direct wholly-owned subsidiary, (8) the term “Intelsat Sub Holdco” refers to Intelsat Subsidiary Holding Company S.A., Intermediate Holdco’s former indirect wholly-owned subsidiary, (9) the term “Intelsat Corp” refers to Intelsat Corporation, Intelsat Jackson’s indirect wholly-owned subsidiary, and (10) the term “Intelsat General” refers to Intelsat General Corporation, our government business subsidiary.

In this Quarterly Report, unless the context otherwise requires, all references to transponder capacity or demand refer to transponder capacity or demand in the C-band and Ku-band frequencies only.

FINANCIAL AND OTHER INFORMATION

Unless otherwise indicated, all references to “dollars” and “$” in this Quarterly Report are to, and all monetary amounts in this Quarterly Report are presented in, U.S. dollars. Unless otherwise indicated, the financial information contained in this Quarterly Report has been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).

Certain monetary amounts, percentages and other figures included in this Quarterly Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

In this Quarterly Report, we refer to and rely on publicly available information regarding our industry and our competitors. Although we believe the information is reliable, we cannot guarantee the accuracy and completeness of the information and have not independently verified it.

FORWARD-LOOKING STATEMENTS

Some of the statements in this Quarterly Report constitute forward-looking statements that do not directly or exclusively relate to historical facts. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements as long as they are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements.

When used in this Quarterly Report, the words “may,” “will,” “might,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “intend,” “potential,” “outlook” and “continue,” and the negative of these terms, and other similar expressions are intended to identify forward-looking statements and information.

The forward-looking statements made in this Quarterly Report reflect our intentions, plans, expectations, assumptions and beliefs about future events. These forward-looking statements speak only as of the date of this Quarterly Report and are not guarantees of future performance or results and are subject to risks, uncertainties and other factors, many of which are outside of our control. These factors could cause actual results or developments to differ materially from the expectations expressed or implied in the forward-looking statements and include known and unknown risks. Known risks include, among others, the risks discussed in Item 1A—Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2011, the political, economic and legal conditions in the markets we are targeting for communications services or in which we operate, and other risks and uncertainties inherent in the telecommunications business in general and the satellite communications business in particular.

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The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements:

• risks associated with operating our in-orbit satellites;

• satellite launch failures, satellite launch and construction delays and in-orbit failures or reduced performance;

• potential changes in the number of companies offering commercial satellite launch services and the number of commercial satellite launch opportunities available in any given time period that could impact our ability to timely schedule future launches and the prices we pay for such launches;

• our ability to obtain new satellite insurance policies with financially viable insurance carriers on commercially reasonable terms or at all, as well as the ability of our insurance carriers to fulfill their obligations;

• possible future losses on satellites that are not adequately covered by insurance;

• U.S. and other government regulation;

• changes in our contracted backlog or expected contracted backlog for future services;

• pricing pressure and overcapacity in the markets in which we compete;

• inadequate access to capital markets;

• the competitive environment in which we operate;

• customer defaults on their obligations to us;

• our international operations and other uncertainties associated with doing business internationally; and

• litigation.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, level of activity, performance or achievements. Because actual results could differ materially from our intentions, plans, expectations, assumptions and beliefs about the future, you are urged not to rely on forward-looking statements in this Quarterly Report and to view all forward-looking statements made in this Quarterly Report with caution. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INTELSAT S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	As of December 31, 2011			As of June 30, 2012
				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents, net of restricted cash	$	294,700		$	254,086
Restricted cash		94,131			118,032
Receivables, net of allowance of $20,830 in 2011 and $23,792 in 2012		331,371			309,867
Deferred income taxes		26,058			25,927
Prepaid expenses and other current assets		42,934			59,336
Total current assets		789,194			767,248
Satellites and other property and equipment, net		6,142,731			6,326,877
Goodwill		6,780,827			6,780,827
Non-amortizable intangible assets		2,458,100			2,458,100
Amortizable intangible assets, net		742,868			696,977
Other assets		447,686			435,291
Total assets	$	17,361,406		$	17,465,320
LIABILITIES AND SHAREHOLDER’S DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$	143,097		$	160,305
Taxes payable		11,764			—
Employee related liabilities		43,315			32,228
Accrued interest payable		359,336			365,467
Current portion of long-term debt		164,818			238,955
Deferred satellite performance incentives		17,715			18,224
Deferred revenue		64,609			83,670
Other current liabilities		76,460			86,433
Total current liabilities		881,114			985,282
Long-term debt, net of current portion		15,837,512			15,900,718
Deferred satellite performance incentives, net of current portion		113,974			120,515
Deferred revenue, net of current portion		724,413			796,452
Deferred income taxes		265,181			283,315
Accrued retirement benefits		305,902			289,437
Other long-term liabilities		322,735			283,546
Redeemable noncontrolling interest		3,024			5,412
Commitments and contingencies (Note 11)
Shareholder’s deficit:
Ordinary shares, $1.00 par value, 100,000,000 shares authorized and 5,000,000 shares issued and outstanding at December 31, 2011 and June 30, 2012		5,000			5,000
Paid-in capital		1,571,855			1,571,606
Accumulated deficit		(2,608,702	)		(2,717,160	)
Accumulated other comprehensive loss		(111,528	)		(106,808	)
Total Intelsat S.A. shareholder’s deficit		(1,143,375	)		(1,247,362	)
Noncontrolling interest		50,926			48,005
Total liabilities and shareholder’s deficit	$	17,361,406		$	17,465,320

See accompanying notes to unaudited condensed consolidated financial statements.

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INTELSAT S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

	Three Months Ended June 30, 2011			Three Months Ended June 30, 2012			Six Months Ended June 30, 2011			Six Months Ended June 30, 2012
Revenue	$	642,446		$	638,668		$	1,282,634		$	1,282,838
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		101,059			99,307			206,082			204,316
Selling, general and administrative		55,147			53,421			106,746			104,388
Depreciation and amortization		194,354			188,628			389,356			375,500
Losses on derivative financial instruments		20,522			15,756			18,808			25,614
Total operating expenses		371,082			357,112			720,992			709,818
Income from operations		271,364			281,556			561,642			573,020
Interest expense, net		325,861			326,691			674,651			638,122
Loss on early extinguishment of debt		(157,953	)		(43,383	)		(326,183	)		(43,383	)
Loss from previously unconsolidated affiliates		(4,589	)		—			(4,469	)		—
Other income (expense), net		3,291			(1,906	)		7,167			997
Loss before income taxes		(213,748	)		(90,424	)		(436,494	)		(107,488	)
Provision for (benefit from) income taxes		734			(6,797	)		(6,253	)		407
Net loss		(214,482	)		(83,627	)		(430,241	)		(107,895	)
Net (income) loss attributable to noncontrolling interest		1,114			(382	)		1,275			(563	)
Net loss attributable to Intelsat S.A.	$	(213,368	)	$	(84,009	)	$	(428,966	)	$	(108,458	)

See accompanying notes to unaudited condensed consolidated financial statements.

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INTELSAT S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

	Three Months Ended June 30, 2011			Three Months Ended June 30, 2012			Six Months Ended June 30, 2011			Six Months Ended June 30, 2012
Net loss	$	(214,482	)	$	(83,627	)	$	(430,241	)	$	(107,895	)
Other Comprehensive income (loss), net of tax:
Defined benefit retirement plans:
Reclassification adjustment for amortization of unrecognized prior service credits included in net periodic pension costs, net of tax of $0.02 million and $0.03 million for the three and six months ended June 30, 2011, respectively, and $0.02 million and $0.03 million for the three and six months ended June 30, 2012, respectively		(27	)		(28	)		(54	)		(56	)
Reclassification adjustment for amortization of unrecognized actuarial loss included in net periodic pension costs, net of tax of $0.6 million and $1.3 million for the three and six months ended June 30, 2011, respectively, and $1.4 million and $2.8 million for the three and six months ended June 30, 2012, respectively		1,082			2,279			2,164			4,558
Gains (losses) on investments, net of tax of $0.01 million and $0.1 million for the three and six months ended June 30, 2011, repectively, and ($0.05) million and $0.1 million for the three and six months ended June 30, 2012, respectively		20			(86	)		197			218
Other comprehensive income		1,075			2,165			2,307			4,720
Comprehensive loss		(213,407	)		(81,462	)		(427,934	)		(103,175	)
Comprehensive (income) loss attributable to noncontrolling interest		1,114			(382	)		1,275			(563	)
Comprehensive loss attributable to Intelsat S.A.	$	(212,293	)	$	(81,844	)	$	(426,659	)	$	(103,738	)

See accompanying notes to unaudited condensed consolidated financial statements.

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INTELSAT S.A.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30, 2011			Six Months Ended June 30, 2012
Cash flows from operating activities:
Net loss	$	(430,241	)	$	(107,895	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		389,356			375,500
Provision for doubtful accounts		1,703			5,554
Foreign currency transaction (gain) loss		(3,920	)		2,293
Loss on disposal of assets		5			46
Share-based compensation expense		4,644			3,328
Deferred income taxes		(14,677	)		(7,275	)
Amortization of discount, premium, issuance costs and other non-cash items		35,957			29,039
Interest paid-in-kind		23,130			4,949
Loss on early extinguishment of debt		326,183			43,383
Share in loss from previously unconsolidated affiliates		4,469			—
Unrealized (gains) losses on derivative financial instruments		(20,418	)		709
Other non-cash items		3,342			2,601
Changes in operating assets and liabilities:
Receivables		(31,471	)		(8,117	)
Prepaid expenses and other assets		(17,220	)		(3,547	)
Accounts payable and accrued liabilities		12,001			(28,531	)
Deferred revenue		178,664			87,901
Accrued retirement benefits		(14,453	)		(16,465	)
Other long-term liabilities		(3,893	)		(826	)
Net cash provided by operating activities		443,161			382,647
Cash flows from investing activities:
Payments for satellites and other property and equipment (including capitalized interest)		(412,710	)		(476,761	)
Capital contributions to previously unconsolidated affiliates		(6,105	)		—
Other investing activities		2,261			—
Net cash used in investing activities		(416,554	)		(476,761	)
Cash flows from financing activities:
Repayments of long-term debt		(6,114,894	)		(1,350,372	)
Proceeds from issuance of long-term debt		5,918,923			1,471,000
Debt issuance costs		(69,307	)		(19,444	)
Payment of premium on early retirement of debt		(171,047	)		(39,475	)
Capital contribution from noncontrolling interest		—			6,105
Dividends paid to noncontrolling interest		—			(4,673	)
Noncontrolling interest in New Dawn		1,558			—
Principal payments on deferred satellite performance incentives		(6,891	)		(7,348	)
Net cash provided by (used in) financing activities		(441,658	)		55,793
Effect of exchange rate changes on cash and cash equivalents		3,920			(2,293	)
Net change in cash and cash equivalents		(411,131	)		(40,614	)
Cash and cash equivalents, beginning of period		692,930			294,700
Cash and cash equivalents, end of period	$	281,799		$	254,086
Supplemental cash flow information:
Interest paid, net of amounts capitalized	$	602,101		$	599,656
Income taxes paid, net of refunds		14,793			18,222
Supplemental disclosure of non-cash investing activities:
Accrued capital expenditures	$	59,965		$	105,707
Restricted cash received		—			23,901

See accompanying notes to unaudited condensed consolidated financial statements.

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INTELSAT S.A.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2012

Note 1 General

Basis of Presentation

The accompanying condensed consolidated financial statements of Intelsat S.A. and its subsidiaries (“Intelsat,” “we,” “us” or “our”) have not been audited, but are prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. References to U.S. GAAP issued by the Financial Accounting Standards Board (“FASB”) in these footnotes are to the FASB Accounting Standards Codification (“ASC” or the “Codification”). The unaudited condensed consolidated financial statements include all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of these financial statements. The results of operations for the periods presented are not necessarily indicative of operating results for the full year or for any future period. The condensed consolidated balance sheet as of December 31, 2011 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 on file with the Securities and Exchange Commission.

On March 30, 2012, Intelsat Global S.A. (“Intelsat Global”), our former indirect parent, and certain of its subsidiaries engaged in a series of transactions that resulted in Intelsat Global Holdings S.A. (“Intelsat Global Holdings”), a new holding company, acquiring all of the outstanding shares of Intelsat Global. As a result, Intelsat Global became a wholly owned subsidiary of Intelsat Global Holdings, and all of Intelsat Global Holdings’ equity is now beneficially owned by the former shareholders of Intelsat Global in the same proportions as such shareholders’ former ownership in Intelsat Global.

Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these condensed consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. Accordingly, ultimate results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the prior year’s financial statements to conform to the current year presentation. The reclassifications had no effect on previously reported results of operations, cash flows or retained earnings.

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued ASU 2011-05,Presentation of Comprehensive Income(“ASU 2011-05”). Beginning in the first quarter of 2012, ASU 2011-05 eliminated the option that had previously allowed us to present the components of other comprehensive income as part of the statement of changes in shareholder’s equity. Beginning in the first quarter of 2012, we have included a separate condensed consolidated statement of comprehensive loss in our financial statements. The majority of our other comprehensive loss and our accumulated other comprehensive loss is related to our defined benefit retirement plans. ASU 2011-05 does not change whether items are reported in net loss or in other comprehensive income and does not change whether and when items of other comprehensive income are reclassified to net loss.

Note 2 Fair Value Measurements

FASB ASC Topic 820,Fair Value Measurements and Disclosure (“FASB ASC 820”) defines fair value, establishes a market-based framework or hierarchy for measuring fair value and provides for certain required disclosures about fair value measurements. The guidance is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value, but does not require any new fair value measurements.

The fair value hierarchy prioritizes the inputs used in valuation techniques into three levels as follows:

• Level 1—unadjusted quoted prices for identical assets or liabilities in active markets;

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• Level 2—quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable or that can be corroborated by observable market data by correlation; and

• Level 3—unobservable inputs based upon the reporting entity’s internally developed assumptions which market participants would use in pricing the asset or liability.

We have identified investments in marketable securities, interest rate financial derivative instruments and a redeemable noncontrolling interest that meet the criteria of the disclosure requirements and fair value framework of FASB ASC 820.

The following tables present assets and liabilities measured and recorded at fair value in our condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy (in thousands), excluding long-term debt (see Note 8—Long-Term Debt). We did not have any transfers between Level 1 and Level 2 fair value measurements during the six months ended June 30, 2012.

			Fair Value Measurements at December 31, 2011
Description	As of December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Marketable securities(1)	$	5,418	$	5,418	$	—	$	—
Total assets	$	5,418	$	5,418	$	—	$	—
Liabilities
Undesignated interest rate swaps(2)	$	95,518	$	—	$	95,518	$	—
Redeemable noncontrolling interest(3)		3,024		—		—		3,024
Total liabilities	$	98,542	$	—	$	95,518	$	3,024

			Fair Value Measurements at June 30, 2012
Description	As of June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Marketable securities(1)	$	5,507	$	5,507	$	—	$	—
Total assets	$	5,507	$	5,507	$	—	$	—
Liabilities
Undesignated interest rate swaps(2)	$	95,197	$	—	$	95,197	$	—
Redeemable noncontrolling interest(3)		5,412		—		—		5,412
Total liabilities	$	100,609	$	—	$	95,197	$	5,412

(1) The valuation measurement inputs of these marketable securities represent unadjusted quoted prices in active markets and, accordingly, we have classified such investments within Level 1 of the fair value hierarchy. The cost basis of our available-for-sale marketable securities was $5.9 million at December 31, 2011 and $5.6 million at June 30, 2012. We sold marketable securities with a cost basis of $0.3 million during the six months ended June 30, 2012 and recorded a loss on the sale of $0.03 million, which was included within other income, net in our condensed consolidated statement of operations.

(2) The fair value of our interest rate financial derivative instruments reflects the estimated amounts that we would pay or receive to terminate the agreement at the reporting date, taking into account current interest rates, the market expectation for future interest rates and current creditworthiness of both the counterparties and ourselves. Observable inputs utilized in the income approach valuation technique incorporate identical contractual notional amounts, fixed coupon rates, periodic terms for interest payments and contract maturity. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments, if any, associated with our derivatives utilize Level 3 inputs, such as the estimates of the current credit spread, to evaluate the likelihood of default by us or our counterparties. We also considered the existence of offset provisions and other credit enhancements that serve to reduce the credit exposure associated with the asset or liability being valued. We have assessed the significance of the inputs of the credit valuation adjustments to the

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overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

(3) We estimated the fair value of the redeemable noncontrolling interest in our indirect subsidiary, New Dawn Satellite Company, Ltd. (“New Dawn”), utilizing the income approach valuation technique, with Level 3 inputs such as discounted cash flows and a weighted average cost of capital of 18.0%. A fifty basis point change in the discount rate applied would impact the valuation by approximately $0.4 million.

The following tables present the activity for those items measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in FASB ASC 820 (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Redeemable Noncontrolling Interest(1)			Embedded Derivative			Total
Balance at December 31, 2010	$	18,621		$	4,295		$	22,916
Contributions		1,734			—			1,734
Mark to market valuation adjustment		(15,090	)		(4,295	)		(19,385	)
Net loss attributable to noncontrolling interest		(2,241	)		—			(2,241	)
Balance at December 31, 2011	$	3,024		$	—		$	3,024

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Redeemable Noncontrolling Interest(1)			Embedded Derivative		Total
Balance at December 31, 2011	$	3,024		$	—	$	3,024
Mark to market valuation adjustment		(268	)		—		(268	)
Net loss attributable to noncontrolling interest		(658	)		—		(658	)
Balance at March 31, 2012		2,098			—		2,098
Mark to market valuation adjustment		3,845			—		3,845
Net loss attributable to noncontrolling interest		(531	)		—		(531	)
Balance at June 30, 2012	$	5,412		$	—	$	5,412

(1) In accordance with FASB ASC Topic 480,Distinguishing Liabilities from Equity(“FASB ASC 480”), regarding the classification and measurement of redeemable securities, we mark to market the fair value of the noncontrolling interest in our joint venture investment in New Dawn.

Note 3 Share-Based and Other Compensation Plans

On May 6, 2009, the board of directors of Intelsat Global adopted the amended and restated Intelsat Global, Ltd. 2008 Share Incentive Plan (the “2008 Share Plan”). The 2008 Share Plan was adopted by our new parent holding company, Intelsat Global Holdings, by an amendment effective as of March 30, 2012. The 2008 Share Plan provides for a variety of equity-based awards with respect to Class A common shares (the “Class A Shares”), and Class B common shares (the “Class B Shares” and, together with the Class A Shares, the “Common Shares”), including non-qualified share options, incentive share options (within the meaning of Section 422 of the United States Internal Revenue Service Tax Code), restricted share awards, restricted share unit awards, share appreciation rights, phantom share awards and performance-based awards.

Due to the expiration of certain repurchase features that are contained within the 2008 Share Plan, we changed the classification of certain executive officers’ awards from liability classified awards to equity classified awards in the first quarter of 2011. The change was accounted for in a manner similar to that of a modification in accordance with FASB ASC Topic 718,Compensation – Stock Compensation, and did not have a material impact on our condensed consolidated balance sheet.

During the six months ended June 30, 2012, Intelsat Global Holdings repurchased 14,231 vested Class A share options and 16,482 vested Class B common shares. Intelsat Global Holdings did not grant any Common Shares under the 2008 Share Plan during the six months ended June 30, 2012. We recorded compensation expense of $4.6 million and $3.3 million during the six months ended June 30, 2011 and 2012, respectively, related to our share-based awards.

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Note 4 Retirement Plans and Other Retiree Benefits

(a) Pension and Other Postretirement Benefits

We maintain a noncontributory defined benefit retirement plan covering substantially all of our employees hired prior to July 19, 2001. The cost of providing benefits to eligible participants under the defined benefit retirement plan is calculated using the plan’s benefit formulas, which take into account the participants’ remuneration, dates of hire, years of eligible service, and certain actuarial assumptions. In addition, as part of the overall medical plan, we provide postretirement medical benefits to certain current retirees who meet the criteria under the medical plan for postretirement benefit eligibility.

The defined benefit retirement plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. We expect that our future contributions to the defined benefit retirement plan will be based on the minimum funding requirements of the Internal Revenue Code and on the plan’s funded status. Any significant decline in the fair value of our defined benefit retirement plan assets or other adverse changes to the significant assumptions used to determine the plan’s funded status would negatively impact its funded status and could result in increased funding in future periods. The impact on the funded status as of October 1, the plan’s annual measurement date, is determined based upon market conditions in effect when we completed our annual valuation. During the six months ended June 30, 2012, we made cash contributions to the defined benefit retirement plan of $18.3 million. We anticipate that we will make additional contributions of approximately $11.8 million to the defined benefit retirement plan during the remainder of 2012. We fund the postretirement medical benefits throughout the year based on benefits paid. We anticipate that our contributions to fund postretirement medical benefits in 2012 will be approximately $4.5 million.

Included in accumulated other comprehensive loss at June 30, 2012 is $176.9 million ($108.2 million, net of tax) that has not yet been recognized in net periodic pension cost, which includes the unrecognized prior service credits and unrecognized actuarial losses.

Net periodic pension benefit costs included the following components (in thousands):

	Three Months Ended June 30, 2011			Three Months Ended June 30, 2012			Six Months Ended June 30, 2011			Six Months Ended June 30, 2012
Service cost	$	775		$	803		$	1,550		$	1,606
Interest cost		5,015			4,765			10,030			9,530
Expected return on plan assets		(4,932	)		(5,141	)		(9,864	)		(10,281	)
Amortization of unrecognized prior service credit		(43	)		(43	)		(86	)		(86	)
Amortization of unrecognized net loss		1,715			3,498			3,430			6,995
Net periodic costs	$	2,530		$	3,882		$	5,060		$	7,764

Net periodic other postretirement benefit costs included the following components (in thousands):

	Three Months Ended June 30, 2011		Three Months Ended June 30, 2012		Six Months Ended June 30, 2011		Six Months Ended June 30, 2012
Service cost	$	113	$	89	$	226	$	177
Interest cost		1,267		1,240		2,534		2,480
Amortization of unrecognized net loss		—		172		—		344
Total costs	$	1,380	$	1,501	$	2,760	$	3,001

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(b) Other Retirement Plans

We maintain two defined contribution retirement plans, qualified under the provisions of Section 401(k) of the Internal Revenue Code, for our employees in the United States. We recognized compensation expense for these plans of $3.5 million and $3.3 million during the six months ended June 30, 2011 and 2012, respectively. We also maintain other defined contribution retirement plans in several non-U.S. jurisdictions, but such plans are not material to our financial position or results of operations.

Note 5 Satellites and Other Property and Equipment

(a) Satellites and Other Property and Equipment, net

Satellites and other property and equipment, net were comprised of the following (in thousands):

	As of December 31, 2011			As of June 30, 2012
Satellites and launch vehicles	$	7,825,259		$	8,301,053
Information systems and ground segment		480,002			506,616
Buildings and other		284,742			289,632
Total cost		8,590,003			9,097,301
Less: accumulated depreciation		(2,447,272	)		(2,770,424	)
Total	$	6,142,731		$	6,326,877

Satellites and other property and equipment are stated at cost, with the exception of satellites that have been impaired. Satellites and other property and equipment acquired as part of an acquisition are based on their fair value at the date of acquisition.

Satellites and other property and equipment, net as of December 31, 2011 and June 30, 2012 included construction-in-progress of $1.5 billion and $1.6 billion, respectively. These amounts relate primarily to satellites under construction and related launch services. Interest costs of $60.6 million and $70.6 million were capitalized during the six months ended June 30, 2011 and 2012, respectively.

We have entered into launch contracts for the launch of both specified and unspecified future satellites. Each of these launch contracts may be terminated at our option, subject to payment of a termination fee that increases as the applicable launch date approaches. In addition, in the event of a failure of any launch, we may exercise our right to obtain a replacement launch within a specified period following our request for re-launch.

(b) Satellite Launches

On March 25, 2012, we successfully launched our IS-22 satellite into orbit. This satellite establishes long-term capacity at the 72° east longitude orbit location most recently occupied by our IS-709 satellite. IS-22 provides capacity for media, government and network services in Africa, Asia, Europe and Middle East via C-band and Ku-band platforms. In addition, IS-22 hosts a specialized UHF communications payload. This satellite entered into service in May 2012.

On June 1, 2012, our IS-19 satellite was launched into orbit. During launch operations, IS-19 experienced damage to its south solar array. Although both solar arrays are deployed, the power available to the satellite is less than is required to operate 100% of the payload capacity. Failure Review Boards were established to determine the cause of the anomaly. As of June 30, 2012, a final conclusion had not been reached as to the most likely cause of the anomaly. In-orbit testing on IS-19 is complete and the satellite is drifting to a 166° east longitude orbital location. This satellite replaces IS-8 at 166° east longitude and will provide C- and Ku- band capacity for media, government and network services customers in the western United States and the Asia-Pacific region, including hosting video neighborhoods with global programmers.

In accordance with our policy and the guidance provided for under FASB ASC Topic 360,Property, Plant and Equipment, we review our long-lived assets for impairment whenever events and circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. The recoverability of an asset or asset group held and used is measured by a comparison of the carrying amount of the asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. When a satellite experiences an anomaly or other health related issues, we believe the lowest level of identifiable cash flows exists at the individual satellite level. Accordingly, in the second quarter of 2012, we performed an impairment review of our IS-19 satellite and determined that there was no impairment. We have indicated to our insurers that, due to the damage to the south solar array, it is reasonably likely that we will file a partial loss claim.

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Note 6 Investments

We have ownership interests in a number of entities which met the criteria of a Variable Interest Entity (“VIE”), including Horizons Satellite Holdings, LLC (“Horizons Holdings”) and WP Com, S. de R.L. de C.V. (“WP Com”). We have a greater than 50% controlling ownership and voting interest in New Dawn and therefore consolidate the New Dawn joint venture. Horizons Holdings, as well as WP Com, are discussed in further detail below, including our analyses of the primary beneficiary determination as required under FASB ASC Topic 810,Consolidation(“FASB ASC 810”).

(a) Horizons Holdings

We have a joint venture with JSAT International, Inc. (“JSAT”), a leading satellite operator in the Asia-Pacific region. The joint venture is named Horizons Satellite Holdings, LLC, and consists of two investments: Horizons-1 Satellite LLC (“Horizons-1”) and Horizons-2 Satellite LLC (“Horizons-2”). Horizons Holdings borrowed from JSAT a portion of the funds necessary to finance the construction of the Horizons-2 satellite (the “Horizons 2 Loan Agreement”). We provide certain services to the joint venture and utilize capacity from the joint venture.

We have determined that this joint venture meets the criteria of a VIE under FASB ASC 810. On September 30, 2011, Intelsat and JSAT amended the joint venture agreement relating to their investment in Horizons Holdings (the “Horizons Amendment”), and as a result, we re-evaluated the primary beneficiary determination. Pursuant to the Horizons Amendment, the Horizons-2 satellite was relocated to 85° east longitude in early 2012 and decisions relating to any future relocation of the Horizons-2 satellite will be effectively controlled by us. We believe satellite location is the most significant driver of Horizons Holdings’ economic performance. Additionally, the Horizons-1 satellite is the less significant asset of the joint venture. As a result, we determined that we became the primary beneficiary of Horizons Holdings as of September 30, 2011. In accordance with FASB ASC 810, as the primary beneficiary, we consolidated Horizons Holdings within our condensed consolidated financial statements, net of eliminating entries, beginning on September 30, 2011. Total assets and liabilities of Horizons Holdings were $171.2 million and $73.6 million as of December 31, 2011, respectively, and $153.2 million and $61.4 million as of June 30, 2012, respectively.

In accordance with FASB ASC 810, the initial consolidation of a VIE that is a business is considered a business combination and should be accounted for in accordance with the provisions in FASB ASC Topic 805,Business Combinations. Determining the fair values of the net assets of Horizons Holdings required us to make significant estimates and assumptions. In order to develop the fair value estimates, we utilized the income approach. Our estimates included assumptions about projected growth rates, cost of capital, effective tax rates and industry and economic trends. While we believe that the estimates and assumptions underlying the valuation methodology were reasonable, different assumptions could have resulted in different market values. We recorded the assets, liabilities and the noncontrolling interest in Horizons Holdings at fair value upon consolidation at September 30, 2011. The $49.3 million fair value of the Horizons Holdings noncontrolling interest at the initial date of consolidation is included in the equity section of our condensed consolidated balance sheet at December 31, 2011 and June 30, 2012 in accordance with FASB ASC 810.

Prior to the consolidation of Horizons Holdings on September 30, 2011, under the equity method of accounting, our 50% share of the results of the joint venture was a loss of $4.5 million for the six months ended June 30, 2011, which is included in earnings (loss) from previously unconsolidated affiliates in the accompanying condensed consolidated statements of operations.

We also have a revenue sharing agreement with JSAT related to services sold on the Horizons satellites. We are responsible for billing and collection for such services and we remit a portion of the revenue, less applicable fees and commissions, to JSAT. Under the Horizons Amendment, we agreed to guarantee to JSAT certain minimum levels of annual gross revenues for a three-year period beginning on the date that the Horizons-2 satellite is relocated to 85° east longitude. This guarantee could require us to pay JSAT a maximum potential amount ranging from $7.8 million to $10.3 million per year over the three-year period, less applicable fees and commission. We currently do not expect to incur any losses under this guarantee, and we will continue to assess this on a quarterly basis. In addition, we guaranteed JSAT certain minimum levels of revenue on the Horizons-2 satellite prior to the arrival at 85° east longitude. Amounts payable to JSAT related to the revenue share, net of applicable fees and commissions, from the Horizons Satellites were $2.2 million and $3.8 million as of December 31, 2011 and June 30, 2012, respectively.

In connection with the Horizons Holdings investment in Horizons-2, we and JSAT entered into a capital contribution and subscription agreement in August 2005, which requires both us and JSAT to fund 50% of the amount due from Horizons Holdings under the Horizons 2 Loan Agreement. As of June 30, 2012, we had a receivable of $30.5 million from JSAT representing the total remaining future payments to be received from JSAT to fund their portion of the amount due under the Horizons 2 Loan Agreement, $12.2 million of which is included in receivables, net and the remainder of which is included in other assets on our condensed consolidated balance sheet as of June 30, 2012.

(b) New Dawn

In June 2008, we entered into a project and shareholders’ agreement (the “New Dawn Project Agreement”) with Convergence SPV, Ltd. (“Convergence Partners”) pursuant to which New Dawn, a Mauritius company in which we have a 74.9% indirect ownership interest and Convergence Partners has a 25.1% noncontrolling ownership interest, launched a satellite in April 2011 to provide satellite transponder services to customers in Africa.

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We and Convergence Partners agreed to make certain capital contributions to New Dawn in proportion to our respective ownership interests in New Dawn to fund a portion of the cost of construction and launch of the New Dawn satellite. Total equity contributions during the six months ended June 30, 2011 were $6.2 million, of which $4.6 million were attributable to us with the remaining $1.6 million contributed by Convergence Partners. There were no equity contributions made during the six months ended June 30, 2012. New Dawn and its subsidiaries are unrestricted subsidiaries for purposes of applicable indentures and credit agreements of ours and our wholly-owned subsidiaries.

Convergence Partners has at its option the ability to require us to buy its ownership interest at fair value subsequent to the operations of New Dawn’s assets for a period as defined in the New Dawn Project Agreement. As a result of this option, as of each balance sheet date, we have reflected within mezzanine equity the estimated amount that we would pay to Convergence Partners if the option was exercised. This amount reflects the fair value analysis we performed at June 30, 2012, which resulted in a year-to-date increase of $3.6 million in the fair value of the option, increasing it to $5.4 million. The $3.6 million change in fair value is shown as a decrease in our paid-in capital at June 30, 2012.

We consolidate New Dawn within our condensed consolidated financial statements, net of eliminating entries. Additionally, we account for the percentage interest in New Dawn owned by Convergence Partners as a noncontrolling interest according to the guidance provided under FASB ASC 480 specifically related to the classification and measurement of redeemable securities.

(c) WP Com

We have formed a joint venture with Corporativo W. Com S. de R.L. de C.V. (“Corporativo”) named WP Com, S. de R.L. de C.V. We own 49% of the voting equity shares and 88% of the economic interest in WP Com and Corporativo owns the remaining 51% of the voting equity shares. PanAmSat de Mexico, S. de R.L. de C.V. (“PAS de Mexico”) is a subsidiary of WP Com, 99.9% of which is owned by WP Com, with the remainder of the equity interest split between us and Corporativo. We formed WP Com to enable us to operate in Mexico, and PAS de Mexico acts as a reseller of our satellite services to customers in Mexico and Ecuador. Profits and losses of WP Com are allocated to the joint venture partners based upon the voting equity shares.

We have determined that this joint venture meets the criteria of a VIE under FASB ASC 810. In accordance with FASB ASC 810, we evaluated this joint venture to determine the primary beneficiary. We have concluded that we are the primary beneficiary because we influence the underlying business drivers of PAS de Mexico, including by acting as the sole provider for satellite services that PAS de Mexico resells. Furthermore, we have modified our pricing for these services to ensure that PAS de Mexico continues to operate in the Mexican market. Corporativo does not fund any of the operating expenses of PAS de Mexico. Thus, we consolidate WP Com within our condensed consolidated financial statements and we account for the percentage interest in the voting equity of WP Com owned by Corporativo as a noncontrolling interest, which is included in the equity section of our condensed consolidated balance sheet in accordance with FASB ASC 810.

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(d) Equity Attributable to Intelsat and Noncontrolling Interests

The following tables present changes in equity attributable to Intelsat and equity attributable to our noncontrolling interests, which is included in the equity section of our condensed consolidated balance sheet (in thousands):

	Intelsat S.A. Shareholder’s Deficit			Non-redeemable Noncontrolling Interest			Total Shareholder’s Deficit
Balance at January 1, 2011	$	(698,941	)	$	1,902		$	(697,039	)
Net income (loss)		(432,888	)		1,136			(431,752	)
Liabilities assumed by parent and other contributed capital		8,385			—			8,385
Consolidation of Horizons Holdings		—			49,263			49,263
Dividends paid to noncontrolling interests		—			(1,375	)		(1,375	)
Mark to market adjustment for redeemable noncontrolling interest		15,090			—			15,090
Pension/postretirement liability adjustment		(35,080	)		—			(35,080	)
Other comprehensive income		59			—			59
Balance at December 31, 2011	$	(1,143,375	)	$	50,926		$	(1,092,449	)

	Intelsat S.A. Shareholder’s Deficit			Non-redeemable Noncontrolling Interest			Total Shareholder’s Deficit
Balance at January 1, 2012	$	(1,143,375	)	$	50,926		$	(1,092,449	)
Net income (loss)		(24,449	)		839			(23,610	)
Liabilities assumed by parent and other contributed capital		1,062			—			1,062
Dividends paid to noncontrolling interests		—			(2,255	)		(2,255	)
Mark to market adjustment for redeemable noncontrolling interest		268			—			268
Pension/postretirement liability adjustment		2,251			—			2,251
Other comprehensive income		304			—			304
Balance at March 31, 2012	$	(1,163,939	)	$	49,510		$	(1,114,429	)
Net income (loss)		(84,009	)		913			(83,096	)
Liabilities assumed by parent and other contributed capital		2,266			—			2,266
Dividends paid to noncontrolling interests		—			(2,418	)		(2,418	)
Mark to market adjustment for redeemable noncontrolling interest		(3,845	)		—			(3,845	)
Pension/postretirement liability adjustment		2,251			—			2,251
Other comprehensive loss		(86	)		—			(86	)
Balance at June 30, 2012	$	(1,247,362	)	$	48,005		$	(1,199,357	)

Note 7 Goodwill and Other Intangible Assets

The carrying amounts of goodwill and acquired intangible assets not subject to amortization consist of the following (in thousands):

	As of December 31, 2011		As of June 30, 2012
Goodwill	$	6,780,827		6,780,827
Trade name		70,400		70,400
Orbital locations		2,387,700		2,387,700

We account for goodwill and other non-amortizable intangible assets in accordance with FASB ASC Topic 350,Intangibles—Goodwill and Other, and have deemed these assets to have indefinite lives. Therefore, these assets are not amortized but are tested on an annual basis for impairment during the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable.

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The carrying amount and accumulated amortization of acquired intangible assets subject to amortization consist of the following (in thousands):

	As of December 31, 2011							As of June 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Backlog and other	$	743,760	$	(456,604	)	$	287,156	$	743,760	$	(488,405	)	$	255,355
Customer relationships		534,030		(78,318	)		455,712		534,030		(92,408	)		441,622
Technology		2,700		(2,700	)		—		2,700		(2,700	)		—
Total	$	1,280,490	$	(537,622	)	$	742,868	$	1,280,490	$	(583,513	)	$	696,977

Intangible assets are amortized based on the expected pattern of consumption. We recorded amortization expense of $52.7 million and $45.9 million for the six months ended June 30, 2011 and 2012, respectively.

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Note 8 Long-Term Debt

The carrying values and fair values of our notes payable and long-term debt were as follows (in thousands):

	As of December 31, 2011					As of June 30, 2012
	Carrying Value			Fair Value		Carrying Value			Fair Value
Intelsat S.A.:
6.5% Senior Notes due November 2013	$	353,550		$	354,434	$	353,550		$	367,692
Unamortized discount on 6.5% Senior Notes		(51,471	)		—		(38,925	)		—
Total Intelsat S.A. obligations		302,079			354,434		314,625			367,692
Intelsat Luxembourg:
11.25% Senior Notes due February 2017		2,805,000			2,706,825		2,805,000			2,903,175
11.5% / 12.5% Senior PIK Election Notes due February 2017		2,502,986			2,340,292		2,502,986			2,584,333
Total Intelsat Luxembourg obligations		5,307,986			5,047,117		5,307,986			5,487,508
Intelsat Jackson:
11.25% Senior Notes due June 2016		1,048,220			1,103,251		603,220			631,149
Unamortized premium on 11.25% Senior Notes		4,286			—		2,246			—
9.5% Senior Notes due June 2016		701,913			733,499		—			—
8.5% Senior Notes due November 2019		500,000			527,500		500,000			551,900
Unamortized discount on 8.5% Senior Notes		(3,545	)		—		(3,385	)		—
7.25% Senior Notes due October 2020		1,000,000			1,011,300		2,200,000			2,304,360
Unamortized premium on 7.25% Senior Notes		—			—		20,673			—
7.25% Senior Notes due April 2019		1,500,000			1,530,000		1,500,000			1,569,450
7.5% Senior Notes due April 2021		1,150,000			1,173,000		1,150,000			1,211,870
Senior Unsecured Credit Facilities due February 2014		195,152			182,468		195,152			190,762
New Senior Unsecured Credit Facilities due February 2014		810,876			758,169		810,876			792,631
Senior Secured Credit Facilities due April 2018		3,233,750			3,217,581		3,217,500			3,209,456
Unamortized discount on Senior Credit Facilities		(14,349	)		—		(13,340	)		—
Senior Secured Revolving Credit Facility		—			—		75,000			75,000
Total Intelsat Jackson obligations		10,126,303			10,236,768		10,257,942			10,536,578
New Dawn:
Senior Secured Debt Facility due 2017		109,625			109,625		112,017			112,017
Mezzanine Secured Debt Facility due 2019		82,580			82,580		85,555			85,555
10.5% Note Payable to Convergence Partners		502			502		502			502
Total New Dawn obligations		192,707			192,707		198,074			198,074
Horizons Holdings:
Loan Payable to JSAT		73,255			73,255		61,046			61,046
Total Horizons Holdings obligations		73,255			73,255		61,046			61,046
Total Intelsat S.A. long-term debt		16,002,330		$	15,904,281		16,139,673		$	16,650,898
Less:
Current portion of long-term debt		164,818					238,955
Total long-term debt, excluding current portion	$	15,837,512				$	15,900,718

The fair value for publicly traded instruments is determined using quoted market prices, and for non-publicly traded instruments, fair value is based upon composite pricing from a variety of sources, including market leading data providers, market makers, and leading brokerage firms. Substantially all of the inputs used to determine the fair value of our debt are classified as Level 1 inputs within the fair value hierarchy from FASB ASC 820, except our senior secured credit facilities, the inputs for which are classified as Level 2. The fair values of the New Dawn obligations and the Horizons Holdings obligations approximate their respective book values.

Senior Secured Credit Facilities

On January 12, 2011, Intelsat Jackson Holdings S.A. (“Intelsat Jackson”), a wholly-owned subsidiary of Intelsat S.A., entered into a secured credit agreement (the “Intelsat Jackson Secured Credit Agreement”), which includes a $3.25 billion term loan facility

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maturing in April 2018 and a $500.0 million revolving credit facility with a five year maturity, and borrowed the full $3.25 billion under the term loan facility. The term loan facility requires regularly scheduled quarterly payments of principal equal to 0.25% of the original principal amount of the term loan beginning six months after January 12, 2011, with the remaining unpaid amount due and payable at maturity on April 2, 2018. Up to $350.0 million of the revolving credit facility is available for issuance of letters of credit. Additionally, up to $70.0 million of the revolving credit facility is available for swingline loans. Both the face amount of any outstanding letters of credit and any swingline loans reduce availability under the revolving credit facility on a dollar for dollar basis. Intelsat Jackson is required to pay a commitment fee for the unused commitments under the revolving credit facility, if any, at a rate per annum of 0.375%. As of June 30, 2012, Intelsat Jackson had $75.0 million outstanding under its revolving credit facility and $387.3 million (net of standby letters of credit) of availability remaining thereunder.

The Intelsat Jackson Secured Credit Agreement includes two financial covenants. Intelsat Jackson must maintain a consolidated secured debt to consolidated EBITDA ratio of less than or equal to 3.50 to 1.00 at the end of each fiscal quarter as well as a consolidated EBITDA to consolidated interest expense ratio of greater than or equal to 1.75 to 1.00 at the end of each fiscal quarter, in each case as such financial measures are defined in the Intelsat Jackson Secured Credit Agreement. Intelsat Jackson was in compliance with these financial maintenance covenant ratios with a consolidated secured debt to consolidated EBITDA ratio of 1.54 to 1.00 and a consolidated EBITDA to consolidated interest expense ratio of 2.77 to 1.00 as of June 30, 2012.

New Dawn Credit Facilities

On December 5, 2008, New Dawn entered into a $215.0 million secured financing arrangement with an eight-year maturity that consists of senior and mezzanine term loan facilities. The credit facilities are non-recourse to New Dawn’s shareholders, including us and our wholly-owned subsidiaries, beyond the shareholders’ scheduled capital contributions. The senior facility provides for a commitment of up to $125.0 million. The interest rate on term loans under the senior facility is the aggregate of the London Inter-Bank Offered Rate (“LIBOR”) plus an applicable margin between 3.0% and 4.0% and certain costs, if incurred. The mezzanine facility provides for a commitment of up to $90.0 million. The interest rate on term loans under the mezzanine facility is the aggregate of LIBOR plus an applicable margin between 5.3% and 6.3% and certain costs, if incurred. New Dawn is required to pay a commitment fee at a rate per annum of between ³/₈% and ¹/₂% on any unused commitments under the credit facilities. New Dawn had aggregate outstanding borrowings of $197.6 million under its credit facilities as of June 30, 2012.

Subsequent to the launch of the Intelsat New Dawn satellite in April 2011, which experienced an anomaly resulting in the failure to deploy the C-band antenna reflector, the New Dawn joint venture filed a partial loss claim with its insurer. The claim was finalized and agreed to during 2011, resulting in total insurance recoveries of $118.0 million. At December 31, 2011 and June 30, 2012, $94.1 million and $118.0 million, respectively, were received from the insurers and held in a specific insurance proceeds account reflected as restricted cash in the accompanying condensed consolidated balance sheets. In July 2012, New Dawn entered into an agreement with its lenders to use the New Dawn insurance proceeds held as restricted cash to prepay certain of its debt obligations, along with associated interest and fees. Subsequent to this prepayment, New Dawn had aggregate outstanding borrowings of $83.9 million under its debt agreements.

Intelsat Luxembourg Senior PIK Election Notes due 2017

In August 2012, we made an election to pay interest on the Intelsat Luxembourg Senior PIK Election Notes due 2017 entirely in cash for the interest period August 15, 2012 through February 15, 2013. For the interest periods beginning February 16, 2013, we are required to make all interest payments in cash.

2012 Intelsat Jackson Notes Offering, Tender Offers and Redemptions

On April 26, 2012, Intelsat Jackson completed an offering of $1.2 billion aggregate principal amount of its 7 ¹/₄% Senior Notes due 2020 (the “2020 Jackson Notes”). Intelsat Jackson had previously issued $1.0 billion aggregate principal amount of the 2020 Jackson Notes on September 30, 2010. The net proceeds from the 2012 offering were used by Intelsat Jackson to repurchase $49.5 million aggregate principal amount of Intelsat Jackson’s outstanding 9 ¹/₂% Senior Notes due 2016 (the “2016 Jackson 9 ¹/₂% Notes”) and $10.1 million aggregate principal amount of Intelsat Jackson’s 11 ¹/₄% Senior Notes due 2016 (the “2016 Jackson 11 ¹/₄% Notes”) in tender offers launched on April 12, 2012 and completed on May 10, 2012. On June 15, 2012, Intelsat Jackson redeemed the remaining $652.4 million aggregate principal amount outstanding of the 2016 Jackson 9 ¹/₂% Notes and an additional $434.9 million aggregate principal amount of the 2016 Jackson 11 ¹/₄% Notes.

In connection with these tender offers and redemptions, we recognized a loss on early extinguishment of debt of $43.4 million during the second quarter of 2012, consisting of the difference between the carrying value of the aggregate debt repurchased or redeemed and the total cash amount paid (including related fees), and a write-off of unamortized debt premium and debt issuance costs.

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Financing Commitment for Intelsat S.A. Senior Notes due 2013

On April 12, 2012, Intelsat S.A. obtained agreements from affiliates of Goldman, Sachs & Co. and Morgan Stanley to provide unsecured term loan commitments sufficient to refinance in full its 6 ¹/₂% Senior Notes due 2013 (the “Intelsat S.A. Notes”) on or immediately prior to their maturity date, in the event that Intelsat S.A. does not otherwise refinance or retire the Intelsat S.A. Notes. These term loans will have a maturity of two years from funding, and the funding thereof is subject to various terms and conditions.

2011 Reorganization and 2011 Secured Loan Refinancing

On January 12, 2011, certain of our subsidiaries completed a series of internal transactions and related steps that reorganized the ownership of our assets among our subsidiaries and effectively combined the legacy businesses of Intelsat Subsidiary Holding Company S.A. (“Intelsat Sub Holdco”) and Intelsat Corporation (“Intelsat Corp”) in order to simplify our operations and enhance our ability to transact business in an efficient manner (the “2011 Reorganization”). Also on January 12, 2011, Intelsat Jackson entered into the Intelsat Jackson Secured Credit Agreement as discussed above, and borrowed $3.25 billion under the term loan facility. Part of the net proceeds of the term loan, amounting to $2.4 billion, were contributed or loaned to Intelsat Corp, which used such funds to repay its existing indebtedness under Intelsat Corp’s senior secured facilities and to redeem Intelsat Corp’s 9 ¹/₄% Senior Notes due 2016. Separately, Intelsat Corp also redeemed all of its 9 ¹/₄% Senior Notes due 2014 and its 6 ⁷/₈% Senior Secured Debentures due 2028. In addition, Intelsat Jackson contributed approximately $330.2 million of the net proceeds of the new term loan to Intelsat Sub Holdco to repay all existing indebtedness under Intelsat Sub Holdco’s senior secured credit facilities. The entry into the Intelsat Jackson Secured Credit Agreement, the repayment of the existing indebtedness of Intelsat Corp and the repayment of all the secured existing indebtedness of Intelsat Sub Holdco are referred to collectively as the “2011 Secured Loan Refinancing”. In connection with the 2011 Secured Loan Refinancing, certain of our interest rate swaps were assigned by Intelsat Sub Holdco and Intelsat Corp to Intelsat Jackson, and are now secured by a first priority security interest in the collateral that also secures obligations under the Intelsat Jackson Secured Credit Agreement. Additionally, in connection with the 2011 Secured Loan Refinancing, we recognized a loss on early extinguishment of debt of $87.9 million during the first quarter of 2011, which consists of the difference between the carrying value of the Intelsat Corp and Intelsat Sub Holdco debt repaid and the total cash amount paid (including related fees), and a write-off of unamortized debt discounts and debt issuance costs.

2011 Notes Redemptions

On March 18, 2011, Intelsat S.A. redeemed all of the $485.8 million aggregate principal amount outstanding of its 7  ⁵/₈% Senior Notes due 2012. Additionally, on March 18, 2011, Intelsat Sub Holdco redeemed $225.0 million aggregate principal amount outstanding of its 8 ¹/₂% Senior Notes due 2013 (the “2013 Sub Holdco Notes”). In connection with these redemptions, we recognized a loss on early extinguishment of $80.3 million during the first quarter of 2011, which consists of the difference between the carrying value of the Intelsat S.A. and Intelsat Sub Holdco debt repaid and the total cash paid (including related fees), and a write-off of unamortized debt discounts and debt issuance costs.

2011 Intelsat Jackson Notes Offering, Tender Offers and Redemptions

On April 5, 2011, Intelsat Jackson completed an offering of $2.65 billion aggregate principal amount of senior notes (the “2011 Intelsat Jackson Notes Offering”), consisting of $1.5 billion aggregate principal amount of 7  ¹/₄% Senior Notes due 2019 (the “7 ¹/₄% 2019 Jackson Notes”) and $1.15 billion aggregate principal amount of 7 ¹/₂% Senior Notes due 2021 (the “2021 Jackson Notes” and collectively, the “New Jackson Notes”). The net proceeds from the sale of the New Jackson Notes were primarily used to repurchase all of the following notes in tender offers launched on March 21, 2011 and completed on April 15, 2011, and to subsequently redeem the remaining outstanding amounts of such notes on May 5, 2011:

• $481.0 million aggregate principal amount outstanding of the Intermediate Holdco 9  ¹/₂% Senior Discount Notes due 2015;

• $625.3 million aggregate principal amount outstanding of the 2013 Sub Holdco Notes, after giving effect to the March 2011 partial redemption of the 2013 Sub Holdco Notes, as discussed above;

• $681.0 million aggregate principal amount outstanding of the Intelsat Sub Holdco 8  ⁷/₈% Senior Notes due 2015;

• $400.0 million aggregate principal amount outstanding of the 2015 Intelsat Sub Holdco Notes, Series B;

• $55.0 million aggregate principal amount outstanding of the Intelsat Jackson 9  ¹/₄% Senior Notes due 2016; and

• $284.6 million aggregate principal amount outstanding of the Intelsat Jackson 11  ¹/₂% Senior Notes due 2016.

As a result, all of the above series of notes were paid off in full and no third party debt remained outstanding at Intermediate Holdco and Intelsat Sub Holdco as of May 5, 2011. Additionally, in connection with the above transactions, we recognized a loss on early extinguishment of debt of $158.0 million during the three months ended June 30, 2011, which consists of the difference between the carrying value of the debt repaid or redeemed and the total cash amount paid (including related fees), and a write-off of unamortized debt discounts and debt issuance costs.

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Note 9 Derivative Instruments and Hedging Activities

Interest Rate Swaps

We are subject to interest rate risk primarily associated with our variable-rate borrowings. Interest rate risk is the risk that changes in interest rates could adversely affect earnings and cash flows. Specific interest rate risk includes: the risk of increasing interest rates on short-term debt; the risk of increasing interest rates for planned new fixed long-term financings; and the risk of increasing interest rates for planned refinancing using long-term fixed-rate debt. We have entered into interest rate swap agreements to reduce the impact of interest rate movements on future interest expense by converting substantially all of our floating-rate debt to a fixed rate.

In connection with the 2011 Secured Loan Refinancing, certain of our interest rate swaps were assigned by Intelsat Sub Holdco and Intelsat Corp to Intelsat Jackson, and are now secured by a first priority security interest in the collateral that also secures obligations under the Intelsat Jackson Secured Credit Agreement (see Note 8 — Long Term Debt).

On December 22, 2011, we amended our interest rate swap agreements with an aggregate notional amount of $448.5 million between Intelsat Jackson and respective counterparties to the interest rate swaps. These amendments resulted in a change to the maturity date, the applicable fixed rate of interest that we pay and certain termination events.

During the first quarter of 2012, we amended our interest rate swap agreements with an aggregate notional amount of $1.2 billion between Intelsat Jackson and respective counterparties to the interest rate swaps. These amendments resulted in a change to the maturity date, the applicable fixed rate of interest that we pay and certain termination events.

As of June 30, 2012, we held interest rate swaps with aggregate notional amounts of $731.4 million and $1.6 billion which mature in March 2013 and January 2016, respectively. These swaps were entered into as further described below to economically hedge the variability in cash flow on a portion of the floating-rate term loans under our senior secured and unsecured credit facilities, but have not been designated as hedges for accounting purposes. On a quarterly basis, we receive a floating rate of interest equal to the three-month LIBOR and pay a fixed rate of interest. On the interest rate reset date of June 14, 2012, the interest rate which the counterparties utilized to compute interest due to us was determined to be 0.47%.

Additionally, as of June 30, 2012, New Dawn had a floating-to-fixed interest rate swap to hedge future interest payments on its senior and mezzanine term loan facilities. The interest rate swap has an effective date of July 7, 2011, maturing on July 7, 2014, with a notional amount of $65.5 million for the mezzanine loan and varying notional amounts for the senior loan. We receive an interest rate of three-month LIBOR and pay a fixed coupon of 3.72%. On the interest rate reset date of April 5, 2012, the interest rate which the counterparties utilized to compute interest due to us was 0.47%. This swap was undesignated as a hedge for accounting purposes. In July 2012, in conjunction with the prepayment of New Dawn debt, we settled $69.0 million notional amount under the New Dawn interest rate swap associated with the senior term loan facilities (see Note 8 — Long-Term Debt — New Dawn Credit Facilities).

The counterparties to our interest rate swap agreements are highly rated financial institutions. In the unlikely event that the counterparties fail to meet the terms of the interest rate swaps, our exposure is limited to the interest rate differential on the notional amount at each quarterly settlement period over the life of the agreement. We do not anticipate non-performance by the counterparties.

All of our interest rate swaps were undesignated as of June 30, 2012. The swaps are marked-to-market quarterly with any change in fair value recorded within (gains) losses on derivative financial instruments in our condensed consolidated statements of operations. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of our derivatives. The fair value measurement of derivatives could result in either a net asset or a net liability position for us. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting arrangements as applicable and necessary. When the swaps are in a net liability position for us, the credit valuation adjustments are calculated by determining the total expected exposure of the derivatives, incorporating the current and potential future exposures and then applying an applicable credit spread to the exposure. The total expected exposure of a derivative is derived using market-observable inputs, such as yield curves and volatilities. The inputs utilized for our own credit spread are based on implied spreads from traded levels of our debt. Accordingly, as of June 30, 2012, we recorded a non-cash credit valuation adjustment of approximately $5.8 million as a reduction to our liability.

As of December 31, 2011 and June 30, 2012, $14.8 million and $27.0 million was included in other current liabilities, respectively, and $80.7 million and $68.2 million was included in other long-term liabilities, respectively, within our condensed consolidated balance sheets related to the interest rate swaps.

Put Option Embedded Derivative Instrument

On the date of issuance of Intelsat Sub Holdco’s 8  ⁷/₈% Senior Notes due 2015 (the “2015 Intelsat Sub Holdco Notes, Series B”), we determined that these debt instruments contained a contingent put option clause within the host contract, which afforded the holders of the notes the option to require the issuer to repurchase such notes at 101% of their principal amount in the event of a change

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of control, as defined in the indenture governing the notes. In our evaluation of the financing arrangement, we concluded that the contingent put option required bifurcation in accordance with current accounting standards under FASB ASC Topic 815,Derivatives and Hedging. We therefore bifurcated the contingent put option and carried it as a derivative liability at fair value. We estimated the fair value of the derivative on the date of inception using a standard valuation technique, which places the most significant emphasis upon the estimated date and probability of a change of control and incorporated the issue price, maturity date and change of control put price. We subsequently revalued the derivative at the end of each reporting period, recognizing any change in fair value through earnings. The fair value of the embedded derivative was calculated as $4.3 million at December 31, 2010. As of May 5, 2011, we redeemed the entire $400 million aggregate principal amount outstanding of the 2015 Intelsat Sub Holdco Notes, Series B. Therefore, we derecognized the embedded derivative liability and the value at December 31, 2011 was $0. We recorded a gain of $4.3 million included in losses on derivative financial instruments in our condensed consolidated statement of operations during the six months ended June 30, 2011 to adjust the fair market value of the put option embedded derivative to $0.

The following table sets forth the fair value of our derivatives by category (in thousands):

		Liability Derivatives
Derivatives not designated as hedging instruments	Balance Sheet Location	December 31, 2011		June 30, 2012
Undesignated interest rate swaps	Other current liabilities	$	14,828	$	27,045
Undesignated interest rate swaps	Other long-term liabilities		80,690		68,152
Total derivatives		$	95,518	$	95,197

The following table sets forth the effect of the derivative instruments on the condensed consolidated statements of operations (in thousands):

Derivatives not designated as hedging instruments	Presentation in Statements of Operations	Three Months Ended June  30, 2011		Three Months Ended June 30, 2012		Six Months Ended June 30, 2011			Six Months Ended June 30, 2012
Undesignated interest rate swaps	Losses on derivative financial instruments	$	20,522	$	15,756	$	23,103		$	25,614
Put option embedded derivative	Losses on derivative financial instruments		—		—		(4,295	)		—
Total losses on derivative financial instruments		$	20,522	$	15,756	$	18,808		$	25,614

Note 10 Income Taxes

The majority of our operations are located in taxable jurisdictions, including Luxembourg, the United States and the United Kingdom. Our Luxembourg companies that file tax returns as a consolidated group generated a loss for the six months ended June 30, 2012. Due to our cumulative losses in recent years, and the inherent uncertainty associated with the realization of future taxable income in the foreseeable future, we recorded a full valuation allowance against the net operating losses generated in Luxembourg. The difference between tax expense (benefit) reported in the condensed consolidated statements of operations and tax computed at statutory rates is attributable to the valuation allowance on losses generated in Luxembourg, the provision for foreign taxes, which were principally in the United States and the United Kingdom, as well as withholding taxes on revenue earned in many of the foreign markets in which we operate.

Cash paid for income taxes, net of refunds, totaled $14.8 million and $18.2 million for the six months ended June 30, 2011 and 2012, respectively.

As of December 31, 2011 and June 30, 2012, our gross unrecognized tax benefits were $64.8 million and $67.9 million, respectively (including interest and penalties), of which $46.6 million and $49.2 million, respectively, if recognized, would affect our effective tax rate. As of December 31, 2011 and June 30, 2012, we had recorded reserves for interest and penalties in the amount of $8.6 million and $10.3 million, respectively. We continue to recognize interest and, to the extent applicable, penalties with respect to the unrecognized tax benefits as income tax expense. Since December 31, 2011, the change in the balance of unrecognized tax benefits consisted of an increase of $1.4 million related to prior period tax positions and an increase of $1.8 million related to current tax positions.

We operate in various taxable jurisdictions throughout the world and our tax returns are subject to audit and review from time to time. We consider Luxembourg, the United States and the United Kingdom to be our significant tax jurisdictions. Our Luxembourg, U.S. and U.K. subsidiaries are subject to income tax examination for periods after December 31, 2003.

Within the next twelve months, we believe that there are no jurisdictions in which the outcome of unresolved tax issues or claims is likely to be material to our results of operations, financial position or cash flows.

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On March 7, 2011, Intelsat Holding Corporation, the former parent of Intelsat Corp, was notified by the Internal Revenue Service of its intent to initiate an audit for the tax years ending December 31, 2008 and 2009. We do not currently expect the result of this audit to have a material impact on our provision for income taxes.

In May 2012, India enacted new legislation that defines payments for satellite services as “royalties for the use of a process”. Due to the law’s retroactive application, and because it is contrary to recent Delhi High Court rulings as well as model commentaries issued by international tax bodies, we are likely to appeal any assessments we may receive as a result of the new law and we believe that it is more likely than not that we would be successful with such appeals. As a result, we do not expect this new law to have a material impact on our provision for income taxes.

Prior to August 20, 2004, Intelsat Corp, joined with The DIRECTV Group and General Motors Corporation in filing a consolidated U.S. federal income tax return. In April 2004, Intelsat Corp entered into a tax separation agreement with The DIRECTV Group that superseded four earlier tax-related agreements among Intelsat Corp and its subsidiaries, The DIRECTV Group and certain of its affiliates. Pursuant to the tax separation agreement, The DIRECTV Group agreed to indemnify Intelsat Corp for all federal and consolidated state and local income taxes a taxing authority may attempt to collect from Intelsat Corp regarding any liability for the federal or consolidated state or local income taxes of General Motors Corporation and The DIRECTV Group, except those income taxes Intelsat Corp is required to pay under the tax separation agreement. In addition, The DIRECTV Group agreed to indemnify Intelsat Corp for any taxes (other than those taxes described in the preceding sentence) related to any periods or portions of such periods ending on, or prior to, the day of the closing of the PanAmSat Corporation recapitalization, which occurred on August 20, 2004, in amounts equal to 80% of the first $75.0 million of such other taxes and 100% of any other taxes in excess of the first $75.0 million. As a result, Intelsat Corp’s tax exposure after indemnification related to these periods is capped at $15.0 million, of which $4.0 million has been paid to date. The tax separation agreement with The DIRECTV Group is effective from August 20, 2004 until the expiration of the statute of limitations with respect to all taxes to which the tax separation agreement relates. As of December 31, 2011 and June 30, 2012, we had a tax indemnification receivable of $2.3 million.

Note 11 Commitments and Contingencies

(a) Litigation and Claims

We are subject to litigation in the ordinary course of business. Management does not believe that the resolution of any pending proceedings would have a material adverse effect on our financial position or results of operations.

(b) LCO Protection

Most of the customer service commitments entered into prior to our privatization were transferred to us pursuant to novation agreements. Certain of these agreements contain provisions, including provisions for lifeline connectivity obligation (“LCO”) protection, which constrain our ability to price services in some circumstances. Our LCO contracts require us to provide customers with the right to renew their service commitments covered by LCO contracts at prices no higher than the prices charged for those services on the privatization date. Under some circumstances, we may also be required by an LCO contract to reduce the price for a service commitment covered by the contract. LCO protection may continue until July 18, 2013. As of June 30, 2012, we had approximately $92.4 million of backlog covered by LCO contracts and to date we have not been required to reduce prices for our LCO-protected service commitments. There can be no assurance that we will not be required to reduce prices in the future under our LCO commitments.

(c) Loss Contingency

Our indirect parent, Intelsat Global Holdings, has entered into an agreement pursuant to which an independent third party has made an investment commitment to us. This commitment is subject to certain terms and conditions and has a fixed duration. We had previously loaned $10 million to Intelsat Global Holdings in connection with a fee paid to the third party under this agreement. In the event that the commitment expires and the investment is not consummated, we will record a $20 million pretax charge as early as the third quarter of 2012, consisting of the $10 million previously loaned to Intelsat Global Holdings and an additional $10 million that would become due to the third party upon expiration of the commitment.

Note 12 Business and Geographic Segment Information

We operate in a single industry segment in which we provide satellite services to our communications customers around the world. Revenue by region is based on the locations of customers to which services are billed. Our satellites are in geosynchronous orbit, and consequently are not attributable to any geographic location. Of our remaining assets, substantially all are located in the United States.

We earn revenue primarily by providing services over satellite transponder capacity to our customers. Our customers generally obtain satellite capacity from us by placing an order pursuant to one of several master customer service agreements. Our customer

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agreements also cover services that we procure from third parties and resell, which we refer to as off-network services. These services can include transponder services and other satellite-based transmission services in frequencies not available on our network. Under the category off-network and other revenues, we also include revenues from consulting and other services.

The geographic distribution of our revenue based upon billing region of the customer was as follows:

	Three Months Ended June  30, 2011			Three Months Ended June  30, 2012
North America		47	%		47	%
Europe		16	%		16	%
Africa and Middle East		17	%		16	%
Latin America and Caribbean		14	%		15	%
Asia Pacific		6	%		6	%

Approximately 4% of our revenue was derived from our largest customer during each of the three months ended June 30, 2011 and 2012. Our ten largest customers accounted for approximately 26% of our revenue for each of the three months ended June 30, 2011 and 2012.

	Six Months Ended June 30, 2011			Six Months Ended June 30, 2012
North America		46	%		47	%
Europe		16	%		16	%
Africa and Middle East		17	%		16	%
Latin America and Caribbean		14	%		15	%
Asia Pacific		7	%		6	%

Approximately 4% of our revenue was derived from our largest customer during each of the six months ended June 30, 2011 and 2012. Our ten largest customers accounted for approximately 26% of our revenue for each of the six months ended June 30, 2011 and 2012.

Our revenues were derived from the following services, with Off-Network and Other Revenues shown separately from On-Network Revenues (in thousands, except percentages):

	Three Months Ended June 30, 2011				Three Months Ended June 30, 2012				Six Months Ended June 30, 2011				Six Months Ended June 30, 2012
On-Network Revenues
Transponder services	$	474,722	74	%	$	480,803	75	%	$	942,005	73	%	$	960,762	75	%
Managed services		70,350	11	%		67,205	11	%		141,297	11	%		133,177	10	%
Channel		26,723	4	%		23,461	4	%		54,019	4	%		47,281	4	%
Total on-network revenues		571,795	89	%		571,469	90	%		1,137,321	89	%		1,141,220	89	%
Off-Network and Other Revenues
Transponder, MSS and other off-network services		56,679	9	%		55,388	9	%		116,148	9	%		119,822	9	%
Satellite-related services		13,972	2	%		11,811	2	%		29,165	2	%		21,796	2	%
Total off-network and other revenues		70,651	11	%		67,199	11	%		145,313	11	%		141,618	11	%
Total	$	642,446	100	%	$	638,668	100	%	$	1,282,634	100	%	$	1,282,838	100	%

Note 13 Related Party Transactions

(a) Shareholders Agreements

The shareholders of Intelsat Global entered into shareholders agreements on February 4, 2008. The shareholders agreements were assigned to Intelsat Global Holdings by an amendment effective as of March 30, 2012. The shareholders agreements and the articles of incorporation of Intelsat Global Holdings provide, among other things, for the governance of Intelsat Global Holdings and its subsidiaries and provide specific rights to and limitations upon the holders of Intelsat Global Holdings’ share capital with respect to shares held by such holders.

(b) Monitoring Fee Agreement

Intelsat Luxembourg, our direct wholly-owned subsidiary, has a monitoring fee agreement dated February 4, 2008 (the “2008 MFA”) with BC Partners Limited and Silver Lake Management Company III, L.L.C. (together, the “2008 MFA Parties”), pursuant to

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which the 2008 MFA Parties provide certain monitoring, advisory and consulting services to Intelsat Luxembourg. We recorded expense for services associated with the 2008 MFA of $12.4 million and $12.5 million during the six months ended June 30, 2011 and 2012, respectively.

(c) Ownership by Management

Certain directors, officers and key employees of Intelsat Global Holdings and its subsidiaries hold restricted shares, options and SCAs of Intelsat Global Holdings (see Note 3—Share-Based and Other Compensation Plans). In the aggregate, these shares and arrangements outstanding as of June 30, 2012 provided for the issuance of approximately 12.3% of the voting equity of Intelsat Global Holdings on a fully diluted basis.

(d) Horizons Holdings

We have a 50% ownership interest in Horizons Holdings as a result of a joint venture with JSAT (see Note 6—Investments).

(e) New Dawn

We have a 74.9% ownership interest in New Dawn as a result of the New Dawn Project Agreement with Convergence Partners (see Note 6—Investments).

(f) WP Com

We have a 49% ownership interest in WP Com as a result of a joint venture with Corporativo (see Note 6—Investments).

(g) Receivable from Parent

We had a receivable from Intelsat Global as of December 31, 2011 and June 30, 2012 of $16.8 million and $22.5 million, respectively.

Note 14 Subsequent Events

In July 2012, Intelsat Global Service LLC, our indirect subsidiary, entered into an agreement to sell our U.S. administrative headquarters office building in Washington, D.C. (the “U.S. Administrative Headquarters Property”), and to assign our Amended and Restated Lease Agreement with the U.S. Government (the “Ground Lessor”) relating to the U.S. Administrative Headquarters Property, to the purchaser for a purchase price of $85.0 million in cash (the “U.S. Administrative Headquarters Sale”). Upon the closing of the U.S. Administrative Headquarters Sale, we expect to enter into an agreement under which we will temporarily lease from the purchaser a portion of the U.S. Administrative Headquarters Property. The closing of the U.S. Administrative Headquarters Sale is contingent upon the Ground Lessor’s approval, together with other customary closing conditions. We are currently in the process of selecting a location for our new permanent U.S. administrative headquarters office.

Note 15 Supplemental Consolidating Financial Information

On February 4, 2008, Intelsat Jackson issued approximately $1.3 billion of the 2016 Jackson 11 ¹/₄% Notes. The 2016 Jackson 11 ¹/₄% Notes are fully and unconditionally guaranteed, jointly and severally, by Intelsat S.A. and Intelsat Luxembourg. The 2016 Jackson 11 ¹/₄% Notes are not guaranteed by any of Intelsat Jackson’s direct or indirect subsidiaries.

In addition, on June 27, 2008, Intelsat Luxembourg issued approximately $2.8 billion of 11 ¹/₄% Senior Notes due 2017 and approximately $2.3 billion of 11 ¹/₂% / 12 ¹/₂% Senior PIK Election Notes due 2017, which are fully and unconditionally guaranteed, jointly and severally, by Intelsat S.A.

Separate financial statements of Intelsat S.A., Intelsat Luxembourg and Intelsat Jackson are not presented because management believes that such financial statements would not be material to investors. Investments in Intelsat Jackson’s subsidiaries in the following condensed consolidating financial information are accounted for under the equity method of accounting. Consolidating adjustments include the following:

• elimination of investment in subsidiaries;

• elimination of intercompany accounts; and

• elimination of equity in earnings (losses) of subsidiaries.

Other comprehensive income for the three months ended June 30, 2011 and 2012, was $1.1 million and $2.2 million, respectively. Other comprehensive income for the six months ended June 30, 2011 and 2012, was $2.3 million and $4.7 million, respectively. Other comprehensive income is fully attributable to the subsidiaries of Intelsat Jackson.

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INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF JUNE 30, 2012

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson		Intelsat Jackson Subsidiaries (Non- Guarantors)		Consolidation and Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents, net of restricted cash	$	735		$	41		$	32,044	$	221,266	$	—		$	254,086
Restricted cash		—			—			—		118,032		—			118,032
Receivables, net of allowance		45			3			390		309,429		—			309,867
Deferred income taxes		—			—			—		25,927		—			25,927
Prepaid expenses and other current assets		—			12,531			257		46,680		(132	)		59,336
Intercompany receivables		—			677			—		4,553,049		(4,553,726	)		—
Total current assets		780			13,252			32,691		5,274,383		(4,553,858	)		767,248
Satellites and other property and equipment, net		—			—			—		6,326,877		—			6,326,877
Goodwill		—			—			—		6,780,827		—			6,780,827
Non-amortizable intangible assets		—			—			—		2,458,100		—			2,458,100
Amortizable intangible assets, net		—			—			—		696,977		—			696,977
Investment in affiliates		(390,464	)		5,086,629			19,485,369		1,010		(24,181,534	)		1,010
Other assets		7,012			92,262			103,204		231,803		—			434,281
Total assets	$	(382,672	)	$	5,192,143		$	19,621,264	$	21,769,977	$	(28,735,392	)	$	17,465,320
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	3,175		$	—		$	795	$	188,695	$	(132	)	$	192,533
Accrued interest payable		3,830			227,953			131,575		2,109		—			365,467
Current portion of long-term debt		—			—			107,500		131,455		—			238,955
Deferred satellite performance incentives		—			—			—		18,224		—			18,224
Other current liabilities		—			—			17,789		152,314		—			170,103
Intercompany payables		495,055			—			4,058,671		—		(4,553,726	)		—
Total current liabilities		502,060			227,953			4,316,330		492,797		(4,553,858	)		985,282
Long-term debt, net of current portion		314,625			5,307,986			10,150,442		127,665		—			15,900,718
Deferred satellite performance incentives, net of current portion		—			—			—		120,515		—			120,515
Deferred revenue, net of current portion		—			—			—		796,452		—			796,452
Deferred income taxes		—			—			—		283,315		—			283,315
Accrued retirement benefits		—			—			—		289,437		—			289,437
Other long-term liabilities		—			45,811			67,863		169,872		—			283,546
Noncontrolling interest		—			—			—		5,412		—			5,412
Shareholder’s equity (deficit):
Ordinary shares		5,000			669,036			4,322,473		23,388		(5,014,897	)		5,000
Other shareholder’s equity (deficit)		(1,204,357	)		(1,058,643	)		764,156		19,461,124		(19,166,637	)		(1,204,357	)
Total liabilities and shareholder’s equity (deficit)	$	(382,672	)	$	5,192,143		$	19,621,264	$	21,769,977	$	(28,735,392	)	$	17,465,320

(Certain totals may not add due to the effects of rounding)

26

INTELSAT S.A. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2011

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson		Intelsat Jackson Subsidiaries (Non- Guarantors)		Consolidation and Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents, net of restricted cash	$	511		$	908		$	2,269	$	291,012	$	—		$	294,700
Restricted cash		—			—			—		94,131		—			94,131
Receivables, net of allowance		41			—			—		331,330		—			331,371
Deferred income taxes		—			—			—		26,058		—			26,058
Prepaid expenses and other current assets		551			16			37		42,330		—			42,934
Intercompany receivables		—			6,249			—		897,410		(903,659	)		—
Total current assets		1,103			7,173			2,306		1,682,271		(903,659	)		789,194
Satellites and other property and equipment, net		—			—			—		6,142,731		—			6,142,731
Goodwill		—			—			—		6,780,827		—			6,780,827
Non-amortizable intangible assets		—			—			—		2,458,100		—			2,458,100
Amortizable intangible assets, net		—			—			—		742,868		—			742,868
Investment in affiliates		(303,483	)		5,177,192			15,832,505		1,010		(20,706,214	)		1,010
Other assets		5,356			99,680			95,708		246,280		(348	)		446,676
Total assets	$	(297,024	)	$	5,284,045		$	15,930,519	$	18,054,087	$	(21,610,221	)	$	17,361,406
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2,484		$	(10	)	$	450	$	195,252	$	—		$	198,176
Accrued interest payable		3,831			227,953			125,714		1,838		—			359,336
Current portion of long-term debt		—			—			32,500		132,318		—			164,818
Deferred satellite performance incentives		—			—			—		17,715		—			17,715
Other current liabilities		—			—			3,195		137,874		—			141,069
Intercompany payables		487,031			—			416,628		—		(903,659	)		—
Total current liabilities		493,346			227,943			578,487		484,997		(903,659	)		881,114
Long-term debt, net of current portion		302,079			5,307,986			10,093,802		133,645		—			15,837,512
Deferred satellite performance incentives, net of current portion		—			—			—		113,974		—			113,974
Deferred revenue, net of current portion		—			—			—		724,413		—			724,413
Deferred income taxes		—			—			—		265,181		—			265,181
Accrued retirement benefits		—			—			—		305,902		—			305,902
Other long-term liabilities		—			49,673			81,038		192,372		(348	)		322,735
Noncontrolling interest		—			—			—		3,024		—			3,024
Shareholder’s equity (deficit):
Ordinary shares		5,000			669,036			4,322,473		9,576,008		(14,567,517	)		5,000
Other shareholder’s equity (deficit)		(1,097,449	)		(970,593	)		854,719		6,254,571		(6,138,697	)		(1,097,449	)
Total liabilities and shareholder’s equity (deficit)	$	(297,024	)	$	5,284,045		$	15,930,519	$	18,054,087	$	(21,610,221	)	$	17,361,406

(Certain totals may not add due to the effects of rounding)

27

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2012

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Intelsat Jackson Subsidiaries (Non- Guarantors)			Consolidation and Eliminations			Consolidated
Revenue	$	—		$	—		$	20,528		$	638,674		$	(20,534	)	$	638,668
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		—			—			—			119,834			(20,527	)		99,307
Selling, general and administrative		1,006			6,279			513			45,630			(7	)		53,421
Depreciation and amortization		—			—			17,104			171,524			—			188,628
Losses on derivative financial instruments		—			—			15,520			236			—			15,756
Total operating expenses		1,006			6,279			33,137			337,224			(20,534	)		357,112
Income (loss) from operations		(1,006	)		(6,279	)		(12,609	)		301,450			—			281,556
Interest (income) expense, net		15,661			152,660			268,643			(110,273	)		—			326,691
Loss on early extinguishment of debt		—			—			(43,383	)		—			—			(43,383	)
Subsidiary income (loss)		(67,343	)		93,968			418,610			—			(445,235	)		—
Other income (expense), net		1			—			(7	)		(1,900	)		—			(1,906	)
Income (loss) before income taxes		(84,009	)		(64,971	)		93,968			409,823			(445,235	)		(90,424	)
Benefit from income taxes		—			—			—			(6,797	)		—			(6,797	)
Net income (loss)		(84,009	)		(64,971	)		93,968			416,620			(445,235	)		(83,627	)
Net income attributable to noncontrolling interest		—			—			—			(382	)		—			(382	)
Net income (loss) attributable to Intelsat S.A.	$	(84,009	)	$	(64,971	)	$	93,968		$	416,238		$	(445,235	)	$	(84,009	)

(Certain totals may not add due to the effects of rounding)

28

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2011

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Intelsat Jackson Subsidiaries (Non- Guarantors)			Consolidation and Eliminations			Consolidated
Revenue	$	—		$	—		$	—		$	642,449		$	(3	)	$	642,446
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		—			—			—			101,059			—			101,059
Selling, general and administrative		669			6,519			320			47,639			—			55,147
Depreciation and amortization		—			—			—			194,354			—			194,354
Losses on derivative financial instruments		—			—			17,801			2,721			—			20,522
Total operating expenses		669			6,519			18,121			345,773			—			371,082
Income (loss) from operations		(669	)		(6,519	)		(18,121	)		296,676			(3	)		271,364
Interest expense, net		14,177			152,451			160,333			(1,100	)		—			325,861
Loss on early extinguishment of debt		—			—			(28,963	)		(128,990	)		—			(157,953	)
Subsidiary income (loss)		(198,519	)		(36,238	)		171,179			—			63,578			—
Loss from previously unconsolidated affiliates		—			—			—			(4,589	)		—			(4,589	)
Other income, net		—			—			—			3,291			—			3,291
Income (loss) before income taxes		(213,365	)		(195,208	)		(36,238	)		167,488			63,575			(213,748	)
Provision for income taxes		—			—			—			734			—			734
Net income (loss)		(213,365	)		(195,208	)		(36,238	)		166,754			63,575			(214,482	)
Net loss attributable to noncontrolling interest		—			—			—			1,114			—			1,114
Net income (loss) attributable to Intelsat S.A.	$	(213,365	)	$	(195,208	)	$	(36,238	)	$	167,868		$	63,575		$	(213,368	)

(Certain totals may not add due to the effects of rounding)

29

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2012

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Intelsat Jackson Subsidiaries (Non- Guarantors)			Consolidation and Eliminations			Consolidated
Revenue	$	—		$	—		$	20,528		$	1,282,844		$	(20,534	)	$	1,282,838
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		—			—			—			224,843			(20,527	)		204,316
Selling, general and administrative		2,055			12,705			974			88,661			(7	)		104,388
Depreciation and amortization		—			—			17,104			358,396			—			375,500
Losses on derivative financial instruments		—			—			24,776			838			—			25,614
Total operating expenses		2,055			12,705			42,854			672,738			(20,534	)		709,818
Income (loss) from operations		(2,055	)		(12,705	)		(22,326	)		610,106			—			573,020
Interest (income) expense, net		31,160			305,259			419,325			(117,622	)		—			638,122
Loss on early extinguishment of debt		—			—			(43,383	)		—			—			(43,383	)
Subsidiary income (loss)		(75,242	)		247,981			733,024			—			(905,763	)		—
Other income (expense), net		(1	)		(1	)		(9	)		1,008			—			997
Income (loss) before income taxes		(108,458	)		(69,984	)		247,981			728,736			(905,763	)		(107,488	)
Provision for income taxes		—			—			—			407			—			407
Net income (loss)		(108,458	)		(69,984	)		247,981			728,329			(905,763	)		(107,895	)
Net income attributable to noncontrolling interest		—			—			—			(563	)		—			(563	)
Net income (loss) attributable to Intelsat S.A.	$	(108,458	)	$	(69,984	)	$	247,981		$	727,766		$	(905,763	)	$	(108,458	)

(Certain totals may not add due to the effects of rounding)

30

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Intelsat Jackson Subsidiaries (Non- Guarantors)			Consolidation and Eliminations			Consolidated
Revenue	$	—		$	—		$	—		$	1,282,637		$	(3	)	$	1,282,634
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		—			—			—			206,082			—			206,082
Selling, general and administrative		1,594			12,845			576			91,731			—			106,746
Depreciation and amortization		—			—			—			389,356			—			389,356
(Gains) losses on derivative financial instruments		—			—			20,337			(1,529	)		—			18,808
					��
Total operating expenses		1,594			12,845			20,913			685,640			—			720,992
Income (loss) from operations		(1,594	)		(12,845	)		(20,913	)		596,997			(3	)		561,642
Interest expense, net		43,624			307,387			293,269			30,371			—			674,651
Loss on early extinguishment of debt		(78,960	)		—			(28,963	)		(218,260	)		—			(326,183	)
Subsidiary income (loss)		(304,785	)		22,359			365,504			—			(83,078	)		—
Loss from previously unconsolidated affiliates		—			—			—			(4,469	)		—			(4,469	)
Other income, net		—			—			—			7,167			—			7,167
Income (loss) before income taxes		(428,963	)		(297,873	)		22,359			351,064			(83,081	)		(436,494	)
Benefit from income taxes		—			—			—			(6,253	)		—			(6,253	)
Net income (loss)		(428,963	)		(297,873	)		22,359			357,317			(83,081	)		(430,241	)
Net loss attributable to noncontrolling interest		—			—			—			1,275			—			1,275
Net income (loss) attributable to Intelsat S.A.	$	(428,963	)	$	(297,873	)	$	22,359		$	358,592		$	(83,081	)	$	(428,966	)

(Certain totals may not add due to the effects of rounding)

31

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2012

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Intelsat Jackson Subsidiaries (Non- Guarantors)			Consolidation and Eliminations			Consolidated
Cash flows from operating activities:	$	(11,362	)	$	(324,917	)	$	230,778		$	488,148		$	—		$	382,647
Cash flows from investing activities:
Payments for satellites and other property and equipment (including capitalized interest)		—			—			—			(476,761	)		—			(476,761	)
Disbursements for intercompany loans		—			—			—			(75,756	)		75,756			—
Investment in subsidiaries		(4,203	)		—			(10,829	)		—			15,032			—
Dividend from affiliates		13,990			338,040			—			—			(352,030	)		—
Net cash provided by (used in) investing activities		9,787			338,040			(10,829	)		(552,517	)		(261,242	)		(476,761	)
Cash flows from financing activities:
Repayments of long-term debt		—			—			(1,338,163	)		(12,209	)		—			(1,350,372	)
Proceeds from issuance of long-term debt		—			—			1,471,000			—			—			1,471,000
Proceeds from intercompany borrowing		1,800			—			73,956			—			(75,756	)		—
Debt issuance costs		—			—			(19,444	)		—			—			(19,444	)
Payment of premium on early retirement of debt		—			—			(39,475	)		—			—			(39,475	)
Principal payments on deferred satellite performance incentives		—			—			—			(7,348	)		—			(7,348	)
Capital contribution from parent		—			—			—			15,032			(15,032	)		—
Dividends to shareholders		—			(13,990	)		(338,040	)		—			352,030			—
Capital contribution from noncontrolling interest		—			—			—			6,105			—			6,105
Dividends paid to noncontrolling interest		—			—			—			(4,673	)		—			(4,673	)
Net cash provided by (used in) financing activities		1,800			(13,990	)		(190,166	)		(3,093	)		261,242			55,793
Effect of exchange rate changes on cash and cash equivalents		(1	)		—			(8	)		(2,284	)		—			(2,293	)
Net change in cash and cash equivalents		224			(867	)		29,775			(69,746	)		—			(40,614	)
Cash and cash equivalents, beginning of period		511			908			2,269			291,012			—			294,700
Cash and cash equivalents, end of period	$	735		$	41		$	32,044		$	221,266		$	—		$	254,086

(Certain totals may not add due to the effects of rounding)

32

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Intelsat Jackson Subsidiaries (Non- Guarantors)			Consolidation and Eliminations			Consolidated
Cash flows from operating activities:	$	(30,136	)	$	(255,417	)	$	(20,132	)	$	748,846		$	—		$	443,161
Cash flows from investing activities:
Payments for satellites and other property and equipment (including capitalized interest)		—			—			—			(412,710	)		—			(412,710	)
Repayment from (disbursements for) intercompany loans		—			—			(113,206	)		1,480			111,726			—
Capital contribution to previously unconsolidated affiliates		—			—			—			(6,105	)		—			(6,105	)
Investment in subsidiaries		(3,100	)		—			(4,993,408	)		—			4,996,508			—
Dividend from affiliates		550,844			797,373			405,170			—			(1,753,387	)		—
Other investing activities		—			—			—			2,261			—			2,261
Net cash provided by (used in) investing activities		547,744			797,373			(4,701,444	)		(415,074	)		3,354,847			(416,554	)
Cash flows from financing activities:
Repayments of long-term debt		(485,841	)		—			(339,630	)		(5,289,423	)		—			(6,114,894	)
Proceeds from issuance of long-term debt		—			—			5,883,750			35,173			—			5,918,923
Proceeds from (repayment of) intercompany borrowing		—			—			(1,480	)		113,206			(111,726	)		—
Debt issuance costs		—			—			(69,307	)		—			—			(69,307	)
Payment of premium on early retirement of debt		(36,770	)		—			(26,114	)		(108,163	)		—			(171,047	)
Principal payments on deferred satellite performance incentives		—			—			—			(6,891	)		—			(6,891	)
Capital contribution from parent		—			—			—			4,996,508			(4,996,508	)		—
Dividends to shareholders		—			(550,844	)		(797,373	)		(405,170	)		1,753,387			—
Noncontrolling interest in New Dawn		—			—			—			1,558			—			1,558
Net cash provided by (used in) financing activities		(522,611	)		(550,844	)		4,649,846			(663,202	)		(3,354,847	)		(441,658	)
Effect of exchange rate changes on cash and cash equivalents		—			(1	)		—			3,921			—			3,920
Net change in cash and cash equivalents		(5,003	)		(8,889	)		(71,730	)		(325,509	)		—			(411,131	)
Cash and cash equivalents, beginning of period		7,315			10,017			126,605			548,993			—			692,930
Cash and cash equivalents, end of period	$	2,312		$	1,128		$	54,875		$	223,484		$	—		$	281,799

(Certain totals may not add due to the effects of rounding)

33

On April 5, 2011 Intelsat Jackson completed an offering of $2.65 billion aggregate principal amount of senior notes, consisting of $1.5 billion aggregate principal amount of the 7 ¹/₄% 2019 Jackson Notes and $1.15 billion aggregate principal amount of the 2021 Jackson Notes. The 7 ¹/₄% 2019 Jackson Notes and the 2021 Jackson Notes are fully and unconditionally guaranteed, jointly and severally, by Intelsat S.A., Intelsat Luxembourg and certain wholly-owned subsidiaries of Intelsat Jackson ( the “Subsidiary Guarantors”).

Separate financial statements of Intelsat S.A., Intelsat Luxembourg, Intelsat Jackson and the Subsidiary Guarantors are not presented because management believes that such financial statements would not be material to investors. Investments in Intelsat Jackson’s subsidiaries in the following condensed consolidating financial information are accounted for under the equity method of accounting. Consolidating adjustments include the following:

• elimination of investment in subsidiaries;

• elimination of intercompany accounts; and

• elimination of equity in earnings (losses) of subsidiaries.

Other comprehensive income for the three months ended June 30, 2011 and 2012 was $1.1 million and $2.2 million, respectively. Other comprehensive income for the six months ended June 30, 2011 and 2012 was $2.3 million and $4.7 million, respectively. Other comprehensive income is fully attributable to the Jackson Subsidiary Guarantors, which are consolidated within Intelsat Jackson as well.

34

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF JUNE 30, 2012

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson		Jackson Subsidiary Guarantors		Non-Guarantor Subsidiaries		Consolidation and Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents, net of restricted cash	$	735		$	41		$	175,645	$	143,602	$	77,665	$	(143,602	)	$	254,086
Restricted cash		—			—			—		—		118,032		—			118,032
Receivables, net of allowance		45			3			218,591		218,202		91,228		(218,202	)		309,867
Deferred income taxes		—			—			23,812		23,812		2,115		(23,812	)		25,927
Prepaid expenses and other current assets		—			12,531			27,824		27,567		22,171		(30,757	)		59,336
Intercompany receivables		—			677			553,202		4,611,873		—		(5,165,752	)		—
Total current assets		780			13,252			999,074		5,025,056		311,211		(5,582,125	)		767,248
Satellites and other property and equipment, net		—			—			6,067,435		6,067,435		276,288		(6,084,281	)		6,326,877
Goodwill		—			—			6,780,827		6,780,827		—		(6,780,827	)		6,780,827
Non-amortizable intangible assets		—			—			2,458,100		2,458,100		—		(2,458,100	)		2,458,100
Amortizable intangible assets, net		—			—			696,977		696,977		—		(696,977	)		696,977
Investment in affiliates		(390,311	)		5,086,782			207,758		207,758		10		(5,110,987	)		1,010
Other assets		7,012			92,262			297,931		194,726		30,848		(188,498	)		434,281
Total assets	$	(382,519	)	$	5,192,296		$	17,508,102	$	21,430,879	$	618,357	$	(26,901,795	)	$	17,465,320
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	3,175		$	—		$	170,424	$	169,629	$	22,124	$	(172,819	)	$	192,533
Accrued interest payable		3,830			227,953			132,810		1,235		874		(1,235	)		365,467
Current portion of long-term debt		—			—			107,500		—		131,455		—			238,955
Deferred satellite performance incentives		—			—			16,792		16,792		1,432		(16,792	)		18,224
Other current liabilities		—			—			148,854		131,065		22,581		(132,397	)		170,103
Intercompany payables		495,055			—			—		—		58,823		(553,878	)		—
Total current liabilities		502,060			227,953			576,380		318,721		237,289		(877,121	)		985,282
Long-term debt, net of current portion		314,625			5,307,986			10,150,442		—		127,665		—			15,900,718
Deferred satellite performance incentives, net of current portion		—			—			118,020		118,020		2,495		(118,020	)		120,515
Deferred revenue, net of current portion		—			—			803,320		803,320		8,462		(818,650	)		796,452
Deferred income taxes		—			—			255,114		255,114		22,005		(248,918	)		283,315
Accrued retirement benefits		—			—			289,437		289,437		—		(289,437	)		289,437
Other long-term liabilities		—			45,811			228,607		160,745		9,128		(160,745	)		283,546
Noncontrolling interest		—			—			—		—		5,412		—			5,412
Shareholder’s equity (deficit):
Ordinary shares		5,000			669,036			4,322,518		23,388		44		(5,014,986	)		5,000
Other shareholder’s equity (deficit)		(1,204,204	)		(1,058,490	)		764,264		19,462,134		205,857		(19,373,918	)		(1,204,357	)
Total liabilities and shareholder’s equity (deficit)	$	(382,519	)	$	5,192,296		$	17,508,102	$	21,430,879	$	618,357	$	(26,901,795	)	$	17,465,320

(Certain totals may not add due to the effects of rounding)

35

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2011

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson		Jackson Subsidiary Guarantors		Non-Guarantor Subsidiaries		Consolidation and Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents, net of restricted cash	$	511		$	908		$	240,175	$	237,906	$	53,106	$	(237,906	)	$	294,700
Restricted cash		—			—			—		—		94,131		—			94,131
Receivables, net of allowance		41			—			217,082		217,082		114,248		(217,082	)		331,371
Deferred income taxes		—			—			23,944		23,944		2,114		(23,944	)		26,058
Prepaid expenses and other current assets		551			16			27,985		27,949		15,216		(28,783	)		42,934
Intercompany receivables		—			6,249			523,329		939,957		—		(1,469,535	)		—
Total current assets		1,103			7,173			1,032,515		1,446,838		278,815		(1,977,250	)		789,194
Satellites and other property and equipment, net		—			—			5,869,027		5,869,027		291,182		(5,886,505	)		6,142,731
Goodwill		—			—			6,780,827		6,780,827		—		(6,780,827	)		6,780,827
Non-amortizable intangible assets		—			—			2,458,100		2,458,100		—		(2,458,100	)		2,458,100
Amortizable intangible assets, net		—			—			742,868		742,868		—		(742,868	)		742,868
Investment in affiliates		(303,383	)		5,177,292			218,048		218,048		10		(5,309,005	)		1,010
Other assets		5,356			99,680			293,032		197,322		42,728		(191,442	)		446,676
Total assets	$	(296,924	)	$	5,284,145		$	17,394,417	$	17,713,030	$	612,735	$	(23,345,997	)	$	17,361,406
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	2,484		$	(10	)	$	168,577	$	168,126	$	27,960	$	(168,961	)	$	198,176
Accrued interest payable		3,831			227,953			126,646		932		906		(932	)		359,336
Current portion of long-term debt		—			—			32,500		—		132,318		—			164,818
Deferred satellite performance incentives		—			—			16,339		16,339		1,376		(16,339	)		17,715
Other current liabilities		—			—			121,327		118,131		21,074		(119,463	)		141,069
Intercompany payables		487,031			—			—		—		42,547		(529,578	)		—
Total current liabilities		493,346			227,943			465,389		303,528		226,181		(835,273	)		881,114
Long-term debt, net of current portion		302,079			5,307,986			10,093,802		—		133,645		—			15,837,512
Deferred satellite performance incentives, net of current portion		—			—			110,982		110,982		2,992		(110,982	)		113,974
Deferred revenue, net of current portion		—			—			731,560		731,560		8,850		(747,557	)		724,413
Deferred income taxes		—			—			244,216		244,216		14,785		(238,036	)		265,181
Accrued retirement benefits		—			—			305,902		305,902		—		(305,902	)		305,902
Other long-term liabilities		—			49,673			265,274		184,237		8,136		(184,585	)		322,735
Noncontrolling interest		—			—			—		—		3,024		—			3,024
Shareholder’s equity (deficit):
Ordinary shares		5,000			669,036			4,322,518		9,576,008		24		(14,567,586	)		5,000
Other shareholder’s equity (deficit)		(1,097,349	)		(970,493	)		854,774		6,256,597		215,098		(6,356,076	)		(1,097,449	)
Total liabilities and shareholder’s equity (deficit)	$	(296,924	)	$	5,284,145		$	17,394,417	$	17,713,030	$	612,735	$	(23,345,997	)	$	17,361,406

(Certain totals may not add due to the effects of rounding)

36

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2012

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Jackson Subsidiary Guarantors			Non-Guarantor Subsidiaries			Consolidation and Eliminations			Consolidated
Revenue	$	—		$	—		$	571,440		$	571,444		$	177,032		$	(681,248	)	$	638,668
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		—			—			64,066			84,593			145,045			(194,397	)		99,307
Selling, general and administrative		1,006			6,279			34,282			33,772			11,854			(33,772	)		53,421
Depreciation and amortization		—			—			178,879			161,775			10,065			(162,091	)		188,628
Losses on derivative financial instruments		—			—			15,519			—			237			—			15,756
Total operating expenses		1,006			6,279			292,746			280,140			167,201			(390,260	)		357,112
Income (loss) from operations		(1,006	)		(6,279	)		278,694			291,304			9,831			(290,988	)		281,556
Interest (income) expense, net		15,661			152,660			154,231			(114,413	)		4,139			114,413			326,691
Loss on early extinguishment of debt		—			—			(43,383	)		—			—			—			(43,383	)
Subsidiary income (loss)		(67,325	)		93,986			6,068			6,068			—			(38,797	)		—
Other income (expense), net		1			—			1,292			1,299			(2,866	)		(1,632	)		(1,906	)
Income (loss) before income taxes		(83,991	)		(64,953	)		88,440			413,084			2,826			(445,830	)		(90,424	)
Benefit from income taxes		—			—			(5,546	)		(5,546	)		(1,251	)		5,546			(6,797	)
Net income (loss)		(83,991	)		(64,953	)		93,986			418,630			4,077			(451,376	)		(83,627	)
Net income attributable to noncontrolling interest		—			—			—			—			(382	)		—			(382	)
Net income (loss) attributable to Intelsat S.A.	$	(83,991	)	$	(64,953	)	$	93,986		$	418,630		$	3,695		$	(451,376	)	$	(84,009	)

(Certain totals may not add due to the effects of rounding)

37

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2011

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Jackson Subsidiary Guarantors			Non-Guarantor Subsidiaries		Consolidation and Eliminations			Consolidated
Revenue	$	—		$	—		$	572,799		$	572,800		$	163,948	$	(667,101	)	$	642,446
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		—			—			61,888			61,888			133,468		(156,185	)		101,059
Selling, general and administrative		669			6,519			34,625			34,304			13,334		(34,304	)		55,147
Depreciation and amortization		—			—			187,233			187,233			7,121		(187,233	)		194,354
Losses on derivative financial instruments		—			—			17,801			—			2,721		—			20,522
Total operating expenses		669			6,519			301,547			283,425			156,644		(377,722	)		371,082
Income (loss) from operations		(669	)		(6,519	)		271,252			289,375			7,304		(289,379	)		271,364
Interest (income) expense, net		14,177			152,451			157,397			(2,936	)		1,836		2,936			325,861
Loss on early extinguishment of debt		—			—			(157,953	)		(128,991	)		—		128,991			(157,953	)
Subsidiary income (loss)		(198,418	)		(36,137	)		9,459			9,459			—		215,637			—
Loss from previously unconsolidated affiliates		—			—			(4,589	)		(4,589	)		—		4,589			(4,589	)
Other income, net		—			—			1,215			1,217			2,176		(1,317	)		3,291
Income (loss) before income taxes		(213,264	)		(195,107	)		(38,013	)		169,407			7,644		55,585			(213,748	)
Provision for (benefit from) income taxes		—			—			(1,876	)		(1,876	)		2,610		1,876			734
Net income (loss)		(213,264	)		(195,107	)		(36,137	)		171,283			5,034		53,709			(214,482	)
Net loss attributable to noncontrolling interest		—			—			—			—			1,114		—			1,114
Net income (loss) attributable to Intelsat S.A.	$	(213,264	)	$	(195,107	)	$	(36,137	)	$	171,283		$	6,148	$	53,709		$	(213,368	)

(Certain totals may not add due to the effects of rounding)

38

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2012

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Jackson Subsidiary Guarantors			Non-Guarantor Subsidiaries			Consolidation and Eliminations			Consolidated
Revenue	$	—		$	—		$	1,136,571		$	1,136,575		$	358,691		$	(1,348,999	)	$	1,282,838
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		—			—			131,576			152,103			285,163			(364,526	)		204,316
Selling, general and administrative		2,055			12,705			64,668			63,698			24,960			(63,698	)		104,388
Depreciation and amortization		—			—			356,108			339,004			20,023			(339,635	)		375,500
Losses on derivative financial instruments		—			—			24,776			—			838			—			25,614
Total operating expenses		2,055			12,705			577,128			554,805			330,984			(767,859	)		709,818
Income (loss) from operations		(2,055	)		(12,705	)		559,443			581,770			27,707			(581,140	)		573,020
Interest (income) expense, net		31,160			305,259			293,002			(126,324	)		8,701			126,324			638,122
Loss on early extinguishment of debt		—			—			(43,383	)		—			—			—			(43,383	)
Subsidiary income (loss)		(75,189	)		248,034			11,678			11,678			—			(196,201	)		—
Other income (expense), net		(1	)		(1	)		3,588			3,595			(1,922	)		(4,262	)		997
Income (loss) before income taxes		(108,405	)		(69,931	)		238,324			723,367			17,084			(907,927	)		(107,488	)
Provision for (benefit from) income taxes		—			—			(9,710	)		(9,710	)		10,101			9,726			407
Net income (loss)		(108,405	)		(69,931	)		248,034			733,077			6,983			(917,653	)		(107,895	)
Net income attributable to noncontrolling interest		—			—			—			—			(563	)		—			(563	)
Net income (loss) attributable to Intelsat S.A.	$	(108,405	)	$	(69,931	)	$	248,034		$	733,077		$	6,420		$	(917,653	)	$	(108,458	)

(Certain totals may not add due to the effects of rounding)

39

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Jackson Subsidiary Guarantors			Non-Guarantor Subsidiaries		Consolidation and Eliminations			Consolidated
Revenue	$	—		$	—		$	1,142,766		$	1,142,767		$	326,914	$	(1,329,813	)	$	1,282,634
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		—			—			126,105			126,105			267,020		(313,148	)		206,082
Selling, general and administrative		1,594			12,845			66,766			66,190			25,541		(66,190	)		106,746
Depreciation and amortization		—			—			375,061			375,061			14,295		(375,061	)		389,356
(Gains) losses on derivative financial instruments		—			—			15,876			(4,461	)		2,932		4,461			18,808
Total operating expenses		1,594			12,845			583,808			562,895			309,788		(749,938	)		720,992
Income (loss) from operations		(1,594	)		(12,845	)		558,958			579,872			17,126		(579,875	)		561,642
Interest expense, net		43,624			307,387			321,321			28,052			2,319		(28,052	)		674,651
Loss on early extinguishment of debt		(78,960	)		—			(247,223	)		(218,259	)		—		218,259			(326,183	)
Subsidiary income (loss)		(304,684	)		22,460			24,543			24,543			—		233,138			—
Loss from previously unconsolidated affiliates		—			—			(4,469	)		(4,469	)		—		4,469			(4,469	)
Other income, net		—			—			1,099			1,099			6,169		(1,200	)		7,167
Income (loss) before income taxes		(428,862	)		(297,772	)		11,587			354,734			20,976		(97,157	)		(436,494	)
Provision for (benefit from) income taxes		—			—			(10,873	)		(10,873	)		4,620		10,873			(6,253	)
Net income (loss)		(428,862	)		(297,772	)		22,460			365,607			16,356		(108,030	)		(430,241	)
Net loss attributable to noncontrolling interest		—			—			—			—			1,275		—			1,275
Net income (loss) attributable to Intelsat S.A.	$	(428,862	)	$	(297,772	)	$	22,460		$	365,607		$	17,631	$	(108,030	)	$	(428,966	)

(Certain totals may not add due to the effects of rounding)

40

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2012

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Jackson Subsidiary Guarantors			Non- Guarantor Subsidiaries			Consolidation and Eliminations			Consolidated
Cash flows from operating activities:	$	(11,362	)	$	(324,917	)	$	653,965		$	389,995		$	64,961		$	(389,955	)	$	382,647
Cash flows from investing activities:
Payments for satellites and other property and equipment (including capitalized interest)		—			—			(471,475	)		(471,475	)		(5,286	)		471,475			(476,761	)
Repayment from (disbursements for) intercompany loans		—			—			8,888			(31,820	)		—			22,932			—
Investment in subsidiaries		(4,203	)		—			292			292			—			3,619			—
Dividend from affiliates		13,990			338,040			15,198			15,198			—			(382,426	)		—
Net cash provided by (used in) investing activities		9,787			338,040			(447,097	)		(487,805	)		(5,286	)		115,600			(476,761	)
Cash flows from financing activities:
Repayments of long-term debt		—			—			(1,338,163	)		—			(12,209	)		—			(1,350,372	)
Proceeds from issuance of long-term debt		—			—			1,471,000			—			—			—			1,471,000
Proceeds from (repayment of) intercompany borrowing		1,800			—			—			—			(10,688	)		8,888			—
Debt issuance costs		—			—			(19,444	)		—			—			—			(19,444	)
Payment of premium on early retirement of debt		—			—			(39,475	)		—			—			—			(39,475	)
Principal payments on deferred satellite performance incentives		—			—			(6,907	)		(6,907	)		(441	)		6,907			(7,348	)
Capital contribution from parent		—			—			—			10,775			3,911			(14,686	)		—
Dividends to shareholders		—			(13,990	)		(338,040	)		—			(15,198	)		367,228			—
Capital contribution from noncontrolling interest		—			—			—			—			6,105			—			6,105
Dividends paid to noncontrolling interest		—			—			—			—			(4,673	)		—			(4,673	)
Net cash provided by (used in) financing activities		1,800			(13,990	)		(271,029	)		3,868			(33,193	)		368,337			55,793
Effect of exchange rate changes on cash and cash equivalents		(1	)		—			(369	)		(362	)		(1,923	)		362			(2,293	)
Net change in cash and cash equivalents		224			(867	)		(64,530	)		(94,304	)		24,559			94,304			(40,614	)
Cash and cash equivalents, beginning of period		511			908			240,175			237,906			53,106			(237,906	)		294,700
Cash and cash equivalents, end of period	$	735		$	41		$	175,645		$	143,602		$	77,665		$	(143,602	)	$	254,086

(Certain totals may not add due to the effects of rounding)

41

INTELSAT S.A. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(in thousands)

	Intelsat S.A.			Intelsat Luxembourg			Intelsat Jackson			Jackson Subsidiary Guarantors			Non-Guarantor Subsidiaries			Consolidation and Eliminations			Consolidated
Cash flows from operating activities:	$	(30,136	)	$	(255,417	)	$	744,129		$	769,167		$	(20,007	)	$	(764,575	)	$	443,161
Cash flows from investing activities:
Payments for satellites and other property and equipment (including capitalized interest)		—			—			(365,287	)		(365,287	)		(47,736	)		365,600			(412,710	)
Repayment from intercompany loans		—			—			—			1,479			787			(2,266	)		—
Capital contributions to previously unconsolidated affiliates		—			—			(6,105	)		(6,105	)		—			6,105			(6,105	)
Investment in subsidiaries		(3,100	)		—			—			(4,661	)		—			7,761			—
Dividend from affiliates		550,844			797,373			13,175			13,175			—			(1,374,567	)		—
Other investing activities		—			—			2,261			2,261			—			(2,261	)		2,261
Net cash provided by (used in) investing activities		547,744			797,373			(355,956	)		(359,138	)		(46,949	)		(999,628	)		(416,554	)
Cash flows from financing activities:
Repayments of long-term debt		(485,841	)		—			(5,629,053	)		(5,289,423	)		—			5,289,423			(6,114,894	)
Proceeds from issuance of long-term debt		—			—			5,883,750			—			35,173			—			5,918,923
Proceeds from (repayment of) intercompany borrowing		—			—			(787	)		112,419			—			(111,632	)		—
Debt issuance costs		—			—			(69,307	)		—			—			—			(69,307	)
Payment of premium on early retirement of debt		(36,770	)		—			(134,277	)		(108,163	)		—			108,163			(171,047	)
Principal payments on deferred satellite performance incentives		—			—			(6,685	)		(6,685	)		(206	)		6,685			(6,891	)
Capital contribution from parent		—			—			—			4,993,408			7,761			(5,001,169	)		—
Dividends to shareholders		—			(550,844	)		(797,373	)		(405,170	)		(13,175	)		1,766,562			—
Noncontrolling interest in New Dawn		—			—			—			—			1,558			—			1,558
Net cash provided by (used in) financing activities		(522,611	)		(550,844	)		(753,732	)		(703,614	)		31,111			2,058,032			(441,658	)
Effect of exchange rate changes on cash and cash equivalents		—			(1	)		—			(244	)		4,165			—			3,920
Net change in cash and cash equivalents		(5,003	)		(8,889	)		(365,559	)		(293,829	)		(31,680	)		293,829			(411,131	)
Cash and cash equivalents, beginning of period		7,315			10,017			595,472			468,867			80,126			(468,867	)		692,930
Cash and cash equivalents, end of period	$	2,312		$	1,128		$	229,913		$	175,038		$	48,446		$	(175,038	)	$	281,799

(Certain totals may not add due to the effects of rounding)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and their notes included elsewhere in this Quarterly Report. See “Forward-Looking Statements” for a discussion of factors that could cause our future financial condition and results of operations to be different from those discussed below.

Overview

We operate the world’s largest satellite services business, providing a critical layer in the global communications infrastructure. We generate more revenue, operate more satellite capacity, hold more orbital location rights, contract more backlog, serve more commercial customers and deliver services in more countries than any other commercial satellite operator. We provide diversified communications services to the world’s leading media companies, fixed and wireless telecommunications operators, data networking service providers for enterprise and mobile applications, multinational corporations and ISPs. We are also the leading provider of commercial satellite capacity to the U.S. government and other select military organizations and their contractors.

Our network solutions are a critical component of our customers’ infrastructures and business models. Our customers use our global network for a broad range of applications, from global distribution of content for media companies to providing the transmission layer for unmanned aerial vehicles to enabling essential network backbones for telecommunications providers. In addition, our satellite solutions provide higher reliability than is available from local terrestrial telecommunications services in many regions and allow our customers to reach geographies that they would otherwise be unable to serve.

2012 Intelsat Jackson Notes Offering, Tender Offers and Redemptions

On April 26, 2012, Intelsat Jackson completed an offering of $1.2 billion aggregate principal amount of its 7 ¹/₄% Senior Notes due 2020 (the “2020 Jackson Notes”). Intelsat Jackson had previously issued $1.0 billion aggregate principal amount of the 2020 Jackson Notes on September 30, 2010. The net proceeds from the 2012 offering were used by Intelsat Jackson to repurchase $49.5 million aggregate principal amount of Intelsat Jackson’s outstanding 9  ¹/₂% Senior Notes due 2016 (the “2016 Jackson 9 ¹/₂% Notes”) and $10.1 million aggregate principal amount of Intelsat Jackson’s 11  ¹/₄% Senior Notes due 2016 (the “2016 Jackson 11 ¹/₄% Notes”) in tender offers launched on April 12, 2012 and completed on May 10, 2012. On June 15, 2012, Intelsat Jackson redeemed the remaining $652.4 million aggregate principal amount outstanding of the 2016 Jackson 9 ¹/₂% Notes and an additional $434.9 million aggregate principal amount of the 2016 Jackson 11  ¹/₄% Notes.

In connection with these tender offers and redemptions, we recognized a loss on early extinguishment of debt of $43.4 million in the second quarter of 2012, consisting of the difference between the carrying value of the aggregate debt repurchased or redeemed and the total cash amount paid (including related fees), and a write-off of unamortized debt premium and debt issuance costs.

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Results of Operations

Three Months Ended June 30, 2011 and 2012

The following table sets forth our comparative statements of operations for the periods shown with the increase (decrease) and percentage changes, except those deemed not meaningful (“NM”), between the periods presented (in thousands, except percentages):

							Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2012
	Three Months Ended June 30, 2011			Three Months Ended June 30, 2012			Increase (Decrease)			Percentage Change
Revenue	$	642,446		$	638,668		$	(3,778	)		(1	)%
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		101,059			99,307			(1,752	)		(2	)
Selling, general and administrative		55,147			53,421			(1,726	)		(3	)
Depreciation and amortization		194,354			188,628			(5,726	)		(3	)
Losses on derivative financial instruments		20,522			15,756			(4,766	)		(23	)
Total operating expenses		371,082			357,112			(13,970	)		(4	)
Income from operations		271,364			281,556			10,192			4
Interest expense, net		325,861			326,691			830			—
Loss on early extinguishment of debt		(157,953	)		(43,383	)		114,570			73
Loss from previously unconsolidated affiliates		(4,589	)		—			4,589			NM
Other income (expense), net		3,291			(1,906	)		(5,197	)		NM
Loss before income taxes		(213,748	)		(90,424	)		123,324			58
Provision for (benefit from) income taxes		734			(6,797	)		(7,531	)		NM
Net loss		(214,482	)		(83,627	)		130,855			61	%
Net (income) loss attributable to noncontrolling interest		1,114			(382	)		(1,496	)		NM
Net loss attributable to Intelsat S.A.	$	(213,368	)	$	(84,009	)	$	129,359			61	%

Revenue

We earn revenue primarily by providing services over satellite transponder capacity to our customers. Our customers generally obtain satellite capacity from us by placing an order pursuant to one of several master customer service agreements. Our master customer service agreements offer different service types, including transponder services, managed services, and channel, which are all services that are provided on, or used to provide access to, our global network. We refer to these services as on-network services. Our customer agreements also cover services that we procure from third parties and resell, which we refer to as off-network services. These services can include transponder services and other satellite-based transmission services sourced from other operators, often in frequencies not available on our network. Under the category Off-Network and Other Revenues, we also include revenues from consulting and other services.

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The following table sets forth our comparative revenue by service type, with Off-Network and Other Revenues shown separately from On-Network Revenues, for the periods shown (in thousands, except percentages):

	Three Months Ended June 30, 2011		Three Months Ended June 30, 2012		Increase (Decrease)			Percentage Change
On-Network Revenues
Transponder services	$	474,722	$	480,803	$	6,081			1	%
Managed services		70,350		67,205		(3,145	)		(4	)
Channel		26,723		23,461		(3,262	)		(12	)
Total on-network revenues		571,795		571,469		(326	)		(0	)
Off-Network and Other Revenues
Transponder, MSS and other off-network services		56,679		55,388		(1,291	)		(2	)
Satellite-related services		13,972		11,811		(2,161	)		(15	)
Total off-network and other revenues		70,651		67,199		(3,452	)		(5	)
Total	$	642,446	$	638,668	$	(3,778	)		(1	)%

Total revenue for the three months ended June 30, 2012 decreased by $3.8 million, or 1%, as compared to the three months ended June 30, 2011. By service type, our revenues increased or decreased due to the following:

On-Network Revenues:

• Transponder services—an aggregate increase of $6.1 million, primarily due to a $10.0 million increase in revenue from growth in capacity sold to media customers mainly in the Latin America and Caribbean, the Europe and the Asia-Pacific regions, as well as a $1.3 million increase in revenue from capacity sold by our Intelsat General business, partially offset by an aggregate $5.2 million decrease in revenue from network services customers, reflecting a decline in the Europe region for services in Africa, but an increase in the Latin America and Caribbean region.

• Managed services—an aggregate decrease of $3.1 million, largely due to a decrease in revenue from network services customers for international trunking primarily in Africa, a trend which we expect will continue due to the migration of services in this region to fiber optic cable.

• Channel—an aggregate decrease of $3.3 million related to a continued decline from the migration of international point-to-point satellite traffic to fiber optic cable, a trend which we expect will continue.

Off-Network and Other Revenues:

• Transponder, MSS and other off-network services—an aggregate decrease of $1.3 million, primarily due to declines of $1.8 million in mobile satellite services (“MSS”) revenue and $2.5 million in off-network transponder services for network services and media customers. The decreases were partially offset by a $2.9 million increase in off-network transponder services related to contracts being implemented by our Intelsat General business.

• Satellite-related services—an aggregate decrease of $2.2 million, primarily due to lower professional fees earned for providing government professional services and flight operations support for third-party satellites as compared to the second quarter of 2011.

Operating Expenses

Direct Costs of Revenue (Exclusive of Depreciation and Amortization)

Direct costs of revenue decreased by $1.8 million, or 2%, to $99.3 million for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. The decrease was primarily due to a $3.1 million decline in costs attributable to purchases of off-network FSS capacity services and other third party services and a $1.5 million reduction in the cost of MSS capacity purchased related to solutions sold by our Intelsat General business, partially offset by a net increase of $2.8 million in staff related and other miscellaneous expenses.

Selling, General and Administrative

Selling, general and administrative expenses decreased by $1.7 million, or 3%, to $53.4 million for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. The decrease was primarily due to $1.9 million of lower professional fees and $1.5 million of lower non-cash stock compensation costs associated with the amended and restated Intelsat Global, Ltd. 2008 Share Incentive Plan (the “2008 Share Plan”), partially offset by a $1.7 million increase in bad debt expense.

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Depreciation and Amortization

Depreciation and amortization expense decreased by $5.7 million, or 3%, to $188.6 million for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. This decrease was primarily due to the following:

• a net decrease of $8.4 million in depreciation expense due to the timing of certain satellites becoming fully depreciated and changes in estimated remaining useful lives of certain satellites;

• a decrease of $4.5 million in depreciation expense due to the timing of ground and other assets placed in service or becoming fully depreciated; and

• a decrease of $3.4 million in amortization expense primarily due to changes in the expected pattern of consumption of amortizable intangible assets as these assets primarily include acquired backlog, which relates to contracts covering varying time periods that expire over time, and acquired customer relationships for which the value diminishes over time; partially offset by

• an increase of $11.0 million in depreciation expense resulting from the impact of satellites placed into service during 2011 and the first quarter of 2012.

Losses on Derivative Financial Instruments

Losses on derivative financial instruments were $15.8 million for the three months ended June 30, 2012 compared to $20.5 million for the three months ended June 30, 2011. The losses on derivative financial instruments are related to the net loss on our interest rate swaps, which reflects interest expense accrued on the interest rate swaps as well as the change in fair value.

Interest Expense, Net

Interest expense, net consists of the gross interest expense we incur less the amount of interest we capitalize related to capital assets under construction and less interest income earned. As of June 30, 2012, we also held interest rate swaps with an aggregate notional amount of $2.3 billion to economically hedge the variability in cash flow on a portion of the floating-rate term loans under our senior secured and unsecured credit facilities. The swaps have not been designated as hedges for accounting purposes. Interest expense, net increased by $0.8 million to $326.7 million for the three months ended June 30, 2012, as compared to $325.9 million for the three months ended June 30, 2011. The increase in interest expense, net was principally due to the following:

• a net increase of $9.7 million in interest expense, principally reflecting $11.3 million of higher interest expense resulting from the period during which the newly issued 2020 Jackson Notes were outstanding but the 2016 Jackson 9 ¹/₂% Notes and the 2016 Jackson 11 ¹/₄% Notes had not been fully redeemed or repurchased in our 2012 notes refinancing (see—Liquidity and Capital Resources—Long-Term Debt—2012 Intelsat Jackson Notes Offering, Tender Offers and Redemptions); partially offset by

• a decrease of $5.1 million in interest expense resulting from our refinancing transactions, redemptions and offerings in 2011 (see—Liquidity and Capital Resources—Long-Term Debt—2011 Debt Transactions); and

• a decrease of $4.9 million from higher capitalized interest resulting from increased levels of satellites and related assets under construction.

Non-cash items in total interest expense, net were $18.6 million for the three months ended June 30, 2012 and included $4.0 million of payment-in-kind interest expense and $14.6 million primarily associated with the amortization of deferred financing fees incurred as a result of new or refinanced debt and the amortization and accretion of discounts and premiums.

Loss on Early Extinguishment of Debt

Loss on early extinguishment of debt was $43.4 million for the three months ended June 30, 2012 as compared to $158.0 million for the three months ended June 30, 2011. The 2012 loss related to the repayment of debt in connection with the 2012 Intelsat Jackson tender offers and redemptions (see Liquidity and Capital Resources—Long-Term Debt—2012 Intelsat Jackson Notes Offering, Tender Offers and Redemptions). In the three months ended June 30, 2012, Intelsat Jackson repurchased or redeemed $1,146.9 million of its debt for $1,186.2 million, excluding accrued and unpaid interest and related fees of $57.7 million. The loss of $43.4 million was primarily driven by a $39.5 million difference between the carrying value of the debt repurchased or redeemed and the total cash amount paid (including related fees), together with a write-off of $3.9 million of unamortized debt premium and debt issuance costs.

The 2011 loss on early extinguishment of debt of $158.0 million related to the repayment of debt in connection with the 2011 refinancings, redemptions and tender offers (see Liquidity and Capital Resources—Long-Term Debt—2011 Debt Transactions). In April and May 2011, we redeemed or repurchased $2,527.0 million of Intelsat Sub Holdco, Intelsat Jackson and Intermediate Holdco notes for $2,604.4 million, excluding accrued and unpaid interest of $58.1 million. The loss of $158.0 million was driven by a $77.4 million difference between the carrying value of the debt repurchased or redeemed and the total cash amount paid (including related fees), together with a write-off of $80.6 million of unamortized debt discounts and debt issuance costs.

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Loss from Previously Unconsolidated Affiliates

Loss from previously unconsolidated affiliates was $4.6 million for the three months ended June 30, 2011 with no comparable amount for the three months ended June 30, 2012, due to the consolidation of the Horizons Holdings joint venture on September 30, 2011 (see Note 6(a)—Investments—Horizons Holdings).

Other Income (Expense), Net

Other expense, net was $1.9 million for the three months ended June 30, 2012 as compared to other income, net of $3.3 million for the three months ended June 30, 2011. The decrease was primarily due to a $3.3 million exchange rate loss during the three months ended June 30, 2012, as compared to a $2.0 million exchange rate gain for the three months ended June 30, 2011, primarily related to our business conducted in Brazilian reais and euros. The 2012 exchange rate loss is partially offset by $1.4 million in miscellaneous other income.

Provision for (Benefit from) Income Taxes

Our benefit from income taxes was $6.8 million for the three months ended June 30, 2012 as compared to a provision for income taxes of $0.7 million for the three months ended June 30, 2011. The difference was principally due to higher pre-tax losses in certain taxable jurisdictions.

Cash paid for income taxes, net of refunds, totaled $7.4 million and $4.2 million for the three months ended June 30, 2011 and 2012, respectively.

Six Months Ended June 30, 2011 and 2012

The following table sets forth our comparative statements of operations for the periods shown with the increase (decrease) and percentage changes, except those deemed not meaningful (“NM”), between the periods presented (in thousands, except percentages):

							Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2012
	Six Months Ended June 30, 2011			Six Months Ended June 30, 2012			Increase (Decrease)			Percentage Change
Revenue	$	1,282,634		$	1,282,838		$	204			—	%
Operating expenses:
Direct costs of revenue (exclusive of depreciation and amortization)		206,082			204,316			(1,766	)		(1	)
Selling, general and administrative		106,746			104,388			(2,358	)		(2	)
Depreciation and amortization		389,356			375,500			(13,856	)		(4	)
Losses on derivative financial instruments		18,808			25,614			6,806			36
Total operating expenses		720,992			709,818			(11,174	)		(2	)
Income from operations		561,642			573,020			11,378			2
Interest expense, net		674,651			638,122			(36,529	)		(5	)
Loss on early extinguishment of debt		(326,183	)		(43,383	)		282,800			87
Loss from previously unconsolidated affiliates		(4,469	)		—			4,469			NM
Other income, net		7,167			997			(6,170	)		(86	)
Loss before income taxes		(436,494	)		(107,488	)		329,006			75
Provision for (benefit from) income taxes		(6,253	)		407			6,660			NM
Net loss		(430,241	)		(107,895	)		322,346			75	%
Net (income) loss attributable to noncontrolling interest		1,275			(563	)		(1,838	)		NM
Net loss attributable to Intelsat S.A.	$	(428,966	)	$	(108,458	)	$	320,508			75	%

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The following table sets forth our comparative revenue by service type, with Off-Network and Other Revenues shown separately from On-Network Revenues, for the periods shown (in thousands, except percentages):

	Six Months Ended June 30, 2011		Six Months Ended June 30, 2012		Increase (Decrease)			Percentage Change
On-Network Revenues
Transponder services	$	942,005	$	960,762	$	18,757			2	%
Managed services		141,297		133,177		(8,120	)		(6	)
Channel		54,019		47,281		(6,738	)		(12	)
Total on-network revenues		1,137,321		1,141,220		3,899			0
Off-Network and Other Revenues
Transponder, MSS and other off-network services		116,148		119,822		3,674			3
Satellite-related services		29,165		21,796		(7,369	)		(25	)
Total off-network and other revenues		145,313		141,618		(3,695	)		(3	)
Total	$	1,282,634	$	1,282,838	$	204			0	%

Total revenue for the six months ended June 30, 2012 increased by $0.2 million as compared to the six months ended June 30, 2011. By service type, our revenues increased or decreased due to the following:

On-Network Revenues:

• Transponder services—an aggregate increase of $18.8 million, primarily due to a $22.5 million increase in revenue from growth in capacity sold to media customers mainly in the Latin America and Caribbean, the Europe, the Asia-Pacific and the North America regions, as well as a $5.1 million increase in revenue from capacity sold by our Intelsat General business, partially offset by an aggregate $8.8 million decrease in revenue from network services customers, reflecting a decline in the Europe region for services in Africa, but an increase in the Latin America and Caribbean region.

• Managed services—an aggregate decrease of $8.1 million, largely due to a decrease in revenue from network services customers for international trunking primarily in Africa, a trend which we expect will continue due to the migration of services in this region to fiber optic cable.

• Channel—an aggregate decrease of $6.7 million related to a continued decline from the migration of international point-to-point satellite traffic to fiber optic cable, a trend which we expect will continue.

Off-Network and Other Revenues:

• Transponder, MSS and other off-network services—an aggregate increase of $3.7 million, primarily due to an increase of $7.4 million in off-network transponder services revenue largely related to contracts being implemented by our Intelsat General business and a $5.0 million increase in customer premises equipment revenue, partially offset by a $4.8 million decline in off-network transponder and media services revenue and a $3.9 million decrease in MSS revenue.

• Satellite-related services—an aggregate decrease of $7.4 million, primarily due to lower professional fees earned for providing government professional services and flight operations support for third-party satellites as compared to the six months ended June 30, 2011.

Operating Expenses

Direct Costs of Revenue (Exclusive of Depreciation and Amortization)

Direct costs of revenue decreased by $1.8 million, or 1%, to $204.3 million for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. The decline was primarily due to a net $5.8 million decrease in costs related to earth station operations and costs attributable to purchases of off-network FSS capacity and other third party services and a $3.3 million decrease in the cost of MSS capacity purchased related to solutions sold by our Intelsat General business, partially offset by a $3.9 million increase in costs of equipment and a net $3.4 million increase in staff related and other miscellaneous expenses.

Selling, General and Administrative

Selling, general and administrative expenses decreased by $2.4 million, or 2%, to $104.4 million for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. The decrease was primarily due to a $5.9 million decrease in professional fees and $2.5 million of lower non-cash stock compensation costs associated with the 2008 Share Plan, partially offset by a $3.9 million increase in bad debt expense and a net $2.1 million increase in staff related and other miscellaneous expenses.

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Depreciation and Amortization

Depreciation and amortization expense decreased by $13.9 million, or 4%, to $375.5 million for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. This decrease was primarily due to the following:

• a net decrease of $18.3 million in depreciation expense due to the timing of certain satellites becoming fully depreciated and changes in estimated remaining useful lives of certain satellites;

• a decrease of $9.7 million in depreciation expense due to the timing of ground and other assets placed in service or becoming fully depreciated; and

• a decrease of $6.8 million in amortization expense primarily due to changes in the expected pattern of consumption of amortizable intangible assets as these assets primarily include acquired backlog, which relates to contracts covering varying time periods that expire over time, and acquired customer relationships for which the value diminishes over time; partially offset by

• an increase of $21.3 million in depreciation expense resulting from the impact of satellites placed into service during 2011 and the first quarter of 2012.

Losses on Derivative Financial Instruments

Losses on derivative financial instruments were $25.6 million for the six months ended June 30, 2012 compared to $18.8 million for the six months ended June 30, 2011. The losses on derivative financial instruments related to the net loss on our interest rate swaps, which reflects interest expense accrued on the interest rate swaps as well as the change in fair value.

Interest Expense, Net

Interest expense, net decreased by $36.5 million, or 5%, to $638.1 million for the six months ended June 30, 2012 as compared to $674.7 million for the six months ended June 30, 2011. The decrease in interest expense, net was principally due to the following:

• a net decrease of $35.6 million in interest expense resulting from our refinancing transactions, redemptions and offerings in 2011 (see—Liquidity and Capital Resources—Long-Term Debt—2011 Debt Transactions);

• a decrease of $10.1 million from higher capitalized interest resulting from increased levels of satellites and related assets under construction; partially offset by

• a net increase of $9.7 million in interest expense, principally reflecting $11.3 million of higher interest expense resulting from the period during which the newly issued 2020 Jackson Notes were outstanding but the 2016 Jackson 9 ¹/₂% Notes and the 2016 Jackson 11 ¹/₄% Notes had not been fully redeemed or repurchased in our 2012 notes refinancing (see—Liquidity and Capital Resources—Long-Term Debt – 2012 Intelsat Jackson Notes Offering, Tender Offers and Redemptions).

Non-cash items in interest expense, net were $34.0 million for the six months ended June 30, 2012 and included $5.0 million of payment-in-kind interest expense and $29.0 million primarily associated with the amortization of deferred financing fees incurred as a result of new or refinanced debt and the amortization and accretion of discounts and premiums.

Loss on Early Extinguishment of Debt

Loss on early extinguishment of debt was $43.4 million for the six months ended June 30, 2012 as compared to $326.2 million for the six months ended June 30, 2011. The 2012 loss related to the repayment of debt in connection with the 2012 Intelsat Jackson tender offers and redemptions (see Liquidity and Capital Resources—Long-Term Debt—2012 Intelsat Jackson Notes Offering, Tender Offers and Redemptions). In the three months ended June 30, 2012, Intelsat Jackson repurchased or redeemed $1,146.9 million of its debt for $1,186.2 million, excluding accrued and unpaid interest and related fees of $57.7 million. The loss of $43.4 million was primarily driven by a $39.5 million difference between the carrying value of the debt repurchased or redeemed and the total cash amount paid (including related fees), together with a write-off of $3.9 million of unamortized debt premium and debt issuance costs.

The 2011 loss on early extinguishment of debt of $326.2 million related to the repayment of debt in connection with the 2011 refinancings, redemptions and tender offers (see Liquidity and Capital Resources—Long-Term Debt—2011 Debt Transactions). In January 2011, we repurchased $2,849.3 million of Intelsat Corp and Intelsat Sub Holdco debt for $2,906.1 million, excluding accrued and unpaid interest and related fees of $8.7 million. In March 2011, we redeemed $710.8 million of Intelsat S.A. and Intelsat Sub Holdco debt for $747.6 million, excluding $19.1 million of accrued and unpaid interest. In April and May 2011, we redeemed or repurchased $2,527.0 million of Intelsat Sub Holdco, Intelsat Jackson and Intermediate Holdco notes for $2,604.4 million, excluding accrued and unpaid interest of $58.1 million. The loss of $326.2 million was driven by a $171.1 million difference between the carrying value of the debt repurchased, redeemed or repaid and the total cash amount paid (including related fees), together with a write-off of $155.1 million of unamortized debt discounts and debt issuance costs.

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Loss from Previously Unconsolidated Affiliates

Loss from previously unconsolidated affiliates was $4.5 million for the six months ended June 30, 2011 with no comparable amount for the six months ended June 30, 2012, due to the consolidation of the Horizons Holdings joint venture on September 30, 2011 (see Note 6(a)—Investments—Horizons Holdings).

Other Income, Net

Other income, net was $1.0 million for the six months ended June 30, 2012 as compared to $7.2 million for the six months ended June 30, 2011. The decrease was primarily due to a $2.3 million exchange rate loss during the six months ended June 30, 2012, as compared to a $3.9 million exchange rate gain for the six months ended June 30, 2011. The 2012 exchange rate loss is offset by $3.3 million in miscellaneous other income.

Provision for (Benefit from) Income Taxes

Our provision for income taxes was $0.4 million for the six months ended June 30, 2012 as compared to a benefit from income taxes of $6.3 million for the six months ended June 30, 2011. The difference was principally due to a release of withholding tax liabilities resulting from certain sales in the Asia-Pacific region as well as the refinancing expenses and changes in the balance of deferred taxes as a result of a 2011 reorganization, both recorded in the three months ended March 31, 2011, and due to a 2012 internal subsidiary merger which caused a remeasurement of our deferred taxes in the three months ended March 31, 2012.

Cash paid for income taxes, net of refunds, totaled $14.8 million and $18.2 million for the six months ended June 30, 2011 and 2012, respectively.

EBITDA

EBITDA consists of earnings before net interest, gain (loss) on early extinguishment of debt, taxes and depreciation and amortization. Given our high level of leverage, refinancing activities are a frequent part of our efforts to manage our costs of borrowing. Accordingly, we consider (gain) loss on early extinguishment of debt an element of interest expense. EBITDA is a measure commonly used in the fixed satellite services sector, and we present EBITDA to enhance the understanding of our operating performance. We use EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. However, EBITDA is not a measure of financial performance under U.S. GAAP, and our EBITDA may not be comparable to similarly titled measures of other companies. EBITDA should not be considered as an alternative to operating income (loss) or net income (loss), determined in accordance with U.S. GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of cash flows, or as a measure of liquidity.

A reconciliation of net loss to EBITDA for the periods shown is as follows (in thousands):

	Three Months Ended June  30, 2011			Three Months Ended June  30, 2012			Six Months Ended June  30, 2011			Six Months Ended June  30, 2012
Net loss	$	(214,482	)	$	(83,627	)	$	(430,241	)	$	(107,895	)
Add (Subtract):
Interest expense, net		325,861			326,691			674,651			638,122
Loss on early extinguishment of debt		157,953			43,383			326,183			43,383
Provision for (benefit from) income taxes		734			(6,797	)		(6,253	)		407
Depreciation and amortization		194,354			188,628			389,356			375,500
EBITDA	$	464,420		$	468,278		$	953,696		$	949,517

Intelsat S.A. Adjusted EBITDA

In addition to EBITDA, we calculate a measure called Intelsat S.A. Adjusted EBITDA to assess the operating performance of Intelsat S.A. Intelsat S.A. Adjusted EBITDA consists of EBITDA of Intelsat S.A. as adjusted to exclude or include certain unusual items, certain other operating expense items and certain other adjustments as described in the table and related footnotes below. Our management believes that the presentation of Intelsat S.A. Adjusted EBITDA provides useful information to investors, lenders and financial analysts regarding our financial condition and results of operations because it permits clearer comparability of our operating performance between periods. By excluding the potential volatility related to the timing and extent of non-operating activities, such as

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impairments of asset value and gains (losses) on derivative financial instruments, our management believes that Intelsat S.A. Adjusted EBITDA provides a useful means of evaluating the success of our operating activities. We also use Intelsat S.A. Adjusted EBITDA, together with other appropriate metrics, to set goals for and measure the operating performance of our business, and it is one of the principal measures we use to evaluate our management’s performance in determining compensation under our incentive compensation plans. Adjusted EBITDA measures have been used historically by investors, lenders and financial analysts to estimate the value of a company, to make informed investment decisions and to evaluate performance. Our management believes that the inclusion of Intelsat S.A. Adjusted EBITDA facilitates comparison of our results with those of companies having different capital structures.

Intelsat S.A. Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and may not be comparable to similarly titled measures of other companies. Intelsat S.A. Adjusted EBITDA should not be considered as an alternative to operating income (loss) or net income (loss), determined in accordance with U.S. GAAP, as an indicator of our operating performance, as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of cash flows, or as a measure of liquidity.

A reconciliation of net loss to Intelsat S.A. EBITDA and Intelsat S.A. EBITDA to Intelsat S.A. Adjusted EBITDA is as follows (in thousands):

	Six Months Ended June  30, 2011			Six Months Ended June  30, 2012
Net loss	$	(430,241	)	$	(107,895	)
Add (Subtract):
Interest expense, net		674,651			638,122
Loss on early extinguishment of debt		326,183			43,383
Provision for (benefit from) income taxes		(6,253	)		407
Depreciation and amortization		389,356			375,500
Intelsat S.A. EBITDA		953,696			949,517
Add (Subtract):
Compensation and benefits (1)		4,857			3,538
Management fees (2)		12,433			12,531
Loss from previously unconsolidated affiliates (3)		4,469			—
Losses on derivative financial instruments (4)		18,808			25,614
Non-recurring and other non-cash items (5)		6,230			(2,483	)
Intelsat S.A. Adjusted EBITDA (6)	$	1,000,493		$	988,717

(1) Reflects non-cash expenses incurred relating to our equity compensation plans and a portion of the expenses related to our defined benefit retirement plan and other postretirement benefits.

(2) Reflects expenses incurred in connection with the monitoring fee agreement with BC Partners Limited and Silver Lake Management Company III, L.L.C. to provide certain monitoring, advisory and consulting services to our subsidiaries.

(3) Represents gains and losses under the equity method of accounting relating to our investment in Horizons Holdings prior to the consolidation of Horizons Holdings on September 30, 2011.

(4) Represents (i) the changes in the fair value of the undesignated interest rate swaps, (ii) the difference between the amount of floating rate interest we receive and the amount of fixed-rate interest we pay under such swaps and (iii) the change in the fair value of our put option embedded derivative related to Intelsat Sub Holdco’s 8 ⁷/₈% Senior Notes due 2015, Series B (the “2015 Intelsat Sub Holdco Notes, Series B”), all of which are recognized in operating income.

(5) Reflects certain non-recurring gains and losses and non-cash items, including costs associated with the 2011 Reorganization and expense for services on the Galaxy13/Horizons-1 and Horizons-2 satellites prior to the consolidation of Horizons Holdings, partially offset by non-cash income related to the settlement of a dispute concerning our investment in WildBlue Communications, Inc. and non-cash income related to the recognition of deferred revenue on a straight-line basis of certain prepaid capacity contracts.

(6) Approximately $7.8 million of the Intelsat S.A. Adjusted EBITDA for the six months ended June 30, 2012 was attributable to our New Dawn Satellite Company Ltd. (“New Dawn”) subsidiary.

Liquidity and Capital Resources

Overview

We are a highly leveraged company and our contractual obligations, commitments and debt service requirements over the next several years are significant. At June 30, 2012, our total indebtedness was $16.1 billion. Our interest expense for the six months ended

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June 30, 2012 was $638.1 million, which included $34.0 million of non-cash interest expense. We also expect to make significant capital expenditures in 2012 and future years, as set forth below in —Capital Expenditures. Our primary source of liquidity is and will continue to be cash generated from operations as well as existing cash. At June 30, 2012, cash and cash equivalents were approximately $254.1 million, excluding restricted cash of $118.0 million relating to proceeds received from a New Dawn insurance claim, which we subsequently used to prepay New Dawn debt in July 2012 in accordance with the terms of an agreement entered into with New Dawn’s lenders (see Note 8—Long-Term Debt—New Dawn Credit Facilities). In addition, Intelsat Jackson had $75.0 million outstanding under its $500.0 million revolving credit facility and an additional $387.3 million of available borrowing capacity (net of $37.7 million of letters of credit outstanding) under that revolving credit facility at June 30, 2012.

We currently expect to use cash on hand, cash flows from operations and borrowings under our senior secured revolving credit facility to fund our most significant cash outlays, including debt service requirements and capital expenditures, in the next twelve months and beyond, and expect such sources to be sufficient to fund our requirements over that time and beyond. In past years, our cash flows from operations and cash on hand have been sufficient to fund our interest expense obligations ($1.38 billion and $1.31 billion in 2010 and 2011, respectively) and significant capital expenditures ($982.1 million and $844.7 million in 2010 and 2011, respectively). Additionally we have been able to refinance significant portions of our debt at favorable rates and on favorable terms. Total capital expenditures are expected to range from $775 million to $850 million in 2012, $550 million to $625 million in 2013 and $525 million to $600 million in 2014. In addition, we expect to receive significant customer prepayments under our customer service contracts. Significant prepayments received in the first half of 2012 totaled $115.9 million. Prepayments are currently expected to range from $150 million to $200 million in 2012, $150 million to $200 million in 2013 and $100 million to $150 million in 2014. However, an inability to generate sufficient cash flow to satisfy our debt service obligations, or to refinance our obligations on commercially reasonable terms, would have an adverse effect on our business, financial position, results of operations and cash flows, as well as on our and our subsidiaries’ ability to satisfy their obligations in respect of their respective debt. We also continually evaluate ways to simplify our capital structure and opportunistically extend our maturities and reduce our costs of debt. In addition, we may from time to time retain any future earnings to purchase, repay, redeem or retire any of our outstanding debt securities in privately negotiated or open market transactions, by tender offer or otherwise.

In July 2012, Intelsat Global Service LLC, our indirect subsidiary, entered into an agreement to sell our U.S. administrative headquarters office building in Washington, D.C. (the “U.S. Administrative Headquarters Property”), and to assign our Amended and Restated Lease Agreement with the U.S. Government (the “Ground Lessor”) relating to the U.S. Administrative Headquarters Property to the purchaser, for a purchase price of $85.0 million in cash (the “U.S. Administrative Headquarters Sale”). Upon the closing of the U.S. Administrative Headquarters Sale, we expect to enter into an agreement under which we will temporarily lease from the purchaser a portion of the U.S. Administrative Headquarters Property. The closing of the U.S. Administrative Headquarters Sale is contingent upon the Ground Lessor’s approval, together with other customary closing conditions. We expect to use the proceeds from the U.S. Administrative Headquarters Sale for general corporate purposes, which could include prepayment of existing debt.

Cash Flow Items

Our cash flows consisted of the following for the periods shown (in thousands):

	Six Months Ended June 30, 2011			Six Months Ended June 30, 2012
Net cash provided by operating activities	$	443,161		$	382,647
Net cash used in investing activities		(416,554	)		(476,761	)
Net cash provided by (used in) financing activities		(441,658	)		55,793
Net change in cash and cash equivalents		(411,131	)		(40,614	)

Net Cash Provided by Operating Activities

Net cash provided by operating activities decreased by $60.5 million during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. During the six months ended June 30, 2012, cash flows from operating activities reflected an $87.9 million cash inflow related to deferred revenue for amounts received from customers for long-term service contracts, partially offset by a $28.5 million cash outflow related to accounts payable and accrued liabilities largely due to tax and staff related payments and a $16.5 million cash outflow related to accrued retirement benefits due to employer contributions to our retirement plan.

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Net Cash Used in Investing Activities

Net cash used in investing activities increased by $60.2 million during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. This increase in investing cash outflow was primarily related to an increase in capital expenditures of $64.1 million in 2012.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities increased by $497.5 million during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, from a cash outflow of $441.7 million in 2011 to a cash inflow of $55.8 million in 2012. During the six months ended June 30, 2012, cash flows from financing activities reflected the 2012 Intelsat Jackson notes offering and the 2012 Intelsat Jackson tender offers and redemptions, as discussed in—2012 Intelsat Jackson Notes Offering, Tender Offers and Redemptions below. Net cash used in financing activities during the six months ended June 30, 2012 also included a $39.5 million payment of a premium related to the debt transactions noted above and $19.4 million of debt issuance costs related to these debt transactions.

Long-Term Debt

Senior Secured Credit Facilities

On January 12, 2011, Intelsat Jackson, a wholly-owned subsidiary of Intelsat S.A., entered into the Intelsat Jackson Secured Credit Agreement, which includes a $3.25 billion term loan facility maturing in April 2018 and a $500.0 million revolving credit facility with a five year maturity, and borrowed the full $3.25 billion under the term loan facility. The term loan facility requires regularly scheduled quarterly payments of principal equal to 0.25% of the original principal amount of the term loan beginning six months after January 12, 2011, with the remaining unpaid amount due and payable at maturity on April 2, 2018. Up to $350.0 million of the revolving credit facility is available for issuance of letters of credit. Additionally, up to $70.0 million of the revolving credit facility is available for swingline loans. Both the face amount of any outstanding letters of credit and any swingline loans reduce availability under the revolving credit facility on a dollar for dollar basis. The revolving credit facility is available for five years on a revolving basis. Intelsat Jackson is required to pay a commitment fee for the unused commitments under the revolving credit facility, if any, at a rate per annum of 0.375%. As of June 30, 2012, Intelsat Jackson had $75.0 million outstanding under its revolving credit facility and $387.3 million (net of standby letters of credit) of availability remaining thereunder.

The Intelsat Jackson Secured Credit Agreement includes two financial covenants. Intelsat Jackson must maintain a consolidated secured debt to consolidated EBITDA ratio of less than or equal to 3.50 to 1.00 at the end of each fiscal quarter as well as a consolidated EBITDA to consolidated interest expense ratio of greater than or equal to 1.75 to 1.00 at the end of each fiscal quarter, in each case as such financial measures are defined in the Intelsat Jackson Secured Credit Agreement. Intelsat Jackson was in compliance with these financial maintenance covenant ratios with a consolidated secured debt to consolidated EBITDA ratio of 1.54 to 1.00 and a consolidated EBITDA to consolidated interest expense ratio of 2.77 to 1.00 as of June 30, 2012. In the event Intelsat Jackson were to fail to comply with these financial maintenance covenant ratios and were unable to obtain waivers, Intelsat Jackson would default under the Intelsat Jackson Secured Credit Agreement, and the lenders under the Intelsat Jackson Secured Credit Agreement could accelerate our obligations thereunder, which would result in an event of default under our existing notes and the Intelsat Jackson senior unsecured credit agreements.

New Dawn Credit Facilities

On December 5, 2008, New Dawn entered into a $215.0 million secured financing arrangement with an eight-year maturity that consists of senior and mezzanine term loan facilities. The credit facilities are non-recourse to New Dawn’s shareholders, including us and our wholly-owned subsidiaries, beyond the shareholders’ scheduled capital contributions. As of June 30, 2012, New Dawn had aggregate outstanding borrowings of $197.6 million under its credit facilities. In July 2012, New Dawn entered into an agreement with its lenders to use the New Dawn insurance proceeds held as restricted cash to prepay certain of its debt obligations, along with associated interest and fees. Subsequent to this prepayment, New Dawn had aggregate outstanding borrowings of $83.9 million under its debt agreements. During the six months ended June 30, 2012, New Dawn revenue was $15.4 million and approximately $7.8 million of the Intelsat S.A. Adjusted EBITDA was attributable to New Dawn.

Intelsat Luxembourg Senior PIK Election Notes due 2017

In August 2012, we made an election to pay interest on the Intelsat Luxembourg Senior PIK Election Notes due 2017 entirely in cash for the interest period August 15, 2012 through February 15, 2013. For the interest periods beginning February 16, 2013, we are required to make all interest payments in cash.

2012 Intelsat Jackson Notes Offering, Tender Offers and Redemptions

On April 26, 2012, Intelsat Jackson completed an offering of $1.2 billion aggregate principal amount of the 2020 Jackson Notes. Intelsat Jackson had previously issued $1.0 billion aggregate principal amount of the 2020 Jackson Notes on September 30, 2010. The net proceeds from the 2012 offering were used by Intelsat Jackson to repurchase $49.5 million aggregate principal amount of the 2016 Jackson 9 ¹/₂% Notes and $10.1 million aggregate principal amount of the 2016 Jackson 11 ¹/₄% Notes in tender offers launched on

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April 12, 2012 and completed on May 10, 2012. On June 15, 2012, Intelsat Jackson redeemed the remaining $652.4 million aggregate principal amount outstanding of the 2016 Jackson 9 ¹/₂% Notes and an additional $434.9 million aggregate principal amount of the 2016 Jackson 11 ¹/₄% Notes.

In connection with these tender offers and redemptions, we recognized a loss on early extinguishment of debt of $43.4 million in the second quarter of 2012, consisting of the difference between the carrying value of the aggregate debt repurchased or redeemed and the total cash amount paid (including related fees), and a write-off of unamortized debt premium and debt issuance costs.

Financing Commitment for Intelsat S.A. Senior Notes due 2013

On April 12, 2012, Intelsat S.A. obtained agreements from affiliates of Goldman, Sachs & Co. and Morgan Stanley to provide unsecured term loan commitments sufficient to refinance in full its 6 ¹/₂% Senior Notes due 2013 (the “Intelsat S.A. Notes”) on or immediately prior to their maturity date, in the event that Intelsat S.A. does not otherwise refinance or retire the Intelsat S.A. Notes. These term loans will have a maturity of two years from funding, and the funding thereof is subject to various terms and conditions.

2011 Debt Transactions

2011 Reorganization and 2011 Secured Loan Refinancing

On January 12, 2011, certain of our subsidiaries completed a series of internal transactions and related steps that reorganized the ownership of our assets among our subsidiaries and effectively combined the legacy businesses of Intelsat Sub Holdco and Intelsat Corp in order to simplify our operations and enhance our ability to transact business in an efficient manner. Also on January 12, 2011, Intelsat Jackson entered into the Intelsat Jackson Secured Credit Agreement as discussed above, and borrowed $3.25 billion under the term loan facility. Part of the net proceeds of the term loan, amounting to $2.4 billion, were contributed or loaned to Intelsat Corp, which used such funds to repay its existing indebtedness under Intelsat Corp’s senior secured credit facilities and to redeem Intelsat Corp’s 9 ¹/₄% Senior Notes due 2016. Separately, Intelsat Corp also redeemed all of its 9 ¹/₄% Senior Notes due 2014 and its 6 ⁷/₈% Senior Secured Debentures due 2028. In addition, Intelsat Jackson contributed approximately $330.2 million of the net proceeds of the new term loan to Intelsat Sub Holdco to repay all existing indebtedness under Intelsat Sub Holdco’s senior secured credit facilities. The entry into the Intelsat Jackson Secured Credit Agreement, the repayment of the existing indebtedness of Intelsat Corp and the repayment of all of the secured existing indebtedness of Intelsat Sub Holdco are referred to collectively as the “2011 Secured Loan Refinancing”. In connection with the 2011 Secured Loan Refinancing, certain of our interest rate swaps were assigned by Intelsat Sub Holdco and Intelsat Corp to Intelsat Jackson, and are now secured by a first priority security interest in the collateral that also secures obligations under the Intelsat Jackson Secured Credit Agreement.

2011 Notes Redemptions

On March 18, 2011, Intelsat S.A. redeemed all of the $485.8 million aggregate principal amount outstanding of its 7 ⁵/₈% Senior Notes due 2012. Additionally, on March 18, 2011, Intelsat Sub Holdco redeemed $225.0 million aggregate principal amount outstanding of its 8 ¹/₂% Senior Notes due 2013 (the “2013 Sub Holdco Notes”). On April 8, 2011, Intermediate Holdco redeemed all of the $4.5 million aggregate principal amount outstanding of its 9 ¹/₄% Senior Discount Notes due 2015.

2011 Intelsat Jackson Notes Offering, Tender Offers and Redemptions

On April 5, 2011, Intelsat Jackson completed an offering of $2.65 billion aggregate principal amount of senior notes, consisting of $1.5 billion aggregate principal amount of 7 ¹/₄% Senior Notes due 2019 and $1.15 billion aggregate principal amount of 7 ¹/₂% Senior Notes due 2021 (collectively, the “New Jackson Notes”). The net proceeds from the sale of the New Jackson Notes were primarily used to repurchase all of the following notes in tender offers launched on March 21, 2011 and completed on April 15, 2011, and to subsequently redeem the remaining outstanding amounts of such notes on May 5, 2011:

• $481.0 million aggregate principal amount outstanding of the Intermediate Holdco 9 ¹/₂% Senior Discount Notes due 2015;

• $625.3 million aggregate principal amount outstanding of the 2013 Sub Holdco Notes, after giving effect to the March 2011 partial redemption of the 2013 Sub Holdco Notes, as discussed above;

• $681.0 million aggregate principal amount outstanding of the Intelsat Sub Holdco 8 ⁷/₈% Senior Notes due 2015;

• $400.0 million aggregate principal amount outstanding of the 2015 Intelsat Sub Holdco Notes, Series B;

• $55.0 million aggregate principal amount outstanding of the Intelsat Jackson 9 ¹/₄% Senior Notes due 2016; and

• $284.6 million aggregate principal amount outstanding of the Intelsat Jackson 11 ¹/₂% Senior Notes due 2016.

As a result, all of the above series of notes were paid off in full and no third party debt remained outstanding at Intermediate Holdco and Intelsat Sub Holdco as of May 5, 2011.

Contracted Backlog

We have historically had and currently have a substantial contracted backlog, which provides some assurance regarding our future revenue expectations. Contracted backlog is our expected future revenue under customer contracts, and includes both cancelable and non-cancelable contracts. Approximately 87% of our total contracted backlog as of June 30, 2012 related to contracts

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that were non-cancelable and approximately 10% related to contracts that were cancelable subject to substantial termination fees. In certain cases of breach for non-payment or customer bankruptcy, we may not be able to recover the full value of certain contracts or termination fees. Our contracted backlog includes 100% of the backlog of our consolidated ownership interests, which is consistent with the accounting for our ownership interests in these entities. Our contracted backlog was approximately $10.6 billion as of June 30, 2012. This backlog reduces the volatility of our net cash provided by operating activities more than would be typical for a company outside our industry.

Capital Expenditures

Our capital expenditures depend on our business strategies and reflect our commercial responses to opportunities and trends in our industry. Our actual capital expenditures may differ from our expected capital expenditures if, among other things, we enter into any currently unplanned strategic transactions. Levels of capital spending from one year to the next are also influenced by the nature of the satellite life cycle and by the capital-intensive nature of the satellite industry. For example, we incur significant capital expenditures during the years in which satellites are under construction. We typically procure a new satellite within a timeframe that would allow the satellite to be deployed at least one year prior to the end of the service life of the satellite to be replaced. As a result, we frequently experience significant variances in our capital expenditures from year to year.

Payments for satellites and other property and equipment during the six months ended June 30, 2012 were $476.8 million. In March 2012, IS-22 was successfully launched into orbit and entered into service in May 2012. On June 1, 2012, IS-19 was launched into orbit. During launch operations, IS-19 experienced damage to its south solar array. Although both solar arrays are deployed, the power available to the satellite is less than is required to operate 100% of the payload capacity. Failure Review Boards were established to determine the cause of the anomaly. As of June 30, 2012, a final conclusion had not been reached as to the most likely cause of the anomaly. In-orbit testing on IS-19 is complete and the satellite is drifting to a 166° east longitude orbital location. We have indicated to our insurers that, due to the damage to the south solar array, it is reasonably likely that we will file a partial loss claim.

Our capital expenditure guidance for the periods 2012 through 2014 (the “Guidance Period”) forecasts capital expenditures during those periods for ten satellites. Of these, two satellites were launched, as discussed above, six satellites are currently in development and two further satellites are expected to be ordered during the Guidance Period. We expect our 2012 total capital expenditures to range from approximately $775 million to $850 million. Capital expenditures are expected to range from $550 million to $625 million in 2013 and $525 million to $600 million in 2014. Our capital expenditures guidance includes capitalized interest. The annual classification of capital expenditure payments could be impacted by the timing of achievement of satellite manufacturing and launch contract milestones.

During the Guidance Period, we expect to receive significant customer prepayments under our existing customer service contracts. We also anticipate that prepayments will be received under customer contracts to be signed in the future. Significant prepayments received during the six months ended June 30, 2012 totaled $115.9 million. Prepayments are currently expected to range from $150 million to $200 million in 2012, all under existing customer contracts. Prepayments are currently expected to range from $150 million to $200 million in 2013 and $100 million to $150 million in 2014, with the majority of these payments coming from existing customer contracts. We intend to fund our capital expenditure requirements through cash on hand, cash provided from operating activities and, if necessary, borrowings under our senior secured revolving credit facility.

Disclosures about Market Risk

See Item 3—Quantitative and Qualitative Disclosures About Market Risk.

Recently Adopted Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05,Presentation of Comprehensive Income(“ASU 2011-05”). Beginning in the first quarter of 2012, ASU 2011-05 eliminated the option that had previously allowed us to present the components of other comprehensive income as part of the statement of changes in shareholder’s equity. Beginning in the first quarter of 2012, we have included a separate condensed consolidated statement of comprehensive loss in our accompanying financial statements. The majority of our other comprehensive loss and our accumulated other comprehensive loss is related to our defined benefit retirement plans. ASU 2011-05 does not change whether items are reported in net loss or in other comprehensive income and does not change whether and when items of other comprehensive income are reclassified to net loss.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are primarily exposed to the market risk associated with unfavorable movements in interest rates and foreign currencies. The risk inherent in our market risk sensitive instruments and positions is the potential loss arising from adverse changes in those factors. In addition, with respect to our interest rate swaps as described below, we are exposed to counterparty credit risk, which we seek to minimize through credit support agreements and the review and monitoring of all counterparties. We do not purchase or hold any derivative financial instruments for speculative purposes.

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Interest Rate Risk

The satellite communications industry is a capital intensive, technology driven business. We are subject to interest rate risk primarily associated with our borrowings. Interest rate risk is the risk that changes in interest rates could adversely affect earnings and cash flows. Specific interest rate risks include: the risk of increasing interest rates on short-term debt; the risk of increasing interest rates for planned new fixed-rate long-term financings; and the risk of increasing interest rates for planned refinancings using long-term fixed-rate debt.

Excluding the impact of our outstanding interest rate swaps, approximately 72%, or $11.6 billion, of our debt as of June 30, 2012 was fixed-rate debt, compared to 72% as of December 31, 2011. Based on the level of fixed-rate debt outstanding at June 30, 2012, a 100 basis point decrease in market rates would result in an increase in fair value of this fixed-rate debt of approximately $571.9 million.

As of June 30, 2012, we held interest rate swaps with an aggregate notional amount of $2.3 billion, with maturities ranging from 2013 to 2016. These swaps were entered into to economically hedge the variability in cash flow on a portion of the floating rate term loans under our senior secured and unsecured credit facilities. On December 22, 2011, we amended our interest rate swap agreements with an aggregate notional amount of $448.5 million between Intelsat Jackson and respective counterparties to the interest rate swaps. These amendments resulted in a change to the maturity date, the applicable fixed rate of interest that we pay and certain termination events. During the first quarter of 2012, we amended our interest rate swap agreements with an aggregate notional amount of $1.2 billion between Intelsat Jackson and respective counterparties to the interest rate swaps. These amendments resulted in a change to the maturity date, the applicable fixed rate of interest that we pay and certain termination events. On a quarterly basis, we receive a floating rate of interest equal to the three-month London Inter-Bank Offered Rate and pay a fixed rate of interest. On June 30, 2012, the rate we paid averaged 2.5% and the rate we received averaged 0.5%. In comparison, at December 31, 2011, the rate we paid averaged 3.3% and the rate we received averaged 0.5%.

These interest rate swaps have not been designated for hedge accounting treatment in accordance with the FASB Accounting Standards Codification Topic 815,Derivatives and Hedging, as amended and interpreted, and the changes in fair value of these instruments will be recognized in earnings during the period of change. Assuming a one percentage point decrease in the prevailing forward yield curve (or less, to the extent that the points on the yield curve are less than one percent) the fair value of the interest rate swap liability, excluding accrued interest, would increase to a liability of approximately $131.3 million from $93.0 million.

We perform interest rate sensitivity analyses on our variable-rate debt, including interest rate swaps, and cash and cash equivalents. These analyses indicate that a one percentage point change in interest rates would have a minimal impact on our condensed consolidated statements of operations and cash flows as of June 30, 2012. While our variable-rate debt may impact earnings and cash flows as interest rates change, it is not subject to changes in fair values.

Foreign Currency Risk

We do not currently use foreign currency derivatives to hedge our foreign currency exposures. There have been no material changes to our foreign currency exposures as discussed in our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. We periodically review the design and effectiveness of our disclosure controls and procedures worldwide, including compliance with various laws and regulations that apply to our operations. We make modifications to improve the design and effectiveness of our disclosure controls and procedures, and may take other corrective action, if our reviews identify a need for such modifications or actions. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

We have carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of June 30, 2012. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2012.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to litigation in the ordinary course of business, but management does not believe that the resolution of any pending proceedings would have a material adverse effect on our financial position or results of operations.

Item 1A. Risk Factors

No material changes in the risks related to our business have occurred since we filed our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

On July 26, 2012, Mr. Edward Kangas was appointed as a member of our board of directors. Mr. Kangas was also appointed as a member of the Company’s Audit Committee and Compensation Committee.

Item 6. Exhibits

Exhibit No.	Document Description
4.1	Fourth Supplemental Indenture for Intelsat Jackson Holdings S.A.’s 7 1/4% Senior Notes due 2020, dated as of April 25, 2012, among Intelsat Jackson Holdings S.A., Intelsat Subsidiary (Gibraltar) Limited, Intelsat New Dawn (Gibraltar) Limited and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 of Intelsat S.A.’s Quarterly Report on Form 10-Q, File No. 000-50262, filed on May 8, 2012).
4.2	Registration Rights Agreement, dated as of April 26, 2012 by and among Intelsat Jackson Holdings S.A., as Issuer, Intelsat S.A. and Intelsat (Luxembourg) S.A., as Parent Guarantors, the subsidiary guarantors named there in and Goldman, Sachs & Co., as Representative of the several initial purchasers named on Schedule I thereto (incorporated by reference to Exhibit 4.1 of Intelsat S.A.’s Current Report on Form 8-K, File No. 000-50262, filed on April 26, 2012).
4.3	Fifth Supplemental Indenture for Intelsat Jackson Holdings S.A.’s 8 1/2 % Senior Notes due 2019, dated as of July 31, 2012, among Intelsat Jackson Holdings S.A., Intelsat Luxembourg Investment S.ar.l. and Wells Fargo Bank, National Association, as Trustee.*
4.4	Fifth Supplemental Indenture for Intelsat Jackson Holdings S.A.’s 7 1/4 % Senior Notes due 2020, dated as of July 31, 2012, among Intelsat Jackson Holdings S.A., Intelsat Luxembourg Investment S.ar.l. and Wells Fargo Bank, National Association, as Trustee.*
4.5	Second Supplemental Indenture for Intelsat Jackson Holdings S.A.’s 7 1/4 % Senior Notes due 2019 and 7 1/2 % Senior Notes due 2021, dated as of July 31, 2012, among Intelsat Jackson Holdings S.A., Intelsat Luxembourg Investment S.ar.l. and Wells Fargo Bank, National Association, as Trustee.*
10.1	Purchase and Sale Agreement, dated July 18, 2012, between Intelsat Global Service LLC and SL 4000 Connecticut LLC.*
10.2	Supplement No. 2 to Guarantee, dated as of July 31, 2012, between Intelsat Luxembourg Investment S.ar.l. and Bank of America, N.A.*
10.3	Agreement for the Adherence by Intelsat Luxembourg Investment S.àr.l. and Intelsat Corporation to the Luxembourg Shares and Beneficiary Certificates Pledge Agreement dated January 12, 2011 and for the Amendment of the Pledge Agreement, dated July 31, 2012 between the Pledgors listed therein and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as Collateral Trustee.*

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10.4	Supplement No. 2 to Security and Pledge Agreement, dated as of July 31, 2012, among Intelsat Luxembourg Investment S.a r.l., as New Guarantor, Bank of America, N.A., as Administrative Agent and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as Collateral Trustee.*
10.5	Collateral Agency and Intercreditor Joinder, dated as of July 31, 2012, between Intelsat Luxembourg Investment S.a r.l. and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as Collateral Trustee.*
10.6	Guarantee, dated as of July 31, 2012, made between Intelsat Luxembourg Investment S.a r.l., Intelsat Jackson Holdings S.A. and Credit Suisse AG, Cayman Islands Branch (f/k/a Credit Suisse, Cayman Islands Branch), as Administrative Agent.*
10.7	Guarantee, dated as of July 31, 2012, made between Intelsat Luxembourg Investment S.a r.l., Intelsat Jackson Holdings S.A. and Bank of America N.A., as Administrative Agent.*
31.1	Certification of the Chief Executive Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.*
31.2	Certification of the Chief Financial Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.*
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*
101.INS	XBRL Instance Document.**
101.SCH	XBRL Taxonomy Extension Schema Document.**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.**

* Filed herewith.

** Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following formatted in Extensible Business Reporting Language (“XBRL”): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements. In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise this Exhibit 101 shall be deemed “furnished” not “filed”.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INTELSAT S.A.
Date: August 1, 2012	By	/S/    DAVID MCGLADE
		David McGlade
		Deputy Chairman and Chief Executive Officer
	INTELSAT S.A.
Date: August 1, 2012	By	/S/    MICHAEL MCDONNELL
		Michael McDonnell
		Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Document Description
4.1	Fourth Supplemental Indenture for Intelsat Jackson Holdings S.A.’s 7 1/4% Senior Notes due 2020, dated as of April 25, 2012, among Intelsat Jackson Holdings S.A., Intelsat Subsidiary (Gibraltar) Limited, Intelsat New Dawn (Gibraltar) Limited and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 of Intelsat S.A.’s Quarterly Report on Form 10-Q, File No. 000-50262, filed on May 8, 2012).
4.2	Registration Rights Agreement, dated as of April 26, 2012 by and among Intelsat Jackson Holdings S.A., as Issuer, Intelsat S.A. and Intelsat (Luxembourg) S.A., as Parent Guarantors, the subsidiary guarantors named there in and Goldman, Sachs & Co., as Representative of the several initial purchasers named on Schedule I thereto (incorporated by reference to Exhibit 4.1 of Intelsat S.A.’s Current Report on Form 8-K, File No. 000-50262, filed on April 26, 2012).
4.3	Fifth Supplemental Indenture for Intelsat Jackson Holdings S.A.’s 8 1/2 % Senior Notes due 2019, dated as of July 31, 2012, among Intelsat Jackson Holdings S.A., Intelsat Luxembourg Investment S.ar.l. and Wells Fargo Bank, National Association, as Trustee.*
4.4	Fifth Supplemental Indenture for Intelsat Jackson Holdings S.A.’s 7 1/4 % Senior Notes due 2020, dated as of July 31, 2012, among Intelsat Jackson Holdings S.A., Intelsat Luxembourg Investment S.ar.l. and Wells Fargo Bank, National Association, as Trustee.*
4.5	Second Supplemental Indenture for Intelsat Jackson Holdings S.A.’s 7 1/4 % Senior Notes due 2019 and 7 1/2 % Senior Notes due 2021, dated as of July 31, 2012, among Intelsat Jackson Holdings S.A., Intelsat Luxembourg Investment S.ar.l. and Wells Fargo Bank, National Association, as Trustee.*
10.1	Purchase and Sale Agreement, dated July 18, 2012, between Intelsat Global Service LLC and SL 4000 Connecticut LLC.*
10.2	Supplement No. 2 to Guarantee, dated as of July 31, 2012, between Intelsat Luxembourg Investment S.ar.l. and Bank of America, N.A.*
10.3	Agreement for the Adherence by Intelsat Luxembourg Investment S.àr.l. and Intelsat Corporation to the Luxembourg Shares and Beneficiary Certificates Pledge Agreement dated January 12, 2011 and for the Amendment of the Pledge Agreement, dated July 31, 2012 between the Pledgors listed therein and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as Collateral Trustee.*
10.4	Supplement No. 2 to Security and Pledge Agreement, dated as of July 31, 2012, among Intelsat Luxembourg Investment S.a r.l., as New Guarantor, Bank of America, N.A., as Administrative Agent and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as Collateral Trustee.*
10.5	Collateral Agency and Intercreditor Joinder, dated as of July 31, 2012, between Intelsat Luxembourg Investment S.a r.l. and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as Collateral Trustee.*
10.6	Guarantee, dated as of July 31, 2012, made between Intelsat Luxembourg Investment S.a r.l., Intelsat Jackson Holdings S.A. and Credit Suisse AG, Cayman Islands Branch (f/k/a Credit Suisse, Cayman Island Branch), as Administrative Agent.*
10.7	Guarantee, dated as of July 31, 2012, made between Intelsat Luxembourg Investment S.a r.l., Intelsat Jackson Holdings S.A. and Bank of America N.A., as Administrative Agent.*
31.1	Certification of the Chief Executive Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.*
31.2	Certification of the Chief Financial Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.*
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*
101.INS	XBRL Instance Document.**
101.SCH	XBRL Taxonomy Extension Schema Document.**

61

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.**

* Filed herewith.

** Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following formatted in Extensible Business Reporting Language (“XBRL”): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements. In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise this Exhibit 101 shall be deemed “furnished” not “filed”.

62