Canada | 4813 | 98 0220739 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
Proposed Maximum | Proposed Maximum | Amount of | ||||||||||
Title of Each Class of | Amount to be | Offering | Aggregate | Registration | ||||||||
Securities to be Registered | Registered | Price per Note | Offering Price | Fee(2) | ||||||||
97/8% Senior Notes due 2014 | $150,000,000 | 100% | $150,000,000 | $16,050.00 | ||||||||
Guarantees(1) | $150,000,000 | — | — | (3) | ||||||||
(1) | The following co-registrants will guarantee the notes to be issued by Stratos Global Corporation: Stratos Canada, Inc., Stratos Wireless Inc., Stratos Funding Company, Stratos Holdings (Cyprus) Limited, Stratos Finance (Ireland) Limited, Stratos LFC S.A., Stratos Investments B.V., Stratos New Zealand Limited, Stratos NZ Holdings Limited, Stratos Aeronautical Limited, Stratos Global Holdings Limited, Stratos Global Limited, Stratos Services Limited, Stratos Communications, Inc., Stratos Financial, LLC, Stratos Financing LUX, LLC, Stratos Funding LLC, Stratos Funding LP, Stratos Government Services, Inc., Stratos Holdings, Inc., Stratos Mobile Networks, Inc., Stratos Mobile Networks (USA), L.L.C. and Stratos Offshore Services Company. | |
(2) | Calculated pursuant to Rule 457(f). | |
(3) | Pursuant to Rule 457(n), no separate fee is payable with respect to the guarantee of notes being registered. |
Primary | ||||||||||||
Standard | ||||||||||||
State or Other | Industrial | I.R.S. | ||||||||||
Jurisdiction of | Classification | Employer | ||||||||||
Exact Name of Registrant | Incorporation | Code | Identification | Telephone | ||||||||
As Specified in its Charter | or Organization | Number | No. | Address | Number | |||||||
Stratos Canada Inc. | Canada | 4813 | N/A | 34 Harvey Road St. John’s, NL Canada A1C 2G1 | 709 724 5200 | |||||||
Stratos Wireless Inc. | Canada | 4813 | 98 0413187 | 34 Glencoe Drive Donovan’s Industrial Park Mount Pearl, NL Canada A1N 4S8 | 709 724 5200 | |||||||
Stratos Funding Company | Nova Scotia | 4813 | N/A | Suite 900 Purdy’s Wharf Tower One 1959 Upper Water Street Halifax, NS B3J 3N2 Canada | 902 420 3372 | |||||||
Stratos Holdings (Cyprus) Limited | Cyprus | 4813 | N/A | 1, Lambousa Street Nicosia 1095 Cyprus | ||||||||
Stratos Finance (Ireland) Limited | Ireland | 4813 | N/A | Arthur Cox Building Earlsfort Terrace Dublin 2 Ireland | 353 1 618 0537 | |||||||
Stratos LFC S.A. | Luxembourg | 4813 | N/A | 73 Côte d’Eich L-1450 Luxembourg | 352 40 45 46 | |||||||
Stratos Investments B.V. | The Netherlands | 4813 | N/A | Locatellikade 1 Parnassustrn 1076AD Amsterdam The Netherlands | 31 20 575 5600 | |||||||
Stratos New Zealand Limited | New Zealand | 4813 | N/A | Level 22, Royal & SunAlliance Centre 48 Shortland Street, Auckland, New Zealand | 64 9 913 3801 | |||||||
Stratos NZ Holdings Limited | New Zealand | 4813 | N/A | Level 22, Royal & SunAlliance Centre 48 Shortland Street, Auckland, New Zealand | 64 9 913 3801 | |||||||
Stratos Aeronautical Limited | United Kingdom | 4813 | N/A | 99 Gresham Street London EC2V 7NG United Kingdom | 44 20 7562 4888 | |||||||
Stratos Global Holdings Limited | United Kingdom | 4813 | N/A | 99 Gresham Street London EC2V 7NG United Kingdom | 44 20 7562 4888 | |||||||
Stratos Global Limited | United Kingdom | 4813 | N/A | 99 Gresham Street London EC2V 7NG United Kingdom | 44 20 7562 4888 | |||||||
Stratos Services Limited | United Kingdom | 4813 | N/A | 99 Gresham Street London EC2V 7NG United Kingdom | 44 20 7562 4888 | |||||||
Stratos Communications, Inc. | Delaware | 4813 | 65 0190513 | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Financial, LLC | Delaware | 4813 | 52 0398350 | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Financing LUX, LLC | Delaware | 4813 | N/A | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Funding LLC | Delaware | 4813 | 74 3134503 | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Funding LP | Delaware | 4813 | 74 3134501 | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Government Services, Inc. | Delaware | 4813 | N/A | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Holdings, Inc. | Delaware | 4813 | 52 2103692 | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Mobile Networks, Inc. | Delaware | 4813 | 95 4309961 | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Mobile Networks (USA), L.L.C. | Delaware | 4813 | 52 2067346 | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 | |||||||
Stratos Offshore Services Company | Delaware | 4813 | 52 2204462 | 6901 Rockledge Dr., Ste 900 Bethesda, MD 20817 | 301 214 8800 |
The information contained in this prospectus is not complete and may be amended. These securities may not be sold until the related registration statement filed with the Securities and Exchange Commission or any applicable State securities commission becomes effective. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
• | We are offering to exchange all outstanding 97/8% senior notes due 2013 that were issued on February 13, 2006 (“original notes”), for an equal amount of new 97/8% senior notes due 2013 (“exchange notes”). | |
• | This exchange offer expires at 5:00 p.m., New York City time, on October 20, 2006 unless extended. | |
• | The exchange notes evidence the same indebtedness as and will be substantially the same as the original notes, except that the exchange notes will be registered under the Securities Act of 1933, or the “Securities Act,” and will not be subject to restrictions on transfer or to any increase in annual interest rate. | |
• | The original notes will be exchanged in integral multiples of $1,000. | |
• | Each broker-dealer that receives exchange notes for its own account pursuant to this exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal accompanying this prospectus states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding original notes where such outstanding original notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of up to 180 days from the first effective date of the registration statement of which this prospectus is a part, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution”. |
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Index to Financial Statements | F-1 |
• | changes in our commercial relationship with Inmarsat plc, or Inmarsat; | |
• | increased competition in the remote telecommunications industry; | |
• | advancements in telecommunications technologies; | |
• | natural and man-made disasters or events influencing the level of demand for our services; | |
• | the effect of mobile satellite system operators’ introducing an ancillary terrestrial component to their services; |
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• | our success in integrating the operations of Xantic B.V. and realizing anticipated cost savings; | |
• | our ability to complete future acquisitions; | |
• | our ability to maintain prices in the face of a changing market environment; | |
• | our ability to adapt to rapidly changing market conditions; | |
• | management’s expectations and estimates concerning our future financial performance, financing plans and programs, and the effects of competition; | |
• | our level of capitalization and debt; | |
• | governmental regulation with respect to the telecommunications industry; | |
• | our ability to sustain and improve our financial performance; and | |
• | other risks, including those set forth under “Risk Factors.” |
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Background | On February 13, 2006, we completed the private offering of $150,000,000 aggregate principal amount of our 97/8% Senior Notes due 2013. In connection with that offering, we entered into a registration rights agreement with the initial purchasers of the original notes in which we agreed, among other things, to complete this exchange offer. Under the terms of the exchange offer, you are entitled to exchange the original notes for exchange notes evidencing the same indebtedness and with substantially similar terms. You should read the discussion under the heading ‘‘Description of the Notes” for further information regarding the exchange notes. | |
The exchange offer | We are offering to exchange up to $150,000,000 aggregate principal amount of 97/8% Senior Notes due 2013 which have been registered under the Securities Act for our 97/8% Senior Notes due 2013 which were issued on February 13, 2006 in the private offering. | |
To participate in the exchange offer, you must follow the automatic tender offer program, or ATOP, procedures established by The Depository Trust Company, or DTC, for tendering notes held in book-entry form. The ATOP procedures require that the exchange agent receive, prior to the expiration date of the exchange offer, a computer-generated message known as an “agent’s message” that is transmitted through ATOP and that DTC confirm that: | ||
• DTC has received instructions to exchange your notes; and | ||
• you agree to be bound by the terms of the letter of transmittal. | ||
For more details, please read “The Exchange Offer — Terms of the Exchange Offer” and “The Exchange Offer — Procedures for Tendering.” Any holder electing to have original notes exchanged pursuant to this exchange offer must properly tender your original notes prior to the close of business on the expiration date. All original notes validly tendered and not properly withdrawn will be accepted for exchange. Original notes may be exchanged only in integral multiples of $1,000. |
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Resales of exchange notes | We believe that the exchange notes may be offered for resale, resold or otherwise transferred by you (unless you are our “affiliate” within the meaning of Rule 405 of the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: | |
• you acquire the exchange notes in the ordinary course of business; and | ||
• you are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate in the distribution of the exchange notes. | ||
If any of the foregoing is not true and you transfer any exchange note without delivering a prospectus meeting the requirements of the Securities Act and without an exemption of your exchange notes from such requirements, you may incur liability under the Securities Act. We do not assume or indemnify you against such liability. | ||
Consequences of failure to exchange originalnotes | All untendered original notes will remain outstanding and will continue to accrue interest but will not retain any rights under the registration rights agreement. All untendered original notes will continue to be subject to the restrictions on transfer provided for in the original notes and in the Indenture, dated as of February 13, 2006, between us, the Guarantors and J.P. Morgan Trust Company, National Association, as Trustee, relating to the original notes (the “indenture”) which will continue to bear legends regarding restrictions on transfer. | |
You will not be able to offer or sell the original notes unless they are registered under the Securities Act (and we will have no obligation to register them after the exchange offer is closed, except for some limited exceptions) or unless you sell them in a manner that does not require registration under the Securities Act. Please see “Risk Factors — Risks Related to the Notes — Failure to tender original notes in the exchange offer may affect their marketability and will substantially limit, and may effectively eliminate, opportunities to sell your original notes in the future” and “The Exchange Offer — Terms of the Exchange Offer”. | ||
Expiration date; Withdrawal of tender | This exchange offer will remain open for at least 20 full business days (as defined by Exchange ActRule 14d-1(g)(3)) and will expire at 5:00 p.m., New York City time, on October 20, 2006, or such later date and time to which we extend it (the “expiration date”). | |
You may withdraw your tender of original notes at any time prior to the expiration date. To withdraw, you must submit a notice of withdrawal to the exchange agent using ATOP procedures before 5:00 p.m., New York City time, on the expiration date of the exchange offer. Please read “The Exchange Offer — Withdrawal of Tenders.” |
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Conditions | The exchange offer is subject to certain customary conditions. See “The Exchange Offer — Conditions.” | |
Certain income tax considerations | This exchange of notes will not be a taxable exchange for U.S. federal or Canadian federal income tax purposes. You should consult your tax advisor about the tax consequences of this exchange. See “Material U.S. Federal Income Tax Considerations” and “Material Canadian Federal Income Tax Considerations.” | |
Use of proceeds | We will not receive any cash proceeds from the issuance of the exchange notes in this exchange offer. | |
Exchange agent | J.P. Morgan Trust Company, National Association, is serving as exchange agent in connection with the exchange offer. |
Issuer | Stratos Global Corporation. | |
Securities | $150,000,000 in aggregate principal amount of 97/8% Senior Notes due 2013. | |
Maturity | February 15, 2013 | |
Interest Rate | 97/8% per annum | |
Interest payment dates | Each February 15 and August 15 of each year, beginning, February 15, 2007 | |
Optional redemption | Prior to February 15, 2010, we may, at our option, redeem the exchange notes, in whole or in part, subject to the payment of a make-whole premium. We may, at our option, redeem the exchange notes, in whole or in part, at any time on or after February 15, 2010, at the redemption prices described in the section “Description of the Notes — Optional Redemption,” plus accrued and unpaid interest. | |
In addition, on or before February 15, 2009, we may redeem up to 35% of the aggregate principal amount of the notes (including the exchange notes and any additional notes) with the net cash proceeds from any qualifying equity offerings at a redemption price of 109.875% of the principal amount of the notes, plus accrued and unpaid interest. However, we may only make such redemptions if at least 65% of the aggregate principal amount of the notes (including the exchange notes and any additional notes) issued under the indenture remains outstanding immediately after the occurrence of such redemption. |
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Optional tax redemption | The exchange notes are redeemable, in whole, but not in part, at our option, at a price equal to 100% of the principal amount thereof, together with any accrued and unpaid interest to the date of redemption, in the event of a change in tax law requiring the imposition of withholding taxes by any relevant tax jurisdiction. | |
Sinking fund | No sinking fund payments will be required. | |
Ranking | The exchange notes will be our unsecured, unsubordinated obligations. Accordingly, they will rank: | |
• equally in right of payment with all of our existing and future unsecured unsubordinated debt; | ||
• effectively subordinated to all existing and future secured debt to the extent of the assets securing such debt, including all borrowings under our restated senior credit agreement; | ||
• senior to any future subordinated debt; and | ||
• effectively subordinated to all existing and future liabilities (including trade payables) of our subsidiaries that are not guarantors including trade payables. | ||
As of June 30, 2006; | ||
• we and the guarantors had outstanding indebtedness of $375.7 million, $225.7 million of which is secured indebtedness; and | ||
• our subsidiaries that are not guarantors of the notes, including Xantic and its subsidiaries, had $120.1 million of liabilities including intercompany liabilities. | ||
Covenants | We will issue the exchange notes under the indenture pursuant to which the original notes were issued. The indenture restricts our ability and the ability of our restricted subsidiaries to, among other things: | |
• incur additional debt; | ||
• create liens; | ||
• pay dividends on or redeem or repurchase capital stock; | ||
• make certain types of investments; | ||
• sell stock in our restricted subsidiaries; | ||
• receive dividends or other payments from subsidiaries; | ||
• enter into transactions with affiliates; | ||
• issue guarantees of debt; | ||
• sell assets, consolidate or merge with other companies; and | ||
• enter into sale and leaseback transactions. |
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These covenants are subject to a number of important exceptions and qualifications. For more details, see “Description of the Notes — Certain Covenants.” | ||
Change of control | Upon the occurrence of a change of control, you will have the right to require us to repurchase all or a portion of your exchange notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages thereon, if any, to the date of repurchase;provided, however, that notwithstanding the occurrence of a change of control, we will not be obligated to repurchase the exchange notes pursuant to a change of control offer in the event that we have exercised our right to redeem all the exchange notes, as described under “Optional redemption” above. See “Description of the Notes — Offers to Repurchase — Change of Control.” | |
Tax consequences | The acquisition, ownership and disposition of the notes have certain U.S. federal and Canadian Federal income tax consequences. For more details, see “Material U.S. Federal Income Tax Considerations” and “Material Canadian Federal Income Tax Considerations”. |
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Historical | Pro Forma | |||||||||||||||||||||||
Year Ended | Six Months Ended | Year Ended | ||||||||||||||||||||||
December 31, | June 30, | December 31, | ||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | 2005 | |||||||||||||||||||
($ in millions, except ratios) | ||||||||||||||||||||||||
Amounts under Canadian GAAP | ||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
Revenue | $ | 397.2 | $ | 367.8 | $ | 381.0 | $ | 185.2 | $ | 258.6 | $ | 574.6 | ||||||||||||
Cost of goods and services | 259.2 | 246.3 | 271.3 | 129.6 | 194.6 | 402.6 | ||||||||||||||||||
Gross margin | 138.0 | 121.5 | 109.7 | 55.6 | 64.0 | 172.0 | ||||||||||||||||||
Operating expenses | 49.2 | 43.3 | 51.5 | 24.9 | 34.5 | 73.7 | ||||||||||||||||||
Interest expense | 15.3 | 11.7 | 11.4 | 5.6 | 17.6 | 33.7 | ||||||||||||||||||
Depreciation and amortization | 29.5 | 29.0 | 36.6 | 18.1 | 19.9 | 46.1 | ||||||||||||||||||
Other costs (income) | (6.8 | ) | 3.6 | 0.5 | 0.4 | 25.3 | (8.9 | ) | ||||||||||||||||
Non-controlling interest | — | — | 0.1 | — | 0.1 | 0.1 | ||||||||||||||||||
Equity in earnings of investee | — | — | (0.7 | ) | (0.3 | ) | (0.5 | ) | (0.7 | ) | ||||||||||||||
Earnings (loss) before income taxes | 50.8 | 33.9 | 10.3 | 6.9 | (32.9 | ) | 28.0 | |||||||||||||||||
Income tax expense (recovery) | 12.7 | 8.7 | 4.9 | 3.0 | (4.0 | ) | 1.0 | |||||||||||||||||
Net earnings (loss) | $ | 38.1 | $ | 25.2 | $ | 5.4 | $ | 3.9 | $ | (28.9 | ) | $ | 27.0 | |||||||||||
Other data: | ||||||||||||||||||||||||
EBITDA (1)(2) | $ | 88.8 | $ | 78.2 | $ | 58.2 | $ | 30.7 | $ | 29.5 | $ | 98.3 | ||||||||||||
Capital expenditures | $ | 19.6 | $ | 22.5 | $ | 25.8 | $ | 12.6 | $ | 12.1 | $ | 28.0 | ||||||||||||
Ratio of total debt/ EBITDA | 3.8 | X | ||||||||||||||||||||||
Ratio of EBITDA/ Interest expense | 2.9 | X |
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Historical | Pro Forma | |||||||||||
As at | As at | As at | ||||||||||
December 31, | June 30, | December 31, | ||||||||||
2005 | 2006 | 2005 | ||||||||||
($ in millions) | ||||||||||||
Balance Sheet Data: | ||||||||||||
Cash and cash equivalents | $ | 14.5 | $ | 54.1 | $ | 30.1 | ||||||
Capital assets | $ | 131.3 | $ | 131.6 | $ | 157.5 | ||||||
Total assets | $ | 495.3 | $ | 783.5 | $ | 795.9 | ||||||
Total debt | $ | 164.2 | $ | 375.7 | $ | 375.8 | ||||||
Shareholders’ equity | $ | 222.9 | $ | 194.9 | $ | 222.0 |
Historical | Pro Forma | |||||||||||||||||||||||
Year Ended | Six Months Ended | Year Ended | ||||||||||||||||||||||
December 31, | June 30, | December 31, | ||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | 2005 | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Amounts under U.S. GAAP | ||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||
Revenue | $ | 397.2 | $ | 367.8 | $ | 381.0 | $ | 185.2 | $ | 258.6 | $ | 574.6 | ||||||||||||
Cost of goods and services | $ | 255.6 | $ | 243.2 | $ | 268.4 | $ | 128.1 | $ | 191.9 | $ | 402.0 | ||||||||||||
Operating expenses (excluding depreciation and amortization and asset impairment charge)(3) | $ | 62.2 | $ | 48.7 | $ | 53.5 | $ | 26.3 | $ | 38.9 | $ | 73.7 | ||||||||||||
Interest expense | $ | 10.3 | $ | 6.2 | $ | 10.3 | $ | 4.8 | $ | 17.6 | $ | 32.6 | ||||||||||||
Depreciation and amortization | $ | 29.5 | $ | 29.0 | $ | 36.6 | $ | 18.1 | $ | 19.9 | $ | 46.1 | ||||||||||||
Asset impairment charge | $ | 5.5 | $ | 2.2 | $ | 0.2 | $ | 0.2 | $ | 23.8 | $ | 0.2 | ||||||||||||
Net earnings (loss) | $ | 44.2 | $ | 37.1 | $ | 6.6 | $ | 4.7 | $ | (29.1 | ) | $ | 28.2 |
Historical | Pro Forma | |||||||||||
As at | As at | As at | ||||||||||
December 31, | June 30, | December 31, | ||||||||||
2005 | 2006 | 2005 | ||||||||||
($ in millions) | ||||||||||||
Balance Sheet Data: | ||||||||||||
Cash and cash equivalents | $ | 14.5 | $ | 54.1 | $ | 30.1 | ||||||
Total assets | $ | 476.3 | $ | 765.7 | $ | 777.0 | ||||||
Total debt | $ | 164.2 | $ | 375.7 | $ | 375.8 | ||||||
Shareholders’ equity | $ | 210.0 | $ | 183.1 | $ | 209.1 |
(1) | We define “EBITDA” as net earnings (loss) before interest expense, income tax expense, depreciation and amortization, equity in earnings of investee, non-controlling interest and other costs (income). Management believes that EBITDA is a useful tool for investors and other users of our financial statements in assessing our ability to serviceand/or incur more indebtedness, maintain current operating levels of capital assets and acquire additional operations and businesses. Management believes that the most directly comparable GAAP measure is net earnings. |
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Historical | Pro Forma | |||||||||||||||||||||||
Year Ended | Six Months Ended | Year Ended | ||||||||||||||||||||||
December 31, | June 30, | December 31, | ||||||||||||||||||||||
2003 | 2004 | 2005 | 2005 | 2006 | 2005 | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Net earnings (loss) | $ | 38.1 | $ | 25.2 | $ | 5.4 | $ | 3.9 | $ | (28.9 | ) | $ | 27.0 | |||||||||||
Interest expense | 15.3 | 11.7 | 11.4 | 5.6 | 17.6 | 33.7 | ||||||||||||||||||
Income tax expense (recovery) | 12.7 | 8.7 | 4.9 | 3.0 | (4.0 | ) | 1.0 | |||||||||||||||||
Depreciation and amortization | 29.5 | 29.0 | 36.6 | 18.1 | 19.9 | 46.1 | ||||||||||||||||||
Equity in earnings of investee | — | — | (0.7 | ) | (0.3 | ) | (0.5 | ) | (0.7 | ) | ||||||||||||||
Non-controlling interest | — | — | 0.1 | — | 0.1 | 0.1 | ||||||||||||||||||
Other costs (income) | (6.8 | ) | 3.6 | 0.5 | 0.4 | 25.3 | (8.9 | ) | ||||||||||||||||
EBITDA | $ | 88.8 | $ | 78.2 | $ | 58.2 | $ | 30.7 | $ | 29.5 | $ | 98.3 | ||||||||||||
(2) | Xantic’s financial statements for the year ended December 31, 2005 include certain non-recurring items that positively affected Xantic’s EBITDA for the year by approximately $4 million. These included bad debt recoveries and customer and supplier settlements. | |
(3) | U.S. GAAP requires operating expenses to include items such as depreciation and amortization, the write-off of deferred acquisition costs, asset impairment charges, restructuring costs, equity in earnings of investee and non-controlling interest. In the table above, depreciation and amortization and asset impairment charges have been excluded from operating expenses under U.S. GAAP. All of these items have been excluded from operating expenses in our Canadian GAAP financial statements. |
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Fiscal Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||||
Pro | Pro | |||||||||||||||||||||||||||||||||||
Forma(1) | Forma(1) | |||||||||||||||||||||||||||||||||||
Ratio of earnings to fixed charges | (2 | ) | 1.7 | x | 4.0 | x | 3.5 | x | 1.7 | x | 1.8 | x | 2.0 | x | (3 | ) | (4 | ) |
(1) | Pro forma amount gives effect to the transactions included in the pro forma unaudited condensed consolidated financial statements included elsewhere in this prospectus. | |
(2) | For the year ended December 31, 2001, earnings were inadequate to cover fixed charges due to a deficiency of approximately $18.8 million. | |
(3) | For the six months ended June 30, 2006, earnings were inadequate to cover fixed charges due to a deficiency of approximately $33.4 million, primarily resulting from asset impairment charges during the period of $23.8 million and the write-off of deferred financing costs of $2.8 million. | |
(4) | Pro forma for the six months ended June 30, 2006, earnings were inadequate to cover fixed charges due to a deficiency of approximately $31.4 million, primarily resulting from asset impairment charges during the period of $23.8 million and the write-off of deferred financing costs of $2.8 million. |
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• | difficulties in detecting all significant risks and liabilities; | |
• | the diversion of management’s attention from the management of our daily operations; |
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• | demands on management related to the increase in size and expanded geographic reach of our operations after the acquisition; | |
• | difficulties in the assimilation and retention of Xantic employees; | |
• | difficulties in the assimilation of our and Xantic’s different corporate cultures and practices, and of broad and geographically dispersed personnel and operations; | |
• | difficulties in the integration of departments, information technology systems, accounting and billing systems and technologies, as well as in maintaining uniform standards and controls, including internal controls, procedures and policies; and | |
• | higher than anticipated integration costsand/or difficulties in realizing the anticipated cost savings from the acquisition. |
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Total debt | $ | 375.7 million | ||
Total shareholders’ equity | $ | 194.9 million | ||
Total capitalization | $ | 570.6 million | ||
Ratio of total debt to total capitalization | 65.8 | % |
• | make it more difficult for us to satisfy our obligations with respect to the notes and our other indebtedness; | |
• | increase our vulnerability to adverse economic and industry conditions; | |
• | require us to dedicate a substantial portion of cash from operations to the servicing of our debt obligations, thereby reducing the availability of cash to fund working capital, capital expenditures and other general corporate purposes; | |
• | limit our ability to obtain financing for working capital, capital expenditures, general corporate purposes or acquisitions; | |
• | place us at a disadvantage compared to our competitors that have a lower degree of leverage; and |
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• | limit our flexibility in planning for, or reacting to, changes in our business and in the remote telecommunications industry. |
• | our financial condition at the time; | |
• | restrictions in agreements governing our debt, including our restated senior credit agreement and the indenture governing the notes; and | |
• | other factors, including the condition of the financial markets and the remote telecommunications industry. |
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• | incur more debt; | |
• | create liens; | |
• | pay dividends on or redeem or repurchase stock; | |
• | make certain types of investments; | |
• | enter into transactions affecting the ability of our restricted subsidiaries, as defined in the indenture, to make distributions, loans or advances to us; | |
• | issue and sell capital stock of restricted subsidiaries; | |
• | enter into transactions with affiliates; | |
• | sell assets, consolidate or merge with other companies; and | |
• | enter into sale and leaseback transactions. |
23
24
• | incurred this debt with the intent of hindering, delaying or defrauding current or future creditors; or | |
• | received less than reasonably equivalent value or fair consideration for incurring this debt and the guarantor (i) was insolvent or was rendered insolvent by reason of the related financing transactions, (ii) was engaged, or about to engage, in a business or transaction for which its remaining assets constituted unreasonably small capital to carry on its business, or (iii) intended to incur, or believed that it would incur, debts beyond its ability to pay these debts as they mature, as all of the foregoing terms are defined in or interpreted under the relevant fraudulent transfer or conveyance statutes; |
• | the overall market for non-investment grade debt securities; | |
• | our financial performance or prospects; or | |
• | the prospects for companies in the remote telecommunications industry generally. |
25
• | Such holder has full power and authority to tender, sell, assign and transfer the original notes and the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when same are accepted by the Company; | |
• | Any exchange notes will be acquired in the ordinary course of such holder’s business; | |
• | At the time of the commencement of the exchange offer such holder has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes in violation of the provisions of the Securities Act; | |
• | Such holder is not our “affiliate”, as defined in Rule 405 of the Securities Act; | |
• | If such holder is a broker-dealer that will receive exchange notes for its own account in exchange for original notes that were acquired as a result of market-making or other trading activities, then such holder will deliver a prospectus in connection with any resale of such exchange notes; and | |
• | Such holder is not an initial purchaser holding exchange notes that have, or are reasonably likely to have, the status of an unsold allotment to an initial distribution. |
26
• | Such exchange notes are acquired in the ordinary course of the holder’s business; | |
• | Such holder is not engaged in, has no arrangement with any person to participate in, and does not intend to engage in, any public distribution of the exchange notes; | |
• | Such holder is not our “affiliate,” as defined in Rule 405 of the Securities Act; and | |
• | If such holder is a broker-dealer that receives exchange notes for its own account in exchange for original notes that were acquired as a result of market-making activities, that it will deliver a prospectus, as required by law, in any resale of such exchange notes. |
• | Cannot rely on the position of the staff of the SEC set forth in “Exxon Capital Holdings Corporation” or similar interpretive letters; and | |
• | Must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. |
27
28
29
• | a book-entry confirmation of such original notes into the exchange agent’s account at DTC; and | |
• | a properly transmitted agent’s message. |
30
Institutional Trust Services
2001 Bryan Street, 9th Floor
Dallas, Texas 75201
Attention: Exchanges, Frank Ivins
By Facsimile:(214) 468-6494
Confirm by Telephone:(800) 275-2048
31
32
As of | ||||
June 30, 2006 | ||||
($ in millions) | ||||
Cash and cash equivalents | $ | 54.1 | ||
Debt: | ||||
Senior credit agreement(1) | ||||
Revolving operating facility | $ | — | ||
Term B facility | 225.0 | |||
97/8% senior notes | 150.0 | |||
Other debt | 0.7 | |||
Total debt | 375.7 | |||
Shareholders’ equity | 194.9 | |||
Total capitalization | $ | 570.6 | ||
(1) | Our senior credit agreement consists of: (i) a five-year $25.0 million revolving operating facility; (ii) a five-year Term A facility of up to $20.0 million; and (iii) a six-year Term B facility of up to $225.0 million. The Term A facility is available only for post-closing adjustments to the purchase price under the share purchase agreement. Unused commitments under the Term A facility will be terminated upon the finalization of the purchase price adjustments, if any, under the share purchase agreement. See “Description of Restated Credit Agreement.” |
33
• | the acquisition of Xantic by Stratos; | |
• | the refinancing of Stratos’ existing Term B facility and revolving operating facility with the restated senior credit agreement; and | |
• | the issuance of the original notes |
34
For the Year Ended December 31, 2005 | ||||||||||||||||||||||||||||||||||||
Xantic (Note 1) | ||||||||||||||||||||||||||||||||||||
Stratos | Dutch | CDN GAAP | Pro Forma Adjustments | U.S.GAAP | ||||||||||||||||||||||||||||||||
CDN GAAP | GAAP | Adjustments | CDN GAAP | Acquisition | Refinancing | Pro Forma | Adjustments | Pro Forma | ||||||||||||||||||||||||||||
Historical | Historical | (Note 2) | Historical | (Note 3(a)) | (Note 3(b)) | CDNGAAP | (Note 4) | U.S. GAAP | ||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||
Revenue | $ | 381.0 | $ | 198.7 | $ | (5.1 | )(a) | $ | 193.6 | $ | — | $ | — | $ | 574.6 | $ | — | $ | 574.6 | |||||||||||||||||
Cost of goods and services | 271.3 | 139.3 | 0.4 | (b) | 139.7 | (8.4 | ) | — | 402.6 | (0.6 | ) | 402.0 | ||||||||||||||||||||||||
Gross margin | 109.7 | 59.4 | (5.5 | ) | 53.9 | 8.4 | — | 172.0 | 0.6 | 172.6 | ||||||||||||||||||||||||||
Operating expenses | 51.5 | 26.3 | (4.1 | )(c) | 22.2 | — | — | 73.7 | — | 73.7 | ||||||||||||||||||||||||||
Interest expense | 11.4 | 0.7 | (0.4 | )(d) | 0.3 | — | 22.0 | 33.7 | (1.1 | ) | 32.6 | |||||||||||||||||||||||||
Depreciation and Amortization | 36.6 | 8.9 | (0.6 | )(e) | 8.3 | 1.2 | — | 46.1 | — | 46.1 | ||||||||||||||||||||||||||
Other costs (income) | 0.5 | (12.5 | ) | 3.1 | (f) | (9.4 | ) | — | — | (8.9 | ) | — | (8.9 | ) | ||||||||||||||||||||||
Non-controlling interest | 0.1 | — | — | — | — | — | 0.1 | — | 0.1 | |||||||||||||||||||||||||||
Equity in earnings of Investee | (0.7 | ) | — | — | — | — | — | (0.7 | ) | — | (0.7 | ) | ||||||||||||||||||||||||
99.4 | 23.4 | (2.0 | ) | 21.4 | 1.2 | 22.0 | 144.0 | (1.1 | ) | 142.9 | ||||||||||||||||||||||||||
Earnings (loss) before income taxes | 10.3 | 36.0 | (3.5 | ) | 32.5 | 7.2 | (22.0 | ) | 28.0 | 1.7 | 29.7 | |||||||||||||||||||||||||
Income tax expense (recovery) | 4.9 | (4.4 | ) | 6.4 | (g) | 2.0 | 1.6 | (7.5 | ) | 1.0 | 0.5 | 1.5 | ||||||||||||||||||||||||
Net earnings (loss) | $ | 5.4 | $ | 40.4 | $ | (9.9 | ) | $ | 30.5 | $ | 5.6 | $ | (14.5 | ) | $ | 27.0 | $ | 1.2 | $ | 28.2 | ||||||||||||||||
Basic and diluted earnings per share | $ | 0.13 | $ | 0.62 | $ | 0.65 | ||||||||||||||||||||||||||||||
Weighted average common shares outstanding (in thousands) | 43,221 | 43,221 | 43,221 | |||||||||||||||||||||||||||||||||
Weighted average common shares outstanding, assuming dilution (in thousands) | 43,251 | 43,251 | 43,251 | |||||||||||||||||||||||||||||||||
35
For the Six Months Ended June 30, 2006 | ||||||||||||||||||||||||||||||||||||
Xantic (Note 1) | ||||||||||||||||||||||||||||||||||||
Stratos | Dutch | CDN GAAP | Pro Forma Adjustments | U.S.GAAP | ||||||||||||||||||||||||||||||||
CDN GAAP | GAAP | Adjustments | CDN GAAP | Acquisition | Refinancing | Pro Forma | Adjustments | Pro Forma | ||||||||||||||||||||||||||||
Historical | Historical | (Note 2) | Historical | (Note 3(a)) | (Note 3(b)) | CDNGAAP | (Note 4) | U.S. GAAP | ||||||||||||||||||||||||||||
($ in millions, except share and per share amounts) | ||||||||||||||||||||||||||||||||||||
Revenue | $ | 258.6 | $ | 22.8 | $ | — | (a) | $ | 22.8 | $ | — | $ | — | $ | 281.4 | $ | — | $ | 281.4 | |||||||||||||||||
Cost of goods and services | 194.6 | 17.2 | — | (b) | 17.2 | (0.7 | ) | — | 211.1 | (0.2 | ) | 210.9 | ||||||||||||||||||||||||
Gross margin | 64.0 | 5.6 | — | 5.6 | 0.7 | — | 70.3 | 0.2 | 70.5 | |||||||||||||||||||||||||||
Operating expenses | 34.5 | 3.0 | (0.1 | )(c) | 2.9 | — | — | 37.4 | 0.4 | 37.8 | ||||||||||||||||||||||||||
Interest expense | 17.6 | — | — | (d) | — | — | 0.1 | 17.7 | — | 17.7 | ||||||||||||||||||||||||||
Depreciation and Amortization | 19.9 | 0.9 | — | (e) | 0.9 | 0.3 | — | 21.1 | — | 21.1 | ||||||||||||||||||||||||||
Other costs | 25.3 | 0.1 | — | (f) | 0.1 | — | — | 25.4 | — | 25.4 | ||||||||||||||||||||||||||
Non-controlling interest | 0.1 | — | — | — | — | — | 0.1 | — | 0.1 | |||||||||||||||||||||||||||
Equity in earnings of Investee | (0.5 | ) | — | — | — | — | — | (0.5 | ) | — | (0.5 | ) | ||||||||||||||||||||||||
96.9 | 4.0 | (0.1 | ) | 3.9 | 0.3 | 0.1 | 101.2 | 0.4 | 101.6 | |||||||||||||||||||||||||||
Earnings (loss) before income taxes | (32.9 | ) | 1.6 | 0.1 | 1.7 | 0.4 | (0.1 | ) | (30.9 | ) | (0.2 | ) | (31.1 | ) | ||||||||||||||||||||||
Income tax expense (recovery) | (4.0 | ) | 0.1 | — | (g) | 0.1 | 0.1 | (0.6 | ) | (4.4 | ) | — | (4.4 | ) | ||||||||||||||||||||||
Net earnings (loss) | $ | (28.9 | ) | $ | 1.5 | $ | 0.1 | $ | 1.6 | $ | 0.3 | $ | 0.5 | $ | (26.5 | ) | $ | (0.2 | ) | $ | (26.7 | ) | ||||||||||||||
Basic and diluted earnings per share | $ | (0.69 | ) | $ | (0.63 | ) | $ | (0.64 | ) | |||||||||||||||||||||||||||
Weighted average common shares outstanding (in thousands) | 41,995 | 41,995 | 41,995 | |||||||||||||||||||||||||||||||||
Weighted average common shares outstanding, assuming dilution (in thousands) | 41,995 | 41,995 | 41,995 | |||||||||||||||||||||||||||||||||
36
1. | Basis of Presentation |
• | the acquisition of Xantic by Stratos; | |
• | the refinancing of Stratos’ existing Term B facility and revolving operating facility with the restated original credit agreement; and | |
• | the issuance of the original notes. |
2. | Canadian GAAP Adjustments — Xantic |
37
2. | Canadian GAAP Adjustments — Xantic — (Continued) |
Fiscal Year | Six Months | |||||||
Ended | Ended | |||||||
December 31, | June 30, | |||||||
2005 | 2006 | |||||||
($ in millions) | ||||||||
a) Revenue | ||||||||
Removal of discontinued operations | $ | (5.4 | ) | $ | — | |||
Revenue recognition on sale of hardware | 0.3 | — | ||||||
(5.1 | ) | — | ||||||
b) Cost of goods and services | ||||||||
Removal of discontinued operations | (0.8 | ) | — | |||||
Revenue recognition on sale of hardware | 0.2 | — | ||||||
Provisions — onerous contracts | 1.0 | — | ||||||
0.4 | — | |||||||
c) Operating expenses | ||||||||
Removal of discontinued operations | (8.2 | ) | — | |||||
Provisions — onerous contracts | 1.8 | 0.1 | ||||||
Provisions — restructuring | 0.5 | — | ||||||
Internally developed software | (0.2 | ) | — | |||||
Early retirement provisions | (0.2 | ) | — | |||||
Employee benefits — pensions | 0.2 | — | ||||||
Leases | (0.3 | ) | (0.1 | ) | ||||
Derivatives | 2.3 | (0.1 | ) | |||||
(4.1 | ) | (0.1 | ) | |||||
d) Interest expense | ||||||||
Provisions — onerous contracts | (0.4 | ) | — | |||||
e) Depreciation and amortization | ||||||||
Business combinations | (0.5 | ) | (0.1 | ) | ||||
Internally developed software | (0.3 | ) | — | |||||
Leases | 0.2 | 0.1 | ||||||
(0.6 | ) | — | ||||||
f) Other costs | ||||||||
Removal of discontinued operations | 0.2 | — | ||||||
Provisions — restructuring | 2.9 | — | ||||||
3.1 | — | |||||||
38
Fiscal Year | Six Months | |||||||
Ended | Ended | |||||||
December 31, | June 30, | |||||||
2005 | 2006 | |||||||
($ in millions) | ||||||||
2. Canadian GAAP Adjustments — Xantic — (Continued) | ||||||||
g) Income tax provision (recovery) | ||||||||
Removal of discontinued operations | $ | (0.1 | ) | $ | — | |||
Future tax effect of above adjustments | (2.3 | ) | — | |||||
Valuation allowance for future tax assets | 8.8 | — | ||||||
6.4 | — | |||||||
3. | Transaction Adjustments |
39
3. | Transaction Adjustments — (Continued) |
Fiscal Year | Six Months | |||||||
Ended | Ended | |||||||
December 31, | June 30, | |||||||
2005 | 2006 | |||||||
($ in millions) | ||||||||
Cost of goods and services: | ||||||||
Increase in volume discounts in accordance with the Inmarsat commercial framework agreement(i) | $ | (8.4 | ) | $ | (0.7 | ) | ||
Depreciation and amortization: | ||||||||
Removal of Xantic existing depreciation and amortization | (8.3 | ) | (0.9 | ) | ||||
Depreciation of Xantic capital assets using Stratos’ depreciation and amortization policies | 2.8 | 0.4 | ||||||
Amortization of intangibles recorded upon acquisition of Xantic | 6.7 | 0.8 | ||||||
1.2 | 0.3 | |||||||
Income tax recovery: | ||||||||
Income tax effect of the above noted adjustments | $ | 1.6 | $ | 0.1 | ||||
(i) | Both Stratos and Xantic operate under the commercial framework agreement between Inmarsat and its distributors. This agreement provides discounts based on the amount of airtime purchased. Under the agreement, the increased airtime purchased as a result of the acquisition of Xantic will result in increased volume discounts. These additional discounts have been reflected in the pro forma results as a reduction to costs of goods and services. |
Fiscal Year | Six Months | |||||||
Ended | Ended | |||||||
December 31, | June 30, | |||||||
2005 | 2006 | |||||||
($ in millions) | ||||||||
Elimination of interest expense (including amortization of prior deferred financing charges) on the retired non-revolving Term B facility and revolving operating facility with interest rates of LIBOR + 2.25% and LIBOR + 1.45%, respectively | $ | (9.7 | ) | $ | (4.0 | ) | ||
Interest expense (including amortization of new deferred financing charges) on the refinanced senior credit facilities and on the notes | 31.7 | 4.1 | ||||||
Net increase in interest expense | $ | 22.0 | $ | 0.1 | ||||
40
4. | U.S. GAAP Adjustments — Stratos and Xantic |
Fiscal Year | Six Months | |||||||
Ended | Ended | |||||||
December 31, | June 30, | |||||||
2005 | 2006 | |||||||
($ in millions) | ||||||||
Cost of goods and services | ||||||||
Deferredstart-up costs(a) | $ | (0.5 | ) | $ | (0.2 | ) | ||
Deferred development costs(a) | (0.1 | ) | — | |||||
(0.6 | ) | (0.2 | ) | |||||
Operating expense | ||||||||
Stock-based compensation costs(b) | — | 0.4 | ||||||
Interest expense | ||||||||
Interest rate swap(c) | (1.1 | ) | — | |||||
Income tax (provision) recovery | ||||||||
Income tax impact of the above noted adjustments | 0.5 | — | ||||||
41
4. | U.S. GAAP Adjustments — Stratos and Xantic — (Continued) |
42
Stratos | ||||||||||||||||||||||||||||||||||||
Selected Consolidated Historical Financial Data | ||||||||||||||||||||||||||||||||||||
As at and for the | ||||||||||||||||||||||||||||||||||||
As at and for the Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||||
(Restated)(1) | (Restated)(1) | (Pro forma) | (Pro forma) | |||||||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||
Amounts under Canadian GAAP | ||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||
Revenue | $ | 289.1 | $ | 326.8 | $ | 397.2 | $ | 367.8 | $ | 381.0 | $ | 574.6 | $ | 185.2 | $ | 258.6 | $ | 281.4 | ||||||||||||||||||
Cost of goods and services | 180.3 | 208.6 | 259.2 | 246.3 | 271.3 | 402.6 | 129.6 | 194.6 | 211.1 | |||||||||||||||||||||||||||
Gross margin | 108.8 | 118.2 | 138.0 | 121.5 | 109.7 | 172.0 | 55.6 | 64.0 | 70.3 | |||||||||||||||||||||||||||
Operating expenses | 46.1 | 46.7 | 49.2 | 43.3 | 51.5 | 73.7 | 24.9 | 34.5 | 37.4 | |||||||||||||||||||||||||||
Interest expense | 36.8 | 24.7 | 15.3 | 11.7 | 11.4 | 33.7 | 5.6 | 17.6 | 17.7 | |||||||||||||||||||||||||||
Depreciation and amortization | 35.6 | 27.7 | 29.5 | 29.0 | 36.6 | 46.1 | 18.1 | 19.9 | 21.1 | |||||||||||||||||||||||||||
Other costs (income) | 9.1 | — | (6.8 | ) | 3.6 | 0.5 | (8.9 | ) | 0.4 | 25.3 | 25.4 | |||||||||||||||||||||||||
Non-controlling interest | — | — | — | — | 0.1 | 0.1 | — | 0.1 | 0.1 | |||||||||||||||||||||||||||
Equity in earnings of investee | — | — | — | — | (0.7 | ) | (0.7 | ) | (0.3 | ) | (0.5 | ) | (0.5 | ) | ||||||||||||||||||||||
Earnings (loss) before income taxes | (18.8 | ) | 19.1 | 50.8 | 33.9 | 10.3 | 28.0 | 6.9 | (32.9 | ) | (30.9 | ) | ||||||||||||||||||||||||
Income tax expense (recovery) | 4.4 | 5.8 | 12.7 | 8.7 | 4.9 | 1.0 | 3.0 | (4.0 | ) | (4.4 | ) | |||||||||||||||||||||||||
Net earnings (loss) | $ | (23.2 | ) | $ | 13.3 | $ | 38.1 | $ | 25.2 | $ | 5.4 | $ | 27.0 | $ | 3.9 | $ | (28.9 | ) | $ | (26.5 | ) | |||||||||||||||
43
Stratos | ||||||||||||||||||||||||||||||||||||
Selected Consolidated Historical Financial Data | ||||||||||||||||||||||||||||||||||||
As at and for the | ||||||||||||||||||||||||||||||||||||
As at and for the Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||||
(Restated)(1) | (Restated)(1) | (Pro forma) | (Pro forma) | |||||||||||||||||||||||||||||||||
($ in millions, except ratios, share and per share amounts) | ||||||||||||||||||||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||||||||||||||
Cash flow provided by (used in) operating activities | $ | (4.4 | ) | $ | 59.1 | $ | 68.0 | $ | 85.8 | $ | 30.7 | N/A | $ | 17.3 | $ | 14.3 | N/A | |||||||||||||||||||
Cash flow provided by (used in) investing activities | $ | (0.9 | ) | $ | (24.1 | ) | $ | 0.7 | $ | (27.8 | ) | $ | (44.4 | ) | N/A | $ | (26.4 | ) | $ | (185.6 | ) | N/A | ||||||||||||||
Cash flow provided by (used in) financing activities | $ | (1.1 | ) | $ | (18.8 | ) | $ | (78.8 | ) | $ | 11.2 | $ | (52.5 | ) | N/A | $ | (50.5 | ) | $ | 210.9 | N/A | |||||||||||||||
Share amounts: | ||||||||||||||||||||||||||||||||||||
Number of shares at end of period (in thousands) | 39,506 | 49,119 | 49,120 | 49,379 | 41,992 | 41,992 | 41,989 | 41,998 | 41,998 | |||||||||||||||||||||||||||
Weighed average number of shares Basic (in thousands) | 39,505 | 45,911 | 49,119 | 49,337 | 43,221 | 43,221 | 44,452 | 41,995 | 41,995 | |||||||||||||||||||||||||||
Diluted (in thousands) | 39,505 | 46,112 | 49,324 | 49,500 | 43,251 | 43,251 | 44,512 | 41,995 | 41,995 | |||||||||||||||||||||||||||
Earnings (loss) per share Basic and diluted | $ | (0.59 | ) | $ | 0.29 | $ | 0.77 | $ | 0.51 | $ | 0.13 | $ | 0.62 | $ | 0.09 | $ | (0.69 | ) | $ | (0.63 | ) | |||||||||||||||
Other Data: | ||||||||||||||||||||||||||||||||||||
EBITDA(2) | $ | 62.7 | $ | 71.5 | $ | 88.8 | $ | 78.2 | $ | 58.2 | $ | 98.3 | $ | 30.7 | $ | 29.5 | $ | 32.9 | ||||||||||||||||||
Capital expenditures | $ | 21.6 | $ | 21.5 | $ | 19.6 | $ | 22.5 | $ | 25.8 | $ | 28.0 | $ | 12.6 | $ | 12.1 | $ | 13.1 | ||||||||||||||||||
Ratio of earnings to fixed charges(3) | — | 1.7 | x | 4.0 | x | 3.5 | x | 1.7 | x | 1.8 | x | 2.0 | x | — | — | |||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 5.3 | $ | 21.5 | $ | 11.5 | $ | 80.7 | $ | 14.5 | $ | 30.1 | $ | 21.0 | $ | 54.1 | (5 | ) | ||||||||||||||||||
Total assets | $ | 521.0 | $ | 510.0 | $ | 485.8 | $ | 529.6 | $ | 495.3 | $ | 795.9 | $ | 499.0 | $ | 783.5 | (5 | ) | ||||||||||||||||||
Total debt | $ | 326.8 | $ | 214.5 | $ | 140.7 | $ | 150.8 | $ | 164.2 | $ | 375.8 | $ | 165.9 | $ | 375.7 | (5 | ) | ||||||||||||||||||
Capital stock | $ | 160.9 | $ | 252.5 | $ | 252.5 | $ | 254.1 | $ | 216.1 | $ | 216.1 | $ | 216.1 | $ | 216.1 | (5 | ) | ||||||||||||||||||
Shareholders’ equity | $ | 110.6 | $ | 215.4 | $ | 253.8 | $ | 281.4 | $ | 222.9 | $ | 220.0 | $ | 220.7 | $ | 194.9 | (5 | ) | ||||||||||||||||||
Amounts under U.S. GAAP | ||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||
Revenue | $ | 289.1 | $ | 326.8 | $ | 397.2 | $ | 367.8 | $ | 381.0 | $ | 574.6 | $ | 185.2 | $ | 258.6 | $ | 281.4 | ||||||||||||||||||
Cost of goods and services | $ | 180.2 | $ | 206.1 | $ | 255.6 | $ | 243.2 | $ | 268.4 | $ | 402.0 | $ | 128.1 | $ | 191.9 | $ | 210.9 | ||||||||||||||||||
Operating expenses (excluding depreciation and amortization and asset impairment charge)(4) | $ | 65.2 | $ | 49.5 | $ | 62.2 | $ | 48.7 | $ | 53.5 | $ | 73.7 | $ | 26.3 | $ | 38.9 | $ | 37.8 | ||||||||||||||||||
Interest expense | $ | 44.1 | $ | 30.7 | $ | 10.3 | $ | 6.2 | $ | 10.3 | $ | 32.6 | $ | 4.8 | $ | 17.5 | $ | 17.7 | ||||||||||||||||||
Depreciation and amortization | $ | 34.6 | $ | 27.7 | $ | 29.5 | $ | 29.0 | $ | 36.6 | $ | 46.1 | $ | 18.1 | $ | 19.9 | $ | 21.1 | ||||||||||||||||||
Asset impairment charge | $ | — | $ | — | $ | 5.5 | $ | 2.2 | $ | 0.2 | $ | 0.2 | $ | 0.2 | $ | 23.8 | $ | 23.8 | ||||||||||||||||||
Net earnings (loss) | $ | (39.0 | ) | $ | 6.9 | $ | 44.2 | $ | 37.1 | $ | 6.6 | $ | 28.2 | $ | 4.7 | $ | (29.1 | ) | $ | (26.7 | ) | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 5.3 | $ | 21.5 | $ | 11.5 | $ | 80.7 | $ | 14.5 | $ | 30.1 | $ | 21.0 | $ | 54.1 | (5 | ) | ||||||||||||||||||
Total assets | $ | 497.0 | $ | 485.6 | $ | 462.4 | $ | 507.9 | $ | 476.3 | $ | 777.0 | $ | 477.6 | $ | 765.7 | (5 | ) | ||||||||||||||||||
Total debt | $ | 326.8 | $ | 214.5 | $ | 140.7 | $ | 150.8 | $ | 164.2 | $ | 375.8 | $ | 165.9 | $ | 375.7 | (5 | ) | ||||||||||||||||||
Capital stock | $ | 160.9 | $ | 254.1 | $ | 254.1 | $ | 256.2 | $ | 218.2 | $ | 218.2 | $ | 218.2 | $ | 218.2 | (5 | ) | ||||||||||||||||||
Shareholders’ equity | $ | 80.7 | $ | 180.8 | $ | 225.5 | $ | 265.1 | $ | 210.0 | $ | 209.1 | $ | 205.2 | $ | 183.1 | (5 | ) |
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(1) | Restated. Effective January 1, 2004, we implemented the recommendations of the Canadian Institute of Chartered Accountants (“CICA”) with respect to asset retirement obligations. Under these recommendations, the fair value of legal obligations associated with the retirement of tangible long-lived assets must be recognized in the financial statements in the period in which the liability is incurred. This standard was applied retroactively with restatement of prior periods for Canadian GAAP numbers. See note 2(b) to our audited consolidated financial statements included elsewhere in this prospectus. | |
(2) | We define “EBITDA” as net earnings (loss) before interest expense, income tax expense, depreciation and amortization, equity in net earnings of investee, non-controlling interest and other costs (income). Management believes that EBITDA is a useful tool for investors and other users of our financial statements in assessing our ability to serviceand/or incur more indebtedness, maintain current operating levels of capital assets and acquire additional operations and businesses. Management believes that the most directly comparable GAAP measure is net earnings. | |
A reconciliation of EBITDA to net earnings under Canadian GAAP is as follows: |
As at and for the | ||||||||||||||||||||||||||||||||||||
As at and for the Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | 2005 | 2006 | 2006 | ||||||||||||||||||||||||||||
(Restated)(1) | (Restated)(1) | (Pro forma) | (Pro forma) | |||||||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||
Net earnings (loss) | $ | (23.2 | ) | $ | 13.3 | $ | 38.1 | $ | 25.2 | $ | 5.4 | $ | 27.0 | $ | 3.9 | $ | (28.9 | ) | $ | (26.5 | ) | |||||||||||||||
Interest expense | 36.8 | 24.7 | 15.3 | 11.7 | 11.4 | 33.7 | 5.6 | 17.6 | 17.7 | |||||||||||||||||||||||||||
Income tax expense (recovery) | 4.4 | 5.8 | 12.7 | 8.7 | 4.9 | 1.0 | 3.0 | (4.0 | ) | (4.4 | ) | |||||||||||||||||||||||||
Depreciation and amortization | 35.6 | 27.7 | 29.5 | 29.0 | 36.6 | 46.1 | 18.1 | 19.9 | 21.1 | |||||||||||||||||||||||||||
Equity in earnings of investee | — | — | — | — | (0.7 | ) | (0.7 | ) | (0.3 | ) | (0.5 | ) | (0.5 | ) | ||||||||||||||||||||||
Non-controlling interest | — | — | — | — | 0.1 | 0.1 | — | 0.1 | 0.1 | |||||||||||||||||||||||||||
Other costs (income) | 9.1 | — | (6.8 | ) | 3.6 | 0.5 | (8.9 | ) | 0.4 | 25.3 | 25.4 | |||||||||||||||||||||||||
EBITDA | $ | 62.7 | $ | 71.5 | $ | 88.8 | $ | 78.2 | $ | 58.2 | $ | 98.3 | $ | 30.7 | $ | 29.5 | $ | 32.9 | ||||||||||||||||||
(3) | For the purposes of computing the ratio of earnings to fixed charges, “earnings” includes pretax income (or loss) from continuing operations, which excludes the effects of discontinued operations, extraordinary items, undistributed earnings in equity-method investees, and fixed charges less capitalized interest during the period. “Fixed charges” includes interest expenses, including capitalized interest, amortization of discounts or premiums on indebtedness and a reasonable estimate of the interest within rental expense. For the year ended December 31, 2001 and the six months ended June 30, 2006, earnings were inadequate to cover fixed charges due to deficiencies of approximately $18.8 million and $33.4 million, respectively. | |
(4) | U.S. GAAP requires operating expenses to include items such as depreciation and amortization, the write-off of deferred acquisition costs, asset impairment charges, restructuring costs, equity in earnings of investee and non-controlling interest. In the table of selected historical consolidated financial data above, depreciation and amortization and asset impairment charges have been excluded from operating expenses under U.S. GAAP. All of these items have been excluded from operating expenses in the Canadian GAAP financial statements. | |
(5) | The balance sheet at June 30, 2006 includes Xantic and therefore pro forma amounts are not relevant. |
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Xantic | ||||||||||||||||||||
Selected Consolidated Historical Financial Data | ||||||||||||||||||||
As at and for the Year Ended December 31, | ||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | ||||||||||||||||
($ in millions) | ||||||||||||||||||||
Amounts under Dutch GAAP | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenue | $ | 258.7 | $ | 253.7 | $ | 236.0 | $ | 224.8 | $ | 201.0 | ||||||||||
Operating expenses excluding depreciation, amortization and impairments | 230.2 | 261.5 | 248.3 | 209.5 | 161.0 | |||||||||||||||
Interest expense (income) | 6.7 | 8.1 | 7.0 | (3.5 | ) | (1.7 | ) | |||||||||||||
Depreciation, amortization and impairments | 21.1 | 95.4 | 32.3 | 10.3 | 8.9 | |||||||||||||||
Result from investments | — | — | (29.7 | ) | — | (3.1 | ) | |||||||||||||
Earnings (loss) before income taxes | 0.7 | (111.3 | ) | (21.9 | ) | 8.5 | 35.9 | |||||||||||||
Income tax expense (recovery) | 1.0 | 1.2 | (0.6 | ) | 0.6 | (4.5 | ) | |||||||||||||
Net earnings (loss) | $ | (0.3 | ) | $ | (112.5 | ) | $ | (21.3 | ) | $ | 7.9 | $ | 40.4 | |||||||
Cash Flow Data: | ||||||||||||||||||||
Cash flow provided by (used in) operating activities | $ | 39.6 | $ | 28.3 | $ | 35.8 | $ | 23.5 | $ | 20.3 | ||||||||||
Cash flow provided by (used in) investing activities | $ | (40.6 | ) | $ | (15.1 | ) | $ | 50.9 | $ | (3.9 | ) | $ | (1.8 | ) | ||||||
Cash flow provided by (used in) financing activities | $ | — | $ | — | $ | (75.0 | ) | $ | (0.5 | ) | $ | (0.5 | ) | |||||||
Other Data: | ||||||||||||||||||||
Capital expenditures | $ | 19.9 | $ | 14.8 | $ | 6.5 | $ | 8.1 | $ | 2.2 | ||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 11.4 | $ | 24.4 | $ | 36.1 | $ | 55.1 | $ | 73.1 | ||||||||||
Total assets | $ | 344.2 | $ | 262.3 | $ | 167.1 | $ | 161.9 | $ | 161.1 | ||||||||||
Total debt | $ | — | $ | 75.0 | $ | — | $ | — | $ | — | ||||||||||
Shareholders’ equity | $ | 176.0 | $ | 63.1 | $ | 42.1 | $ | 50.1 | $ | 89.7 | ||||||||||
Amounts under U.S. GAAP | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenue | (1 | ) | (1 | ) | (1 | ) | $ | 205.5 | $ | 193.6 | ||||||||||
Operating expenses (excluding depreciation and amortization)(2) | (1 | ) | (1 | ) | (1 | ) | $ | 193.8 | $ | 161.9 | ||||||||||
Interest expense (income) | (1 | ) | (1 | ) | (1 | ) | $ | (1.4 | ) | $ | 0.3 | |||||||||
Depreciation and amortization | (1 | ) | (1 | ) | (1 | ) | $ | 11.9 | $ | 8.3 | ||||||||||
Net earnings (loss) | (1 | ) | (1 | ) | (1 | ) | $ | 2.7 | $ | 30.5 | ||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | (1 | ) | (1 | ) | (1 | ) | $ | 7.7 | $ | 15.2 | ||||||||||
Total assets | (1 | ) | (1 | ) | (1 | ) | $ | 155.3 | $ | 146.1 | ||||||||||
Total debt | (1 | ) | (1 | ) | (1 | ) | $ | 0.6 | $ | 0.4 | ||||||||||
Shareholders’ equity | (1 | ) | (1 | ) | (1 | ) | $ | 46.3 | $ | 74.1 |
(1) | No U.S. GAAP information is available for these periods. | |
(2) | Operating expenses under U.S. GAAP include items such as depreciation and amortization, asset impairment charges and restructuring costs. These items have been excluded from operating expenses in the Dutch GAAP financial statements. |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Six Months Ended June 30 | ||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||
MSS | Broadband | Consolidated | MSS | Broadband | Consolidated | |||||||||||||||||||
($ in millions, except percentages) | ||||||||||||||||||||||||
Revenue | $ | 195.2 | $ | 63.4 | $ | 258.6 | $ | 126.3 | $ | 58.9 | $ | 185.2 | ||||||||||||
Gross margin | 64.0 | 55.6 | ||||||||||||||||||||||
As a % of revenue | 25 | % | 30 | % | ||||||||||||||||||||
Operating expenses | 34.5 | 24.9 | ||||||||||||||||||||||
As a % of revenue | 13 | % | 13 | % | ||||||||||||||||||||
Segment earnings | $ | 24.0 | $ | 5.5 | $ | 29.5 | $ | 22.4 | $ | 8.3 | $ | 30.7 | ||||||||||||
As a % of revenue | 12 | % | 9 | % | 11 | % | 18 | % | 14 | % | 17 | % | ||||||||||||
Interest expense | 17.6 | 5.6 | ||||||||||||||||||||||
Depreciation and amortization | 19.9 | 18.1 | ||||||||||||||||||||||
Other costs (income) | 25.3 | 0.4 | ||||||||||||||||||||||
Non-controlling interest | 0.1 | — | ||||||||||||||||||||||
Equity in earnings of investee | (0.5 | ) | (0.3 | ) | ||||||||||||||||||||
Earnings (loss) before income taxes | (32.9 | ) | 6.9 | |||||||||||||||||||||
Income tax (recovery) expense | (4.0 | ) | 3.0 | |||||||||||||||||||||
Net (loss) earnings | $ | (28.9 | ) | $ | 3.9 | |||||||||||||||||||
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Six Months Ended | ||||||||
June 30, | ||||||||
2006 | 2005 | |||||||
($ in millions) | ||||||||
Revenues | ||||||||
Maritime sector: | ||||||||
Voice services | $ | 54.0 | $ | 21.4 | ||||
Data services | 19.7 | 8.3 | ||||||
Total maritime sector | 73.7 | 29.7 | ||||||
Land sector: | ||||||||
Voice services | 10.4 | 4.8 | ||||||
Data services | 25.5 | 24.8 | ||||||
Total land sector | 35.9 | 29.6 | ||||||
Aeronautical sector | 11.7 | 3.1 | ||||||
Leasing | 35.5 | 34.1 | ||||||
Total Inmarsat revenue | $ | 156.8 | $ | 96.5 | ||||
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• | Severance and other costs of $1.3 million recorded in the second quarter of 2006 as a result of the integration of Xantic related to positions existing within our MSS segment prior to the acquisition and a restructuring of the Broadband sales and operations groups. | |
• | Coincident with the acquisition of Xantic, we completed an evaluation of our consolidated post-acquisition LES network infrastructure. As a result, in the first quarter of 2006, we recorded an asset impairment charge of $19.6 million in connection with our LES in Goonhilly, England. LES services currently provided from the Goonhilly LES will be transitioned to our Burum, Netherlands LES by the first quarter of 2007. | |
• | An asset impairment charge of $4.2 million related to the write-off of capital assets in the first quarter of 2006, representing costs incurred under a contract to customize and integrate customer relationship management software for use within our mobile satellite business. We filed a claim for U.S. $7.0 million in damages, plus costs and interest, as a result of a third party consultant’s breach of contract, and have received a counterclaim from the defendant, alleging breach of the same contract and seeking U.S. $6.7 million in damages, plus costs and interest. | |
• | Severance and other costs of $0.2 million recorded in the first quarter of 2006. |
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Year Ended December 31 | ||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||
MSS | Broadband | Consolidated | MSS | Broadband | Consolidated | |||||||||||||||||||
($ in millions, except percentages) | ||||||||||||||||||||||||
Revenue | $ | 259.9 | $ | 121.1 | $ | 381.0 | $ | 265.8 | $ | 102.0 | $ | 367.8 | ||||||||||||
Gross margin | 109.7 | 121.5 | ||||||||||||||||||||||
As a % of revenue | 29 | % | 33 | % | ||||||||||||||||||||
Operating expenses | 51.5 | 43.3 | ||||||||||||||||||||||
As a % of revenue | 14 | % | 12 | % | ||||||||||||||||||||
Segment earnings | $ | 44.8 | $ | 13.4 | 58.2 | $ | 56.2 | $ | 22.0 | $ | 78.2 | |||||||||||||
As a % of revenue | 17 | % | 11 | % | 15 | % | 21 | % | 22 | % | 21 | % | ||||||||||||
Interest expense | 11.4 | 11.7 | ||||||||||||||||||||||
Depreciation and amortization | 36.6 | 29.0 | ||||||||||||||||||||||
Other costs | 0.5 | 3.6 | ||||||||||||||||||||||
Non-controlling interest | 0.1 | — | ||||||||||||||||||||||
Equity in earnings of investee | (0.7 | ) | — | |||||||||||||||||||||
Earnings before income taxes | 10.3 | 33.9 | ||||||||||||||||||||||
Income tax expense | 4.9 | 8.7 | ||||||||||||||||||||||
Net earnings | $ | 5.4 | $ | 25.2 | ||||||||||||||||||||
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• | income recognized in the first quarter of $2.0 million related to the settlement of a commercial dispute with a third party regarding licensing and use of certain technology; | |
• | costs of $1.7 million related to a court ruling in a lawsuit brought against us by one of our former officers; |
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• | costs of $0.9 million in respect of employee severance and other costs related to a minor restructuring of sales and operating groups; | |
• | income of $0.3 million related to the gain on disposal of certain assets; and | |
• | costs of $0.2 million related to a write-down of certain software assets. |
• | severance and other costs of $2.9 million associated with workforce reductions in the MSS and Broadband segments and at the corporate level, as well as the consolidation of certain finance and operational functions in the Broadband and MSS segments. These costs consisted of severance, retention, relocation, travel and other expenses associated with restructuring activities; | |
• | asset impairment charges of $1.9 million resulting from the termination of a Broadband contract which utilized specific assets that we did not re-deploy due to the limited market for the technology and the consolidation of certain telecommunications switches within the Broadband segment to improve efficiencies and customer service; | |
• | asset impairment charges of $0.3 million related to a planned rationalization of the MSS segment’s network infrastructure designed to improve operational efficiency and reduce operating costs; and | |
• | income of $1.5 million related to a reduction to the allowance for uncollectability of accounts receivable, the result of successful collection activities leading to (i) a significant reduction in overall account balances, (ii) an improvement in the aging of accounts receivable and (iii) a reduction in the concentration of accounts receivable due from certain large customers. |
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Year Ended December 31 | ||||||||||||||||||||||||
2004 | 2003 | |||||||||||||||||||||||
MSS | Broadband | Consolidated | MSS | Broadband | Consolidated | |||||||||||||||||||
($ in millions, except percentages) | ||||||||||||||||||||||||
Revenue | $ | 265.8 | $ | 102.0 | $ | 367.8 | $ | 300.8 | $ | 96.4 | $ | 397.2 | ||||||||||||
Gross margin | 121.5 | 138.0 | ||||||||||||||||||||||
As a % of revenue | 33 | % | 35 | % | ||||||||||||||||||||
Operating expenses | 43.3 | 49.2 | ||||||||||||||||||||||
As a % of revenue | 12 | % | 12 | % | ||||||||||||||||||||
Segment earnings | $ | 56.2 | $ | 22.0 | 78.2 | $ | 67.4 | $ | 21.4 | 88.8 | ||||||||||||||
As a % of revenue | 21 | % | 22 | % | 21 | % | 22 | % | 22 | % | 22 | % | ||||||||||||
Interest expense | 11.7 | 15.3 | ||||||||||||||||||||||
Depreciation and amortization | 29.0 | 29.5 | ||||||||||||||||||||||
Other costs (income) | 3.6 | (6.8 | ) | |||||||||||||||||||||
Earnings before income taxes | 33.9 | 50.8 | ||||||||||||||||||||||
Income tax expense | 8.7 | 12.7 | ||||||||||||||||||||||
Net earnings | $ | 25.2 | $ | 38.1 | ||||||||||||||||||||
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• | severance and other costs of $2.9 million associated with workforce reductions in the MSS and Broadband segments and at the corporate level, as well as the consolidation of certain finance and operational functions in the MSS and Broadband segments. These costs consisted of severance, retention, relocation, travel and other expenses associated with restructuring activities; | |
• | asset impairment charges of $1.9 million resulting from the termination of a Broadband contract which utilized specific assets that we did not re-deploy due to the limited market for the technology and the consolidation of certain telecommunications switches within the Broadband segment to improve efficiencies and customer service; | |
• | asset impairment charges of $0.3 million related to a planned rationalization of the MSS segment network infrastructure designed to improve operational efficiency and reduce operating costs; and | |
• | income of $1.5 million related to a reduction to the allowance for uncollectability of accounts receivable, the result of successful collection activities leading to (i) a significant reduction in overall account balances, (ii) an improvement in the aging of accounts receivable and (iii) a reduction in the concentration of accounts receivable due from certain large customers. |
• | a gain on sale of our 1.8% equity interest in Inmarsat Ventures plc of $9.8 million; | |
• | income of $5.9 million related to a reduction to the allowance for uncollectability of accounts receivable, the result of successful collection activities and better than expected settlements with certain customers; | |
• | a cash payment of $7.0 million from Aliant, our former controlling shareholder, under an agreement entered into in connection with Aliant’s sale of its controlling interest in us; |
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• | the write-off of deferred acquisition costs of $7.3 million related to a significant consolidation opportunity for which successful completion was no longer considered more likely than not; | |
• | an asset impairment charge of $5.5 million related to our aeronautical business and operations as a result of our assessment of operating results, economic projections and market trends facing our aeronautical telecommunications businesses and the airline industry generally; and | |
• | other costs of $3.1 million related to the restructuring activities in each of our MSS and Broadband segments. |
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Payments Due for the Twelve Months Ended June 30 | ||||||||||||||||||||||||||||
Contractual Obligations | Total | 2007 | 2008 | 2009 | 2010 | 2011 | Thereafter | |||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||
Long-term debt(1)(2) | $ | 375.7 | $ | 2.4 | $ | 2.4 | $ | 2.4 | $ | 2.4 | $ | 2.4 | $ | 363.7 | ||||||||||||||
Operating leases | 26.7 | 7.6 | 4.8 | 3.1 | 2.4 | 1.8 | 7.0 | |||||||||||||||||||||
Maintenance contracts | 7.2 | 6.2 | 0.7 | 0.3 | 0.0 | 0.0 | 0.0 | |||||||||||||||||||||
Capital expenditure obligations | 3.2 | 1.2 | 0.8 | 0.6 | 0.4 | 0.2 | 0.0 | |||||||||||||||||||||
Purchase obligations(3) | 56.2 | 39.2 | 12.5 | 4.1 | 0.2 | 0.1 | 0.1 | |||||||||||||||||||||
Other obligations | 14.1 | 3.5 | 1.0 | 1.0 | 1.1 | 1.1 | 6.4 | |||||||||||||||||||||
Total contractual obligations | $ | 483.1 | $ | 60.1 | $ | 22.2 | $ | 11.5 | $ | 6.5 | $ | 5.6 | $ | 377.2 | ||||||||||||||
(1) | Excludes interest. | |
(2) | See changes in long-term debt under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Cash, Short-Term and Long-Term Borrowings”. | |
(3) | Purchase obligations are related primarily to space segment costs and will be funded from contracts to provide space segment and related services to our customers. |
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• | significant underperformance relative to historical or projected future operating results; | |
• | significant changes in the manner of our use of assets or the strategy of the overall business; and | |
• | significant negative industry or economic trends. |
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• | compare the fair value of a reporting unit with its carrying amount, including goodwill, to identify potential impairment; and | |
• | if the carrying amount of a reporting unit exceeds its fair value, step two requires the fair value of the reporting unit to be allocated to the underlying assets and liabilities, resulting in an implied fair value of goodwill for the reporting unit. If the carrying amount of the reporting unit goodwill exceeds the implied fair value, an impairment loss equal to the excess would be recorded in net earnings (loss). |
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• | Space Segment. The space segment consists of satellites that typically contain multiple transponders, each capable of independently receiving and transmitting one or more signals from or to multiple users simultaneously. A satellite is typically described by the number and frequency types of its transponders. Modern telecommunications satellites typically carry between 24 and 72 individual transponders of varying frequency and bandwidth. Bandwidth for a transponder is a measure of spectrum (frequency) use or capacity. The higher the bandwidth of a signal, the more data it can carry. | |
• | Ground Segment. The ground segment consists of terrestrial-based transmission and reception systems consisting principally of one or more LESs, which provide a telecommunications link to the end-user either directly or through a terrestrial network. A LES is an integrated system consisting of an antenna, radio signal transmitting and receiving equipment, modulation/demodulation equipment, monitor and control systems and voice, data and video network interface equipment. |
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• | End-User Terminal. The terminal allows an end-user to communicate “up” to the satellite, which relays the telecommunications “down” to an LES, which is interconnected with a terrestrial wireline network. A distinction is made between “mobile” and “fixed” satellite services. Mobile satellite services, or MSS, use a variety of mobile receiver and transmitter equipment to provide telecommunications services for land, mobile, maritime and aeronautical end-users. Fixed satellite services, or FSS, use fixed or stabilized antennas to receive and transmit satellite signals. |
• | GEO. GEO satellites are located 22,300 miles above the earth. At this orbital altitude, a satellite orbits the earth at the same speed as the earth’s rotation, allowing the satellite to stay fixed over one location. Three GEO satellites are sufficient to provide global coverage, excluding the extreme polar regions, reducing the space segment cost. Since GEO satellites are farther from earth than LEO satellites, they generally require larger terminals and have significantly greater delay or latency (approximately 240 milliseconds per round trip) than LEO satellites (approximately 4-6 milliseconds per round trip). GEO satellite systems are used for most FSS and by some mobile satellite system operators, including Inmarsat, MSV, Thuraya and ACeS, for MSS. | |
• | LEO. LEO satellites are located at an average altitude of less than 1,000 miles above the earth. The lower transmission power necessary to transmit signals to LEO satellites allows the user terminals to be smaller, lighter and less expensive than similar terminals used to access GEO satellites. However, LEO satellites move quickly over the earth, staying in view of any one location for only two to eight minutes. This characteristic requires a large number of LEO satellites to be deployed to provide global coverage. For example, the Iridium LEO system uses 66 operational satellites. LEO satellite systems, such as that of Iridium and Globalstar, are used for MSS. |
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• | First Generation Services. Inmarsat’s original service, Inmarsat A, uses older analog technology and provides only voice and limited data telecommunications. Inmarsat A service has been replaced by more efficient services, and is scheduled to be discontinued in 2007. | |
• | Second Generation Services. Inmarsat’s second generation services incorporate older digital technologies and generally require relatively large terminals compared to later-generation Inmarsat services. Second generation services include Inmarsat B (digital voice, fax and data with a high-speed data option), Inmarsat C (two-way messaging via Internete-mail, telex or fax), Inmarsat D+ (global messaging, monitoring and control, and data broadcasts to pager-sized terminals), Inmarsat M (digital voice, fax and data), Inmarsat Mini-M (digital voice, fax and data), and Inmarsat Aero H and Aero I (aeronautical satellite telecommunications). | |
• | Third Generation Services. Inmarsat’s third generation services incorporate newer advances in digital satellite telecommunications technology, which, through the highly efficient use of satellite resources, allows for delivery of high-speed data services at lower cost and from smaller terminals than first or second generation services. Such services directly support Internet Protocol (IP), making the services compatible with almost all modern data applications. Inmarsat’s third generation services include Inmarsat Global Area Network (GAN) (ISDN and IP land mobile, portable high-speed voice and data services, including Internet web access ande-mail, videoconferencing and high-resolution image transfer capabilities), Fleet 33, Fleet 55 and Fleet 77 (ISDN and IP maritime digital voice, fax and data with high-speed data and packet data services), Swift 64 (ISDN and IP aeronautical high-speed data and voice services), and Regional BGAN (broadband IP telecommunications). | |
• | Fourth Generation Services. In December 2005, Inmarsat introduced BGAN, its initial fourth generation mobile satellite service utilizing the broadband capability of its Inmarsat-4 satellites. BGAN offers end-users secure, reliable broadband for high-speed data applications, supported by smaller, more portable and less expensive terminals than those used to access Inmarsat’s prior-generation services. The new BGAN service is currently available in Europe, Africa, the Middle East, parts of Asia and the United States. The service supports data transmission rates of up to 492 kbps, similar to, and in some cases higher than, the transmission rates planned for third generation terrestrial wireless networks, with the option of 64 kbps ISDN or Quality of Services (QoS) streaming IP (which offer guaranteed data rates of 32, 64, 128 or 256 kbps). |
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• | if Xantic’s EBITDA (as defined in, and calculated according to, the share purchase agreement) for the twelve months ended December 31, 2005, calculated according to the share purchase agreement, is less than $22.0 million, then the base purchase price will be decreased based on a multiple of 8.5 times the amount by which Xantic’s EBITDA for the twelve months ended December 31, 2005 is less than $22.5 million; | |
• | if Xantic’s EBITDA for the twelve months ended December 31, 2005, calculated according to the share purchase agreement, is greater than $23.0 million, then the base purchase price will be increased based on a multiple of 8.5 times the amount by which Xantic’s EBITDA for the twelve months ended December 31, 2005 is greater than $22.5 million; | |
• | the base purchase price will be decreased by the amount of Xantic’s outstanding indebtedness as of the effective date; and | |
• | the base purchase price will be increased or decreased, as applicable, by the amount by which Xantic’s cash as of the effective date, after adding (or subtracting, if it is a negative number) Xantic’s working capital on the effective date and adding the amount of certain provisions as of the effective date and the amount of the threshold applicable to the tax indemnity (all as calculated in accordance with the share purchase agreement), is greater or less than $0. |
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• | StratosOne. StratosOne is a unified messaging system that provides a low-cost, efficient and reliable platform for mobile satellite-based maritime messaging and telecommunications. | |
• | AMOS Connect. AMOS Connect integrates telex, fax, SMS ande-mail interoffice telecommunication and access for mobile personnel in a single messaging system. By automatically compressing files, AMOS Connect can reduce costs up to 85%. | |
• | StratosNet 2.0. StratosNet 2.0 provides end-users with Internet access software to optimize their Internet connectivity over satellites. Our software compresses data an average of 80%-90%, facilitatese-mail, providese-mail filters, includes spam and virus protection, and enables efficient transfers of large files. | |
• | Easy Accelerator. The Easy Accelerator Internet access service allows users to browse the Internet and download files quickly and cheaply. Easy Accelerator provides compression of up to 80% and optimizes requested web pages for satellite transmission. | |
• | SMSCrew Mail. Stratos’ SMSCrew Mail is a short messaging and short texte-mail service enabling maritime crewmembers to use a prepaid card to stay in touch while at sea. | |
• | BEST. BEST, our proprietary bandwidth management solution, permits leasing customers to share leased Inmarsat channels among terminals, increasing the efficiency and value of use of leased services. | |
• | Secure Inter-working Function (SIWF) Protocol. The SIWF Protocol is our solution for providing seamless encrypted services over Inmarsat satellites, provided at no additional charge to our customers. Some of our most important U.S. government customers specify this solution by name in their requirements. | |
• | Stratos Access System. Stratos Access System assists distributors in managing credit risks, monitoring usage and managing accounts. |
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• | Reseller arrangements, under which a reseller deals directly with the end-user, providing the customer with pricing, customer service, support and billing. Resellers do not provide network infrastructure or “touch” the service. | |
• | Agency or dealer arrangements, under which an agent introduces the customer to our services and we then deal directly with the end-user. We are responsible for all pricing, billing and service issues associated with these arrangements. |
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• | a provider of facilities-based or resold international telecommunications service obtain FCC authorizations. | |
• | an operator of radiocommunications facilities (including satellite earth stations) obtain authorization from the FCC to operate the facilities. Maintenance of required licenses is a condition of providing service in the United States, and the FCC has authority to suspend or revoke licenses for violation of license conditions or other improper conduct. | |
• | telecommunications common carriers to provide services on a non-discriminatory basis and to charge “just and reasonable” rates. | |
• | most providers of interstate telecommunications service to the public contribute a percentage of end-user revenue to a “universal service” fund that is used to support service to high-cost and under-served customers. |
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Location | Facility | |
Mount Pearl, Newfoundland | Operations and data center | |
North Auckland, New Zealand | Land earth station |
Annual Lease | ||||||||
Location | Facility | Expiry Date | Payment (2005) | |||||
St. John’s, Newfoundland | Corporate and registered office | December 2010 | $ | 451,548 | ||||
Lake Cowichan, British Columbia | Telemetry, tracking and control station | July 2008 | $ | 144,924 | ||||
Sambro Creek, Nova Scotia | Telemetry, tracking and control station | July 2008 | $ | 144,924 | ||||
Bethesda, Maryland | Corporate head office | December 2007 | $ | 511,922 | ||||
Englewood, Colorado | VSAT hub/office | July 2008 | $ | 53,847 | ||||
Scott (Lafayette Parish), Louisiana | VSAT hub/office | October 2020 | $ | 297,800 | ||||
London, England | Administrative and sales office | March 2010 | $ | 470,748 | ||||
Goonhilly, Cornwall, England | Land earth station | December 2010 | $ | 99,204 | ||||
Mormond Hill, Aberdeenshire, Scotland | VSAT hub | December 2025 | $ | 192,672 | ||||
Bridge of Don, Aberdeen, Scotland | VSAT hub (land only) | May 2016 | $ | 37,234 | * | |||
Weir, Quebec, Canada | Land earth station | February 2009 | $ | 387,931 | * | |||
The Hague, The Netherlands | Corporate and administrative office | Under re-negotiation | $ | 840,720 | ||||
Burum, The Netherlands | Land earth station | April 2015 | $ | 1,189,097 | ||||
Perth, Australia | Land earth station | Under re-negotiation | $ | 485,560 |
(*) | Reflects annual lease payment for leases entered into during 2006. |
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Year First | ||||||||
Name and Address | Age | Elected/Appointed | ||||||
James J. Parm | 47 | 2003 | ||||||
Bethesda, Maryland | ||||||||
Michael J. Bayer | 59 | 2006 | ||||||
Washington, D.C. | ||||||||
Charles W. Bissegger | 65 | 1998 | ||||||
Ste. Anne des Lacs, Quebec, Canada | ||||||||
Josef J. Fridman | 60 | 2000 | ||||||
Palm Beach Gardens, Florida | ||||||||
John M. Green | 61 | 1999 | ||||||
St. John’s, Newfoundland and Labrador, Canada | ||||||||
Janice I. Obuchowski | 55 | 2001 | ||||||
McLean, Virginia | ||||||||
David R. Oliver, Jr. | 65 | 2001 | ||||||
Arlington, Virginia | ||||||||
Edward Reevey | 62 | 2003 | ||||||
Rothesay, New Brunswick, Canada | ||||||||
Frank L. Salizzoni | 68 | 2004 | ||||||
Jupiter, Florida | ||||||||
Robert Walmsley | 65 | 2006 | ||||||
London, United Kingdom | ||||||||
Stephen G. Wetmore | 53 | 1998 | ||||||
Mississauga, Ontario, Canada | ||||||||
Charles W. White | 59 | 2003 | ||||||
St. John’s, Newfoundland and Labrador, Canada |
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Name and Address | Age | Position | ||||
Alfred C. Giammarino | 50 | Executive Vice President and Chief Financial | ||||
Great Falls, Virginia | Officer | |||||
David J. Oake | 49 | Executive Vice President, Corporate | ||||
St. John’s, Newfoundland and Labrador, Canada | Development | |||||
Robert J. Roe | 49 | President, Stratos Government Services, Inc. | ||||
Stafford, Virginia | ||||||
John D. Prentice | 53 | Senior Vice President, Corporate | ||||
Rockville, Maryland | ||||||
Richard E. Harris | 42 | Senior Vice President, Chief Legal Officer | ||||
Washington, D.C. | and Corporate Secretary | |||||
John M. Mackey | 39 | Senior Vice President and Chief Technology | ||||
North Bethesda, Maryland | Officer | |||||
John R. Wilson | 47 | Senior Vice President, Energy Sales | ||||
Bellaire, Texas | ||||||
Paula M. Sturge | 44 | Senior Vice President, Finance | ||||
St. John’s, Newfoundland and Labrador, Canada | ||||||
Ronald Spithout | 42 | Senior Vice President, MSS Sales | ||||
Alphen A/D Ryn, The Netherlands |
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Mandatory Deferred | ||||||||||||
Cash Portion | Share Unit Plan | |||||||||||
of Fee | Contribution(1) | Total | ||||||||||
Position | ($) | ($) | ($) | |||||||||
Chair of the Board of Directors | 75,000 | 75,000 | 150,000 | |||||||||
Chair of the Audit Committee | 55,000 | 55,000 | 110,000 | |||||||||
Chair of the Compensation Committee or Corporate Governance Committee | 50,000 | 50,000 | 100,000 | |||||||||
Director that is on the Audit Committee (other than the Audit Committee Chair) | 45,000 | 45,000 | 90,000 | |||||||||
Director that is not a Chair and on one Committee (other than the Audit Committee) | 40,000 | 40,000 | 80,000 | |||||||||
Fee for each additional Committee | 3,500 | 3,500 | 7,000 |
(1) | For a description of the deferred share unit plan, see “— Equity Compensation and Defined Contribution Plans — Deferred Share Unit Plan.” |
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Long-Term Compensation | ||||||||||||||||||||||||
Annual Compensation | Awards | |||||||||||||||||||||||
Other Annual | Securities Under | All Other | ||||||||||||||||||||||
Salary | Bonus | Compensation | Options/SARs | Compensation(1) | ||||||||||||||||||||
Name | Year | ($) | ($) | ($) | Granted | ($) | ||||||||||||||||||
James J. Parm | 2005 | 414,300 | 130,625 | — | 53,000 | 10,500 | ||||||||||||||||||
Alfred C. Giammarino | 2005 | 260,731 | 53,829 | — | 19,125 | 10,500 | ||||||||||||||||||
Richard E. Harris | 2005 | 228,577 | 35,938 | — | 10,300 | 10,500 | ||||||||||||||||||
David J. Oake(2) | 2005 | 227,352 | 42,920 | — | — | 14,253 | ||||||||||||||||||
John D. Prentice(3) | 2005 | 203,577 | 32,031 | — | 5,820 | — |
(1) | All other compensation includes payments to a group registered retirement savings plan and payments in lieu of pension and 401K contributions. | |
(2) | All of the compensation to Mr. Oake was paid in Canadian dollars, which amounts have been converted to U.S. dollars at the prevailing exchange rate at December 31, 2005. | |
(3) | Mr. Prentice began a two-year secondment from Aliant Inc. (then, Stratos’ majority shareholder) (“Aliant”) and became an officer of the Corporation on July 15, 2002. On July 15, 2004, Mr. Prentice ended his two-year secondment from Aliant and became our employee, at which time he was appointed as our Senior Vice President, Corporate. Under the terms of several related agreements entered into in July 2004 between Aliant and the Corporation (and in one case, Mr. Prentice), Mr. Prentice continues to be a member of the Aliant pension plan. In connection with these arrangements, the Corporation agreed to remain as a member company in good standing of the Aliant pension plan to enable Mr. Prentice to remain a participant in that plan. Separately, the Corporation agreed to pay an annual management fee to Aliant from July 15, 2005 through July 15, 2008 in an amount averaging $40,000 annually. |
Market Value of | ||||||||||||||||||||
Common | % of Total | Common Shares | ||||||||||||||||||
Shares | Options/SARs | Underlying | ||||||||||||||||||
Underlying | Granted to | Exercise or | Options/SARs on the | |||||||||||||||||
Options/SARs | Employees in | Base Price | Date of Grant | |||||||||||||||||
Name | Granted (#) | Financial Year(1) | ($/Share)(2) | ($/Share)(2) | Expiration Date | |||||||||||||||
James J. Parm | 53,000 | 31.79% | 8.72 | 8.72 | February 17, 2012 | |||||||||||||||
Alfred C. Giammarino | 19,125 | 11.47% | 8.72 | 8.72 | February 17, 2012 | |||||||||||||||
Richard E. Harris | 10,300 | 6.18% | 8.72 | 8.72 | February 17, 2012 | |||||||||||||||
David J. Oake | 0 | 0.00% | N/A | N/A | N/A | |||||||||||||||
John D. Prentice | 5,820 | 3.49% | 8.72 | 8.72 | February 17, 2012 |
(1) | The percentage of total options/SARs granted to each of the named executive officers is based on the grant of options to purchase or acquire a total of 166,745 of our common shares in 2005. These options were |
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granted with exercise prices ranging from $7.26 to $9.30, with a weighted average exercise price of $8.59. All such options were granted with SARs attached. | ||
(2) | The exercise price and market value of common shares underlying options/SARs on the date of grant was determined based on the weighted average of the prices at which our common shares traded on the Toronto Stock Exchange for the five trading days immediately preceding the date of grant, converted to U.S. dollars at the prevailing exchange rate as at the date of grant. |
Number of Unexercised | Value of Unexercised | |||||||||||||||||||||||
Common | Options/SARs at | In-the-Money | ||||||||||||||||||||||
Shares | December 31, | Options/SARs at | ||||||||||||||||||||||
Acquired on | Aggregate | 2005 | December 31, 2005(1) | |||||||||||||||||||||
Exercise | Value Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||
Name | (#) | ($) | (#) | (#) | ($) | ($) | ||||||||||||||||||
James J. Parm | 1,422 | 12,451 | 236,583 | 264,667 | 58,675 | 73,361 | ||||||||||||||||||
Alfred C. Giammarino | 0 | 0 | 20,000 | 59,125 | 8,604 | 17,207 | ||||||||||||||||||
Richard E. Harris | 0 | 0 | 15,333 | 40,967 | 11,349 | 22,699 | ||||||||||||||||||
David J. Oake | 0 | 0 | 78,333 | 81,667 | — | — | ||||||||||||||||||
John D. Prentice | 0 | 0 | 69,667 | 25,153 | 4,835 | 9,670 |
(1) | Based on the closing price of our common shares on the Toronto Stock Exchange on December 30, 2005 of C$9.47 and converted to U.S. dollars at the prevailing exchange rate at December 31, 2005. |
Number of Common | ||||||||||||
Shares Remaining | ||||||||||||
Available for | ||||||||||||
Future Issuance | ||||||||||||
Number of Common | Under Equity | |||||||||||
Shares to be Issued | Weighted Average | Compensation Plans | ||||||||||
Upon Exercise of | Exercise Price of | (Excluding | ||||||||||
Outstanding | Outstanding | Securities | ||||||||||
Options, Warrants | Options, Warrants | Reflected in the | ||||||||||
and Rights | and Rights | Second Column) | ||||||||||
Plan Category | (#) | ($/Share) | (#) | |||||||||
Equity Compensation Plans Approved by Securityholders | 1,814,165 | 9.99 | 1,211,914 | |||||||||
Equity Compensation Plans Not Approved by Securityholders | — | — | — | |||||||||
Total | 1,814,165 | 9.99 | 1,211,914 |
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• | we are to pay to Mr. Parm a lump sum severance payment equal to two times his gross base salary and target STIP payment at the time of termination, in addition to his base salary and a pro rata portion of the target STIP payment through the date of termination; | |
• | we are to provide Mr. Parm with continued group medical benefits and life insurance coverage under any plans in which he was enrolled immediately prior to termination (with the exception of any benefits that cannot be continued beyond the last day of Mr. Parm’s active employment under the terms of the applicable plan) until the earlier of two years from the notice of his termination or his obtaining alternate employment; and | |
• | Mr. Parm is entitled to immediate vesting of a pro rata portion of any options granted to him that were scheduled to vest within one year of the date of the notice of his termination. However, none of the vested but unexercised options can be exercised until the end of a restricted period that begins on the termination date and ends upon the board of directors providing notice that such period had ended, which is to occur promptly after the board has approved and released our audited financial statements for the fiscal year in which Mr. Parm’s employment is terminated. |
• | Mr. Parm is to receive, in lieu of the lump sum severance payment described above, a payment equal to 2.5 times his gross base salary and STIP payment at the time of such termination, in addition to his base salary and a pro rata portion of his target STIP payment through the date of termination; | |
• | we are to provide Mr. Parm with continued group medical benefits and life insurance coverage under any plans in which he was enrolled immediately prior to termination (with the exception any benefits that cannot be continued beyond the last day of Mr. Parm’s active employment under the terms of the applicable plan) for a period of 2.5 years; and |
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• | Mr. Parm is entitled to the immediate vesting of all unvested options. Such options will not be exercisable until the end of the restricted period. |
• | In the event of Mr. Parm’s resignation for good reason, Mr. Parm will be entitled to a cash payment, with respect to any performance share units held by him for which the performance criteria have been satisfied but which have not vested as of the time of his resignation, equal to a pro rata portion of the amount otherwise payable with respect to such performance share units had Mr. Parm continued his participation until their vesting date. The plan provides for a payout, with respect to performance share units for which the performance criteria have been satisfied but which have not vested, only upon a participant’s ceasing to be eligible to participate in the plan by reason of the participant’s disability, death or termination without cause. | |
• | In the event of a change of control that constitutes a “reorganization” (as defined in the performance share unit plan), performance share units held by Mr. Parm for which the performance criteria have not then been met will not be cancelled, as the plan would otherwise provide. Instead, if and when the performance criteria applicable to such performance share units are met and they have vested, Mr. Parm will be entitled to a cash payment with respect to such performance share units. | |
• | If Mr. Parm’s employment is terminated without cause in the three-year period after a change of control that constitutes a reorganization (as defined in the performance share unit plan), we are obligated to make a cash payment to Mr. Parm with respect to any performance share units then held by him for which the performance criteria have not then been met and which have not then vested. | |
• | If Mr. Parm’s employment is terminated without cause in the three-year period following a change of control that does not constitute a reorganization (as defined in the performance share unit plan), we are obligated to make a cash payment to Mr. Parm in respect of all performance share units granted to him, without regard to the performance criteria and vesting provisions attached to such performance share units. |
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• | we are to pay to Mr. Giammarino his monthly gross base salary and 1/12 of his target STIP payment at the time of his termination each month for a period of up to 12 months, subject to adjustment in the event of commencement of alternate employment; | |
• | we are to provide Mr. Giammarino with continued group medical and life insurance coverage under any plans in which he was enrolled immediately prior to termination (with the exception of any benefits that cannot be continued beyond the last day of Mr. Giammarino’s active employment under the terms of the applicable plan) until the earlier of one year from the date of his termination and his commencement of alternate employment; and | |
• | Mr. Giammarino is entitled to immediate vesting of a pro rata portion of options granted to him that were scheduled to vest within one year of the date of the notice of his termination. However, none of the vested but unexercised options can be exercised until the end of a restricted period that begins on the termination date and ends upon the board of directors providing notice that such period has ended, which is to occur promptly after the board has approved and released our audited financial statements for the fiscal year in which Mr. Giammarino’s employment is terminated. |
• | Mr. Giammarino is entitled to receive, in lieu of the payment described above, a lump sum payment equal to two times his gross base salary and target STIP payment at the time of such termination, in addition to his base salary and apro rataportion of the target STIP payment through the date of termination; | |
• | we are to provide Mr. Giammarino with continued group medical and life insurance coverage under any plan in which he was enrolled immediately prior to termination (with the exception of any benefits that cannot be continued beyond the last day of Mr. Giammarino’s active employment under the terms of the applicable plan) until the earlier of two years from the date of his termination or his commencement of alternate employment; and | |
• | Mr. Giammarino is entitled to the immediate vesting of all unvested options. Such options will not be exercisable until the end of the restricted period. |
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• | we are to pay to Mr. Oake one times his deemed base salary and target STIP payment; | |
• | we are to provide Mr. Oake with continued group medical and life insurance coverage under any plans in which he was enrolled immediately prior to termination (with the exception of all forms of disability insurance) until the earlier of one year from the date of the notice of his termination and his commencement of alternate employment; and | |
• | Mr. Oake is entitled to apro ratavesting of those options granted to him in 2001. |
• | Mr. Oake is entitled to receive, in lieu of the payment described above, a payment equal to 1.5 times his deemed base salary and target STIP payment; | |
• | We are to provide Mr. Oake with continued group medical and life insurance coverage under any plans in which he was enrolled immediately prior to termination (with the exception of all forms of disability insurance) until the earlier of one and one-half years from the date of the notice of his termination and his commencement of alternate employment; and | |
• | Mr. Oake is entitled to immediate vesting of all unvested options. All vested options are required to be exercised within 60 days of termination. |
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• | we are to pay to Mr. Prentice his monthly gross base salary and 1/12 of his target STIP payment at the time of his termination each month for a period of up to 12 months, subject to adjustment in the event of commencement of alternate employment); | |
• | we are to provide Mr. Prentice with continued group medical and life insurance coverage under any plans in which he was enrolled immediately prior to termination (with the exception of any benefits that cannot be continued beyond the last day of Mr. Prentice’s active employment under the terms of the applicable plan) until the earlier of one year from the date of his termination and his commencement of alternate employment; and | |
• | Mr. Prentice is entitled to immediate vesting of apro rataportion of any options granted to him that were scheduled to vest within one year of the date of the notice of his termination. However, none of the vested but unexercised options can be exercised until the end of a restricted period that begins on the termination date and ends upon the board of directors providing notice that such period has ended, which is to occur promptly after the board has approved and released our audited financial statements for the fiscal year in which Mr. Prentice’s employment is terminated. |
• | Mr. Prentice is entitled to receive, in lieu of the payment described above, a lump sum payment equal to 1.5 times his gross base salary and target STIP payment at the time of such termination, in addition to his base salary and apro rataportion of the target STIP payment through the date of termination; | |
• | We are to provide Mr. Prentice with continued group medical and life insurance coverage under any plans in which he was enrolled immediately prior to termination (with the exception of any benefits that cannot be continued beyond the last day of Mr. Prentice’s active employment under the terms of the applicable plan) until the earlier of one and one-half years from the date of his termination and his commencement of alternate employment; and |
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• | Mr. Prentice is entitled to immediate vesting of all his unvested options. Such options will not be exercisable until the end of the restricted period. |
• | we are to pay Mr. Harris his monthly gross base salary and 1/12 of his target STIP at the time of his termination each month for a period of up to 12 months, subject to adjustment in the event of commencement of alternative employment; | |
• | we are to provide Mr. Harris with continued group medical and life insurance coverage under any plans in which he was enrolled immediately prior to termination (with the exception of any benefits that cannot be continued beyond the last day of Mr. Harris’s active employment under the terms of the applicable plan) until the earlier of one year from the date of his termination and his commencement of alternate employment; and | |
• | Mr. Harris is entitled to immediate vesting of a pro rata portion of options granted to him that were scheduled to vest within one year of the date of the notice of his termination. |
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• | Mr. Harris is entitled to receive, in lieu of the payment described above, a lump sum payment equal to 1.5 times his gross base salary and target STIP payment at the time of such termination, in addition to his base salary and a pro rata portion of the target STIP payment through the date of termination; | |
• | we are to provide Mr. Harris with continued group medical and life insurance coverage under any plan in which he was enrolled immediately prior to termination (with the exception of any benefits that cannot be continued beyond the last day of Mr. Harris’s active employment under the terms of the applicable plan) for a period of 1.5 years following such termination or until the Executive obtains alternate employment; and | |
• | Mr. Harris is entitled to the immediate vesting of all unvested options, which must be exercised within 60 days of termination. |
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• | an offer for our common shares where the shares subject to the offer, together with the shares held by the offerer and any person or entity acting jointly or in concert with the offeror, constitute in the aggregate 20% or more of our common shares; | |
• | any person becoming the beneficial owner of our common shares, directly or indirectly, and together with any shares of any person or entity acting jointly or in concert with such person, representing more than 20% of either the total economic value of our common shares or the total voting power; | |
• | a merger, consolidation, amalgamation, arrangement or similar transaction with respect to which persons who were the beneficial owners of our common shares immediately prior to such transaction own less than 20% of our shares or 20% of the outstanding voting securities of the surviving or resulting corporation upon consummation of the transaction; | |
•�� | our sale or license of all or substantially all of our assets to another corporation which is not a wholly-owned subsidiary; or | |
• | such other transaction as our board of directors, in its sole discretion, deems to be a reorganization. |
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• | review of our audit plan; | |
• | review and recommendation of approval of our annual and quarterly financial statements, including the management’s discussion and analysis of financial condition and results of operations that accompanies such financial statements; | |
• | review of our accounting systems and internal controls; and | |
• | review of litigation to which we are a party. |
• | oversight of the establishment of a plan of continuity for our executives and other key employees; | |
• | oversight of the establishment of a broad plan of executive compensation that is competitive and motivating in order to attract, retain and incentivize our executives and other key employees; and |
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• | annual review of the performance of each of our senior executive officers and recommendation of individual executive compensation and executive changes for approval by the full board of directors. |
• | recommendation of nominees for election to the board of directors to the full board; | |
• | reporting to the full board on corporate governance matters; and | |
• | providing a focus on corporate governance to the full board with a view to enhancing our performance and ensuring proper conduct in accordance with applicable guidelines and requirements. |
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Total Common | ||||||||||||
Shares(2), Deferred | ||||||||||||
Share Units(3) and | Common Shares | |||||||||||
Common Shares | Performance Share | Beneficially Owned | ||||||||||
Beneficially | Units(4) | as Percent | ||||||||||
Name of Beneficial Owner | Owned(1) | Beneficially Owned | of Class(5) | |||||||||
Michael J. Bayer | — | 1,054 | ||||||||||
Charles W. Bissegger | 79,000 | 102,238 | ||||||||||
Josef J. Fridman | 38,000 | 55,103 | ||||||||||
John M. Green | 36,000 | 51,824 | ||||||||||
Janice I. Obuchowski | 23,100 | 35,752 | ||||||||||
David R. Oliver, Jr. | 24,000 | 39,221 | ||||||||||
James J. Parm(6) | 374,392 | 758,725 | ||||||||||
Edward Reevey | 3,000 | 15,784 | ||||||||||
Frank L. Salizzoni | — | 11,624 | ||||||||||
Robert Walmsley | — | 1,054 | ||||||||||
Stephen G. Wetmore | 1,000 | 16,358 | ||||||||||
Charles W. White | 3,000 | 15,394 | ||||||||||
Alfred C. Giammarino(7) | 46,375 | 144,325 | ||||||||||
Richard E. Harris(8) | 34,100 | 108,300 | ||||||||||
John M. Mackey(9) | 128,500 | 176,000 | ||||||||||
David J. Oake(10) | 162,067 | 214,900 | ||||||||||
John D. Prentice(11) | 81,273 | 129,120 | ||||||||||
Robert J. Roe(12) | 67,274 | 129,635 | ||||||||||
Ronald Spithout | — | 26,400 | ||||||||||
Paula M. Sturge(13) | 86,667 | 117,800 | ||||||||||
John R. Wilson(14) | 5,733 | 87,000 | ||||||||||
All directors and executive officers as a group (21 persons) | 1,193,481 | 2,237,611 | 2.8 | % |
(1) | The figures in this column include common shares and common shares underlying stock options that are exercisable as of September 12, 2006. | |
(2) | The figures in this column include common shares and all common shares underlying stock options, whether or not exercisable as of September 12, 2006, as well as deferred share units and performance share units. All stock options held by directors are exercisable as of September 12, 2006. We have a share retention policy for certain executive officers which provides for ownership of a minimum number of our common shares. The minimum ownership thresholds are established by our board of directors, with the highest threshold for our chief executive officer and declining thresholds for our other executive |
112
officers. An executive may meet these minimum thresholds by acquiring shares in the market; however, the requirement can also be satisfied through the exercise of stock options (and the retention of the underlying shares) by the executive. | ||
(3) | Board members receive a portion of their annual directors’ fees in deferred share units under the DSU Plan, which plan is intended to promote greater alignment between the interests of directors and shareholders. See “Compensation — Equity Compensation and Defined Contribution Plans — Deferred Share Unit Plan.” | |
(4) | The performance share unit plan provides for the grant of performance share units to our eligible employees as a mechanism to focus our management on creating shareholder value. See “Compensation — Equity Compensation and Defined Contribution Plans — Performance Share Unit Plan.” Performance share units include grants made to officers in respect of performance in future years, and are subject to the vesting schedule set out in each applicable grant agreement. | |
(5) | None of our directors or officers beneficially owns common shares (including shares underlying options exercisable as of September 12, 2006) that represent more than 1.0% of our outstanding common shares as of September 12, 2006. | |
(6) | Includes 364,167 shares underlying outstanding stock options that are exercisable as of September 12, 2006. | |
(7) | Includes 46,375 shares underlying outstanding stock options that are exercisable as of September 12, 2006. | |
(8) | Includes 34,100 shares underlying outstanding stock options that are exercisable as of September 12, 2006. | |
(9) | Includes 127,700 shares underlying outstanding stock options that are exercisable as of September 12, 2006. | |
(10) | Includes 156,667 shares underlying outstanding stock options that are exercisable as of September 12, 2006. | |
(11) | Includes 81,273 shares underlying outstanding stock options that are exercisable as of September 12, 2006. | |
(12) | Includes 66,174 shares underlying outstanding stock options that are exercisable as of September 12, 2006. | |
(13) | Includes 86,667 shares underlying outstanding stock options that are exercisable as of September 12, 2006. | |
(14) | Includes 5,733 shares underlying outstanding stock options that are exercisable as of September 12, 2006. |
Name | Number of Options | Exercise Price | Expiration Date | Date of Grant | ||||||||
Michael J. Bayer | — | — | ||||||||||
Charles W. Bissegger | 25,000 | C | $10.25 | May 17, 2011 | May 17, 2001 | |||||||
30,000 | C | $15.31 | June 4, 2012 | June 4, 2002 | ||||||||
Josef J. Friedman | 15,000 | C | $10.25 | May 17, 2011 | May 17, 2001 | |||||||
18,000 | C | $15.31 | June 4, 2012 | June 4, 2002 | ||||||||
John M. Green | 15,000 | C | $10.25 | May 17, 2011 | May 17, 2001 | |||||||
18,000 | C | $15.31 | June 4, 2012 | June 4, 2002 | ||||||||
Janice I. Obuchowski | 10,000 | C | $10.25 | May 17, 2011 | May 17, 2001 | |||||||
10,000 | C | $15.31 | June 4, 2012 | June 4, 2002 | ||||||||
David R. Oliver, Jr. | 10,000 | C | $10.25 | August 16, 2011 | August 16, 2001 | |||||||
10,000 | C | $15.31 | June 4, 2012 | June 4, 2002 |
113
Name | Number of Options | Exercise Price | Expiration Date | Date of Grant | ||||||||
James J. Parm | 17,500 | C | $ 8.50 | 50% Feb. 21, 2007 | February 21, 2000 | |||||||
50% Feb. 21, 2008 | ||||||||||||
39,000 | C | $11.67 | 33.3% April 7, 2007 | April 7, 2000 | ||||||||
33.3% April 7, 2008 | ||||||||||||
33.3% April 7, 2009 | ||||||||||||
50,000 | C | $10.25 | 25% March 30, 2009 | March 30, 2001 | ||||||||
25% March 30, 2010 | ||||||||||||
50% March 30, 2011 | ||||||||||||
80,000 | C | $14.30 | September 11, 2013 | September 11, 2003 | ||||||||
20,000 | C | $13.01 | January 8, 2014 | January 8, 2004 | ||||||||
220,000 | $ 7.68 | September 1, 2011 | September 1, 2004 | |||||||||
53,000 | $ 8.72 | February 17, 2012 | February 17, 2005 | |||||||||
112,700 | $ 8.16 | March 16, 2013 | March 16, 2006 | |||||||||
Edward Reevey | — | — | ||||||||||
Frank L. Salizzoni | — | — | ||||||||||
Ronald Spithout | 5,500 | C | $ 9.41 | March 16, 2013 | March 16, 2006 | |||||||
Stephen G. Wetmore | — | — | ||||||||||
Charles W. White | — | — | ||||||||||
Alfred C. Giammarino | 60,000 | $ 7.75 | May 10, 2011 | May 10, 2004 | ||||||||
19,125 | $ 8.72 | February 17, 2012 | February 17, 2005 | |||||||||
25,100 | $ 8.16 | March 16, 2013 | March 16, 2006 | |||||||||
Richard E. Harris | 46,000 | $ 7.44 | August 9, 2011 | August 9, 2004 | ||||||||
10,300 | $ 8.72 | February 17, 2012 | February 17, 2005 | |||||||||
20,200 | $ 8.16 | March 16, 2013 | March 16, 2006 | |||||||||
John M. Mackey | 2,500 | C | $ 8.50 | February 21, 2008 | February 21, 2000 | |||||||
7,500 | C | $11.62 | 50% April 27, 2007 | April 27, 2000 | ||||||||
50% April 27, 2008 | ||||||||||||
100,000 | C | $18.03 | 25% August 10, 2008 | August 10, 2000 | ||||||||
25% August 10, 2009 | ||||||||||||
50% August 10, 2010 | ||||||||||||
21,000 | C | $10.03 | September 1, 2011 | September 1, 2004 | ||||||||
11,100 | C | $10.77 | February 17, 2012 | February 17, 2005 | ||||||||
6,800 | $ 8.16 | March 16, 2013 | March 16, 2006 | |||||||||
David J. Oake | 150,000 | C | $10.25 | 25% March 30, 2009 | March 30, 2001 | |||||||
25% March 30, 2010 | ||||||||||||
50% March 30, 2011 | ||||||||||||
10,000 | C | $10.03 | September 1, 2011 | September 1, 2004 | ||||||||
18,600 | C | $ 9.41 | March 16, 2013 | March 16, 2006 | ||||||||
John D. Prentice | 60,000 | C | $10.46 | August 21, 2012 | August 21, 2002 | |||||||
29,000 | $ 7.68 | September 1, 2011 | September 1, 2004 | |||||||||
5,820 | $ 8.72 | February 17, 2005 | February 17, 2005 | |||||||||
12,400 | $ 8.16 | March 16, 2013 | March 16, 2006 |
114
Name | Number of Options | Exercise Price | Expiration Date | Date of Grant | ||||||||
Robert J. Roe | 20,000 | C | $10.94 | 20% March 30, 2007 | March 30, 2001 | |||||||
20% March 30, 2008 | ||||||||||||
20% March 30, 2009 | ||||||||||||
20% March 30, 2010 | ||||||||||||
20% March 30, 2011 | ||||||||||||
13,635 | C | $15.31 | 20% June 4, 2008 | June 4, 2002 | ||||||||
20% June 4, 2009 | ||||||||||||
20% June 4, 2010 | ||||||||||||
20% June 4, 2011 | ||||||||||||
20% June 4, 2012 | ||||||||||||
19,500 | C | $ 8.63 | 20% February 11, 2009 | February 11, 2003 | ||||||||
20% February 11, 2010 | ||||||||||||
20% February 11, 2011 | ||||||||||||
20% February 11, 2012 | ||||||||||||
20% February 11, 2013 | ||||||||||||
29,000 | $ 7.68 | September 1, 2011 | September 1, 2004 | |||||||||
12,700 | $ 8.72 | February 17, 2012 | February 17, 2005 | |||||||||
6,200 | $ 8.16 | March 16, 2013 | March 16, 2006 | |||||||||
Paula M. Sturge | 5,000 | C | $10.94 | 50% April 24, 2007 | April 24, 2000 | |||||||
50% April 24, 2008 | ||||||||||||
75,000 | C | $10.24 | 25% March 30, 2009 | March 30, 2001 | ||||||||
25% March 30, 2010 | ||||||||||||
50% March 30, 2011 | ||||||||||||
10,000 | C | $10.03 | September 1, 2011 | September 1, 2004 | ||||||||
5,300 | C | $ 9.41 | March 16, 2013 | March 16, 2006 | ||||||||
John R. Wilson | 17,200 | $ 7.63 | June 6, 2012 | June 6, 2005 | ||||||||
16,200 | $ 8.16 | March 16, 2013 | March 16, 2006 |
115
116
• | are general unsecured obligations of the Company; | |
• | are effectively subordinated to all existing and any future secured Indebtedness of the Company, including the Indebtedness of the Company under the Credit Agreement, to the extent of the assets securing such Indebtedness, and to all existing and any future liabilities of the Company’s subsidiaries that are not Guarantors, to the extent of the assets of such subsidiaries; | |
• | are pari passu in right of payment with any future unsecured, unsubordinated Indebtedness of the Company; | |
• | are senior in right of payment to any future subordinated Indebtedness of the Company; and | |
• | are guaranteed by the Guarantors. |
117
• | is a general unsecured obligation of the Guarantor; | |
• | is effectively subordinated to all existing and any future secured Indebtedness of the Guarantor, including the Guarantee of the Guarantor under the Credit Agreement; | |
• | is pari passu in right of payment with any future unsecured, unsubordinated Indebtedness of the Guarantor; and | |
• | is senior in right of payment to any future subordinated Indebtedness of the Guarantor. |
118
Year | Percentage | |||
2010 | 104.938% | |||
2011 | 102.469% | |||
2012 and thereafter | 100.000% |
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To Tender
97/8% Senior Notes due 2013
of
STRATOS GLOBAL CORPORATION
Pursuant to the Exchange Offer and Prospectus dated , 2006
The Exchange Agent for the Exchange Offer is:
J.P. Morgan Trust Company, National Association
By Registered and Certified Mail J.P. Morgan Trust Company, National Association 2001 Bryan Street, 9th Floor Dallas, Texas 75201 | By Overnight Courier or Regular Mail: J.P. Morgan Trust Company, National Association 2001 Bryan Street, 9th Floor Dallas, Texas 75201 | By Hand Delivery J.P. Morgan Trust Company, National Association 2001 Bryan Street, 9th Floor Dallas, Texas 75201 |
(214) 468-6949
By Telephone:
(800) 275-2048
• | DTC has received your instructions to tender your Original Notes; and | |
• | You agree to be bound by the terms of this Letter of Transmittal. |
A-1
• | the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned; | |
• | neither the undersigned nor any such other person has an arrangement or understanding with any person to participate in the distribution of the Exchange Notes; | |
• | neither the undersigned nor any such other person is an “affiliate,” as defined under Rule 405 under the Securities Act, of the Company or, if the undersigned or such person is an affiliate, the undersigned or such person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable; | |
• | if the undersigned or any such other person is not a broker-dealer, the holder or any such other person is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes. | |
• | if the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Original Notes that were acquired as a result of market-making activities or other trading activities, the undersigned will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. |
A-2
o | CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. |
A-3
1. | Book-Entry Confirmations |
2. | Validity of Tenders |
3. | Waiver of Conditions |
4. | No Conditional Tender |
5. | Request for Assistance or Additional Copies |
6. | Withdrawal |
A-4
7. | No Guarantee of Late Delivery |
8. | Transfer Taxes |
A-5
STRATOS GLOBAL CORPORATION | ||||
Audited Financial Statements | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
Unaudited Financial Statements | ||||
Consolidated Balance Sheet as at June 30, 2006 and December 31, 2005 | F-51 | |||
Consolidated Statements of Operations for the six months ended June 30, 2006 and 2005 | F-52 | |||
Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2006 and 2005 | F-53 | |||
Consolidated Statements of Cash Flow for the six months ended June 30, 2006 and 2005 | F-54 | |||
Notes to the Consolidated Financial Statements | F-55 | |||
XANTIC B.V. | ||||
Audited Consolidated Financial Statements for the Year Ended December 31, 2005 | ||||
F-95 | ||||
F-96 | ||||
F-97 | ||||
F-98 | ||||
F-99 | ||||
Notes to the Consolidated Financial Statements | F-106 | |||
Audited Consolidated Financial Statements for the Years Ended December 31, 2004 and 2003 | ||||
Report of Independent Auditors | F-148 | |||
F-149 | ||||
F-150 | ||||
F-151 | ||||
F-152 | ||||
Notes to the Consolidated Financial Statements | F-159 |
F-1
F-2
As at December 31 (U.S. dollars; in thousands)
Incorporated under the laws of Canada
2005 | 2004 | |||||||
ASSETS (Note 9) | ||||||||
Current | ||||||||
Cash and cash equivalents | $ | 14,472 | $ | 80,682 | ||||
Accounts receivable (Notes 18 and 20) | 56,290 | 53,349 | ||||||
Unbilled revenue | 24,622 | 23,635 | ||||||
Inventory | 7,796 | 4,719 | ||||||
Prepaids and other | 20,757 | 15,416 | ||||||
Future income taxes (Note 14) | 4,216 | 2,746 | ||||||
128,153 | 180,547 | |||||||
Investments (Note 5) | 6,337 | — | ||||||
Capital assets (Note 4) | 131,265 | 134,290 | ||||||
Goodwill and other intangible assets (Note 6) | 218,081 | 207,550 | ||||||
Other assets (Note 7) | 11,432 | 7,258 | ||||||
$ | 495,268 | $ | 529,645 | |||||
LIABILITIES | ||||||||
Current | ||||||||
Payables and accruals (Note 8) | $ | 69,955 | $ | 61,623 | ||||
Deferred revenue | 7,576 | 7,478 | ||||||
Current portion of long-term debt (Note 9) | 1,657 | 1,651 | ||||||
79,188 | 70,752 | |||||||
Long-term debt (Note 9) | 162,581 | 149,176 | ||||||
Other liabilities (Note 10) | 5,492 | 6,085 | ||||||
Future income taxes (Note 14) | 24,648 | 22,263 | ||||||
Total liabilities | 271,909 | 248,276 | ||||||
Non-controlling interest | 429 | — | ||||||
Shareholders’ equity | 222,930 | 281,369 | ||||||
$ | 495,268 | $ | 529,645 | |||||
Commitments and contingencies (Note 19) |
F-3
Year ended December 31 (U.S. dollars; in thousands, except per share amounts)
2005 | 2004 | 2003 | ||||||||||
(Note 2(b)) | ||||||||||||
Revenue | $ | 381,000 | $ | 367,753 | $ | 397,188 | ||||||
Cost of goods and services | 271,310 | 246,278 | 259,195 | |||||||||
Gross margin | 109,690 | 121,475 | 137,993 | |||||||||
Operating expenses | 51,510 | 43,330 | 49,222 | |||||||||
Interest expense (Note 12) | 11,404 | 11,745 | 15,275 | |||||||||
Depreciation and amortization | 36,565 | 28,988 | 29,492 | |||||||||
Other costs (income) (Note 13) | 538 | 3,574 | (6,762 | ) | ||||||||
Non-controlling interest | 103 | — | — | |||||||||
Equity in earnings of investee | (766 | ) | — | — | ||||||||
99,354 | 87,637 | 87,227 | ||||||||||
Earnings before income taxes | 10,336 | 33,838 | 50,766 | |||||||||
Income tax expense (Note 14) | 4,931 | 8,717 | 12,677 | |||||||||
Net earnings | $ | 5,405 | $ | 25,121 | $ | 38,089 | ||||||
Basic and diluted earnings per share (Note 15) | $ | 0.13 | $ | 0.51 | $ | 0.77 | ||||||
F-4
Year ended December 31 (U.S. dollars; in thousands)
2005 | 2004 | 2003 | ||||||||||
(Note 2(b)) | ||||||||||||
Retained earnings, beginning of year | $ | 26,163 | $ | 1,042 | $ | (36,140 | ) | |||||
Retroactive application of change in accounting policy (Note 2(b)) | — | — | (907 | ) | ||||||||
Retained earnings (deficit), beginning of year, as restated | 26,163 | 1,042 | (37,047 | ) | ||||||||
Share repurchase (Note 11) | (25,983 | ) | — | — | ||||||||
Net earnings | 5,405 | 25,121 | 38,089 | |||||||||
Retained earnings, end of year | 5,585 | 26,163 | 1,042 | |||||||||
Capital stock (Note 11) | 216,128 | 254,147 | 252,474 | |||||||||
Contributed surplus | 1,217 | 1,059 | 298 | |||||||||
Total shareholders’ equity | $ | 222,930 | $ | 281,369 | $ | 253,814 | ||||||
F-5
Year ended December 31 (U.S. dollars; in thousands)
2005 | 2004 | 2003 | ||||||||||
(Note 2(b)) | ||||||||||||
Operating activities | ||||||||||||
Net earnings | $ | 5,405 | $ | 25,121 | $ | 38,089 | ||||||
Items not requiring (generating) cash | ||||||||||||
Depreciation and amortization | 36,565 | 28,988 | 29,492 | |||||||||
Gain on sale of Inmarsat investment (Note 5) | — | — | (9,845 | ) | ||||||||
Adjustment to allowance for uncollectability (Note 13) | — | (1,500 | ) | (5,857 | ) | |||||||
Write-off deferred acquisition costs (Note 13) | — | — | 7,285 | |||||||||
Asset impairment charge (Note 13) | 165 | 2,220 | 5,500 | |||||||||
Foreign exchange (gain) loss | (611 | ) | 337 | (37 | ) | |||||||
Future income tax expense | 866 | 5,928 | 6,847 | |||||||||
Amortization of deferred financing costs (Note 12) | 590 | 2,891 | 1,528 | |||||||||
Equity in earnings of investee — net of dividends | (228 | ) | — | — | ||||||||
Stock-based compensation expense | 1,448 | 772 | 306 | |||||||||
Other | 1,335 | 230 | 257 | |||||||||
45,535 | 64,987 | 73,565 | ||||||||||
Change in non-cash working capital items related to operating activities (Note 16) | (14,844 | ) | 20,821 | (5,540 | ) | |||||||
30,691 | 85,808 | 68,025 | ||||||||||
Investing activities | ||||||||||||
Business acquisitions (net of cash acquired) (Note 3) | (12,054 | ) | — | — | ||||||||
Proceeds on disposal of investment (Note 5) | 170 | — | 26,481 | |||||||||
Capital asset expenditures | (25,824 | ) | (22,544 | ) | (19,639 | ) | ||||||
Deferred costs | (6,681 | ) | (5,277 | ) | (6,137 | ) | ||||||
(44,389 | ) | (27,821 | ) | 705 | ||||||||
Financing activities | ||||||||||||
Long-term debt repayments | (1,815 | ) | (139,941 | ) | (74,068 | ) | ||||||
Long-term debt proceeds | 15,000 | 150,000 | — | |||||||||
Capital stock issuances (Note 11) | 56 | 1,663 | 7 | |||||||||
Share repurchase (Note 11) | (65,348 | ) | — | — | ||||||||
Other liabilities | (405 | ) | (496 | ) | (4,728 | ) | ||||||
(52,512 | ) | 11,226 | (78,789 | ) | ||||||||
Change in cash and cash equivalents during the year | (66,210 | ) | 69,213 | (10,059 | ) | |||||||
Cash and cash equivalents, beginning of year | 80,682 | 11,469 | 21,528 | |||||||||
Cash and cash equivalents, end of year | $ | 14,472 | $ | 80,682 | $ | 11,469 | ||||||
Supplementary cash flow information | ||||||||||||
Interest paid | $ | 11,068 | $ | 8,558 | $ | 19,146 | ||||||
Income taxes paid | $ | 1,542 | $ | 5,402 | $ | 5,639 | ||||||
F-6
December 31, 2005, 2004 and 2003
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
1. | Description of the business |
F-7
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
1. | Description of the business (Continued) |
2. | Summary of significant accounting policies |
Stratos Mobile Networks, Inc.
Stratos Mobile Networks (USA), L.L.C.
Stratos Communications, Inc.
Stratos VSAT, Inc.
Stratos Offshore Services Company
Stratos Telecom, Inc.
Stratos Global Limited
Stratos Aeronautical Limited
Stratos Services Limited
Stratos New Zealand Limited
Stratos Communications (Australia) Pty Limited
Plenexis Holding GmbH
Plenexis Gesellschaft Fur Satelliten — Kommunikation mbH
Plenexis CIS GmbH
Plenexis Satellite — Communication AB
Moskowskij Teleport (75% ownership interest)
F-8
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
2. | Summary of significant accounting policies (Continued) |
2005 | 2004 | 2003 | ||||||||||
Canadian dollar | $ | 0.86 | $ | 0.82 | $ | 0.76 | ||||||
U.K. Pound Sterling | $ | 1.77 | $ | 1.94 | $ | 1.75 | ||||||
Euro | $ | 1.20 | $ | 1.34 | $ | 1.23 |
Basis | Rate | |||||||
Telecommunications equipment | Declining-balance | 5%- 20% | ||||||
Earth station equipment | Straight-line | 10-12 years | ||||||
Computer hardware and software | Declining-balance | 30% | ||||||
Furniture and other | Straight-line | 5 years | ||||||
Buildings | Declining-balance | 4% - 5% |
F-9
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
2. | Summary of significant accounting policies (Continued) |
F-10
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
2. | Summary of significant accounting policies (Continued) |
F-11
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
2. | Summary of significant accounting policies (Continued) |
(i) | Stock Option Plan |
F-12
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
2. | Summary of significant accounting policies (Continued) |
(ii) | Deferred Share Unit Plan |
(iii) | Performance Share Unit Plan |
F-13
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
2. | Summary of significant accounting policies (Continued) |
2003 | ||||
Reported net earnings | $ | 38,479 | ||
Accretion expense | (257 | ) | ||
Depreciation and amortization | (243 | ) | ||
Income tax | 110 | |||
Adjusted net earnings | $ | 38,089 | ||
Reported basic and diluted earnings per share | $ | 0.78 | ||
Restated basic and diluted earnings per share | $ | 0.77 | ||
F-14
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
2. | Summary of significant accounting policies (Continued) |
3. | Business acquisitions |
Purchase | ||||
Consideration | ||||
Cash — share purchase | $ | 217 | ||
Transaction costs | 1,151 | |||
Total purchase consideration | $ | 1,368 | ||
F-15
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
3. | Business acquisitions (Continued) |
Purchase | ||||
Consideration | ||||
Fair value of assets acquired | ||||
Cash and cash equivalents | $ | 2,696 | ||
Current assets | 5,062 | |||
Capital assets and other | 7,199 | |||
Intangible assets including customer contracts | 5,849 | |||
$ | 20,806 | |||
Less: Liabilities assumed | ||||
Current liabilities | $ | 17,354 | ||
Debt assumed on purchase | 7,304 | |||
Long-term liabilities | 1,343 | |||
Non-controlling interest | 326 | |||
$ | 26,327 | |||
Fair value of net liabilities acquired | $ | (5,521 | ) | |
Goodwill | 6,889 | |||
Purchase consideration | $ | 1,368 | ||
F-16
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
4. | Capital assets |
2005 | ||||||||||||
Accumulated | Net Book | |||||||||||
Cost | Depreciation | Value | ||||||||||
Telecommunications equipment | $ | 142,239 | $ | 81,551 | $ | 60,688 | ||||||
Earth station equipment | 91,459 | 46,117 | 45,342 | |||||||||
Computer hardware and software | 44,555 | 27,912 | 16,643 | |||||||||
Furniture and other | 8,079 | 5,556 | 2,523 | |||||||||
Buildings | 8,526 | 3,463 | 5,063 | |||||||||
Land | 1,006 | — | 1,006 | |||||||||
$ | 295,864 | $ | 164,599 | $ | 131,265 | |||||||
2004 | ||||||||||||
Accumulated | Net Book | |||||||||||
Cost | Depreciation | Value | ||||||||||
Telecommunications equipment | $ | 127,701 | $ | 66,853 | $ | 60,848 | ||||||
Earth station equipment | 85,751 | 36,614 | 49,137 | |||||||||
Computer hardware and software | 37,867 | 21,107 | 16,760 | |||||||||
Furniture and other | 6,277 | 5,136 | 1,141 | |||||||||
Buildings | 8,323 | 2,925 | 5,398 | |||||||||
Land | 1,006 | — | 1,006 | |||||||||
$ | 266,925 | $ | 132,635 | $ | 134,290 | |||||||
5. | Investments |
F-17
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
5. | Investments (Continued) |
6. | Goodwill and other intangible assets |
2005 | 2004 | |||||||
Goodwill | $ | 210,329 | $ | 203,440 | ||||
Licenses | 3,862 | 4,110 | ||||||
Customer contracts | 3,890 | — | ||||||
$ | 218,081 | $ | 207,550 | |||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||
$ | 2,750 | $ | 2,686 | $ | 791 | $ | 630 | $ | 630 | |||||||||
7. | Other assets |
2005 | 2004 | |||||||
Deferred financing costs | $ | 4,950 | $ | 3,116 | ||||
Deferredstart-up costs | 343 | 858 | ||||||
Deferred acquisition costs | 2,754 | 641 | ||||||
Other | 3,385 | 2,643 | ||||||
$ | 11,432 | $ | 7,258 | |||||
F-18
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
8. | Payables and accruals |
2005 | 2004 | |||||||
Trade accounts payable | $ | 60,438 | $ | 52,842 | ||||
Accrued employee costs | 6,407 | 5,629 | ||||||
Other accrued liabilities | 3,110 | 3,152 | ||||||
$ | 69,955 | $ | 61,623 | |||||
9. | Long-term debt |
Interest Rate at | ||||||||||||
December 31, 2005 | 2005 | 2004 | ||||||||||
Term B facility | LIBOR + 2.25 | % | $ | 148,500 | $ | 150,000 | ||||||
Revolving operating facility | LIBOR + 1.45 | % | 15,000 | — | ||||||||
Mortgage obligation | 7.59 | % | 684 | 743 | ||||||||
Bank loan | 13.00 | % | 25 | — | ||||||||
Capital lease obligations | 7.10 | % | 29 | 84 | ||||||||
164,238 | 150,827 | |||||||||||
Less: long-term debt due within one year | 1,657 | 1,651 | ||||||||||
$ | 162,581 | $ | 149,176 | |||||||||
F-19
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
9. | Long-term debt (Continued) |
F-20
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
9. | Long-term debt (Continued) |
2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | |||||||||||||||||
$ | 1,657 | $ | 1,623 | $ | 1,626 | $ | 1,636 | $ | 16,646 | $ | 141,050 | |||||||||||
10. | Other liabilities |
2005 | 2004 | |||||||
Asset retirement obligation | $ | 3,920 | $ | 3,329 | ||||
Deferred revenue | 392 | 1,962 | ||||||
Government assistance, net of accumulated amortization of $1,029 (2004 — $985) | 556 | 591 | ||||||
Defined benefit pension obligation | 388 | — | ||||||
Other | 236 | 203 | ||||||
$ | 5,492 | $ | 6,085 | |||||
F-21
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
10. | Other liabilities (Continued) |
Estimated Undiscounted | ||||
Range of Expected Settlement Dates | Cash Flows | |||
2009 — 2010 | $ | 404 | ||
2014 — 2015 | 2,008 | |||
$ | 2,412 | |||
Estimated Undiscounted | ||||
Range of Expected Settlement Dates | Cash Flows | |||
2007 — 2010 | $ | 1,849 | ||
2011 — 2015 | 2,701 | |||
$ | 4,550 | |||
2005 | 2004 | |||||||
Asset retirement obligation, beginning of year | $ | 3,329 | $ | 3,058 | ||||
Asset retirement obligation assumed on acquisition | 312 | — | ||||||
Accretion expense | 279 | 271 | ||||||
Asset retirement obligation, end of year | $ | 3,920 | $ | 3,329 | ||||
11. | Capital Stock |
F-22
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
11. | Capital Stock (Continued) |
Capital stock | $ | 38,088 | ||
Retained earnings | 25,983 | |||
Contributed surplus | 1,277 | |||
$ | 65,348 | |||
2005 | ||||||||
Number | Stated Value | |||||||
Beginning of year | 49,379,103 | $ | 254,147 | |||||
Issued pursuant to exercise of options | 12,771 | 56 | ||||||
Shares repurchased and cancelled | (7,400,000 | ) | (38,088 | ) | ||||
Transfers from contributed surplus related to exercise of options | — | 13 | ||||||
End of year | 41,991,874 | $ | 216,128 | |||||
2004 | ||||||||
Number | Stated Value | |||||||
Beginning of year | 49,119,703 | $ | 252,474 | |||||
Issued pursuant to exercise of options | 259,400 | 1,663 | ||||||
Transfers from contributed surplus related to exercise of options | — | 10 | ||||||
End of year | 49,379,103 | $ | 254,147 | |||||
2003 | ||||||||
Number | Stated Value | |||||||
Beginning of year | 49,118,703 | $ | 252,458 | |||||
Issued pursuant to exercise of options | 1,000 | 7 | ||||||
Transfers from contributed surplus related to exercise of options | — | 9 | ||||||
End of year | 49,119,703 | $ | 252,474 | |||||
F-23
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
11. | Capital Stock (Continued) |
2005 | ||||||||
Weighted Average | ||||||||
Number | Exercise Price | |||||||
Outstanding at beginning of year | 2,064,535 | $ | 9.59 | |||||
Granted | 166,745 | 8.59 | ||||||
Exercised | (12,771 | ) | 7.47 | |||||
Forfeited, cancelled or expired | (404,344 | ) | 9.29 | |||||
Outstanding at end of year | 1,814,165 | $ | 9.99 | |||||
Exercisable at end of year | 985,952 | $ | 10.85 | |||||
Weighted average fair value of options granted during the year | $ | 3.54 | ||||||
2004 | ||||||||
Weighted Average | ||||||||
Number | Exercise Price | |||||||
Outstanding at beginning of year | 2,225,739 | $ | 9.11 | |||||
Granted | 688,100 | 8.34 | ||||||
Exercised | (259,400 | ) | 7.76 | |||||
Forfeited, cancelled or expired | (589,904 | ) | 9.74 | |||||
Outstanding at end of year | 2,064,535 | $ | 9.59 | |||||
Exercisable at end of year | 757,351 | $ | 10.28 | |||||
Weighted average fair value of options granted during the year | $ | 3.64 | ||||||
F-24
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
11. | Capital Stock (Continued) |
2003 | ||||||||
Weighted Average | ||||||||
Number | Exercise Price | |||||||
Outstanding at beginning of year | 2,207,245 | $ | 7.93 | |||||
Granted | 398,000 | 7.81 | ||||||
Exercised | (1,000 | ) | 7.78 | |||||
Forfeited, cancelled or expired | (378,506 | ) | 9.23 | |||||
Outstanding at end of year | 2,225,739 | $ | 9.11 | |||||
Exercisable at end of year | 1,053,475 | $ | 9.14 | |||||
Weighted average fair value of options granted during the year | $ | 5.05 | ||||||
2005 | ||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||
Number | Remaining | Average | Number | Average | ||||||||||||||||
Range of Exercise Price | Outstanding | Life (Years) | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
$ 2.75 - $ 5.24 | 2,500 | — | $ | 2.81 | 2,500 | $ | 2.81 | |||||||||||||
$ 5.25 - $ 7.74 | 583,350 | 5 | 7.60 | 213,383 | 7.56 | |||||||||||||||
$ 7.75 - $10.24 | 839,395 | 6 | 8.89 | 457,517 | 9.06 | |||||||||||||||
$10.25 - $15.75 | 388,920 | 7 | 13.61 | 312,552 | 13.83 | |||||||||||||||
1,814,165 | $ | 9.99 | 985,952 | $ | 10.85 | |||||||||||||||
2004 | ||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||
Number | Remaining | Average | Number | Average | ||||||||||||||||
Range of Exercise Price | Outstanding | Life (Years) | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
$2.00 - $ 4.49 | 5,000 | — | $ | 2.66 | 5,000 | $ | 2.66 | |||||||||||||
$4.50 - $ 6.99 | 45,500 | — | 6.95 | 45,500 | 6.95 | |||||||||||||||
$7.00 - $ 9.49 | 1,428,700 | 6 | 8.14 | 323,950 | 8.32 | |||||||||||||||
$9.50 - $14.75 | 585,335 | 6 | 12.14 | 382,901 | 11.75 | |||||||||||||||
2,064,535 | $ | 9.59 | 757,351 | $ | 10.28 | |||||||||||||||
F-25
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
11. | Capital Stock (Continued) |
2003 | ||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||
Number | Remaining | Average | Number | Average | ||||||||||||||||
Range of Exercise Price | Outstanding | Life (Years) | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
$2.00 - $ 4.49 | 75,000 | — | $ | 2.86 | 75,000 | $ | 2.86 | |||||||||||||
$4.50 - $ 6.99 | 352,500 | 6 | 6.54 | 47,500 | 6.45 | |||||||||||||||
$7.00 - $ 9.49 | 1,329,500 | 5 | 8.29 | 762,700 | 8.61 | |||||||||||||||
$9.50 - $13.75 | 468,739 | 7 | 12.00 | 168,275 | 11.97 | |||||||||||||||
2,225,739 | $ | 9.11 | 1,053,475 | $ | 9.14 | |||||||||||||||
2005 | 2004 | 2003 | ||||||||||
Reported net earnings | $ | 5,405 | $ | 25,121 | $ | 38,089 | ||||||
Stock based compensation expense | (388 | ) | (663 | ) | (415 | ) | ||||||
Adjusted net earnings | $ | 5,017 | $ | 24,458 | $ | 37,674 | ||||||
Adjusted basic earnings per share | $ | 0.12 | $ | 0.50 | $ | 0.77 | ||||||
Adjusted diluted earnings per share | $ | 0.12 | $ | 0.49 | $ | 0.76 |
2005 | ||||||||
June | March | |||||||
Risk free interest rate | 4.31 | % | 4.18 | % | ||||
Expected life in years | 6.00 | 6.00 | ||||||
Expected volatility | 34.0 | % | 36.0 | % | ||||
Expected dividends | 0.0 | % | 0.0 | % |
F-26
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
11. | Capital Stock (Continued) |
2004 | ||||||||||||
September | June | March | ||||||||||
Risk free interest rate | 4.15 | % | 4.28 | % | 4.54 | % | ||||||
Expected life in years | 6.00 | 6.00 | 7.00 | |||||||||
Expected volatility | 39.5 | % | 44.4 | % | 46.6 | % | ||||||
Expected dividends | 0.0 | % | 0.0 | % | 0.0 | % |
2003 | ||||||||||||
September | June | March | ||||||||||
Risk free interest rate | 4.53 | % | 5.02 | % | 5.16 | % | ||||||
Expected life in years | 7.00 | 8.00 | 8.30 | |||||||||
Expected volatility | 53.9 | % | 78.2 | % | 80.2 | % | ||||||
Expected dividends | 0.0 | % | 0.0 | % | 0.0 | % |
F-27
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
12. | Interest expense |
2005 | �� | 2004 | 2003 | |||||||||
Long-term debt | $ | 10,592 | $ | 8,657 | $ | 13,046 | ||||||
Guarantee fee (Note 9) | — | — | 543 | |||||||||
Amortization of deferred financing costs | 590 | 2,891 | 1,528 | |||||||||
Bank indebtedness | 222 | 197 | 158 | |||||||||
$ | 11,404 | $ | 11,745 | $ | 15,275 | |||||||
13. | Other costs (income) |
2005 | 2004 | 2003 | ||||||||||
Severance and other | $ | 713 | $ | 2,854 | $ | 3,155 | ||||||
Asset impairment charges | 165 | 2,220 | 5,500 | |||||||||
Commercial settlement | (2,038 | ) | — | — | ||||||||
Provision for legal claim | 1,698 | — | — | |||||||||
Adjustment to allowance for uncollectability | — | (1,500 | ) | (5,857 | ) | |||||||
Gain on sale of Inmarsat investment | — | — | (9,845 | ) | ||||||||
Receipt from former controlling shareholder | — | — | (7,000 | ) | ||||||||
Write-off of deferred acquisition costs | — | — | 7,285 | |||||||||
$ | 538 | $ | 3,574 | $ | (6,762 | ) | ||||||
F-28
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
13. | Other costs (income) (Continued) |
F-29
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
13. | Other costs (income) (Continued) |
14. | Income taxes |
2005 | 2004 | 2003 | ||||||||||
Earnings before income taxes | $ | 10,336 | $ | 33,838 | $ | 50,766 | ||||||
Income tax expense based upon statutory rates | 3,721 | 12,182 | 19,291 | |||||||||
Increase (decrease) in income taxes resulting from: | ||||||||||||
Non-taxable items | (1,747 | ) | (369 | ) | 759 | |||||||
Benefit of previous years’ non-capital losses | — | (5,928 | ) | (12,620 | ) | |||||||
Benefit of current years’ non-capital losses not recognized | 2,247 | 1,580 | 3,697 | |||||||||
Difference in foreign tax rates | 154 | 674 | 898 | |||||||||
Capital tax | 556 | 578 | 652 | |||||||||
Income tax expense | $ | 4,931 | $ | 8,717 | $ | 12,677 | ||||||
F-30
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
14. | Income taxes (Continued) |
2005 | 2004 | 2003 | ||||||||||
Canadian | ||||||||||||
Current taxes | $ | 786 | $ | 453 | $ | 502 | ||||||
Future income taxes | 381 | 2,246 | — | |||||||||
$ | 1,167 | $ | 2,699 | $ | 502 | |||||||
Foreign | ||||||||||||
Current taxes | $ | 3,279 | $ | 2,336 | $ | 5,216 | ||||||
Future income taxes | 485 | 3,682 | 6,959 | |||||||||
$ | 3,764 | $ | 6,018 | $ | 12,175 | |||||||
Income tax expense | $ | 4,931 | $ | 8,717 | $ | 12,677 | ||||||
2005 | 2004 | |||||||
Loss carry-forwards | $ | 26,296 | $ | 9,180 | ||||
Capital assets | (10,254 | ) | (9,582 | ) | ||||
Goodwill | (18,333 | ) | (14,799 | ) | ||||
Current assets | 3,060 | 2,191 | ||||||
Asset retirement obligation | 1,277 | 1,174 | ||||||
Other | 290 | 382 | ||||||
Current liabilities | (42 | ) | 555 | |||||
Valuation allowance | (22,726 | ) | (8,618 | ) | ||||
Total future income taxes | $ | (20,432 | ) | $ | (19,517 | ) | ||
2005 | 2004 | |||||||
Future income tax asset — current portion | $ | 4,216 | $ | 2,746 | ||||
Future income tax liability — long-term portion | (24,648 | ) | (22,263 | ) | ||||
Net future income tax liability | $ | (20,432 | ) | $ | (19,517 | ) | ||
F-31
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
14. | Income taxes (Continued) |
15. | Per share information |
2005 | 2004 | 2003 | ||||||||||
Net earnings | $ | 5,405 | $ | 25,121 | $ | 38,089 | ||||||
Weighted average common shares used in the calculation of basic earnings per share | 43,221 | 49,337 | 49,119 | |||||||||
Incremental common shares calculated in accordance with the treasury stock method | 30 | 163 | 205 | |||||||||
Weighted average common shares used in the calculation of diluted earnings per share | 43,251 | 49,500 | 49,324 | |||||||||
Basic and diluted earnings per share | $ | 0.13 | $ | 0.51 | $ | 0.77 | ||||||
16. | Change in non-cash working capital |
2005 | 2004 | 2003 | ||||||||||
Accounts receivable | $ | (690 | ) | $ | 18,398 | $ | (14,020 | ) | ||||
Unbilled revenue | (987 | ) | 1,616 | (188 | ) | |||||||
Inventory | (1,172 | ) | 749 | 950 | ||||||||
Prepaids and other | (2,147 | ) | (1,410 | ) | 294 | |||||||
Payables and accruals | (8,066 | ) | 893 | 7,496 | ||||||||
Deferred revenue | (1,782 | ) | 575 | (72 | ) | |||||||
$ | (14,844 | ) | $ | 20,821 | $ | (5,540 | ) | |||||
F-32
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
17. | Business segments |
2005 | 2004 | 2003 | ||||||||||
(Note 2(b)) | ||||||||||||
Revenue | ||||||||||||
MSS | $ | 259,914 | $ | 265,772 | $ | 300,810 | ||||||
Broadband | 121,086 | 101,981 | 96,378 | |||||||||
$ | 381,000 | $ | 367,753 | $ | 397,188 | |||||||
Segment earnings | ||||||||||||
MSS | $ | 44,748 | $ | 56,144 | $ | 67,398 | ||||||
Broadband | 13,432 | 22,001 | 21,373 | |||||||||
$ | 58,180 | $ | 78,145 | $ | 88,771 | |||||||
Interest expense | $ | 11,404 | $ | 11,745 | $ | 15,275 | ||||||
Depreciation and amortization | 36,565 | 28,988 | 29,492 | |||||||||
Other costs | 538 | 3,574 | (6,762 | ) | ||||||||
Non-controlling interest | 103 | — | — | |||||||||
Equity in earnings of investee | (766 | ) | — | — | ||||||||
$ | 47,844 | $ | 44,307 | $ | 38,005 | |||||||
Earnings before income taxes | $ | 10,336 | $ | 33,838 | $ | 50,766 | ||||||
2005 | 2004 | |||||||
Total identifiable assets at December 31 | ||||||||
MSS | $ | 163,179 | $ | 205,083 | ||||
Broadband | 121,760 | 121,122 | ||||||
$ | 284,939 | $ | 326,205 | |||||
Goodwill | ||||||||
MSS | $ | 162,591 | $ | 162,591 | ||||
Broadband | 47,738 | 40,849 | ||||||
$ | 210,329 | $ | 203,440 | |||||
$ | 495,268 | $ | 529,645 | |||||
F-33
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
17. | Business segments (Continued) |
2005 | 2004 | 2003 | ||||||||||
United States | $ | 212,807 | $ | 223,536 | $ | 250,760 | ||||||
United Kingdom | 62,469 | 69,001 | 69,387 | |||||||||
Canada | 18,921 | 16,374 | 21,128 | |||||||||
Other | 86,803 | 58,842 | 55,913 | |||||||||
$ | 381,000 | $ | 367,753 | $ | 397,188 | |||||||
2005 | 2004 | |||||||
United States | $ | 99,914 | $ | 101,207 | ||||
United Kingdom | 151,955 | 158,325 | ||||||
Canada | 52,265 | 51,574 | ||||||
Other | 37,460 | 26,624 | ||||||
$ | 341,594 | $ | 337,730 | |||||
18. | Financial instruments |
F-34
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
18. | Financial instruments (Continued) |
F-35
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
18. | Financial instruments (Continued) |
19. | Commitments and contingencies |
2006 | $ | 61.8 | ||
2007 | $ | 25.2 | ||
2008 | $ | 11.2 | ||
2009 | $ | 5.8 | ||
2010 | $ | 5.3 | ||
Thereafter | $ | 6.2 |
20. | Related party transactions |
F-36
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
21. | Subsequent events |
Purchase | ||||
Consideration | ||||
Cash paid on closing — share purchase | $ | 191,250 | ||
Transaction costs | 6,417 | |||
197,667 | ||||
Estimated purchase price adjustment | 20,000 | |||
$ | 217,667 | |||
F-37
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
21. | Subsequent events (Continued) |
Purchase | ||||
Consideration | ||||
Fair value of assets acquired | ||||
Cash and cash equivalents | $ | 33,181 | ||
Current assets | 43,323 | |||
Capital assets | 26,194 | |||
Intangible assets including customer relationships | 83,600 | |||
Future income taxes | 6,985 | |||
Intangible assets including customer contracts | 879 | |||
$ | 194,162 | |||
Less: Liabilities assumed: | ||||
Current liabilities | $ | 73,284 | ||
Long-term liabilities | 9,654 | |||
Future income taxes | 10,477 | |||
$ | 93,415 | |||
Fair value of net assets acquired | $ | 100,747 | ||
Goodwill | 116,920 | |||
Purchase consideration | $ | 217,667 | ||
F-38
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
21. | Subsequent events (Continued) |
F-39
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
21. | Subsequent events (Continued) |
22. | Differences between Canadian and United States generally accepted accounting principles |
F-40
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
2005 | 2004 | 2003 | ||||||||||
Net earnings in accordance with Canadian GAAP | $ | 5,405 | $ | 25,121 | $ | 38,089 | ||||||
Interest rate swap(i) | 1,055 | 4,470 | 5,268 | |||||||||
Deferredstart-up costs(iii) | 515 | 516 | 682 | |||||||||
Deferred development costs(iii) | 47 | 121 | 605 | |||||||||
Deferred financing costs(iv) | — | 1,028 | (247 | ) | ||||||||
Stock-based compensation costs(v) | 15 | (33 | ) | (265 | ) | |||||||
Income tax impact of the above(i, iii, iv, viii) | (467 | ) | 5,891 | 42 | ||||||||
Net earnings in accordance with U.S. GAAP | $ | 6,570 | $ | 37,114 | $ | 44,174 | ||||||
2005 | 2004 | 2003 | ||||||||||
Shareholders’ equity in accordance with Canadian GAAP | $ | 222,930 | $ | 281,369 | $ | 253,814 | ||||||
Interest rate swap(i) | — | (1,055 | ) | (5,525 | ) | |||||||
Business combinations(ii) | (20,802 | ) | (20,802 | ) | (20,802 | ) | ||||||
Deferredstart-up costs(iii) | (343 | ) | (858 | ) | (1,374 | ) | ||||||
Deferred development costs(iii) | — | (47 | ) | (168 | ) | |||||||
Deferred financing costs | — | — | (1,028 | ) | ||||||||
Income tax impact of the above(i, ii, iii, iv, viii) | 6,033 | 6,500 | 609 | |||||||||
Accumulated other comprehensive income(i) | 2,205 | — | — | |||||||||
Shareholders’ equity in accordance with U.S. GAAP | $ | 210,023 | $ | 265,107 | $ | 225,526 | ||||||
2005 | 2004 | 2003 | ||||||||||
Capital stock | $ | 218,166 | $ | 256,185 | $ | 254,134 | ||||||
Retained earnings (deficit) | (7,765 | ) | 11,648 | (25,466 | ) | |||||||
Contributed surplus(v) | 1,243 | 1,100 | 684 | |||||||||
Other comprehensive income(i, vii) | (1,621 | ) | (3,826 | ) | (3,826 | ) | ||||||
Shareholders’ equity in accordance with U.S. GAAP | $ | 210,023 | $ | 265,107 | $ | 225,526 | ||||||
F-41
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
2005 | 2004 | |||||||||||||||
Canadian | U.S. | Canadian | U.S. | |||||||||||||
GAAP | GAAP | GAAP | GAAP | |||||||||||||
Assets | ||||||||||||||||
Current | ||||||||||||||||
Cash and cash equivalents | $ | 14,472 | $ | 14,472 | $ | 80,682 | $ | 80,682 | ||||||||
Accounts receivable | 56,290 | 56,290 | 53,349 | 53,349 | ||||||||||||
Unbilled revenue | 24,622 | 24,622 | 23,635 | 23,635 | ||||||||||||
Derivative instruments(i) | — | 2,205 | — | — | ||||||||||||
Inventory | 7,796 | 7,796 | 4,719 | 4,719 | ||||||||||||
Prepaids and other | 20,757 | 20,757 | 15,416 | 15,416 | ||||||||||||
Future income taxes | 4,216 | 4,216 | 2,746 | 2,746 | ||||||||||||
128,153 | $ | 130,358 | 180,547 | 180,547 | ||||||||||||
Investments | 6,337 | 6,337 | — | — | ||||||||||||
Capital assets | 131,265 | 131,265 | 134,290 | 134,290 | ||||||||||||
Goodwill and other intangible assets(ii) | 218,081 | 197,279 | 207,550 | 186,748 | ||||||||||||
Other assets(iii) | 11,432 | 11,089 | 7,258 | 6,353 | ||||||||||||
$ | 495,268 | $ | 476,328 | $ | 529,645 | $ | 507,938 | |||||||||
Liabilities | ||||||||||||||||
Current | ||||||||||||||||
Payables and accruals | $ | 69,955 | $ | 69,955 | $ | 61,623 | $ | 61,623 | ||||||||
Derivative instruments(i) | — | — | — | 1,055 | ||||||||||||
Deferred revenue | 7,576 | 7,576 | 7,478 | 7,478 | ||||||||||||
Current portion of long-term debt | 1,657 | 1,657 | 1,651 | 1,651 | ||||||||||||
79,188 | 79,188 | 70,752 | 71,807 | |||||||||||||
Long-term debt | 162,581 | 162,581 | 149,176 | 149,176 | ||||||||||||
Other liabilities | 5,492 | 5,492 | 6,085 | 6,085 | ||||||||||||
Future income taxes(ii, iii, viii) | 24,648 | 18,615 | 22,263 | 15,763 | ||||||||||||
Total liabilities | 271,909 | 265,876 | 248,276 | 242,831 | ||||||||||||
Non-controlling interest | 429 | 429 | — | — | ||||||||||||
Shareholders’ equity | 222,930 | 210,023 | 281,369 | 265,107 | ||||||||||||
$ | 495,268 | $ | 476,328 | $ | 529,645 | $ | 507,938 | |||||||||
F-42
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
2005 | 2004 | 2003 | ||||||||||
Revenue | $ | 381,000 | $ | 367,753 | $ | 397,188 | ||||||
Cost of goods and services | 268,422 | 243,189 | 255,631 | |||||||||
Gross margin | 112,578 | 124,564 | 141,557 | |||||||||
Selling, general and administrative | 47,311 | 39,107 | 44,740 | |||||||||
Rental expense | 6,235 | 5,076 | 4,903 | |||||||||
Bad debt expense | 886 | 1,295 | 2,158 | |||||||||
Depreciation and amortization | 36,565 | 28,988 | 29,492 | |||||||||
Write-off of deferred acquisition costs (Note 13) | — | — | 7,285 | |||||||||
Asset impairment charge (Note 13) | 165 | 2,220 | 5,500 | |||||||||
Equity in earnings of investee | (766 | ) | — | — | ||||||||
Foreign exchange (gain) loss | (611 | ) | 337 | (37 | ) | |||||||
Non-controlling interest | 103 | — | — | |||||||||
Other costs | 373 | 2,854 | 3,155 | |||||||||
90,261 | 79,877 | 97,196 | ||||||||||
Earnings from operations | 22,317 | 44,687 | 44,361 | |||||||||
Interest expense | 11,404 | 10,717 | 15,522 | |||||||||
Interest rate swap | (1,055 | ) | (4,470 | ) | (5,268 | ) | ||||||
Gain on sale of Inmarsat investment (Note 13) | — | — | (9,845 | ) | ||||||||
Adjustment to allowance for uncollectability (Note 13) | — | (1,500 | ) | (5,857 | ) | |||||||
Receipt from former controlling shareholder (Note 13) | — | — | (7,000 | ) | ||||||||
Net earnings before income taxes | 11,968 | 39,940 | 56,809 | |||||||||
Income tax expense | 5,398 | 2,826 | 12,635 | |||||||||
Net earnings | $ | 6,570 | $ | 37,114 | $ | 44,174 | ||||||
Basic and diluted earnings per share in accordance with U.S. GAAP | $ | 0.15 | $ | 0.75 | $ | 0.90 | ||||||
F-43
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
F-44
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
2005 | 2004 | 2003 | ||||||||||
Net earnings as per U.S. GAAP | $ | 6,570 | $ | 37,114 | $ | 44,174 | ||||||
Stock-based compensation expenses included in reported net earnings determined under the intrinsic value based method | (15 | ) | 33 | 265 | ||||||||
Stock-based compensation expenses included in reported net earnings determined under the fair value based method | 1,448 | 770 | 307 | |||||||||
Total stock-based compensation expense determined under the fair value based method for all awards | (4,152 | ) | (4,604 | ) | (3,677 | ) | ||||||
Adjusted net earnings as per U.S. GAAP | $ | 3,851 | $ | 33,313 | $ | 41,069 | ||||||
Adjusted basic earnings per share | $ | 0.09 | $ | 0.68 | $ | 0.84 | ||||||
Adjusted diluted earnings per share | $ | 0.09 | $ | 0.67 | $ | 0.83 | ||||||
F-45
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
F-46
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
2005 | 2004 | 2003 | ||||||||||
Cash flows from operating activities in accordance with U.S. GAAP | $ | 31,253 | $ | 86,445 | $ | 69,312 | ||||||
Cash flows from investing activities in accordance with U.S. GAAP | $ | (44,951 | ) | $ | (28,458 | ) | $ | (582 | ) | |||
Cash flows from financing activities in accordance with U.S. GAAP | $ | (52,512 | ) | $ | 11,226 | $ | (78,789 | ) | ||||
23. | Supplemental guarantor financial information |
F-47
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
23. | Supplemental guarantor financial information (Continued) |
As at December 31, 2005 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Assets | ||||||||||||||||||||
Current | ||||||||||||||||||||
Cash and cash equivalents | $ | 591 | $ | 6,263 | $ | 7,618 | $ | — | $ | 14,472 | ||||||||||
Accounts receivable | — | 54,824 | 1,466 | — | 56,290 | |||||||||||||||
Unbilled revenue | — | 24,251 | 371 | — | 24,622 | |||||||||||||||
Due from affiliated companies | 29,864 | — | — | (29,864 | ) | — | ||||||||||||||
Derivative instruments | 500 | 1,705 | — | — | 2,205 | |||||||||||||||
Inventory | — | 5,724 | 2,072 | — | 7,796 | |||||||||||||||
Prepaids and other | (214 | ) | 20,225 | 746 | — | 20,757 | ||||||||||||||
Future income taxes | — | 4,216 | — | — | 4,216 | |||||||||||||||
30,741 | 117,208 | 12,273 | (29,864 | ) | 130,358 | |||||||||||||||
Investments | 178,681 | — | — | (172,344 | ) | 6,337 | ||||||||||||||
Capital assets | — | 125,013 | 6,252 | — | 131,265 | |||||||||||||||
Due from affiliated companies | 144,393 | 94,910 | — | (239,303 | ) | — | ||||||||||||||
Goodwill and other intangible assets | — | 186,354 | 10,925 | — | 197,279 | |||||||||||||||
Other assets | 3,937 | 7,152 | — | — | 11,089 | |||||||||||||||
$ | 357,752 | $ | 530,637 | $ | 29,450 | $ | (441,511 | ) | $ | 476,328 | ||||||||||
Liabilities | ||||||||||||||||||||
Current | ||||||||||||||||||||
Payables and accruals | $ | 5,717 | $ | 56,312 | $ | 7,926 | $ | — | $ | 69,955 | ||||||||||
Deferred revenue | — | 6,248 | 1,328 | — | 7,576 | |||||||||||||||
Due to affiliated companies | — | 13,392 | 11,454 | (24,846 | ) | — | ||||||||||||||
Current portion of long-term debt | 400 | 1,232 | 25 | — | 1,657 | |||||||||||||||
6,117 | 77,184 | 20,733 | (24,846 | ) | 79,188 | |||||||||||||||
Long-term debt | 54,200 | 108,381 | — | — | 162,581 | |||||||||||||||
Due to affiliated companies | 88,219 | 144,393 | 6,691 | (239,303 | ) | — | ||||||||||||||
Other liabilities | — | 4,570 | 922 | — | 5,492 | |||||||||||||||
Future income taxes | 2,660 | 15,893 | 62 | — | 18,615 | |||||||||||||||
Total liabilities | 151,196 | 350,421 | 28,408 | (264,149 | ) | 265,876 | ||||||||||||||
Non-controlling interest | — | — | 429 | — | 429 | |||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Capital stock | 218,166 | 178,205 | 9,267 | (187,472 | ) | 218,166 | ||||||||||||||
Contributed surplus | 1,243 | — | — | — | 1,243 | |||||||||||||||
Accumulated other comprehensive earnings | (5,088 | ) | 3,467 | — | — | (1,621 | ) | |||||||||||||
Retained earnings | (7,765 | ) | (1,456 | ) | (8,654 | ) | 10,110 | (7,765 | ) | |||||||||||
$ | 357,752 | $ | 530,637 | $ | 29,450 | $ | (441,511 | ) | $ | 476,328 | ||||||||||
F-48
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
23. | Supplemental guarantor financial information (Continued) |
For the Year Ended December 31, 2005 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Revenue | $ | 19 | $ | 353,220 | $ | 29,834 | $ | (2,073 | ) | $ | 381,000 | |||||||||
Cost of goods and services | — | 249,011 | 19,776 | (365 | ) | 268,422 | ||||||||||||||
Gross margin | 19 | 104,209 | 10,058 | (1,708 | ) | 112,578 | ||||||||||||||
Operating expenses | 5,355 | 41,485 | 8,689 | (1,708 | ) | 53,821 | ||||||||||||||
Interest expense | 3,114 | 7,202 | 33 | — | 10,349 | |||||||||||||||
Intercompany interest expense (revenue) | (10,015 | ) | 9,449 | 566 | — | — | ||||||||||||||
Depreciation and amortization | — | 32,594 | 3,971 | — | 36,565 | |||||||||||||||
Other costs (income) | 1,586 | (1,510 | ) | 462 | — | 538 | ||||||||||||||
Non-controlling interest | — | — | 103 | — | 103 | |||||||||||||||
Equity in earnings of investee | (7,723 | ) | — | — | 6,957 | (766 | ) | |||||||||||||
$ | (7,683 | ) | $ | 89,220 | $ | 13,824 | $ | 5,249 | $ | 100,610 | ||||||||||
Earnings (loss) before income taxes | $ | 7,702 | $ | 14,989 | $ | (3,766 | ) | $ | (6,957 | ) | $ | 11,968 | ||||||||
Income tax expense | 1,132 | 3,865 | 401 | — | 5,398 | |||||||||||||||
Net earnings (loss) | $ | 6,570 | $ | 11,124 | $ | (4,167 | ) | $ | (6,957 | ) | $ | 6,570 | ||||||||
F-49
(U.S. dollars; tabular amounts in thousands except share and per share amounts)
23. | Supplemental guarantor financial information (Continued) |
For the Year Ended December 31, 2005 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Operating activities | ||||||||||||||||||||
Net cash flow from operations | $ | 67,479 | $ | (42,534 | ) | $ | 6,308 | $ | — | $ | 31,253 | |||||||||
Investing activities | ||||||||||||||||||||
Business acquisitions (net of cash acquired) | (14,750 | ) | — | 2,696 | — | (12,054 | ) | |||||||||||||
Proceeds on disposal of investment | — | — | 170 | — | 170 | |||||||||||||||
Capital asset expenditures | — | (24,884 | ) | (940 | ) | — | (25,824 | ) | ||||||||||||
Deferred costs | (2,479 | ) | (4,459 | ) | (305 | ) | — | (7,243 | ) | |||||||||||
(17,229 | ) | (29,343 | ) | 1,621 | — | (44,951 | ) | |||||||||||||
Financing activities | ||||||||||||||||||||
Long-term debt proceeds | 15,000 | — | — | — | 15,000 | |||||||||||||||
Long-term debt repayments | (400 | ) | (1,252 | ) | (163 | ) | — | (1,815 | ) | |||||||||||
Capital stock issuances | 56 | — | — | — | 56 | |||||||||||||||
Share repurchase | (65,348 | ) | — | — | — | (65,348 | ) | |||||||||||||
Dividends paid | — | — | — | — | — | |||||||||||||||
Other liabilities | — | (195 | ) | (210 | ) | — | (405 | ) | ||||||||||||
(50,692 | ) | (1,447 | ) | (373 | ) | — | (52,512 | ) | ||||||||||||
Change in cash and cash equivalents during the period | (442 | ) | (73,324 | ) | 7,556 | — | (66,210 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 1,035 | 79,586 | 61 | — | 80,682 | |||||||||||||||
Cash and cash equivalents, end of year | $ | 593 | $ | 6,262 | $ | 7,617 | $ | — | $ | 14,472 | ||||||||||
F-50
(Unaudited)
Incorporated under the laws of Canada
2006 | 2005 | |||||||
Assets (Note 9) | ||||||||
Current | ||||||||
Cash and cash equivalents | $ | 54,140 | $ | 14,472 | ||||
Accounts receivable (Notes 18 and 20) | 80,562 | 56,290 | ||||||
Unbilled revenue | 41,095 | 24,622 | ||||||
Inventory | 10,071 | 7,796 | ||||||
Prepaids and other | 23,153 | 20,757 | ||||||
Future income taxes (Note 14) | 8,754 | 4,216 | ||||||
217,775 | 128,153 | |||||||
Investments (Note 5) | 7,307 | 6,337 | ||||||
Capital assets (Note 4) | 131,642 | 131,265 | ||||||
Goodwill and other intangible assets (Note 6) | 411,380 | 218,081 | ||||||
Other assets (Note 7) | 15,428 | 11,432 | ||||||
$ | 783,532 | $ | 495,268 | |||||
Liabilities | ||||||||
Current | ||||||||
Payables and accruals (Note 8) | $ | 156,057 | $ | 69,955 | ||||
Deferred revenue | 11,135 | 7,576 | ||||||
Current portion of long-term debt (Note 9) | 2,381 | 1,657 | ||||||
169,573 | 79,188 | |||||||
Long-term debt (Note 9(a)) | 223,287 | 162,581 | ||||||
Senior unsecured notes (Note 9(b)) | 150,000 | — | ||||||
Other liabilities (Note 10) | 14,095 | 5,492 | ||||||
Future income taxes (Note 14) | 31,225 | 24,648 | ||||||
Total liabilities | 588,180 | 271,909 | ||||||
Non-controlling interest | 487 | 429 | ||||||
Shareholders’ equity | 194,865 | 222,930 | ||||||
$ | 783,532 | $ | 495,268 | |||||
Commitments and contingencies (Note 19) |
F-51
(Unaudited)
2006 | 2005 | |||||||
Revenue | $ | 258,580 | $ | 185,179 | ||||
Cost of goods and services | 194,635 | 129,548 | ||||||
Gross margin | 63,945 | 55,631 | ||||||
Operating expenses | 34,480 | 24,886 | ||||||
Interest expense (Note 12) | 17,544 | 5,637 | ||||||
Depreciation and amortization | 19,911 | 18,101 | ||||||
Other costs (Note 13) | 25,285 | 440 | ||||||
Non-controlling interest | 58 | — | ||||||
Equity in earnings of investee | (454 | ) | (331 | ) | ||||
96,824 | 48,733 | |||||||
(Loss) earnings before income taxes | (32,879 | ) | 6,898 | |||||
Income tax (recovery) expense (Note 14) | (3,954 | ) | 2,987 | |||||
Net (loss) earnings | $ | (28,925 | ) | $ | 3,911 | |||
Basic and diluted (loss) earnings per share (Note 15) | $ | (0.69 | ) | $ | 0.09 | |||
F-52
(Unaudited)
2006 | 2005 | |||||||
Retained earnings, beginning of period | $ | 5,585 | $ | 26,163 | ||||
Share repurchase (Note 11) | — | (25,983 | ) | |||||
Net (loss) earnings | (28,925 | ) | 3,911 | |||||
(Deficit) retained earnings, end of period | (23,340 | ) | 4,091 | |||||
Capital stock (Note 11) | 216,153 | 216,116 | ||||||
Contributed surplus | 2,052 | 482 | ||||||
Total shareholders’ equity | $ | 194,865 | $ | 220,689 | ||||
F-53
(Unaudited)
2006 | 2005 | |||||||
Operating activities | ||||||||
Net (loss) earnings | $ | (28,925 | ) | $ | 3,911 | |||
Items not requiring (generating) cash | ||||||||
Depreciation and amortization | 19,911 | 18,101 | ||||||
Asset impairment charge (Note 13) | 23,786 | 165 | ||||||
Foreign exchange gain | (523 | ) | (300 | ) | ||||
Future income tax (recovery) expense | (2,238 | ) | 994 | |||||
Amortization of deferred financing costs (Note 12) | 3,592 | 294 | ||||||
Equity in earnings of investee — net of dividends | (90 | ) | (331 | ) | ||||
Stock-based compensation expense | 834 | 707 | ||||||
Other | 766 | 532 | ||||||
17,113 | 24,073 | |||||||
Change in non-cash working capital items related to operating activities (Note 16) | (2,804 | ) | (6,755 | ) | ||||
14,309 | 17,318 | |||||||
Investing activities | ||||||||
Business acquisitions (net of cash acquired) (Note 3) | (162,037 | ) | (12,054 | ) | ||||
Capital asset expenditures | (12,141 | ) | (12,611 | ) | ||||
Deferred costs | (11,406 | ) | (1,777 | ) | ||||
(185,584 | ) | (26,442 | ) | |||||
Financing activities | ||||||||
Long-term debt proceeds | 225,000 | 15,000 | ||||||
Senior unsecured notes proceeds | 150,000 | — | ||||||
Long-term debt repayments | (163,593 | ) | (157 | ) | ||||
Capital stock issuances (Note 11) | 24 | 50 | ||||||
Share repurchase (Note 11) | — | (65,348 | ) | |||||
Other liabilities | (488 | ) | (81 | ) | ||||
210,943 | (50,536 | ) | ||||||
Change in cash and cash equivalents during the period | 39,668 | (59,660 | ) | |||||
Cash and cash equivalents, beginning of period | 14,472 | 80,682 | ||||||
Cash and cash equivalents, end of period | $ | 54,140 | $ | 21,022 | ||||
Supplementary cash flow information | ||||||||
Interest paid | $ | 8,771 | $ | 5,593 | ||||
Income taxes (refunded) paid | $ | (831 | ) | $ | 858 | |||
F-54
1. | Description of the business |
F-55
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
1. | Description of the business (Continued) |
2. | Summary of significant accounting policies |
F-56
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
2. | Summary of significant accounting policies (Continued) |
Basis | Rate | |||||||
Telecommunications equipment | Declining-balance | 5% — 20 | % | |||||
Earth station equipment | Straight-line | 10-12 years | ||||||
Computer hardware and software | Declining-balance | 30 | % | |||||
Furniture and other | Straight-line | 5 years | ||||||
Buildings | Declining-balance | 4% — 5 | % |
F-57
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
2. | Summary of significant accounting policies (Continued) |
F-58
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
2. | Summary of significant accounting policies (Continued) |
2006 — 2009 | 10 | % | ||
2010 — 2013 | 9 | % | ||
2014 — 2018 | 5 | % |
F-59
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
2. | Summary of significant accounting policies (Continued) |
F-60
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
2. | Summary of significant accounting policies (Continued) |
F-61
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
2. | Summary of significant accounting policies (Continued) |
3. | Business acquisitions |
F-62
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
3. | Business acquisitions (Continued) |
Purchase | ||||
Consideration | ||||
Fair value of assets acquired | ||||
Current assets | $ | 43,350 | ||
Capital assets | 26,239 | |||
Intangible assets including customer relationships | 83,600 | |||
Future income taxes | 6,792 | |||
Investment | 879 | |||
$ | 160,860 | |||
Less: Liabilities assumed | ||||
Current liabilities | $ | 71,706 | ||
Long-term liabilities | 8,678 | |||
Future income taxes | 11,069 | |||
$ | 91,453 | |||
Fair value of net assets acquired | $ | 69,407 | ||
Goodwill | 115,385 | |||
Purchase consideration (net of cash acquired) | $ | 184,792 | ||
Purchase | ||||
Consideration | ||||
Cash — share purchase | $ | 217 | ||
Transaction costs | 1,151 | |||
Total purchase consideration | $ | 1,368 | ||
F-63
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
3. | Business acquisitions (Continued) |
Purchase | ||||
Consideration | ||||
Fair value of assets acquired | ||||
Cash and cash equivalents | $ | 2,696 | ||
Current assets | 5,062 | |||
Capital assets and other | 7,199 | |||
Intangible assets including customer contracts | 5,849 | |||
$ | 20,806 | |||
Less: Liabilities assumed | ||||
Current liabilities | $ | 17,354 | ||
Debt assumed on purchase | 7,304 | |||
Long-term liabilities | 1,343 | |||
Non-controlling interest | 326 | |||
$ | 26,327 | |||
Fair value of net liabilities acquired | $ | (5,521 | ) | |
Goodwill | 6,889 | |||
Purchase consideration | $ | 1,368 | ||
F-64
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
4. | Capital assets |
June 30, 2006 | ||||||||||||
Accumulated | Net Book | |||||||||||
Cost | Depreciation | Value | ||||||||||
Telecommunications equipment | $ | 149,608 | $ | 88,589 | $ | 61,019 | ||||||
Earth station equipment | 113,789 | 69,069 | 44,720 | |||||||||
Computer hardware and software | 50,289 | 34,871 | 15,418 | |||||||||
Furniture and other | 7,803 | 5,895 | 1,908 | |||||||||
Buildings | 11,471 | 3,900 | 7,571 | |||||||||
Land | 1,006 | — | 1,006 | |||||||||
$ | 333,966 | $ | 202,324 | $ | 131,642 | |||||||
December 31, 2005 | ||||||||||||
Accumulated | Net Book | |||||||||||
Cost | Depreciation | Value | ||||||||||
Telecommunications equipment | $ | 142,239 | $ | 81,551 | $ | 60,688 | ||||||
Earth station equipment | 91,459 | 46,117 | 45,342 | |||||||||
Computer hardware and software | 44,555 | 27,912 | 16,643 | |||||||||
Furniture and other | 8,079 | 5,556 | 2,523 | |||||||||
Buildings | 8,526 | 3,463 | 5,063 | |||||||||
Land | 1,006 | — | 1,006 | |||||||||
$ | 295,864 | $ | 164,599 | $ | 131,265 | |||||||
5. | Investments |
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Long-term investment, at equity | $ | 6,428 | $ | 6,337 | ||||
Long-term investment, at cost | 879 | — | ||||||
$ | 7,307 | $ | 6,337 | |||||
F-65
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
6. | Goodwill and other intangible assets |
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Goodwill | $ | 325,713 | $ | 210,329 | ||||
Customer relationships, contracts and other | 83,697 | 3,890 | ||||||
Licenses | 1,970 | 3,862 | ||||||
$ | 411,380 | $ | 218,081 | |||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||
$ | 9,743 | $ | 10,650 | $ | 9,360 | $ | 9,283 | $ | 8,706 | |||||||||
7. | Other assets |
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Deferred financing costs | $ | 12,540 | $ | 4,950 | ||||
Deferredstart-up costs | 163 | 343 | ||||||
Deferred acquisition costs | — | 2,754 | ||||||
Other | 2,725 | 3,385 | ||||||
$ | 15,428 | $ | 11,432 | |||||
8. | Payables and accruals |
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Trade accounts payable | $ | 139,851 | $ | 60,438 | ||||
Accrued employee costs | 11,690 | 6,407 | ||||||
Other accrued liabilities | 4,516 | 3,110 | ||||||
$ | 156,057 | $ | 69,955 | |||||
F-66
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
9. | Long-term debt |
Interest Rate at | June 30, | December 31, | ||||||||||
June 30, 2006 | 2006 | 2005 | ||||||||||
Term B facility | LIBOR + 2.75 | % | $ | 225,000 | $ | 148,500 | ||||||
Revolving operating facility | N/A | — | 15,000 | |||||||||
Mortgage obligation | 7.03 | % | 654 | 684 | ||||||||
Bank loan | 13.00 | % | — | 25 | ||||||||
Capital lease obligations | 7.10 | % | 14 | 29 | ||||||||
225,668 | 164,238 | |||||||||||
Less: long-term debt due within one year | 2,381 | 1,657 | ||||||||||
$ | 223,287 | $ | 162,581 | |||||||||
F-67
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
9. | Long-term debt (Continued) |
F-68
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
9. | Long-term debt (Continued) |
2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | |||||||||||||||||
$ | 2,381 | $ | 2,376 | $ | 2,385 | $ | 2,395 | $ | 2,381 | $ | 363,750 | |||||||||||
F-69
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
10. | Other liabilities |
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Asset retirement obligation | $ | 3,075 | $ | 3,920 | ||||
Government assistance, net of accumulated amortization of $1,050 (2005 — $1,029) | 527 | 556 | ||||||
Defined benefit pension obligation | 403 | 388 | ||||||
Defined benefit pension obligation — multiemployer plan | 6,385 | — | ||||||
Other employment benefits | 866 | — | ||||||
Restructuring provision | 1,100 | — | ||||||
Other | 1,739 | 628 | ||||||
$ | 14,095 | $ | 5,492 | |||||
Estimated Undiscounted | ||||
Range of Expected Settlement Dates | Cash Flows | |||
2009 — 2010 | $ | 404 | ||
2014 — 2015 | 2,067 | |||
$ | 2,471 | |||
Estimated Undiscounted | ||||
Range of Expected Settlement Dates | Cash Flows | |||
2007 — 2011 | $ | 551 | ||
2015 — 2016 | 4,109 | |||
2021 | 572 | |||
$ | 5,232 | |||
F-70
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
10. | Other liabilities (Continued) |
June 30, 2006 | December 31, 2005 | |||||||
Asset retirement obligation, beginning of period | $ | 3,920 | $ | 3,329 | ||||
Asset retirement obligation assumed on acquisition | 33 | 312 | ||||||
Revision in estimated cash flows and timing of settlement | 468 | — | ||||||
Accretion expense | 154 | 279 | ||||||
Asset retirement obligation, end of period | 4,575 | 3,920 | ||||||
Less: asset retirement obligation due within one year (included in payables and accruals) | 1,500 | — | ||||||
$ | 3,075 | $ | 3,920 | |||||
11. | Capital Stock |
June 30, 2006 | December 31, 2005 | |||||||||||||||
Stated | Stated | |||||||||||||||
Number | Value | Number | Value | |||||||||||||
Beginning of period | 41,991,874 | $ | 216,128 | 49,379,103 | $ | 254,147 | ||||||||||
Issued pursuant to exercise of options | 6,333 | 24 | 12,771 | 56 | ||||||||||||
Shares repurchased and cancelled | — | — | (7,400,000 | ) | (38,088 | ) | ||||||||||
Transfers from contributed surplus related to exercise of options | — | 1 | — | 13 | ||||||||||||
End of period | 41,998,207 | $ | 216,153 | 41,991,874 | $ | 216,128 | ||||||||||
Capital stock | $ | 38,088 | ||
Retained earnings | 25,983 | |||
Contributed surplus | 1,277 | |||
$ | 65,348 | |||
F-71
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
June 30, 2006 | December 31, 2005 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise | Exercise | |||||||||||||||
Number | Price | Number | Price | |||||||||||||
Outstanding at beginning of period | 1,814,165 | $ | 9.99 | 2,064,535 | $ | 9.59 | ||||||||||
Granted | 236,200 | 8.19 | 166,745 | 8.59 | ||||||||||||
Exercised | (6,333 | ) | 6.68 | (12,771 | ) | 7.47 | ||||||||||
Forfeited, cancelled or expired | (114,927 | ) | 9.94 | (404,344 | ) | 9.29 | ||||||||||
Outstanding at end of period | 1,929,105 | $ | 10.10 | 1,814,165 | $ | 9.99 | ||||||||||
Exercisable at end of period | 1,167,328 | $ | 10.92 | 985,952 | $ | 10.85 | ||||||||||
Weighted average fair value of options granted during the period | $ | 3.43 | $ | 3.54 | ||||||||||||
F-72
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Average | Average | Average | ||||||||||||||||||
Number | Remaining | Exercise | Number | Exercise | ||||||||||||||||
Range of Exercise Price | Outstanding | Life (Years) | Price | Exercisable | Price | |||||||||||||||
$ 7.25 — $ 9.74 | 1,503,120 | 6 | $ | 8.45 | 789,224 | $ | 8.75 | |||||||||||||
$ 9.75 — $12.24 | 87,250 | 8 | 10.74 | 80,583 | 10.66 | |||||||||||||||
$12.25 — $16.25 | 338,735 | 6 | 14.32 | 297,521 | 14.47 | |||||||||||||||
1,929,105 | $ | 10.10 | 1,167,328 | $ | 10.92 | |||||||||||||||
June 30, 2006 | June 30, 2005 | |||||||
Reported net (loss) earnings | $ | (28,925 | ) | $ | 3,911 | |||
Stock based compensation expense | (205 | ) | (190 | ) | ||||
Adjusted net earnings | $ | (29,130 | ) | $ | 3,721 | |||
Adjusted basic and diluted (loss) earnings per share | $ | (0.69 | ) | $ | 0.08 | |||
2006 | 2005 | |||||||
Risk free interest rate | 4.63 | % | 4.31 | % | ||||
Expected life | 6.00 yrs | 6.00 yrs | ||||||
Expected volatility | 35.9 | % | 34.0 | % | ||||
Expected dividends | 0.0 | % | 0.0 | % |
F-73
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
12. | Interest expense |
2006 | 2005 | |||||||
Long-term debt | $ | 13,753 | $ | 5,231 | ||||
Amortization of deferred financing costs | 3,592 | 294 | ||||||
Bank indebtedness | 199 | 112 | ||||||
$ | 17,544 | $ | 5,637 | |||||
F-74
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
13. | Other costs (income) |
2006 | 2005 | |||||||
Severance and other costs | $ | 1,499 | $ | 615 | ||||
Asset impairment charge | 23,786 | 165 | ||||||
Commercial settlement | — | (2,038 | ) | |||||
Provision for legal claim | — | 1,698 | ||||||
$ | 25,285 | $ | 440 | |||||
F-75
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
14. | Income taxes |
2006 | 2005 | |||||||
(Loss) earnings before income taxes | $ | (32,879 | ) | $ | 6,898 | |||
Income tax (recovery) expense based upon statutory rates | (11,836 | ) | 2,483 | |||||
Increase (decrease) in income taxes resulting from: | ||||||||
Non-taxable items | (751 | ) | (1,522 | ) | ||||
Benefit of current years’ non-capital losses not recognized | 8,659 | 1,670 | ||||||
Difference in foreign tax rates | (85 | ) | 137 | |||||
Capital tax | 59 | 219 | ||||||
Income tax (recovery) expense | $ | (3,954 | ) | $ | 2,987 | |||
2006 | 2005 | |||||||
Canadian | ||||||||
Current taxes | $ | (518 | ) | $ | 12 | |||
Future income taxes | (2,969 | ) | 1,020 | |||||
$ | (3,487 | ) | $ | 1,032 | ||||
Foreign | ||||||||
Current taxes | $ | (1,198 | ) | $ | 1,981 | |||
Future income taxes | 731 | (26 | ) | |||||
(467 | ) | 1,955 | ||||||
Income tax (recovery) expense | $ | (3,954 | ) | $ | 2,987 | |||
F-76
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
June 30, 2006 | December 31, 2005 | |||||||
Loss carry-forwards | $ | 47,122 | $ | 26,296 | ||||
Capital assets | (4,527 | ) | (10,254 | ) | ||||
Goodwill and other intangible assets | (43,885 | ) | (18,333 | ) | ||||
Current assets | 2,544 | 3,060 | ||||||
Asset retirement obligation | 1,010 | 1,277 | ||||||
Other | 888 | 290 | ||||||
Current liabilities | 4,949 | (42 | ) | |||||
Valuation allowance | (30,572 | ) | (22,726 | ) | ||||
Total future income taxes | $ | (22,471 | ) | $ | (20,432 | ) | ||
June 30, 2006 | December 31, 2005 | |||||||
Future income tax asset — current portion | $ | 8,754 | $ | 4,216 | ||||
Future income tax liability — long-term portion | (31,225 | ) | (24,648 | ) | ||||
Net future income tax liability | $ | (22,471 | ) | $ | (20,432 | ) | ||
F-77
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
15. | Per share information |
June 30, 2006 | June 30, 2005 | |||||||
Net (loss) earnings | $ | (28,925 | ) | $ | 3,911 | |||
Weighted average common shares used in the calculation of basic earnings per share | 41,995 | 44,452 | ||||||
Incremental common shares calculated in accordance with the treasury stock method | — | 60 | ||||||
Weighted average common shares used in the calculation of diluted earnings per share | 41,995 | 44,512 | ||||||
Basic and diluted (loss) earnings per share | $ | (0.69 | ) | $ | 0.09 | |||
16. | Change in non-cash working capital |
June 30, 2006 | June 30, 2005 | |||||||
Accounts receivable | $ | 10,238 | $ | 4,055 | ||||
Unbilled revenue | (9,875 | ) | (1,502 | ) | ||||
Inventory | (1,501 | ) | (232 | ) | ||||
Prepaids and other | (928 | ) | (1,909 | ) | ||||
Payables and accruals | (789 | ) | (7,734 | ) | ||||
Deferred revenue | 51 | 567 | ||||||
$ | (2,804 | ) | $ | (6,755 | ) | |||
17. | Business segments |
F-78
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
June 30, 2006 | June 30, 2005 | |||||||
Revenue | ||||||||
MSS | $ | 195,212 | $ | 126,321 | ||||
Broadband | 63,368 | 58,858 | ||||||
$ | 258,580 | $ | 185,179 | |||||
Segment earnings | ||||||||
MSS | $ | 24,000 | $ | 22,428 | ||||
Broadband | 5,465 | 8,317 | ||||||
$ | 29,465 | $ | 30,745 | |||||
Interest expense | $ | 17,544 | $ | 5,637 | ||||
Depreciation and amortization | 19,911 | 18,101 | ||||||
Other costs (income) | 25,285 | 440 | ||||||
Non-controlling interest | 58 | — | ||||||
Equity in earnings of investee | (454 | ) | (331 | ) | ||||
$ | 62,344 | $ | 23,847 | |||||
(Loss) earnings before income taxes | $ | (32,879 | ) | $ | 6,898 | |||
June 30, 2006 | December 31, 2005 | |||||||
Total identifiable assets | ||||||||
MSS | $ | 333,071 | $ | 163,179 | ||||
Broadband | 124,748 | 121,760 | ||||||
$ | 457,819 | $ | 284,939 | |||||
Goodwill | ||||||||
MSS | $ | 277,976 | $ | 162,591 | ||||
Broadband | 47,737 | 47,738 | ||||||
$ | 325,713 | $ | 210,329 | |||||
$ | 783,532 | $ | 495,268 | |||||
June 30, 2006 | June 30, 2005 | |||||||
Geographic Information — Revenue | ||||||||
United States | $ | 105,360 | $ | 101,469 | ||||
United Kingdom | 33,646 | 32,494 | ||||||
Canada | 9,789 | 8,194 | ||||||
Other | 109,785 | 43,022 | ||||||
$ | 258,580 | $ | 185,179 | |||||
F-79
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
June 30, 2006 | December 31, 2005 | |||||||
Geographic Information — Capital Assets and Goodwill | ||||||||
United States | $ | 99,148 | $ | 99,914 | ||||
United Kingdom | 132,082 | 151,955 | ||||||
Canada | 48,501 | 52,265 | ||||||
Netherlands | 130,867 | — | ||||||
Other | 46,757 | 37,460 | ||||||
$ | 457,355 | $ | 341,594 | |||||
18. | Financial instruments |
F-80
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
18. | Financial instruments (Continued) |
F-81
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
19. | Commitments and contingencies |
2006 | $ | 54.2 | ||
2007 | $ | 18.8 | ||
2008 | $ | 8.1 | ||
2009 | $ | 3.0 | ||
2010 | $ | 2.1 | ||
Thereafter | $ | 7.1 |
20. | Related party transactions |
21. | Subsequent event |
F-82
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
22. | Differences between Canadian and United States generally accepted accounting principles |
2006 | 2005 | |||||||
Net (loss) earnings in accordance with Canadian GAAP | $ | (28,925 | ) | $ | 3,911 | |||
Interest rate swap(i) | — | 827 | ||||||
Deferredstart-up costs(iii) | 180 | 258 | ||||||
Deferred development costs(iii) | — | 47 | ||||||
Stock-based compensation costs(iv) | (396 | ) | 15 | |||||
Income tax impact of the above(i, iii) | (6 | ) | (350 | ) | ||||
Net (loss) earnings U.S. GAAP | $ | (29,147 | ) | $ | 4,708 | |||
2006 | 2005 | |||||||
Shareholders’ equity in accordance with Canadian GAAP | $ | 194,865 | $ | 220,689 | ||||
Interest rate swap(i) | — | (228 | ) | |||||
Business combinations(ii) | (20,802 | ) | (20,802 | ) | ||||
Deferredstart-up costs(iii) | (163 | ) | (600 | ) | ||||
Income tax impact of the above(i, ii, iii) | 6,027 | 6,150 | ||||||
Accumulated other comprehensive income(i) | 3,162 | — | ||||||
Shareholders’ equity in accordance with U.S. GAAP | $ | 183,089 | $ | 205,209 | ||||
2006 | 2005 | |||||||
Capital stock | $ | 218,191 | $ | 218,154 | ||||
Deficit | (36,912 | ) | (9,627 | ) | ||||
Contributed surplus(v) | 2,474 | 508 | ||||||
Other comprehensive income(v) | (664 | ) | (3,826 | ) | ||||
Shareholders’ equity in accordance with U.S. GAAP | $ | 183,089 | $ | 205,209 | ||||
F-83
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
2006 | 2005 | |||||||||||||||
Canadian | U.S. | Canadian | U.S. | |||||||||||||
GAAP | GAAP | GAAP | GAAP | |||||||||||||
Assets | ||||||||||||||||
Current | ||||||||||||||||
Cash and cash equivalents | $ | 54,140 | $ | 54,140 | $ | 14,472 | $ | 14,472 | ||||||||
Accounts receivable | 80,562 | 80,562 | 56,290 | 56,290 | ||||||||||||
Unbilled revenue | 41,095 | 41,095 | 24,622 | 24,622 | ||||||||||||
Derivative instruments(i) | 1,081 | 4,432 | — | 2,205 | ||||||||||||
Inventory | 10,071 | 10,071 | 7,796 | 7,796 | ||||||||||||
Prepaids and other | 22,072 | 22,072 | 20,757 | 20,757 | ||||||||||||
Future income taxes | 8,754 | 8,754 | 4,216 | 4,216 | ||||||||||||
217,775 | 221,126 | 128,153 | 130,358 | |||||||||||||
Investments | 7,307 | 7,118 | 6,337 | 6,337 | ||||||||||||
Capital assets | 131,642 | 131,642 | 131,265 | 131,265 | ||||||||||||
Goodwill and other intangible assets(ii) | 411,380 | 390,578 | 218,081 | 197,279 | ||||||||||||
Other assets(iii) | 15,428 | 15,265 | 11,432 | 11,089 | ||||||||||||
$ | 783,532 | $ | 765,729 | $ | 495,268 | $ | 476,328 | |||||||||
Liabilities | ||||||||||||||||
Current | ||||||||||||||||
Payables and accruals | $ | 156,057 | $ | 156,057 | $ | 69,955 | $ | 69,955 | ||||||||
Deferred revenue | 11,135 | 11,135 | 7,576 | 7,576 | ||||||||||||
Current portion of long-term debt | 2,381 | 2,381 | 1,657 | 1,657 | ||||||||||||
169,573 | 169,573 | 79,188 | 79,188 | |||||||||||||
Long-term debt | 223,287 | 223,287 | 162,581 | 162,581 | ||||||||||||
Senior unsecured notes | 150,000 | 150,000 | — | — | ||||||||||||
Other liabilities | 14,095 | 14,095 | 5,492 | 5,492 | ||||||||||||
Future income taxes(ii, iii) | 31,225 | 25,198 | 24,648 | 18,615 | ||||||||||||
Total liabilities | 588,180 | 582,153 | 271,909 | 265,876 | ||||||||||||
Non-controlling interest | 487 | 487 | 429 | 429 | ||||||||||||
Shareholders’ equity | 194,865 | 183,089 | 222,930 | 210,023 | ||||||||||||
$ | 783,532 | $ | 765,729 | $ | 495,268 | $ | 476,328 | |||||||||
F-84
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
2006 | 2005 | |||||||
Revenue | $ | 258,580 | $ | 185,179 | ||||
Costs of goods and services | 191,887 | 128,127 | ||||||
Gross margin | 66,693 | 57,052 | ||||||
Selling, general and administrative | 33,273 | 22,365 | ||||||
Rental expense | 4,370 | 3,137 | ||||||
Bad debt expense | 324 | 785 | ||||||
Depreciation and amortization | 19,911 | 18,101 | ||||||
Asset impairment charge (Note 13) | 23,786 | 165 | ||||||
Equity in earnings of investee | (454 | ) | (331 | ) | ||||
Foreign exchange (gain) loss | (523 | ) | (300 | ) | ||||
Non-controlling interest | 58 | — | ||||||
Other costs (income) | 1,499 | 275 | ||||||
82,244 | 44,197 | |||||||
(Loss) earnings from operations | (15,551 | ) | 12,855 | |||||
Interest expense | 17,544 | 5,637 | ||||||
Interest rate swap | — | (827 | ) | |||||
Net (loss) earnings before income taxes | (33,095 | ) | 8,045 | |||||
Income tax (recovery) expense | (3,948 | ) | 3,337 | |||||
Net (loss) earnings | $ | (29,147 | ) | $ | 4,708 | |||
Basic and diluted (loss) earnings per share in accordance with U.S. GAAP | $ | (0.69 | ) | $ | 0.11 | |||
F-85
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
F-86
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
Six Months Ended | ||||
June 30, 2005 | ||||
Net earnings as per U.S. GAAP | $ | 4,708 | ||
Stock-based compensation expenses included in reported net earnings determined under the intrinsic value based method | (15 | ) | ||
Stock-based compensation expenses included in reported net earnings determined under the fair value based method | 707 | |||
Total stock-based compensation expenses determined under the fair value based method for all awards | (2,121 | ) | ||
Adjusted net earnings as per U.S. GAAP | $ | 3,279 | ||
Adjusted basic and diluted earnings per share | $ | 0.07 | ||
F-87
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
22. | Differences between Canadian and United States generally accepted accounting principles (Continued) |
2006 | 2005 | |||||||
Cash flows from operating activities in accordance with U.S. GAAP | $ | 14,489 | $ | 17,623 | ||||
Cash flows from investing activities in accordance with U.S. GAAP | $ | (185,764 | ) | $ | (26,747 | ) | ||
Cash flows from financing activities in accordance with U.S. GAAP | $ | 210,943 | $ | (50,536 | ) | |||
23. | Supplemental guarantor financial information |
F-88
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
23. | Supplemental guarantor financial information (Continued) |
As at June 30, 2006 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Assets | ||||||||||||||||||||
Current | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 10,018 | $ | 46,333 | $ | (2,211 | ) | $ | 54,140 | |||||||||
Accounts receivable | — | 52,321 | 28,241 | — | 80,562 | |||||||||||||||
Unbilled revenue | — | 22,902 | 18,193 | — | 41,095 | |||||||||||||||
Due from affiliated companies | 49,982 | — | — | (49,982 | ) | — | ||||||||||||||
Derivative instruments | 1,050 | 2,797 | 585 | — | 4,432 | |||||||||||||||
Inventory | — | 7,966 | 2,105 | — | 10,071 | |||||||||||||||
Prepaids and other | 294 | 20,072 | 1,706 | — | 22,072 | |||||||||||||||
Future income taxes | — | 3,846 | 4,902 | 6 | 8,754 | |||||||||||||||
51,326 | 119,922 | 102,065 | (52,187 | ) | 221,126 | |||||||||||||||
Investments | 151,415 | 217,973 | 691 | (362,961 | ) | 7,118 | ||||||||||||||
Capital assets | — | 99,427 | 32,215 | — | 131,642 | |||||||||||||||
Due from affiliated companies | 336,002 | 95,269 | — | (431,271 | ) | — | ||||||||||||||
Goodwill and other intangible assets | — | 184,500 | 206,078 | — | 390,578 | |||||||||||||||
Other assets | 2,028 | 13,237 | — | — | 15,265 | |||||||||||||||
$ | 540,771 | $ | 730,328 | $ | 341,049 | $ | (846,419 | ) | $ | 765,729 | ||||||||||
Liabilities | ||||||||||||||||||||
Current | ||||||||||||||||||||
Bank indebtedness | $ | 2,211 | $ | — | $ | — | $ | (2,211 | ) | $ | — | |||||||||
Payables and accruals | 2,395 | 76,944 | 76,718 | — | 156,057 | |||||||||||||||
Deferred revenue | — | 6,697 | 4,438 | — | 11,135 | |||||||||||||||
Due to affiliated companies | — | 33,121 | 11,839 | (44,960 | ) | — | ||||||||||||||
Current portion of long-term debt | 1,161 | 1,220 | — | — | 2,381 | |||||||||||||||
5,767 | 117,982 | 92,995 | (47,171 | ) | 169,573 | |||||||||||||||
Long-term debt | 264,939 | 108,348 | — | — | 373,287 | |||||||||||||||
Due to affiliated companies | 88,219 | 336,002 | 7,050 | (431,271 | ) | — | ||||||||||||||
Other liabilities | — | 3,246 | 10,849 | — | 14,095 | |||||||||||||||
Future income taxes | 2,631 | 13,388 | 9,179 | — | 25,198 | |||||||||||||||
Total liabilities | 361,556 | 578,966 | 120,073 | (478,442 | ) | 582,153 | ||||||||||||||
Non-controlling interest | — | — | 487 | — | 487 | |||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Capital stock | 218,191 | 178,205 | 138,881 | (317,086 | ) | 218,191 | ||||||||||||||
Contributed surplus | 2,474 | — | — | — | 2,474 | |||||||||||||||
Accumulated other comprehensive earnings | (4,538 | ) | 4,063 | (189 | ) | — | (664 | ) | ||||||||||||
Retained earnings | (36,912 | ) | (30,906 | ) | 81,797 | (50,891 | ) | (36,912 | ) | |||||||||||
$ | 540,771 | $ | 730,328 | $ | 341,049 | $ | (846,419 | ) | $ | 765,729 | ||||||||||
F-89
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
23. | Supplemental guarantor financial information (Continued) |
For the six months ended June 30, 2006 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Revenue | $ | 15 | $ | 174,044 | $ | 86,717 | $ | (2,196 | ) | $ | 258,580 | |||||||||
Cost of goods and services | — | 127,986 | 65,492 | (1,591 | ) | 191,887 | ||||||||||||||
Gross margin | $ | 15 | $ | 46,058 | $ | 21,225 | $ | (605 | ) | $ | 66,693 | |||||||||
Operating expenses | 2,769 | 23,421 | 11,859 | (605 | ) | 37,444 | ||||||||||||||
Interest expense | 11,351 | 6,193 | — | — | 17,544 | |||||||||||||||
Intercompany interest expense (revenue) | (11,305 | ) | 10,996 | 309 | — | — | ||||||||||||||
Depreciation and amortization | — | 13,858 | 6,053 | — | 19,911 | |||||||||||||||
Other costs | — | 24,859 | 426 | — | 25,285 | |||||||||||||||
Non-controlling interest | — | — | 58 | — | 58 | |||||||||||||||
Equity in earnings of investee | 26,906 | — | — | (27,360 | ) | (454 | ) | |||||||||||||
$ | 29,721 | $ | 79,327 | $ | 18,705 | $ | (27,965 | ) | $ | 99,788 | ||||||||||
Earnings (loss) before income taxes | $ | (29,706 | ) | $ | (33,269 | ) | $ | 2,520 | $ | 27,360 | $ | (33,095 | ) | |||||||
Income tax expense (recovery) | (559 | ) | (3,819 | ) | 430 | — | (3,948 | ) | ||||||||||||
Net earnings (loss) | $ | (29,147 | ) | $ | (29,450 | ) | $ | 2,090 | $ | 27,360 | $ | (29,147 | ) | |||||||
F-90
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
23. | Supplemental guarantor financial information (Continued) |
For the six months ended June 30, 2006 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Operating activities | ||||||||||||||||||||
Net cash flow from operations | $ | (23,751 | ) | $ | 30,616 | $ | 7,624 | $ | — | $ | 14,489 | |||||||||
Investing activities | ||||||||||||||||||||
Business acquisitions (net of cash acquired) | — | (195,218 | ) | 33,181 | — | (162,037 | ) | |||||||||||||
Capital asset expenditures | — | (10,357 | ) | (1,784 | ) | — | (12,141 | ) | ||||||||||||
Deferred costs | 1,032 | (12,458 | ) | (160 | ) | — | (11,586 | ) | ||||||||||||
1,032 | (218,033 | ) | 31,237 | — | (185,764 | ) | ||||||||||||||
Financing activities | ||||||||||||||||||||
Long-term debt proceeds | 116,100 | 108,900 | — | — | 225,000 | |||||||||||||||
Senior unsecured notes proceeds | 150,000 | — | — | — | 150,000 | |||||||||||||||
Long-term debt repayments | (54,600 | ) | (108,968 | ) | (25 | ) | — | (163,593 | ) | |||||||||||
Capital stock issuances | 24 | — | — | — | 24 | |||||||||||||||
Other liabilities | (191,607 | ) | 191,240 | (121 | ) | — | (488 | ) | ||||||||||||
19,917 | 191,172 | (146 | ) | — | 210,943 | |||||||||||||||
Change in cash and cash equivalents during the period | (2,802 | ) | 3,755 | 38,715 | — | 39,668 | ||||||||||||||
Cash and cash equivalents, beginning of period | 591 | 6,263 | 7,618 | — | 14,472 | |||||||||||||||
Cash and cash equivalents, end of period | $ | (2,211 | ) | $ | 10,018 | $ | 46,333 | $ | — | $ | 54,140 | |||||||||
F-91
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
23. | Supplemental guarantor financial information (Continued) |
As at June 30, 2005 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Assets | ||||||||||||||||||||
Current | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,378 | $ | 17,037 | $ | 2,607 | $ | — | $ | 21,022 | ||||||||||
Accounts receivable | — | 49,627 | 1,553 | — | 51,180 | |||||||||||||||
Unbilled revenue | — | 23,995 | 1,142 | — | 25,137 | |||||||||||||||
Due from affiliated companies | 27,389 | — | — | (27,389 | ) | — | ||||||||||||||
Inventory | — | 5,137 | 1,719 | — | 6,856 | |||||||||||||||
Prepaids and other | 326 | 17,709 | 196 | (210 | ) | 18,021 | ||||||||||||||
Future income taxes | — | 2,994 | — | — | 2,994 | |||||||||||||||
29,093 | 116,499 | 7,217 | (27,599 | ) | 125,210 | |||||||||||||||
Investments | 177,219 | — | 129 | (170,782 | ) | 6,566 | ||||||||||||||
Capital assets | — | 131,011 | 6,119 | — | 137,130 | |||||||||||||||
Due from affiliated companies | 144,542 | 95,060 | — | (239,602 | ) | — | ||||||||||||||
Goodwill and other intangible assets | — | 186,508 | 14,756 | — | 201,264 | |||||||||||||||
Other assets | 1,734 | 5,655 | — | — | 7,389 | |||||||||||||||
$ | 352,588 | $ | 534,733 | $ | 28,221 | $ | (437,983 | ) | $ | 477,559 | ||||||||||
Liabilities | ||||||||||||||||||||
Current | ||||||||||||||||||||
Payables and accruals | $ | 3,609 | $ | 55,150 | $ | 14,019 | $ | — | $ | 72,778 | ||||||||||
Derivative instruments | 228 | — | — | — | 228 | |||||||||||||||
Deferred revenue | — | 6,136 | 2,401 | — | 8,537 | |||||||||||||||
Due to affiliated companies | — | 21,112 | 1,476 | (22,588 | ) | — | ||||||||||||||
Current portion of long-term debt | 400 | 1,256 | 98 | — | 1,754 | |||||||||||||||
4,237 | 83,654 | 17,994 | (22,588 | ) | 83,297 | |||||||||||||||
Long-term debt | 54,600 | 109,497 | — | — | 164,097 | |||||||||||||||
Due to affiliated companies | 88,219 | 144,543 | 6,840 | (239,602 | ) | — | ||||||||||||||
Other liabilities | — | 6,192 | 1,083 | — | 7,275 | |||||||||||||||
Future income taxes | 2,085 | 15,248 | — | 22 | 17,355 | |||||||||||||||
Total liabilities | 149,141 | 359,134 | 25,917 | (262,168 | ) | 272,024 | ||||||||||||||
Non-controlling interest | — | — | 326 | — | 326 | |||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Capital stock | 218,154 | 178,205 | 9,267 | (187,472 | ) | 218,154 | ||||||||||||||
Contributed surplus | 508 | — | — | — | 508 | |||||||||||||||
Accumulated other comprehensive earnings | (5,588 | ) | 1,762 | — | — | (3,826 | ) | |||||||||||||
Retained earnings | (9,627 | ) | (4,368 | ) | (7,289 | ) | 11,657 | (9,627 | ) | |||||||||||
$ | 352,588 | $ | 534,733 | $ | 28,221 | $ | (437,983 | ) | $ | 477,559 | ||||||||||
F-92
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
23. | Supplemental guarantor financial information (Continued) |
For the six months ended June 30, 2005 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Revenue | $ | 19 | $ | 171,939 | $ | 14,160 | $ | (939 | ) | $ | 185,179 | |||||||||
Cost of goods and services | — | 118,534 | 9,593 | — | 128,127 | |||||||||||||||
Gross margin | $ | 19 | $ | 53,405 | $ | 4,567 | $ | (939 | ) | $ | 57,052 | |||||||||
Operating expenses | $ | 1,929 | $ | 20,396 | $ | 4,601 | $ | (939 | ) | $ | 25,987 | |||||||||
Interest expense | 1,306 | 3,460 | 44 | — | 4,810 | |||||||||||||||
Intercompany interest expense (revenue) | (3,957 | ) | 3,694 | 263 | — | — | ||||||||||||||
Depreciation and amortization | — | 15,978 | 2,123 | — | 18,101 | |||||||||||||||
Other (income) costs | 1,573 | (1,400 | ) | 267 | — | 440 | ||||||||||||||
Equity in earnings of investee | (5,883 | ) | — | — | 5,552 | (331 | ) | |||||||||||||
$ | (5,032 | ) | $ | 42,128 | $ | 7,298 | $ | 4,613 | $ | 49,007 | ||||||||||
Earnings (loss) before income taxes | $ | 5,051 | $ | 11,277 | $ | (2,731 | ) | $ | (5,552 | ) | $ | 8,045 | ||||||||
Income tax expense | 343 | 2,898 | 72 | 24 | 3,337 | |||||||||||||||
Net earnings (loss) | $ | 4,708 | $ | 8,379 | $ | (2,803 | ) | $ | (5,576 | ) | $ | 4,708 | ||||||||
F-93
June 30, 2006 (U.S. dollars; tabular amounts in thousands except share and per share amounts)
(Unaudited)
23. | Supplemental guarantor financial information (Continued) |
For the six months ended June 30, 2005 | ||||||||||||||||||||
Stratos | Non- | |||||||||||||||||||
Global | Guarantor | Guarantor | ||||||||||||||||||
Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
Operating activities | ||||||||||||||||||||
Net cash flow from operations | $ | 65,603 | $ | (48,154 | ) | $ | 174 | $ | — | $ | 17,623 | |||||||||
Investing activities | ||||||||||||||||||||
Business acquisitions (net of cash acquired) | (14,750 | ) | — | 2,696 | — | (12,054 | ) | |||||||||||||
Capital asset expenditures | — | (12,459 | ) | (152 | ) | — | (12,611 | ) | ||||||||||||
Deferred costs | (201 | ) | (1,798 | ) | (83 | ) | — | (2,082 | ) | |||||||||||
(14,951 | ) | (14,257 | ) | 2,461 | — | (26,747 | ) | |||||||||||||
Financing activities | ||||||||||||||||||||
Long-term debt proceeds | 15,000 | — | — | — | 15,000 | |||||||||||||||
Long-term debt repayments | — | (68 | ) | (89 | ) | — | (157 | ) | ||||||||||||
Capital stock issuances | 50 | — | — | — | 50 | |||||||||||||||
Share repurchase | (65,348 | ) | — | — | — | (65,348 | ) | |||||||||||||
Other liabilities | (11 | ) | (70 | ) | — | — | (81 | ) | ||||||||||||
(50,309 | ) | (138 | ) | (89 | ) | — | (50,536 | ) | ||||||||||||
Change in cash and cash equivalents during the period | 343 | (62,549 | ) | 2,546 | — | (59,660 | ) | |||||||||||||
Cash and cash equivalents, beginning of period | 1,035 | 79,586 | 61 | — | 80,682 | |||||||||||||||
Cash and cash equivalents, end of period | $ | 1,378 | $ | 17,037 | $ | 2,607 | $ | — | $ | 21,022 | ||||||||||
F-94
F-95
Consolidated financial statements 2005
Consolidated balance sheet
December 31, | December 31, | |||||||||||||||
2005 | 2004 | |||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
ASSETS | ||||||||||||||||
Fixed assets | ||||||||||||||||
Intangible fixed assets(1) | ||||||||||||||||
Goodwill | 13,305 | 14,792 | ||||||||||||||
Tangible fixed assets(2) | ||||||||||||||||
Land and buildings | 2,667 | 3,024 | ||||||||||||||
Property, plant and equipment | 19,706 | 19,282 | ||||||||||||||
Other | 3,190 | 5,058 | ||||||||||||||
Assets under construction | 1,943 | 7,787 | ||||||||||||||
27,506 | 35,151 | |||||||||||||||
Financial fixed assets(3) | ||||||||||||||||
Investments | 939 | — | ||||||||||||||
Total fixed assets | �� | 41,750 | 49,943 | |||||||||||||
Current assets | ||||||||||||||||
Inventory(4) | 44 | 1,481 | ||||||||||||||
Receivables(5) | 20,367 | 35,953 | ||||||||||||||
Prepayments and accrued income(6) | 14,376 | 14,189 | ||||||||||||||
Deferred taxes(19) | 11,441 | 5,235 | ||||||||||||||
Cash and cash equivalents | 73,094 | 55,141 | ||||||||||||||
Total current assets | 119,322 | 111,999 | ||||||||||||||
Total assets | 161,072 | 161,942 | ||||||||||||||
GROUP EQUITY AND LIABILITIES | ||||||||||||||||
Group equity(7) | 89,748 | 50,078 | ||||||||||||||
Provisions | ||||||||||||||||
Pension provisions(8) | 7,523 | 6,249 | ||||||||||||||
Deferred taxes(19) | — | 189 | ||||||||||||||
Other provisions(9) | 7,281 | 33,795 | ||||||||||||||
Total provisions | 14,804 | 40,233 | ||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and other liabilities(10) | 38,211 | 43,891 | ||||||||||||||
Accruals and deferred income | 18,309 | 27,740 | ||||||||||||||
Total current liabilities | 56,520 | 71,631 | ||||||||||||||
Total group equity and liabilities | 161,072 | 161,942 | ||||||||||||||
F-96
Consolidated financial statements 2005
Consolidated income statement
2005 | 2004 | |||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Net sales (12) | 201,002 | 224,754 | ||||||||||||||
Work contracted out and other external expenses | 123,956 | 132,177 | ||||||||||||||
Salaries and social security contributions(13) | 23,963 | 44,976 | ||||||||||||||
Selling, general and administrative expenses(14) | 12,951 | 32,288 | ||||||||||||||
Depreciation, amortisation and impairments(15) | 8,931 | 10,338 | ||||||||||||||
Total operating expenses | 169,801 | 219,779 | ||||||||||||||
Operating income | 31,201 | 4,975 | ||||||||||||||
Interest receivable and similar income(16) | 2,374 | 4,151 | ||||||||||||||
Interest payable and similar expenses(17) | (666 | ) | (676 | ) | ||||||||||||
Financial income | 1,708 | 3,475 | ||||||||||||||
Result from sale of subsidiaries(18) | 3,084 | — | ||||||||||||||
Income from normal operations before taxes | 35,993 | 8,450 | ||||||||||||||
Taxes(19) | 4,450 | (610 | ) | |||||||||||||
Net income | 40,443 | 7,840 | ||||||||||||||
F-97
Consolidated financial statements 2005
Consolidated cash flow statement
2005 | 2004 | |||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Operating income | 31,201 | 4,975 | ||||||||||||||
Income tax paid | (1,252 | ) | (1,435 | ) | ||||||||||||
Depreciation and amortisation | 7,084 | 10,338 | ||||||||||||||
Impairments of tangible assets | 1,847 | — | ||||||||||||||
Changes in provisions | (21,459 | ) | 1,219 | |||||||||||||
Changes in working capital: | ||||||||||||||||
— Inventory | 551 | 854 | ||||||||||||||
— Receivables and other current assets (excluding cash movements) | 14,998 | 21,923 | ||||||||||||||
— Current liabilities (excluding short-term financing) | (12,696 | ) | (14,389 | ) | ||||||||||||
2,853 | 8,388 | |||||||||||||||
Net cash flow from operating activities | 20,274 | 23,485 | ||||||||||||||
Interest received | 2,374 | 4,151 | ||||||||||||||
Net additions to tangible fixed assets | (2,203 | ) | (8,064 | ) | ||||||||||||
Disposals | 120 | — | ||||||||||||||
Refunds on prior year fixed assets projects | 1,850 | — | ||||||||||||||
Sale of subsidiaries | (3,957 | ) | — | |||||||||||||
Net cash flow from investing activities | (1,816 | ) | (3,913 | ) | ||||||||||||
Interest paid | (569 | ) | (676 | ) | ||||||||||||
Translation differences foreign subsidiaries | 64 | 174 | ||||||||||||||
Net cash flow from financing activities | (505 | ) | (502 | ) | ||||||||||||
Changes in cash and cash equivalents | 17,953 | 19,070 | ||||||||||||||
Cash and cash equivalents beginning of year | 55,141 | 36,071 | ||||||||||||||
Cash and cash equivalents end of year | 73,094 | 55,141 | ||||||||||||||
F-98
Consolidated financial statements 2005
Consolidation and accounting principles
Name | Statutory Residence | |
Xantic Sales B.V | The Hague, The Netherlands | |
Xantic Broadcast B.V | The Hague, The Netherlands | |
Xantic Consultancy B.V | The Hague, The Netherlands | |
Xantic Holding B.V | The Hague, The Netherlands | |
Xantic Brasil Ltda | Rio de Janeiro, Brazil | |
Xantic GmbH | Hamburg, Germany | |
Xantic Satellite Communications Greece S.A. | Piraeus of Attica, Greece | |
Xantic Hong Kong Ltd | Hong Kong, China | |
Xantic Mobile Satellite Services Singapore Pte Ltd | Singapore, Singapore | |
Marinor Boff | Pasic City, Philippines | |
Xantic Spain S.A. | Madrid, Spain | |
Xantic Norway AS | Baerum, Norway | |
Xantic Solutions Ltd | Nairobi, Kenya | |
Xantic UK Ltd | Sheffield, United Kingdom | |
Xantic Holding Inc | Washington, USA | |
Xantic USA Inc | Washington, USA | |
AMOS Group B.V., including its branch office in Norway (sold) | The Hague, The Netherlands |
F-99
Consolidated financial statements 2005
Consolidation and accounting principles — (Continued)
Name | Statutory Residence | |
AMOS Holding B.V. (sold) | The Hague, The Netherlands | |
AMOS Italy Spa (sold) | La Spezia, Italy | |
AMOS Software Asia Pacific Pte Ltd (sold) | Singapore, Singapore | |
AMOS Norway AS (sold) | Baerum, Norway | |
AMOS Russia Ltd (sold) | St. Petersburg, Russia | |
AMOS Sweden AB (sold) | Goteburg, Sweden | |
AMOS UK Ltd (sold) | Cardiff, United Kingdom | |
AMOS Consultancy Pty Ltd (sold) | Queensland, Australia | |
AMOS Cyprus Ltd (sold) | Limmasol, Cyprus | |
Xantic Americas Inc (sold) | Connecticut, USA | |
AMOS USA Inc (sold) | Tallahassee, USA |
F-100
Consolidated financial statements 2005
Consolidation and accounting principles — (Continued)
F-101
Consolidated financial statements 2005
Consolidation and accounting principles — (Continued)
F-102
Consolidated financial statements 2005
Consolidation and accounting principles — (Continued)
F-103
Consolidated financial statements 2005
Consolidation and accounting principles — (Continued)
F-104
Consolidated financial statements 2005
Consolidation and accounting principles — (Continued)
F-105
Consolidated financial statements 2005
Notes to the consolidated balance sheet
(1) | Intangible fixed assets |
Goodwill | ||||
(In thousands | ||||
of US dollars) | ||||
Balance as of January 1, 2005 | 14,792 | |||
Amortisation | (1,487 | ) | ||
Balance as of December 31, 2005 | 13,305 | |||
Historical cost | 21,020 | |||
Accumulated amortisation | (7,715 | ) | ||
Balance as of December 31, 2005 | 13,305 | |||
Amortisation rate | 5-20 | % |
(2) | Tangible fixed assets |
Property, | Assets | |||||||||||||||||||
Land and | Plant and | Under | ||||||||||||||||||
Buildings | Equipment | Other | Construction | Total | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||
Balance as of January 1, 2005 | 3,024 | 19,282 | 5,058 | 7,787 | 35,151 | |||||||||||||||
Additions | 49 | 432 | 123 | 1,599 | 2,203 | |||||||||||||||
Finished assets own construction | — | 2,548 | 1,198 | (3,746 | ) | — | ||||||||||||||
Exchange rate differences | — | — | (14 | ) | — | (14 | ) | |||||||||||||
Reclassifications | — | 643 | (643 | ) | — | — | ||||||||||||||
Deconsolidation | — | — | (420 | ) | — | (420 | ) | |||||||||||||
Disposals | — | (5 | ) | (115 | ) | — | (120 | ) | ||||||||||||
Refunds on prior year projects | — | — | — | (1,850 | ) | (1,850 | ) | |||||||||||||
Impairments | — | — | — | (1,847 | ) | (1,847 | ) | |||||||||||||
Depreciation | (406 | ) | (3,194 | ) | (1,997 | ) | — | (5,597 | ) | |||||||||||
Balance as of December 31, 2005 | 2,667 | 19,706 | 3,190 | 1,943 | 27,506 | |||||||||||||||
Historical cost | 4,775 | 71,759 | 21,030 | 1,943 | 99,507 | |||||||||||||||
Accumulated depreciation | (2,108 | ) | (52,053 | ) | (17,840 | ) | — | (72,001 | ) | |||||||||||
Balance as of December 31, 2005 | 2,667 | 19,706 | 3,190 | 1,943 | 27,506 | |||||||||||||||
Depreciation rate | 10 | % | 10-20 | % | 20-33 | % |
F-106
Consolidated financial statements 2005
Notes to the consolidated balance sheet — (Continued)
(3) | Financial fixed assets |
(4) | Inventory |
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Work in progress | 9 | 1,395 | ||||||
Trade inventory | 35 | 86 | ||||||
Balance as of December 31 | 44 | 1,481 | ||||||
(5) | Receivables |
2005 | 2004 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Accounts receivable | 20,273 | 35,227 | ||||||
VAT | — | 413 | ||||||
Other | 94 | 313 | ||||||
Balance as of December 31 | 20,367 | 35,953 | ||||||
F-107
Consolidated financial statements 2005
Notes to the consolidated balance sheet — (Continued)
(6) | Prepayments and accrued income |
2005 | 2004 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Amounts to be invoiced | 12,319 | 11,885 | ||||||
Prepayments | 2,057 | 2,304 | ||||||
Balance as of December 31 | 14,376 | 14,189 | ||||||
(7) | Group equity |
Issued | Additional | |||||||||||||||||||||||||||
Share | Paid-in | Exchange | Revaluation | Accumulated | Net | |||||||||||||||||||||||
Capital | Capital | Rate Diff. | Reserve | Losses | Income | Total | ||||||||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||||||||||
Balance as of January 1, 2005 | 186 | 167,224 | 857 | — | (126,029 | ) | 7,840 | 50,078 | ||||||||||||||||||||
Changes in accounting principles | — | — | — | 77 | (1,412 | ) | — | (1,335 | ) | |||||||||||||||||||
Adjusted balance as of January 1 | 186 | 167,224 | 857 | 77 | (127,441 | ) | 7,840 | 48,743 | ||||||||||||||||||||
Appropriation of net income | — | — | — | — | 7,840 | (7,840 | ) | — | ||||||||||||||||||||
Translation differences subsidiaries | — | — | 50 | — | — | — | 50 | |||||||||||||||||||||
Release of translation differences | — | — | (350 | ) | — | — | — | (350 | ) | |||||||||||||||||||
Additions for the year | — | — | — | 862 | — | — | 862 | |||||||||||||||||||||
Net income 2005 | — | — | — | — | — | 40,443 | 40,443 | |||||||||||||||||||||
Balance as of December 31, 2005 | 186 | 167,224 | 557 | 939 | (119,601 | ) | 40,443 | 89,748 | ||||||||||||||||||||
F-108
Consolidated financial statements 2005
Notes to the consolidated balance sheet — (Continued)
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Net income | 40,443 | 7,840 | ||||||
Effect of changes in accounting principles | (1,335 | ) | — | |||||
Revaluation of fixed assets | 862 | — | ||||||
Translation differences | (300 | ) | 174 | |||||
Total | 39,670 | 8,014 | ||||||
(8) | Pension provisions |
Pensions | Other | |||||||||||
and Early | Long Term | |||||||||||
Retirement | Employee Benefits | Total | ||||||||||
(In thousands of US dollars) | ||||||||||||
Balance as of January 1, 2005 | 5,204 | 1,045 | 6,249 | |||||||||
Effect of change to RJ271 | 2,018 | — | 2,018 | |||||||||
Adjusted balance as of January 1, 2005 | 7,222 | 1,045 | 8,267 | |||||||||
Additions | 1,703 | 283 | 1,986 | |||||||||
Releases | (494 | ) | — | (494 | ) | |||||||
Usage | (745 | ) | — | (745 | ) | |||||||
Revaluation | (994 | ) | (60 | ) | (1,054 | ) | ||||||
Deconsolidation | — | (437 | ) | (437 | ) | |||||||
Balance as of December 31, 2005 | 6,692 | 831 | 7,523 | |||||||||
F-109
Consolidated financial statements 2005
Notes to the consolidated balance sheet — (Continued)
F-110
Consolidated financial statements 2005
Notes to the consolidated balance sheet — (Continued)
(9) | Other provisions |
Onerous | ||||||||||||||||
Restructuring | Contracts | Miscellaneous | Total | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Balance as of January 1, 2005 | 15,024 | 13,271 | 5,500 | 33,795 | ||||||||||||
Additions | 394 | — | 195 | 589 | ||||||||||||
Releases | (4,663 | ) | (1,508 | ) | (13 | ) | (6,184 | ) | ||||||||
Usage | (4,281 | ) | (9,925 | ) | (987 | ) | (15,193 | ) | ||||||||
Revaluation | (1,010 | ) | — | — | (1,010 | ) | ||||||||||
Accretion | — | 646 | — | 646 | ||||||||||||
Deconsolidation | (2,862 | ) | — | (2,500 | ) | (5,362 | ) | |||||||||
Balance as of December 31, 2005 | 2,602 | 2,484 | 2,195 | 7,281 | ||||||||||||
F-111
Consolidated financial statements 2005
Notes to the consolidated balance sheet — (Continued)
(10) | Accounts payable and other liabilities |
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Accounts payable | 30,767 | 34,582 | ||||||
Current account shareholders | 333 | 1,766 | ||||||
Taxes and social securities | 6,447 | 7,165 | ||||||
Other debts | 664 | 378 | ||||||
Balance as of December 31 | 38,211 | 43,891 | ||||||
(11) | Off-balance-sheet commitments |
Up to 1 Year | 1 to 5 Years | Over 5 Years | Total | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Commitments by virtue of: | ||||||||||||||||
— purchase obligations | 1,741 | — | — | 1,741 | ||||||||||||
— rental and lease contracts | 4,864 | 6,011 | 5,278 | 16,153 | ||||||||||||
Total | 6,605 | 6,011 | 5,278 | 17,894 | ||||||||||||
F-112
Consolidated financial statements 2005
Notes to the consolidated balance sheet — (Continued)
F-113
Consolidated financial statements 2005
Notes to the consolidated income statement
(12) | Net sales |
2005 | 2004 | |||||||
Airtime | 94 | % | 76 | % | ||||
AMOS | 3 | % | 9 | % | ||||
MUT | 3 | % | 15 | % | ||||
Total | 100 | % | 100 | % | ||||
2005 | 2004 | |||||||
Asia Pacific | 37 | % | 27 | % | ||||
Northern Europe | 24 | % | 32 | % | ||||
Southern Europe | 17 | % | 17 | % | ||||
Americas | 10 | % | 10 | % | ||||
Nordics, Baltic and Russia | 7 | % | 7 | % | ||||
Middle East and Africa | 5 | % | 7 | % | ||||
Total | 100 | % | 100 | % | ||||
(13) | Salaries and social security contributions |
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Salaries | 25,996 | 37,580 | ||||||
Pension charges | 1,361 | 2,725 | ||||||
Social security contributions | 571 | 3,029 | ||||||
Movement in restructuring provisions | (3,965 | ) | 1,642 | |||||
Total | 23,963 | 44,976 | ||||||
F-114
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
2005 | 2004 | |||||||
Marketing and sales | 218 | 373 | ||||||
Support | 166 | 217 | ||||||
Total | 384 | 590 | ||||||
• | exercise price is equal to the market value of a share on the grant date; | |
• | options vest immediately, as exercising the option is not contingent on the employee remaining employed for the three year period, and become exercisable after three years; | |
• | when employees leave before the third year after the grant date, options are exercisable from this date and expire three months later; | |
• | when employees remain employed three years after the grant date, options are exercisable three years after the grant date and expire five years from the grant date; and | |
• | each option gives the right to one ordinary share. |
Number of | Average Exercise | |||||||
Options | Price | |||||||
(In EUR) | ||||||||
Balance as of January 1, 2005 | 184,827 | 14.04 | ||||||
Options granted | 20,750 | 6.73 | ||||||
Options exercised | (48,710 | ) | 5.09 | |||||
Options expired | (21,400 | ) | 57.43 | |||||
Options forfeited | (30,602 | ) | 15.86 | |||||
Balance as of December 31, 2005 | 104,865 | 7.37 | ||||||
F-115
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(14) | Selling, general and administrative expenses |
• | Improved ageing of debtors, resulting in a release of the bad debt provision in 2005 of USD 3.5 million, compared to a bad debt expense in 2004 of USD 2.4 million. | |
• | Reimbursement for the aborted OTC program of USD 2.5 million. | |
• | Loss from the sale of MUT assets of USD 1.6 million. |
(15) | Depreciation, amortisation and impairments |
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Depreciation tangible fixed assets | 5,597 | 8,852 | ||||||
Amortisation intangible fixed assets | 1,487 | 1,486 | ||||||
Impairment OTC project | 1,847 | — | ||||||
Total | 8,931 | 10,338 | ||||||
(16) | Interest receivable and similar income |
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Exchange rate results | 1,433 | 3,897 | ||||||
Interest receivable and similar income | 941 | 254 | ||||||
Total | 2,374 | 4,151 | ||||||
(17) | Interest payable and similar expenses |
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Accretion of provisions | 646 | — | ||||||
Other interest | 20 | 676 | ||||||
Total | 666 | 676 | ||||||
F-116
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(18) | Result from sale of subsidiaries |
(19) | Taxes |
2005 | 2004 | |||||||
(In percentages) | ||||||||
Dutch corporate income tax rate | 31.5 | % | 34.5 | % | ||||
Changes in non-valued deferred tax assets | (48.8 | )% | (27.3 | )% | ||||
Permanent differences: | ||||||||
— Non-deductable part of result on sale of AMOS | 4.9 | % | — | |||||
Effective tax rate | (12.4 | )% | 7.2 | % | ||||
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Current tax | (1,252 | ) | (1,435 | ) | ||||
Changes in deferred taxes | 5,702 | 825 | ||||||
Taxes on result from normal operations | 4,450 | (610 | ) | |||||
F-117
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
Assets for Timing | ||||||||||||
Differences and | Liabilities for | Total | ||||||||||
Future Loss | Timing | Deferred | ||||||||||
Compensation | Differences | Taxes | ||||||||||
(In thousands of US dollars) | ||||||||||||
Balance as of January 1 | 5,235 | (189 | ) | 5,046 | ||||||||
Effect of change to RJ 271 | — | 606 | 606 | |||||||||
Reversal of netting 2004 | 3,147 | (3,147 | ) | — | ||||||||
Adjusted balance as of January 1 | 8,382 | (2,730 | ) | 5,652 | ||||||||
Additions | 24,034 | — | 24,034 | |||||||||
Withdrawals | (18,912 | ) | 509 | (18,403 | ) | |||||||
Tax rate changes | (5 | ) | 76 | 71 | ||||||||
Reclassifications | 432 | (432 | ) | — | ||||||||
Subtotal changes through tax | 5,549 | 153 | 5,702 | |||||||||
Exchange rate differences | (109 | ) | 12 | (97 | ) | |||||||
Deconsolidation | (5 | ) | 189 | 184 | ||||||||
Subtotal other movements | (114 | ) | 201 | 87 | ||||||||
Nominal balance as of December 31 | 13,817 | (2,376 | ) | 11,441 | ||||||||
Netting 2005 | (2,376 | ) | 2,376 | — | ||||||||
Net balance as of December 31, 2005 | 11,441 | — | 11,441 | |||||||||
F-118
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(20) | Related party transactions |
F-119
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(21) | Application of US GAAP |
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Net income reported under Dutch GAAP | 40,443 | 7,840 | ||||||
US GAAP adjustments | ||||||||
— Provisions — onerous contracts(a) | (2,385 | ) | (5,047 | ) | ||||
— Derivatives(b) | (2,255 | ) | (2,858 | ) | ||||
— Provisions — restructuring(c) | (559 | ) | (2,782 | ) | ||||
— Employee benefits — early retirement(d) | 214 | (1,755 | ) | |||||
— Business combinations(e) | 540 | (816 | ) | |||||
— Internally developed software(f) | 512 | (755 | ) | |||||
— Employee benefits — pensions(g) | (291 | ) | (373 | ) | ||||
— Employee benefits — share-based compensation(h) | (10 | ) | (217 | ) | ||||
— Discontinued operations and related depreciation(i) | 122 | 67 | ||||||
— Employee benefits — long service leave(j) | 82 | (30 | ) | |||||
— Leases(k) | 20 | 6 | ||||||
— Asset retirement obligations(l) | (4 | ) | (4 | ) | ||||
— Revenue recognition(m) | 68 | — | ||||||
— Results on sale of shares(o) | (3,051 | ) | — | |||||
— Deferred tax effect on US GAAP adjustments(p) | 2,334 | 4,441 | ||||||
— Valuation allowance for deferred tax assets(p) | (8,824 | ) | (4,024 | ) | ||||
Total US GAAP adjustments | (13,487 | ) | (14,147 | ) | ||||
Net income (loss) under US GAAP | 26,956 | (6,307 | ) | |||||
F-120
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Group equity reported under Dutch GAAP | 89,748 | 50,078 | ||||||
US GAAP adjustments | ||||||||
— Provisions — onerous contracts(a) | 1,547 | 3,933 | ||||||
— Derivatives(b) | (667 | ) | 1,588 | |||||
— Provisions — restructuring(c) | 3,181 | 3,740 | ||||||
— Employee benefits — early retirement(d) | (1,344 | ) | (3,576 | ) | ||||
— Business combinations(e) | (5,048 | ) | (5,588 | ) | ||||
— Internally developed software(f) | 172 | (339 | ) | |||||
— Discontinued operations and related depreciation(i) | 189 | 67 | ||||||
— Employee benefits — long service leave(j) | — | (82 | ) | |||||
— Leases(k) | (109 | ) | (129 | ) | ||||
— Asset retirement obligations(l) | (13 | ) | (9 | ) | ||||
— Revenue recognition(m) | — | (68 | ) | |||||
— Available-for-sale securities(n) | — | 77 | ||||||
— Results on sale of shares(o) | (3,051 | ) | — | |||||
— Deferred tax effect on US GAAP adjustments(p) | 1,114 | (1,220 | ) | |||||
— Valuation allowance for deferred tax assets(p) | (11,579 | ) | (2,151 | ) | ||||
Total US GAAP adjustments | (15,608 | ) | (3,757 | ) | ||||
Group equity under US GAAP | 74,140 | 46,321 | ||||||
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Group equity under US GAAP at beginning of year | 46,321 | 51,865 | ||||||
Net income (loss) | 26,956 | (6,307 | ) | |||||
Other comprehensive income (loss): | ||||||||
— Unrealised gain (loss) onavailable-for-sale securities(n) | 862 | (1 | ) | |||||
— Foreign currency translation adjustments, net of tax | (300 | ) | 174 | |||||
Additional paid-in capital attributable to: | ||||||||
— Employee benefits — pensions | 291 | 373 | ||||||
— Employee benefits — share-based compensation | 10 | 217 | ||||||
Group equity under US GAAP at end of year | 74,140 | 46,321 | ||||||
F-121
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Net income (loss) in accordance with US GAAP | 26,956 | (6,307 | ) | |||||
Other comprehensive income (loss): | ||||||||
— Unrealised gain (loss) onavailable-for-sale securities(n) | 862 | (1 | ) | |||||
— Foreign currency translation adjustments, net of tax | (300 | ) | 174 | |||||
Comprehensive income (loss) | 27,518 | (6,134 | ) | |||||
December 31, 2005 | December 31, 2004 | |||||||||||||||
DGAAP | USGAAP | DGAAP | USGAAP | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed assets | ||||||||||||||||
Goodwill(e) | 13,305 | 7,169 | 14,792 | 7,169 | ||||||||||||
Other intangible fixed assets(e) | — | 1,088 | — | 2,035 | ||||||||||||
Land and buildings | 2,667 | 2,667 | 3,024 | 3,024 | ||||||||||||
Property, plant and equipment(i)(k)(l) | 19,706 | 20,095 | 19,282 | 19,853 | ||||||||||||
Other tangible fixed assets(f)(i)(k) | 3,190 | 3,370 | 5,058 | 4,767 | ||||||||||||
Tangible fixed assets under construction(f) | 1,943 | 1,943 | 7,787 | 7,263 | ||||||||||||
Available-for-sale securities(n) | 939 | 939 | — | 77 | ||||||||||||
Total fixed assets | 41,750 | 37,271 | 49,943 | 44,188 | ||||||||||||
Current assets | ||||||||||||||||
Inventory(i) | 44 | 44 | 1,481 | 595 | ||||||||||||
Receivables(e)(i) | 20,367 | 20,367 | 35,953 | 29,813 | ||||||||||||
Receivables — related party(q) | — | 57,883 | — | 42,767 | ||||||||||||
Prepayments and accrued income(b)(i)(k)(m) | 14,376 | 14,380 | 14,189 | 14,952 | ||||||||||||
Deferred taxes(p) | 11,441 | 976 | 5,235 | 1,864 | ||||||||||||
Cash and cash equivalents(i)(q) | 73,094 | 15,211 | 55,141 | 7,672 | ||||||||||||
Assets held for sale(i) | — | — | — | 13,473 | ||||||||||||
Total current assets | 119,322 | 108,861 | 111,999 | 111,136 | ||||||||||||
Total assets | 161,072 | 146,132 | 161,942 | 155,324 | ||||||||||||
F-122
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
December 31, 2005 | December 31, 2004 | |||||||||||||||
DGAAP | USGAAP | DGAAP | USGAAP | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Group equity and liabilities | ||||||||||||||||
Group equity | 89,748 | 74,140 | 50,078 | 46,321 | ||||||||||||
Provisions | ||||||||||||||||
Pension provisions(d)(i)(j)(r) | 7,523 | 8,035 | 6,249 | 8,802 | ||||||||||||
Deferred taxes(i) | — | — | 189 | — | ||||||||||||
Other provisions(a)(c)(l)(o)(r) | 7,281 | 4,298 | 33,795 | 11,742 | ||||||||||||
Total provisions | 14,804 | 12,333 | 40,233 | 20,544 | ||||||||||||
Long-term liabilities | ||||||||||||||||
Other long-term debts(i)(k) | — | 381 | — | 564 | ||||||||||||
Total long-term liabilities | — | 381 | — | 564 | ||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and other liabilities(i) | 38,211 | 38,211 | 43,891 | 41,319 | ||||||||||||
Accruals and deferred income(a)(b)(i)(k)(m) | 18,309 | 19,086 | 27,740 | 32,213 | ||||||||||||
Current provisions(i)(r) | — | 1,981 | — | 8,779 | ||||||||||||
Liabilities held for sale(i) | — | — | — | 5,584 | ||||||||||||
Total current liabilities | 56,520 | 59,278 | 71,631 | 87,895 | ||||||||||||
Total group equity and liabilities | 161,072 | 146,132 | 161,942 | 155,324 | ||||||||||||
(a) | Provisions — onerous contracts |
F-123
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(b) | Derivatives |
(c) | Provisions — restructuring |
F-124
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(d) | Employee benefits — early retirement |
F-125
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(In thousands of | ||||
US dollars) | ||||
US GAAP adjustment as of January 1, 2005 | (3,576 | ) | ||
Effect of change to RJ 271 | 2,018 | |||
Adjusted opening balance January 1, 2005 | (1,558 | ) | ||
Release (US GAAP adjustment on net income 2005) | 214 | |||
US GAAP adjustment as of December 31, 2005 | (1,344 | ) | ||
(e) | Business combinations |
F-126
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(f) | Internally developed software for internal use |
F-127
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(g) | Employee benefits — pensions |
(h) | Employee benefits — share-based compensation |
F-128
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(i) | Discontinued operations and related depreciation |
2005 | 2004 | |||||||
(In thousands of US dollars) | ||||||||
Net sales | 5,410 | 19,288 | ||||||
Operating expenses | (8,324 | ) | (25,413 | ) | ||||
Interest and other financial income | (566 | ) | (2,695 | ) | ||||
Income tax | (93 | ) | (233 | ) | ||||
Result from sale of shares (see note 21(o)) | 33 | — | ||||||
Net loss from discontinued operations | (3,540 | ) | (9,053 | ) | ||||
F-129
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
December 31, 2005 | December 31, 2004 | |||||||
Total | Total | |||||||
(In thousands of US dollars) | ||||||||
Assets | ||||||||
Assets held for sale | ||||||||
Property, plant and equipment | — | 132 | ||||||
Other tangible fixed assets | — | 568 | ||||||
Inventory | — | 886 | ||||||
Receivables | — | 6,140 | ||||||
Prepayments and accrued income | — | 1,045 | ||||||
Deferred taxes | — | — | ||||||
Cash and cash equivalents | — | 4,702 | ||||||
Total assets held for sale | — | 13,473 | ||||||
December 31, 2005 | December 31, 2004 | |||||||
Total | Total | |||||||
Liabilities | ||||||||
Liabilities held for sale | ||||||||
Pension provisions | — | 414 | ||||||
Deferred taxes | — | 189 | ||||||
Other long-term liabilities | — | 138 | ||||||
Accounts payable and other liabilities | — | 2,572 | ||||||
Accruals and deferred income | — | 2,240 | ||||||
Current provisions | — | 31 | ||||||
Total liabilities held for sale | — | 5,584 | ||||||
(j) | Employee benefits — long service leave |
F-130
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(k) | Leases |
(l) | Asset retirement obligations |
(m) | Revenue recognition |
(n) | Available-for-sale securities |
F-131
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(o) | Result on sale of shares |
(p) | Deferred tax effect on US GAAP adjustments and valuation allowance for deferred tax assets |
F-132
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(In thousands of | ||||
US dollars) | ||||
US GAAP adjustment as of January 1, 2005 | (2,151 | ) | ||
Effect of change to RJ 271 | (604 | ) | ||
Adjusted opening balance January 1, 2005 | (2,755 | ) | ||
Additions (US GAAP adjustment on net income 2005) | (8,824 | ) | ||
US GAAP adjustment as of December 31, 2005 | (11,579 | ) | ||
(q) | Reclassification of cash and cash equivalents |
(r) | Short-term portion of provisions |
F-133
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(22) | Application of CDN GAAP |
2005 | 2004 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Net income reported under Dutch GAAP | 40,443 | 7,840 | ||||||
CDN GAAP adjustments | ||||||||
— Provisions — onerous contracts(a) | (2,385 | ) | (5,047 | ) | ||||
— Derivatives(b) | (2,255 | ) | 1,588 | |||||
— Provisions — restructuring(c) | (559 | ) | (2,782 | ) | ||||
— Employee benefits — early retirement(d) | 214 | (1,755 | ) | |||||
— Business combinations(e) | 540 | (816 | ) | |||||
— Internally developed software(f) | 512 | (755 | ) | |||||
— Employee benefits — pensions(g) | (291 | ) | (373 | ) | ||||
— Employee benefits — share-based compensation(h) | (10 | ) | (217 | ) | ||||
— Discontinued operations and related depreciation(i) | 122 | 67 | ||||||
— Employee benefits — long service leave(j) | 82 | (30 | ) | |||||
— Leases(k) | 20 | 6 | ||||||
— Asset retirement obligations(l) | (4 | ) | (4 | ) | ||||
— Revenue recognition(m) | 68 | — | ||||||
— Results on sale of shares(o) | (3,051 | ) | — | |||||
— Future income tax effect on CDN GAAP adjustments(p) | 2,334 | 3,040 | ||||||
— Valuation allowance for future income tax assets(p) | (8,824 | ) | (2,623 | ) | ||||
Total CDN GAAP adjustments | (13,487 | ) | (9,701 | ) | ||||
Net income (loss) under CDN GAAP | 26,956 | (1,861 | ) | |||||
F-134
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
2005 | 2004 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Group equity reported under Dutch GAAP | 89,748 | 50,078 | ||||||
CDN GAAP adjustments | ||||||||
— Provisions — onerous contracts(a) | 1,547 | 3,933 | ||||||
— Derivatives(b) | (667 | ) | 1,588 | |||||
— Provisions — restructuring(c) | 3,181 | 3,740 | ||||||
— Employee benefits — early retirement(d) | (1,344 | ) | (3,576 | ) | ||||
— Business combinations(e) | (5,048 | ) | (5,588 | ) | ||||
— Internally developed software(f) | 172 | (339 | ) | |||||
— Discontinued operations and related depreciation(i) | 189 | 67 | ||||||
— Employee benefits — long service leave(j) | — | (82 | ) | |||||
— Leases(k) | (109 | ) | (129 | ) | ||||
— Asset retirement obligations(l) | (13 | ) | (9 | ) | ||||
— Revenue recognition(m) | — | (68 | ) | |||||
— Investments(n) | (939 | ) | — | |||||
— Results on sale of shares(o) | (3,051 | ) | — | |||||
— Future income tax effect on CDN GAAP adjustments(p) | 1,114 | (1,220 | ) | |||||
— Valuation allowance for future income tax assets(p) | (11,579 | ) | (2,151 | ) | ||||
Total CDN GAAP adjustments | (16,547 | ) | (3,834 | ) | ||||
Group equity under CDN GAAP | 73,201 | 46,244 | ||||||
2005 | 2004 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Group equity under CDN GAAP at beginning of year | 46,244 | 47,341 | ||||||
Net income (loss) | 26,956 | (1,861 | ) | |||||
Foreign currency translation adjustments, net of tax | (300 | ) | 174 | |||||
Additional paid-in capital attributable to: | ||||||||
— Employee benefits — pensions | 291 | 373 | ||||||
— Employee benefits — share-based compensation | 10 | 217 | ||||||
Group equity under CDN GAAP at end of year | 73,201 | 46,244 | ||||||
F-135
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
December 31, 2005 | December 31, 2004 | |||||||||||||||
CDN | CDN | |||||||||||||||
DGAAP | GAAP | DGAAP | GAAP | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed assets | ||||||||||||||||
Goodwill(e) | 13,305 | 7,169 | 14,792 | 7,169 | ||||||||||||
Other intangible fixed assets(e) | — | 1,088 | — | 2,035 | ||||||||||||
Land and buildings | 2,667 | 2,667 | 3,024 | 3,024 | ||||||||||||
Property, plant and equipment(i)(k)(l) | 19,706 | 20,095 | 19,282 | 19,853 | ||||||||||||
Other tangible fixed assets(f)(i)(k) | 3,190 | 3,370 | 5,058 | 4,767 | ||||||||||||
Tangible fixed assets under construction(f) | 1,943 | 1,943 | 7,787 | 7,263 | ||||||||||||
Financial fixed assets(n) | 939 | — | — | — | ||||||||||||
Total fixed assets | 41,750 | 36,332 | 49,943 | 44,111 | ||||||||||||
Current assets | ||||||||||||||||
Inventory(i) | 44 | 44 | 1,481 | 595 | ||||||||||||
Receivables(e)(i) | 20,367 | 20,367 | 35,953 | 29,813 | ||||||||||||
Receivables — related party(q) | — | 57,883 | — | 42,767 | ||||||||||||
Prepayments and accrued income(b)(i)(k)(m) | 14,376 | 14,380 | 14,189 | 14,952 | ||||||||||||
Future income taxes(p) | 11,441 | 976 | 5,235 | 1,864 | ||||||||||||
Cash and cash equivalents(i)(q) | 73,094 | 15,211 | 55,141 | 7,672 | ||||||||||||
Assets held for sale(i) | — | — | — | 13,473 | ||||||||||||
Total current assets | 119,322 | 108,861 | 111,999 | 111,136 | ||||||||||||
Total assets | 161,072 | 145,193 | 161,942 | 155,247 | ||||||||||||
F-136
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
December 31, 2005 | December 31, 2004 | |||||||||||||||
CDN | CDN | |||||||||||||||
DGAAP | GAAP | DGAAP | GAAP | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Group equity and liabilities | ||||||||||||||||
Group equity | 89,748 | 73,201 | 50,078 | 46,244 | ||||||||||||
Provisions | ||||||||||||||||
Pension provisions(d)(i)(j)(r) | 7,523 | 8,035 | 6,249 | 8,802 | ||||||||||||
Future income taxes(i) | — | — | 189 | — | ||||||||||||
Other provisions(a)(c)(l) (o)(r) | 7,281 | 4,298 | 33,795 | 11,742 | ||||||||||||
Total provisions | 14,804 | 12,333 | 40,233 | 20,544 | ||||||||||||
Long-term liabilities | ||||||||||||||||
Other long-term debts(i)(k) | — | 381 | — | 564 | ||||||||||||
Total long-term liabilities | — | 381 | — | 564 | ||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and other liabilities(i) | 38,211 | 38,211 | 43,891 | 41,319 | ||||||||||||
Accruals and deferred income(a)(b)(i)(k)(m) | 18,309 | 19,086 | 27,740 | 32,213 | ||||||||||||
Current provisions(i)(r) | — | 1,981 | — | 8,779 | ||||||||||||
Liabilities held for sale(i) | — | — | — | 5,584 | ||||||||||||
Total current liabilities | 56,520 | 59,278 | 71,631 | 87,895 | ||||||||||||
Total group equity and liabilities | 161,072 | 145,193 | 161,942 | 155,247 | ||||||||||||
(a) | Provisions — onerous contracts |
F-137
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(b) | Derivatives |
(c) | Provisions — restructuring |
F-138
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(d) | Employee benefits — early retirement |
F-139
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(In thousands | ||||
of US dollars) | ||||
CDN GAAP adjustment as of January 1, 2005 | (3,576 | ) | ||
Effect of change to RJ 271 | 2,018 | |||
Adjusted opening balance January 1, 2005 | (1,558 | ) | ||
Release (CDN GAAP adjustment on net income 2005) | 214 | |||
CDN GAAP adjustment as of December 31, 2005 | (1,344 | ) | ||
(e) | Business combinations |
F-140
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(f) | Internally developed software for internal use |
F-141
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(g) | Employee benefits — pensions |
(h) | Employee benefits — share-based compensation |
F-142
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(i) | Discontinued operations and related depreciation |
2005 | 2004 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Net sales | 5,410 | 19,288 | ||||||
Operating expenses | (8,324 | ) | (25,413 | ) | ||||
Interest and other financial income | (566 | ) | (2,695 | ) | ||||
Income tax | (93 | ) | (233 | ) | ||||
Result from sale of shares (see note 22(o)) | 33 | — | ||||||
Net loss from discontinued operations | (3,540 | ) | (9,053 | ) | ||||
F-143
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
December 31, | December 31, | |||||||
2005 | 2004 | |||||||
Total | Total | |||||||
(In thousands of US dollars) | ||||||||
Assets | ||||||||
Assets held for sale | ||||||||
Property, plant and equipment | — | 132 | ||||||
Other tangible fixed assets | — | 568 | ||||||
Inventory | — | 886 | ||||||
Receivables | — | 6,140 | ||||||
Prepayments and accrued income | — | 1,045 | ||||||
Future income taxes | — | — | ||||||
Cash and cash equivalents | — | 4,702 | ||||||
Total assets held for sale | — | 13,473 | ||||||
Liabilities | ||||||||
Liabilities held for sale | ||||||||
Pension provisions | — | 414 | ||||||
Future income taxes | — | 189 | ||||||
Other long-term liabilities | — | 138 | ||||||
Accounts payable and other liabilities | — | 2,572 | ||||||
Accruals and deferred income | — | 2,240 | ||||||
Current provisions | — | 31 | ||||||
Total liabilities held for sale | — | 5,584 | ||||||
(j) | Employee benefits — long service leave |
F-144
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(k) | Leases |
(l) | Asset retirement obligations |
(m) | Revenue recognition |
(n) | Investments |
F-145
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(o) | Result on sale of shares |
(p) | Future income tax effect on CDN GAAP adjustments and valuation allowance for future income tax assets |
F-146
Consolidated financial statements 2005
Notes to the consolidated income statement — (Continued)
(In thousands of | ||||
US dollars) | ||||
CDN GAAP adjustment as of January 1, 2005 | (2,151 | ) | ||
Effect of change to RJ 271 | (604 | ) | ||
Adjusted opening balance January 1, 2005 | (2,755 | ) | ||
Additions (CDN GAAP adjustment on net income 2005) | (8,824 | ) | ||
CDN GAAP adjustment as of December 31, 2005 | (11,579 | ) | ||
(q) | Reclassification of cash and cash equivalents |
(r) | Short-term portion of provisions |
F-147
F-148
December 31, 2004 | December 31, 2003 | |||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
ASSETS | ||||||||||||||||
Fixed assets | ||||||||||||||||
Intangible fixed assets(1) | ||||||||||||||||
Goodwill | 14,792 | 16,278 | ||||||||||||||
Tangible fixed assets(2) | ||||||||||||||||
Land and buildings | 3,024 | 3,608 | ||||||||||||||
Machinery and equipment | 19,282 | 20,352 | ||||||||||||||
Other | 5,058 | 8,265 | ||||||||||||||
Assets under construction | 7,787 | 3,714 | ||||||||||||||
35,151 | 35,939 | |||||||||||||||
Total fixed assets | 49,943 | 52,217 | ||||||||||||||
Current assets | ||||||||||||||||
Inventory(3) | 1,481 | 2,335 | ||||||||||||||
Receivables(4) | 41,188 | 60,405 | ||||||||||||||
Prepayments and accrued income(5) | 14,189 | 16,070 | ||||||||||||||
Cash and cash equivalents | 55,141 | 36,071 | ||||||||||||||
Total current assets | 111,999 | 114,881 | ||||||||||||||
Total assets | 161,942 | 167,098 | ||||||||||||||
GROUP EQUITY AND LIABILITIES | ||||||||||||||||
Group equity(6) | 50,078 | 42,064 | ||||||||||||||
Provisions | ||||||||||||||||
Pension provisions(7) | 6,249 | 1,535 | ||||||||||||||
Deferred taxes(15) | 189 | 189 | ||||||||||||||
Other provisions(8) | 33,795 | 37,290 | ||||||||||||||
Total provisions | 40,233 | 39,014 | ||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and other liabilities(9) | 43,891 | 45,344 | ||||||||||||||
Accruals and deferred income | 27,740 | 40,676 | ||||||||||||||
Total current liabilities | 71,631 | 86,020 | ||||||||||||||
Total group equity and liabilities | 161,942 | 167,098 | ||||||||||||||
F-149
2004 | 2003 | |||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Net sales(11) | 224,754 | 236,032 | ||||||||||||||
Cost of materials | — | 1,545 | ||||||||||||||
Work contracted out and other external expenses | 132,177 | 186,608 | ||||||||||||||
Salaries and social security contributions(12) | 44,976 | 55,359 | ||||||||||||||
Selling, general and administrative expenses | 32,288 | 4,773 | ||||||||||||||
Depreciation, amortisation and impairments | 10,338 | 32,276 | ||||||||||||||
Total operating expenses | 219,779 | 280,561 | ||||||||||||||
Operating income (loss) | 4,975 | (44,529 | ) | |||||||||||||
Interest and other financial income(13) | 4,151 | 415 | ||||||||||||||
Interest expenses(13) | (676 | ) | (7,405 | ) | ||||||||||||
Result from investments(14) | — | 29,683 | ||||||||||||||
Financial result | 3,475 | 22,693 | ||||||||||||||
Income (loss) before taxes | 8,450 | (21,836 | ) | |||||||||||||
Taxes(15) | (610 | ) | 586 | |||||||||||||
Net income (loss) | 7,840 | (21,250 | ) | |||||||||||||
F-150
2004 | 2003 | |||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Net income (loss) | 7,840 | (21,250 | ) | |||||||||||||
Depreciation, amortisation and impairments | 10,338 | 32,276 | ||||||||||||||
Changes in provisions | 1,219 | 13,674 | ||||||||||||||
Deferred taxes | (825 | ) | (627 | ) | ||||||||||||
Changes in working capital: | ||||||||||||||||
— Inventory | 854 | 4,339 | ||||||||||||||
— Receivables | 20,042 | 14,212 | ||||||||||||||
— Prepayments and accrued income | 1,881 | 5,906 | ||||||||||||||
— Accounts payable | 466 | (17,963 | ) | |||||||||||||
— Other liabilities | (1,919 | ) | (2,470 | ) | ||||||||||||
— Accruals and deferred income | (12,936 | ) | 7,657 | |||||||||||||
8,388 | 11,681 | |||||||||||||||
Net cash flow from operating activities | 26,960 | 35,754 | ||||||||||||||
Movements financial fixed assets | — | 57,251 | ||||||||||||||
Purchases of tangible fixed assets | (8,064 | ) | (6,471 | ) | ||||||||||||
Exchange rate differences on subsidiaries | 174 | 167 | ||||||||||||||
Net cash flow from investing activities | (7,890 | ) | 50,947 | |||||||||||||
Net cash flow from financing activities | ||||||||||||||||
Loans redeemed | — | (75,000 | ) | |||||||||||||
Net cash flow from financing activities | — | (75,000 | ) | |||||||||||||
Changes in cash and cash equivalents | 19,070 | 11,701 | ||||||||||||||
Cash and cash equivalents beginning of year | 36,071 | 24,370 | ||||||||||||||
Cash and cash equivalents end of year | 55,141 | 36,071 | ||||||||||||||
F-151
Name | Statutory residence | |
Xantic B.V. | The Hague, The Netherlands | |
Xantic Group B.V. | The Hague, The Netherlands | |
Xantic Holding B.V. | The Hague, The Netherlands | |
Xantic Sales B.V. | The Hague, The Netherlands | |
Xantic Broadcast B.V. | The Hague, The Netherlands | |
Xantic Consultancy B.V. | The Hague, The Netherlands | |
Veha B.V. | Dordrecht, The Netherlands | |
Xantic Consultancy Pty Ltd | Queensland, Australia | |
Xantic Ltd | Limmasol, Cyprus | |
Xantic Brasil Ltda | Rio de Janeiro, Brazil | |
Xantic GmbH | Hamburg, Germany | |
Xantic Telecommunications Services Hellas S.A. | Piraeus of Attica, Greece | |
Xantic Hong Kong Ltd | Hong Kong, China | |
Xantic Pte Ltd | Singapore, Singapore | |
Marinor Shipping Offshore Systems Pte Ltd | Singapore, Singapore | |
Marinor Boff | Pasic City, Philippines | |
Xantic Solutions Ltd | Nairobi, Kenya | |
Xantic Spa | La Spezia, Italy | |
Xantic S.A. | Madrid, Spain | |
Xantic Middle East AS | Baerum, Norway | |
Xantic AS | Baerum, Norway | |
Xantic Ltd | St. Petersburg, Russia |
F-152
Name | Statutory residence | |
Xantic AB | Goteburg, Sweden | |
Xantic Ltd | Cardiff, United Kingdom | |
Xantic Connecticut Inc | Connecticut, USA | |
Xantic Inc | Tallahassee, USA |
F-153
F-154
F-155
F-156
F-157
F-158
Consolidated financial statements 2004 and 2003
Notes to the consolidated balance sheet
Goodwill | ||||
(In thousands of | ||||
US dollars) | ||||
Balance as of January 1, 2004 | 16,278 | |||
Amortisation | (1,486 | ) | ||
Balance as of December 31, 2004 | 14,792 | |||
Historical cost | 89,046 | |||
Accumulated amortisation | (74,254 | ) | ||
Balance as of December 31, 2004 | 14,792 | |||
Amortisation rate | 5-20 | % |
Goodwill | Software | Total | ||||||||||
(In thousands of US dollars) | ||||||||||||
Balance as of January 1, 2003 | 24,660 | 2,117 | 26,777 | |||||||||
Amortisation and impairment | (8,382 | ) | (2,117 | ) | (10,499 | ) | ||||||
Balance as of December 31, 2003 | 16,278 | — | 16,278 | |||||||||
Historical cost | 89,046 | 7,621 | 96,667 | |||||||||
Accumulated amortisation | (72,768 | ) | (7,621 | ) | (80,389 | ) | ||||||
Balance as of December 31, 2003 | 16,278 | — | 16,278 | |||||||||
Amortisation rate | 5-20 | % | 33 | % |
F-159
Consolidated financial statements 2004 and 2003
Notes to the consolidated balance sheet — (Continued)
(2) | Tangible fixed assets |
Land and | Machinery and | Assets under | ||||||||||||||||||
Buildings | Equipment | Other | Construction | Total | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||
Balance as of January 1, 2004 | 3,608 | 20,352 | 8,265 | 3,714 | 35,939 | |||||||||||||||
Additions | — | — | 239 | 7,926 | 8,165 | |||||||||||||||
Finished assets under construction | 24 | 2,531 | 1,298 | (3,853 | ) | — | ||||||||||||||
Disposals | — | (92 | ) | (9 | ) | — | (101 | ) | ||||||||||||
Depreciation | (608 | ) | (3,509 | ) | (4,735 | ) | — | (8,852 | ) | |||||||||||
Balance as of December 31, 2004 | 3,024 | 19,282 | 5,058 | 7,787 | 35,151 | |||||||||||||||
Historical cost | 4,726 | 77,387 | 24,146 | 7,787 | 114,046 | |||||||||||||||
Accumulated depreciation | (1,702 | ) | (58,105 | ) | (19,088 | ) | — | (78,895 | ) | |||||||||||
Balance as of December 31, 2004 | 3,024 | 19,282 | 5,058 | 7,787 | 35,151 | |||||||||||||||
Depreciation rate | 10 | % | 10-20 | % | 20-33 | % |
Land and | Machinery and | Assets Under | ||||||||||||||||||
Buildings | Equipment | Other | Construction | Total | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||
Balance as of January 1, 2003 | 3,700 | 27,718 | 13,568 | 6,259 | 51,245 | |||||||||||||||
Additions | 617 | 358 | 2,144 | 3,352 | 6,471 | |||||||||||||||
Finished assets under construction | — | 5,093 | 804 | (5,897 | ) | — | ||||||||||||||
Disposals | — | — | (131 | ) | — | (131 | ) | |||||||||||||
Depreciation | (709 | ) | (8,888 | ) | (4,755 | ) | — | (14,352 | ) | |||||||||||
Impairments | — | (3,929 | ) | (3,365 | ) | — | (7,294 | ) | ||||||||||||
Balance as of December 31, 2003 | 3,608 | 20,352 | 8,265 | 3,714 | 35,939 | |||||||||||||||
Historical cost | 4,702 | 78,254 | 22,049 | 3,714 | 108,719 | |||||||||||||||
Accumulated depreciation | (1,094 | ) | (57,902 | ) | (13,784 | ) | — | (72,780 | ) | |||||||||||
Balance as of December 31, 2003 | 3,608 | 20,352 | 8,265 | 3,714 | 35,939 | |||||||||||||||
Depreciation rate | 10 | % | 10-20 | % | 20-33 | % |
F-160
Consolidated financial statements 2004 and 2003
Notes to the consolidated balance sheet — (Continued)
2004 | 2003 | |||||||
Americas (0%), Northern Europe (65%), Nordics, Baltic and Russia (1%) | 66 | % | 66 | % | ||||
Southern Europe (1%), Middle East and Africa (0%) | 1 | % | 1 | % | ||||
Asia Pacific | 33 | % | 33 | % | ||||
Total | 100 | % | 100 | % | ||||
(3) | Inventory |
2004 | 2003 | |||||||
(In thousands of US dollars) | ||||||||
Work in progress | 1,395 | 2,222 | ||||||
Trade inventory | 86 | 113 | ||||||
Balance as of December 31 | 1,481 | 2,335 | ||||||
(4) | Receivables |
2004 | 2003 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Accounts receivable | 35,227 | 55,150 | ||||||
Deferred tax assets(15) | 5,235 | 4,410 | ||||||
Other | 726 | 845 | ||||||
Balance as of December 31 | 41,188 | 60,405 | ||||||
F-161
Consolidated financial statements 2004 and 2003
Notes to the consolidated balance sheet — (Continued)
(5) | Prepayments and accrued income |
2004 | 2003 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Accrued income | 11,885 | 12,956 | ||||||
Prepayments | 2,304 | 3,114 | ||||||
Balance as of December 31 | 14,189 | 16,070 | ||||||
Issued | Additional | |||||||||||||||||||
Share | Paid-in | Exchange Rate | Accumulated | |||||||||||||||||
Capital | Capital | Differences | Losses | Total | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||
Balance as of January 1, 2004 | 186 | 167,224 | 683 | (126,029 | ) | 42,064 | ||||||||||||||
Exchange rate differences on subsidiaries | — | — | 174 | — | 174 | |||||||||||||||
Net result | — | — | — | 7,840 | 7,840 | |||||||||||||||
Balance as of December 31, 2004 | 186 | 167,224 | 857 | (118,189 | ) | 50,078 | ||||||||||||||
Issued | Additional | |||||||||||||||||||
Share | Paid-in | Exchange Rate | Accumulated | |||||||||||||||||
Capital | Capital | Differences | Losses | Total | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||
Balance as of January 1, 2003 | 186 | 167,224 | 516 | (104,779 | ) | 63,147 | ||||||||||||||
Exchange rate differences on subsidiaries | — | — | 167 | — | 167 | |||||||||||||||
Net loss | — | — | — | (21,250 | ) | (21,250 | ) | |||||||||||||
Balance as of December 31, 2003 | 186 | 167,224 | 683 | (126,029 | ) | 42,064 | ||||||||||||||
(7) | Pensions |
F-162
Consolidated financial statements 2004 and 2003
Notes to the consolidated balance sheet — (Continued)
2004 | 2003 | |||||||
(In thousands of US dollars) | ||||||||
Balance as of January 1 | 1,535 | 1,042 | ||||||
Additions | 4,671 | 755 | ||||||
Releases | (99 | ) | (74 | ) | ||||
Usage | (466 | ) | (206 | ) | ||||
Other | 608 | 18 | ||||||
Balance as of December 31 | 6,249 | 1,535 | ||||||
F-163
Consolidated financial statements 2004 and 2003
Notes to the consolidated balance sheet — (Continued)
(8) | Other provisions |
Onerous | ||||||||||||||||
Restructuring | Contracts | Miscellaneous | Total | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Balance as of January 1, 2004 | 19,733 | 13,557 | 4,000 | 37,290 | ||||||||||||
Additions | 2,568 | 204 | 1,500 | 4,272 | ||||||||||||
Releases | (579 | ) | — | — | (579 | ) | ||||||||||
Usage | (5,824 | ) | (490 | ) | — | (6,314 | ) | |||||||||
Foreign currency effects | 651 | — | — | 651 | ||||||||||||
Reclassifications | (1,525 | ) | — | — | (1,525 | ) | ||||||||||
Balance as of December 31, 2004 | 15,024 | 13,271 | 5,500 | 33,795 | ||||||||||||
Onerous | ||||||||||||||||
Restructuring | Contracts | Miscellaneous | Total | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Balance as of January 1, 2003 | 4,102 | 16,551 | 3,456 | 24,109 | ||||||||||||
Additions | 16,387 | — | 1,000 | 17,387 | ||||||||||||
Releases | (368 | ) | (2,994 | ) | — | (3,362 | ) | |||||||||
Usage | (388 | ) | — | (456 | ) | (844 | ) | |||||||||
Balance as of December 31, 2003 | 19,733 | 13,557 | 4,000 | 37,290 | ||||||||||||
F-164
Consolidated financial statements 2004 and 2003
Notes to the consolidated balance sheet — (Continued)
(9) | Accounts payable and other liabilities |
2004 | 2003 | |||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Accounts payable | 34,582 | 27,820 | ||||||
Accounts payable — related parties | 1,766 | 8,062 | ||||||
Taxes and social securities | 7,165 | 7,048 | ||||||
Other liabilities | 378 | 2,414 | ||||||
Balance as of December 31 | 43,891 | 45,344 | ||||||
(10) | Commitments and contingencies |
Up to 1 Year | 1 to 5 Years | Over 5 Years | Total | |||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Commitments by virtue of: | ||||||||||||||||
— purchase obligations | 2,183 | — | — | 2,183 | ||||||||||||
— rental and lease contracts | 6,803 | 8,833 | 7,530 | 23,166 | ||||||||||||
Total | 8,986 | 8,833 | 7,530 | 25,349 | ||||||||||||
F-165
Consolidated financial statements 2004 and 2003
Notes to the consolidated balance sheet — (Continued)
F-166
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement
(11) | Net sales |
2004 | 2003 | |||||||
Airtime | 76 | % | 72 | % | ||||
AMOS | 9 | % | 9 | % | ||||
MUT | 15 | % | 19 | % | ||||
Total | 100 | % | 100 | % | ||||
2004 | 2003 | |||||||
Americas (10%), Northern Europe (32%), Nordics, Baltic and Russia (7%) | 49 | % | 64 | % | ||||
Southern Europe (17%), Middle East and Africa (7%) | 24 | % | 15 | % | ||||
Asia Pacific | 27 | % | 21 | % | ||||
Total | 100 | % | 100 | % | ||||
(12) | Salaries and social security contributions |
2004 | 2003 | |||||||
(In thousands of US dollars) | ||||||||
Salaries | 37,580 | 39,034 | ||||||
Pension charges | 2,725 | 2,274 | ||||||
Social security contributions | 3,029 | 2,374 | ||||||
Restructuring provision II(8) | 1,642 | — | ||||||
Restructuring provision I | — | 11,677 | ||||||
Total | 44,976 | 55,359 | ||||||
2004 | 2003 | |||||||
Marketing and sales | 373 | 371 | ||||||
Support | 217 | 241 | ||||||
Total | 590 | 612 | ||||||
F-167
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
• | exercise price is equal to the market value of a share on the grant date; | |
• | options vest immediately, as exercising the option is not contingent on the employee remaining employed for the three year period, and become exercisable after three years; | |
• | when employees leave before the third year after the grant date, options are exercisable from this date and expire three months later; | |
• | when employees remain employed three years after the grant date, options are exercisable three years after the grant date and expire five years from the grant date; and | |
• | each option gives the right to one ordinary share. |
F-168
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
Number of | ||||
Options | ||||
Balance as of January 1, 2004 | 275,694 | |||
Options granted | 19,950 | |||
Options exercised | (37,495 | ) | ||
Options expired | (27,524 | ) | ||
Options forfeited | (45,798 | ) | ||
Balance as of December 31, 2004 | 184,827 | |||
(13) | Interest and other financial income |
2004 | 2003 | |||||||
(In thousands of US dollars) | ||||||||
Exchange rate results | 3,897 | — | ||||||
Interest and other financial income | 254 | 415 | ||||||
Total | 4,151 | 415 | ||||||
2004 | 2003 | |||||||
(In thousands of US dollars) | ||||||||
Exchange rate results | — | 2,735 | ||||||
Interest to shareholders | — | 3,685 | ||||||
Other interest | 676 | 985 | ||||||
Total | 676 | 7,405 | ||||||
(14) | Result from investments |
F-169
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(15) | Taxes |
2004 | 2003 | |||||||
(In thousands of US dollars) | ||||||||
Pre-tax income (loss) | ||||||||
Dutch fiscal unity | 9,537 | (15,726 | ) | |||||
Adjustment for profit on sale Inmarsat (exempt for income tax) | — | (29,683 | ) | |||||
Other | (1,087 | ) | (6,110 | ) | ||||
8,450 | (51,519 | ) | ||||||
Income tax expense | ||||||||
Dutch fiscal unity | (377 | ) | 627 | |||||
Other | (233 | ) | (41 | ) | ||||
(610 | ) | 586 | ||||||
Current income tax expense | ||||||||
Dutch fiscal unity | (1,202 | ) | — | |||||
Other | (233 | ) | (41 | ) | ||||
(1,435 | ) | (41 | ) | |||||
Deferred income tax expense | ||||||||
Dutch fiscal unity | �� | 825 | 627 | |||||
Other | — | — | ||||||
825 | 627 | |||||||
2004 | 2003 | |||||||
(In percentages) | ||||||||
Dutch corporate income tax rate | 34.5 | % | 34.5 | % | ||||
Adjustment to statutory rate: | ||||||||
— Valuation allowance net losses carried forward | (27.3 | )% | (78.7 | )% | ||||
— Non-taxable profit sale investment | — | 46.9 | % | |||||
Effective tax rate | 7.2 | % | 2.7 | % | ||||
F-170
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
Deferred Tax | Deferred Tax | Net Deferred | ||||||||||
Asset | Liabilities | Taxes | ||||||||||
(In thousands of US dollars) | ||||||||||||
Nominal balance as of January 1, 2004 | 7,451 | (3,230 | ) | 4,221 | ||||||||
Netting 2003 | (3,041 | ) | 3,041 | — | ||||||||
Net balance as of January 1, 2004 | 4,410 | (189 | ) | 4,221 | ||||||||
Reversal of netting 2003 | 3,041 | (3,041 | ) | — | ||||||||
Additions | 1,257 | (951 | ) | 306 | ||||||||
Tax rate changes | (42 | ) | 504 | 462 | ||||||||
Withdrawals | (284 | ) | 341 | 57 | ||||||||
Nominal balance as of December 31, 2004 | 8,382 | (3,336 | ) | 5,046 | ||||||||
Netting 2004 | (3,147 | ) | 3,147 | — | ||||||||
Net balance as of December 31, 2004 | 5,235 | (189 | ) | 5,046 | ||||||||
Deferred Tax | Deferred Tax | Net Deferred | ||||||||||
Asset | Liabilities | Taxes | ||||||||||
(In thousands of US dollars) | ||||||||||||
Nominal balance as of January 1 | 5,195 | (1,601 | ) | 3,594 | ||||||||
Netting 2002 | (1,412 | ) | 1,412 | — | ||||||||
Net balance as of January 1, 2003 | 3,783 | (189 | ) | 3,594 | ||||||||
Reversal of netting 2002 | 1,412 | (1,412 | ) | — | ||||||||
Additions | 16,082 | (1,709 | ) | 14,373 | ||||||||
Withdrawals | (13,826 | ) | 80 | (13,746 | ) | |||||||
Nominal balance as of December 31 | 7,451 | (3,230 | ) | 4,221 | ||||||||
Netting 2003 | (3,041 | ) | 3,041 | — | ||||||||
Net balance as of December 31, 2003 | 4,410 | (189 | ) | 4,221 | ||||||||
(16) | Related party transactions |
F-171
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(17) | Subsequent events |
F-172
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(18) | Application of US GAAP |
2004 | ||||||||
As restated | ||||||||
(In thousands of US dollars) | ||||||||
Net income reported under Dutch GAAP | 7,840 | |||||||
US GAAP adjustments | ||||||||
— Provisions — onerous contracts(a) | (5,047 | ) | ||||||
— Derivatives(b) | (2,858 | ) | ||||||
— Provisions — restructuring(c) | (2,782 | ) | ||||||
— Employee benefits — early retirement(d) | (1,755 | ) | ||||||
— Business combinations(e) | (816 | ) | ||||||
— Internally developed software(f) | (755 | ) | ||||||
— Employee benefits — pensions(g) | (373 | ) | ||||||
— Employee benefits — share-based compensation(h) | (217 | ) | ||||||
— Discontinued operations and related depreciation(i) | 67 | |||||||
— Employee benefits — long service leave(j) | (30 | ) | ||||||
— Leases(k) | 6 | |||||||
— Asset retirement obligations(l) | (4 | ) | ||||||
— Deferred tax effect on US GAAP adjustments(o) | 4,441 | |||||||
— Valuation allowance for deferred tax assets(o) | (4,024 | ) | ||||||
Total US GAAP adjustments | (14,147 | ) | ||||||
Net loss under US GAAP | (6,307 | ) | ||||||
F-173
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
2004 | 2003 | |||||||
As restated | ||||||||
(In thousands of US dollars) | ||||||||
Equity reported under Dutch GAAP | 50,078 | 42,064 | ||||||
US GAAP adjustments: | ||||||||
— Provisions — onerous contracts(a) | 3,933 | 8,980 | ||||||
— Derivatives(b) | 1,588 | 4,446 | ||||||
— Provisions — restructuring(c) | 3,740 | 6,522 | ||||||
— Employee benefits — early retirement(d) | (3,576 | ) | (1,821 | ) | ||||
— Business combinations(e) | (5,588 | ) | (4,772 | ) | ||||
— Internally developed software(f) | (339 | ) | 416 | |||||
— Discontinued operations and related depreciation(i) | 67 | — | ||||||
— Employee benefits — long service leave(j) | (82 | ) | (52 | ) | ||||
— Leases(k) | (129 | ) | (135 | ) | ||||
— Asset retirement obligations(l) | (9 | ) | (5 | ) | ||||
— Revenue recognition(m) | (68 | ) | (68 | ) | ||||
— Investments(n) | 77 | 78 | ||||||
— Deferred tax effect on US GAAP adjustments(o) | (1,220 | ) | (5,661 | ) | ||||
— Valuation allowance for deferred tax assets(o) | (2,151 | ) | 1,873 | |||||
Total US GAAP adjustments | (3,757 | ) | 9,801 | |||||
Equity under US GAAP | 46,321 | 51,865 | ||||||
As restated | ||||
(In thousands of US dollars) | ||||
Equity under US GAAP at December 31, 2003 | 51,865 | |||
Net loss | (6,307 | ) | ||
Other comprehensive income (loss): | ||||
— Unrealised loss on available for sale securities(n) | (1 | ) | ||
— Foreign currency translation adjustments, net of tax | 174 | |||
Additional paid-in capital attributable to: | ||||
— Employee benefits — pensions | 373 | |||
— Employee benefits — share-based compensation | 217 | |||
Equity under US GAAP at December 31, 2004 | 46,321 | |||
F-174
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
2004 | ||||
As restated | ||||
(In thousands of US dollars) | ||||
Net loss in accordance with US GAAP | (6,307 | ) | ||
Other comprehensive income (loss): | ||||
— Unrealised loss on available for sale securities(n) | (1 | ) | ||
— Foreign currency translation adjustments, net of tax | 174 | |||
Comprehensive loss | (6,134 | ) | ||
December 31, 2004 | December 31, 2003 | |||||||||||||||
DGAAP | USGAAP | DGAAP | USGAAP | |||||||||||||
As restated | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed assets | ||||||||||||||||
Goodwill and intangible fixed assets(e) | 14,792 | 7,169 | 16,278 | 7,169 | ||||||||||||
Other intangible fixed assets(e) | — | 2,035 | — | 4,472 | ||||||||||||
Land and buildings | 3,024 | 3,024 | 3,608 | 3,608 | ||||||||||||
Machinery and equipment(i)(k)(l) | 19,282 | 19,853 | 20,352 | 20,918 | ||||||||||||
Other tangible fixed assets(f)(i)(k) | 5,058 | 4,767 | 8,265 | 7,917 | ||||||||||||
Tangible fixed assets under construction(f) | 7,787 | 7,263 | 3,714 | 3,714 | ||||||||||||
Financial fixed assets(n) | — | 77 | — | 78 | ||||||||||||
Total fixed assets | 49,943 | 44,188 | 52,217 | 47,876 | ||||||||||||
Current assets | ||||||||||||||||
Inventory(i) | 1,481 | 595 | 2,335 | 1,411 | ||||||||||||
Receivables(e)(i)(o) | 41,188 | 31,677 | 60,405 | 48,265 | ||||||||||||
Receivables — related party(p) | — | 42,767 | — | 25,455 | ||||||||||||
Prepayments and accrued income(b)(i)(k)(m) | 14,189 | 14,952 | 16,070 | 19,519 | ||||||||||||
Cash and cash equivalents(i)(p) | 55,141 | 7,672 | 36,071 | 7,642 | ||||||||||||
Assets held for sale(i) | — | 13,473 | — | 14,352 | ||||||||||||
Total current assets | 111,999 | 111,136 | 114,881 | 116,644 | ||||||||||||
Total assets | 161,942 | 155,324 | 167,098 | 164,520 | ||||||||||||
F-175
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
December 31, 2004 | December 31, 2003 | |||||||||||||||
DGAAP | USGAAP | DGAAP | USGAAP | |||||||||||||
As restated | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Group Equity and Liabilities | ||||||||||||||||
Group equity | 50,078 | 46,321 | 42,064 | 51,865 | ||||||||||||
Provisions | ||||||||||||||||
Pension provisions(d)(i)(j)(q) | 6,249 | 8,802 | 1,535 | 2,493 | ||||||||||||
Deferred taxes(i) | 189 | — | 189 | — | ||||||||||||
Other provisions(a)(c)(l)(q) | 33,795 | 11,742 | 37,290 | 16,927 | ||||||||||||
Total provisions | 40,233 | 20,544 | 39,014 | 19,420 | ||||||||||||
Long-term liabilities | ||||||||||||||||
Other long-term debts(i)(k) | — | 564 | — | 618 | ||||||||||||
Total long-term liabilities | — | 564 | — | 618 | ||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and other liabilities(i) | 43,891 | 41,319 | 45,344 | 41,579 | ||||||||||||
Accruals and deferred income(a)(i)(k)(m) | 27,740 | 32,213 | 40,676 | 38,128 | ||||||||||||
Current provisions(i)(q) | — | 8,779 | — | 5,411 | ||||||||||||
Liabilities held for sale(i) | — | 5,584 | — | 7,499 | ||||||||||||
Total current liabilities | 71,631 | 87,895 | 86,020 | 92,617 | ||||||||||||
Total group equity and liabilities | 161,942 | 155,324 | 167,098 | 164,520 | ||||||||||||
December 31, 2004 | December 31, 2004 | |||||||||||
Originally Reported | Adjustment | as Restated | ||||||||||
(In thousands of US dollars) | ||||||||||||
Other provisions | 13,268 | (1,526 | ) | 11,742 | ||||||||
Receivables | 31,677 | — | 31,677 | |||||||||
Equity | 44,795 | 1,526 | 46,321 | |||||||||
Net loss | (7,833 | ) | 1,526 | (6,307 | ) |
F-176
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(a) | Provisions — onerous contracts (as restated) |
(b) | Derivatives |
F-177
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(c) | Provisions — restructuring |
(d) | Employee benefits — early retirement |
(e) | Business combinations |
F-178
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
F-179
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(f) | Internally developed software for internal use |
(g) | Employee benefits — pensions |
F-180
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(h) | Employee benefits — share-based compensation |
(i) | Discontinued operations and related depreciation |
F-181
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
MUT | AMOS | Total | ||||||||||
(In thousands of US dollars) | ||||||||||||
Net sales | — | 19,288 | 19,288 | |||||||||
Operating expenses | — | (25,413 | ) | (25,413 | ) | |||||||
Interest expenses | — | (2,695 | ) | (2,695 | ) | |||||||
Income tax | — | (233 | ) | (233 | ) | |||||||
Net loss from discontinued operations | — | (9,053 | ) | (9,053 | ) | |||||||
December 31, 2004 | December 31, 2003 | |||||||||||||||||||||||
MUT | AMOS | Total | MUT | AMOS | Total | |||||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Assets held for sale | ||||||||||||||||||||||||
Machinery and equipment | — | 132 | 132 | — | 134 | 134 | ||||||||||||||||||
Other tangible fixed assets | — | 568 | 568 | — | 855 | 855 | ||||||||||||||||||
Inventory | — | 886 | 886 | — | 924 | 924 | ||||||||||||||||||
Receivables | 1,023 | 5,117 | 6,140 | 317 | 7,900 | 8,217 | ||||||||||||||||||
Prepayments and accrued income | — | 1,045 | 1,045 | — | 1,248 | 1,248 | ||||||||||||||||||
Cash and cash equivalents | — | 4,702 | 4,702 | — | 2,974 | 2,974 | ||||||||||||||||||
Total assets held for sale | 1,023 | 12,450 | 13,473 | 317 | 14,035 | 14,352 | ||||||||||||||||||
December 31, 2004 | December 31, 2003 | |||||||||||||||||||||||
MUT | AMOS | Total | MUT | AMOS | Total | |||||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Liabilities held for sale | ||||||||||||||||||||||||
Pension provisions | — | 414 | 414 | — | 326 | 326 | ||||||||||||||||||
Deferred taxes | — | 189 | 189 | — | 189 | 189 | ||||||||||||||||||
Other long-term debts | — | 138 | 138 | — | 135 | 135 | ||||||||||||||||||
Accounts payable and other liabilities | — | 2,572 | 2,572 | — | 3,765 | 3,765 | ||||||||||||||||||
Accruals and deferred income | — | 2,240 | 2,240 | — | 3,016 | 3,016 | ||||||||||||||||||
Current provisions | — | 31 | 31 | — | 68 | 68 | ||||||||||||||||||
Total liabilities held for sale | — | 5,584 | 5,584 | — | 7,499 | 7,499 | ||||||||||||||||||
F-182
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(j) | Employee benefits — long service leave |
(k) | Leases |
(l) | Asset retirement obligations |
(m) | Revenue recognition |
F-183
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(n) | Investments |
(o) | Deferred tax effect on US GAAP adjustments and valuation allowance for deferred tax assets (as restated) |
F-184
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(p) | Reclassification of cash and cash equivalents |
(q) | Short-term portion of provisions |
F-185
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(19) | Application of CDN GAAP |
2004 | ||||||||
As restated | ||||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Net income reported under Dutch GAAP | 7,840 | |||||||
CDN GAAP adjustments | ||||||||
— Provisions — onerous contracts(a) | (5,047 | ) | ||||||
— Derivatives(b) | 1,588 | |||||||
— Provisions — restructuring(c) | (2,782 | ) | ||||||
— Employee benefits — early retirement(d) | (1,755 | ) | ||||||
— Business combinations(e) | (816 | ) | ||||||
— Internally developed software(f) | (755 | ) | ||||||
— Employee benefits — pensions(g) | (373 | ) | ||||||
— Employee benefits — share-based compensation(h) | (217 | ) | ||||||
— Discontinued operations and related depreciation(i) | 67 | |||||||
— Employee benefits — long service leave(j) | (30 | ) | ||||||
— Leases(k) | 6 | |||||||
— Asset retirement obligations(l) | (4 | ) | ||||||
— Future income tax effect on CDN GAAP adjustments(n) | 3,040 | |||||||
— Valuation allowance for future income tax assets(n) | (2,623 | ) | ||||||
Total CDN GAAP adjustments | (9,701 | ) | ||||||
Net loss under CDN GAAP | (1,861 | ) | ||||||
F-186
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
2004 | 2003 | |||||||
As restated | ||||||||
(In thousands of | ||||||||
US dollars) | ||||||||
Equity reported under Dutch GAAP | 50,078 | 42,064 | ||||||
CDN GAAP adjustments | ||||||||
— Provisions — onerous contracts(a) | 3,933 | 8,980 | ||||||
— Derivatives(b) | 1,588 | — | ||||||
— Provisions — restructuring(c) | 3,740 | 6,522 | ||||||
— Employee benefits — early retirement(d) | (3,576 | ) | (1,821 | ) | ||||
— Business combinations(e) | (5,588 | ) | (4,772 | ) | ||||
— Internally developed software(f) | (339 | ) | 416 | |||||
— Discontinued operations and related depreciation(i) | 67 | — | ||||||
— Employee benefits — long service leave(j) | (82 | ) | (52 | ) | ||||
— Leases(k) | (129 | ) | (135 | ) | ||||
— Asset retirement obligations(l) | (9 | ) | (5 | ) | ||||
— Revenue recognition(m) | (68 | ) | (68 | ) | ||||
— Future income tax effect on CDN GAAP adjustments(n) | (1,220 | ) | (4,260 | ) | ||||
— Valuation allowance for future income tax assets(n) | (2,151 | ) | 472 | |||||
Total CDN GAAP adjustments | (3,834 | ) | 5,277 | |||||
Equity under CDN GAAP | 46,244 | 47,341 | ||||||
(In thousands of | ||||
US dollars) | ||||
Equity under CDN GAAP at December 31, 2003 | 47,341 | |||
Net loss | (1,861 | ) | ||
Foreign currency translation adjustments, net of tax | 174 | |||
Additional paid-in capital attributable to: | ||||
— Employee benefits — pensions | 373 | |||
— Employee benefits — share-based compensation | 217 | |||
Equity under CDN GAAP at December 31, 2004 | 46,244 | |||
F-187
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
December 31, 2004 | December 31, 2003 | |||||||||||||||
CDN | CDN | |||||||||||||||
DGAAP | GAAP | DGAAP | GAAP | |||||||||||||
As restated | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Assets | ||||||||||||||||
Fixed assets | ||||||||||||||||
Goodwill and intangible fixed assets(e) | 14,792 | 7,169 | 16,278 | 7,169 | ||||||||||||
Other intangible fixed assets(e) | — | 2,035 | — | 4,472 | ||||||||||||
Land and buildings | 3,024 | 3,024 | 3,608 | 3,608 | ||||||||||||
Machinery and equipment(i)(k)(l) | 19,282 | 19,853 | 20,352 | 20,918 | ||||||||||||
Other tangible fixed assets(f)(i)(k) | 5,058 | 4,767 | 8,265 | 7,917 | ||||||||||||
Tangible fixed assets under construction(f) | 7,787 | 7,263 | 3,714 | 3,714 | ||||||||||||
Total fixed assets | 49,943 | 44,111 | 52,217 | 47,798 | ||||||||||||
Current assets | ||||||||||||||||
Inventory(i) | 1,481 | 595 | 2,335 | 1,411 | ||||||||||||
Receivables(e)(i)(n) | 41,188 | 31,677 | 60,405 | 48,265 | ||||||||||||
Receivables — related party(o) | — | 42,767 | — | 25,455 | ||||||||||||
Prepayments and accrued income(b)(i)(k)(m) | 14,189 | 14,952 | 16,070 | 15,073 | ||||||||||||
Cash and cash equivalents(i)(o) | 55,141 | 7,672 | 36,071 | 7,642 | ||||||||||||
Assets held for sale(i) | — | 13,473 | — | 14,352 | ||||||||||||
Total current assets | 111,999 | 111,136 | 114,881 | 112,198 | ||||||||||||
Total assets | 161,942 | 155,247 | 167,098 | 159,996 | ||||||||||||
F-188
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
December 31, 2004 | December 31, 2003 | |||||||||||||||
CDN | CDN | |||||||||||||||
DGAAP | GAAP | DGAAP | GAAP | |||||||||||||
As restated | ||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||
Group Equity and Liabilities | ||||||||||||||||
Group equity | 50,078 | 46,244 | 42,064 | 47,341 | ||||||||||||
Provisions | ||||||||||||||||
Pension provisions(d)(i)(j)(p) | 6,249 | 8,802 | 1,535 | 2,493 | ||||||||||||
Future income taxes(i) | 189 | — | 189 | — | ||||||||||||
Other provisions(a)(c)(l)(p) | 33,795 | 11,742 | 37,290 | 16,927 | ||||||||||||
Total provisions | 40,233 | 20,544 | 39,014 | 19,420 | ||||||||||||
Long-term liabilities | ||||||||||||||||
Other long-term debts(i)(k) | — | 564 | — | 618 | ||||||||||||
Total long-term liabilities | — | 564 | — | 618 | ||||||||||||
Current liabilities | �� | |||||||||||||||
Accounts payable and other liabilities(i) | 43,891 | 41,319 | 45,344 | 41,579 | ||||||||||||
Accruals and deferred income(a)(i)(k)(m) | 27,740 | 32,213 | 40,676 | 38,128 | ||||||||||||
Current provisions(i)(p) | — | 8,779 | — | 5,411 | ||||||||||||
Liabilities held for sale(i) | — | 5,584 | — | 7,499 | ||||||||||||
Total current liabilities | 71,631 | 87,895 | 86,020 | 92,617 | ||||||||||||
Total group equity and liabilities | 161,942 | 155,247 | 167,098 | 159,996 | ||||||||||||
F-189
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
December 31, 2004 | ||||||||||||
Originally Reported | Adjustment | December 31, 2004 | ||||||||||
As restated | ||||||||||||
(In thousands of US dollars) | ||||||||||||
Other provisions | 13,268 | (1,526 | ) | 11,742 | ||||||||
Receivables | 31,677 | — | 31,677 | |||||||||
Equity | 44,718 | 1,526 | 46,244 | |||||||||
Net loss | (3,387 | ) | 1,526 | (1,861 | ) |
(a) | Provisions — onerous contracts (as restated) |
(b) | Derivatives |
F-190
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(c) | Provisions — restructuring |
F-191
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(d) | Employee benefits — early retirement |
(e) | Business combinations |
F-192
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(f) | Internally developed software for internal use |
(g) | Employee benefits — pensions |
F-193
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(h) | Employee benefits — share-based compensation |
(i) | Discontinued operations and related depreciation |
F-194
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
MUT | AMOS | Total | ||||||||||
(In thousands of US dollars) | ||||||||||||
Net sales | — | 19,288 | 19,288 | |||||||||
Operating expenses | — | (25,413 | ) | (25,413 | ) | |||||||
Interest expenses | — | (2,695 | ) | (2,695 | ) | |||||||
Income tax | — | (233 | ) | (233 | ) | |||||||
Net loss from discontinued operations | — | (9,053 | ) | (9,053 | ) | |||||||
F-195
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
December 31, 2004 | December 31, 2003 | |||||||||||||||||||||||
MUT | AMOS | Total | MUT | AMOS | Total | |||||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Assets held for sale | ||||||||||||||||||||||||
Machinery and equipment | — | 132 | 132 | — | 134 | 134 | ||||||||||||||||||
Other tangible fixed assets | — | 568 | 568 | — | 855 | 855 | ||||||||||||||||||
Inventory | — | 886 | 886 | — | 924 | 924 | ||||||||||||||||||
Receivables | 1,023 | 5,117 | 6,140 | 317 | 7,900 | 8,217 | ||||||||||||||||||
Prepayments and accrued income | — | 1,045 | 1,045 | — | 1,248 | 1,248 | ||||||||||||||||||
Cash and cash equivalents | — | 4,702 | 4,702 | — | 2,974 | 2,974 | ||||||||||||||||||
Total assets held for sale | 1,023 | 12,450 | 13,473 | 317 | 14,035 | 14,352 | ||||||||||||||||||
December 31, 2004 | December 31, 2003 | |||||||||||||||||||||||
MUT | AMOS | Total | MUT | AMOS | Total | |||||||||||||||||||
(In thousands of US dollars) | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Liabilities held for sale | ||||||||||||||||||||||||
Pension provisions | — | 414 | 414 | — | 326 | 326 | ||||||||||||||||||
Future income taxes | — | 189 | 189 | — | 189 | 189 | ||||||||||||||||||
Other long-term liabilities | — | 138 | 138 | — | 135 | 135 | ||||||||||||||||||
Accounts payable and other liabilities | — | 2,572 | 2,572 | — | 3,765 | 3,765 | ||||||||||||||||||
Accruals and deferred income | — | 2,240 | 2,240 | — | 3,016 | 3,016 | ||||||||||||||||||
Current provisions | — | 31 | 31 | — | 68 | 68 | ||||||||||||||||||
Total liabilities held for sale | — | 5,584 | 5,584 | — | 7,499 | 7,499 | ||||||||||||||||||
(j) | Employee benefits — long service leave |
F-196
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(k) | Leases |
(l) | Asset retirement obligations |
(m) | Revenue recognition |
F-197
Consolidated financial statements 2004 and 2003
Notes to the consolidated income statement — (Continued)
(n) | Future income tax effect on CDN GAAP adjustments and valuation allowance for future income tax assets (as restated) |
(o) | Reclassification of cash and cash equivalents |
(p) | Short-term portion of provisions |
F-198
Item 20. | Indemnification of Directors and Officers |
Item 21. | Exhibits and financial statement schedules. |
II-1
Item 22. | Undertakings. |
II-2
II-3
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director, President & Chief Executive Officer | September 18, 2006 | ||||
/s/ Charles W. Bissegger Charles W. Bissegger | Director | September 18, 2006 | ||||
/s/ Josef J. Fridman Josef J. Fridman | Director | September 18, 2006 | ||||
/s/ John M. Green John M. Green | Director | September 18, 2006 | ||||
/s/ Janice I. Obuchowski Janice I. Obuchowski | Director | September 18, 2006 | ||||
/s/ David R. Oliver, Jr. David R. Oliver, Jr. | Director | September 18, 2006 | ||||
/s/ Edward Reevey Edward Reevey | Director | September 18, 2006 |
II-4
Name | Title | Date | ||||
/s/ Frank L. Salizzoni Frank L. Salizzoni | Director | September 18, 2006 | ||||
/s/ Stephen G. Wetmore Stephen G. Wetmore | Director | September 18, 2006 | ||||
/s/ Charles W. White Charles W. White | Director | September 18, 2006 | ||||
/s/ Robert Walmsley Robert Walmsley | Director | September 18, 2006 | ||||
/s/ Michael J. Bayer Michael J. Bayer | Director | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Executive Vice President & Chief Financial Officer | September 18, 2006 | ||||
/s/ Paula M. Sturge Paula M. Sturge | Senior Vice President, Finance | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-5
By: | /s/ Paula M. Sturge |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director & President | September 18, 2006 | ||||
/s/ Paula M. Sturge Paula M. Sturge | Director & Vice President, Finance | September 18, 2006 | ||||
/s/ William H. Holden William H. Holden | Director & Treasurer | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-6
By: | /s/ Paula M. Sturge |
Name | Title | Date | ||||
/s/ David J. Oake David J. Oake | Director & President | September 18, 2006 | ||||
/s/ Paula M. Sturge Paula M. Sturge | Director & Vice President, Finance | September 18, 2006 | ||||
/s/ William H. Holden William H. Holden | Director & Treasurer | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-7
By: | /s/ Paula M. Sturge |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director & President | September 18, 2006 | ||||
/s/ Paula M. Sturge Paula M. Sturge | Director & Vice President, Finance | September 18, 2006 | ||||
/s/ David J. Oake David J. Oake | Director | September 18, 2006 | ||||
/s/ William H. Holden William H. Holden | Treasurer | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-8
By: | /s/ Eleni K. Chrysostomides |
Name | Title | Date | ||||
/s/ Eleni K. Chrysostomides Eleni K. Chrysostomides | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-9
By: | /s/ Patrick Stronge |
Name | Title | Date | ||||
/s/ Patrick Stronge Patrick Stronge | Director | September 18, 2006 | ||||
/s/ Maury D. Shenk Maury D. Shenk | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-10
By: | /s/ James J. Parm |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director | September 18, 2006 | ||||
/s/ Alex Schmitt Alex Schmitt | Director | September 18, 2006 | ||||
/s/ Chantal Keereman Chantal Keereman | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-11
By: | /s/ J.C. Kleij |
Name | Title | Date | ||||
/s/ J.C. Kleij J.C. Kleij | Managing Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-12
By: | /s/ John M. Mackey |
Name | Title | Date | ||||
/s/ John M. Mackey John M. Mackey | Director | September 18, 2006 | ||||
/s/ Eric G. Jones Eric G. Jones | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-13
By: | /s/ John M. Mackey |
Name | Title | Date | ||||
/s/ John M. Mackey John M. Mackey | Director | September 18, 2006 | ||||
/s/ Eric G. Jones Eric G. Jones | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-14
By: | /s/ David J. Oake |
Name | Title | Date | ||||
/s/ David J. Oake David J. Oake | Director | September 18, 2006 | ||||
/s/ Ian A. Canning Ian A. Canning | Director | September 18, 2006 | ||||
/s/ Maury D. Shenk Maury D. Shenk | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-15
By: | /s/ David J. Oake |
Name | Title | Date | ||||
/s/ David J. Oake David J. Oake | Director | September 18, 2006 | ||||
/s/ Ian A. Canning Ian A. Canning | Director | September 18, 2006 | ||||
/s/ Maury D. Shenk Maury D. Shenk | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-16
By: | /s/ David J. Oake |
Name | Title | Date | ||||
/s/ David J. Oake David J. Oake | Director | September 18, 2006 | ||||
/s/ Ian A. Canning Ian A. Canning | Director | September 18, 2006 | ||||
/s/ Maury D. Shenk Maury D. Shenk | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-17
By: | /s/ David J. Oake |
Name | Title | Date | ||||
/s/ David J. Oake David J. Oake | Director | September 18, 2006 | ||||
/s/ Ian A. Canning Ian A. Canning | Director | September 18, 2006 | ||||
/s/ Maury D. Shenk Maury D. Shenk | Director | September 18, 2006 | ||||
Authorized representative in the United States: | ||||||
/s/ Richard E. Harris Richard E. Harris | September 18, 2006 |
II-18
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director & President | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Director, Vice President & Chief Financial Officer | September 18, 2006 | ||||
/s/ John D. Prentice John D. Prentice | Director & Vice President | September 18, 2006 | ||||
/s/ David J. Oake David J. Oake | Director & Vice President | September 18, 2006 | ||||
/s/ William H. Holden William H. Holden | Treasurer | September 18, 2006 |
II-19
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ Richard E. Harris Richard E. Harris | Manager | September 18, 2006 | ||||
/s/ James J. Parm James J. Parm | President | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Chief Financial Officer & Treasurer | September 18, 2006 |
II-20
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Manager & President | September 18, 2006 | ||||
/s/ Richard E. Harris Richard E. Harris | Manager & Secretary | September 18, 2006 | ||||
/s/ John D. Prentice John D. Prentice | Manager | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Chief Financial Officer & Treasurer | September 18, 2006 |
II-21
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Manager & President | September 18, 2006 | ||||
/s/ Richard E. Harris Richard E. Harris | Manager & Secretary | September 18, 2006 | ||||
/s/ John D. Prentice John D. Prentice | Manager | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Chief Financial Officer & Treasurer | September 18, 2006 |
II-22
By: | Stratos Global Corporation, |
By: | /s/ Alfred C. Giammarino |
II-23
By: | /s/ Robert J. Roe |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director | September 18, 2006 | ||||
/s/ Robert J. Roe Robert J. Roe | President & Secretary | September 18, 2006 |
II-24
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director & President | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Director, Vice President & Chief Financial Officer | September 18, 2006 | ||||
/s/ John D. Prentice John D. Prentice | Director & Vice President | September 18, 2006 | ||||
/s/ David J. Oake David J. Oake | Director & Vice President | September 18, 2006 | ||||
/s/ William H. Holden William H. Holden | Treasurer | September 18, 2006 |
II-25
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director & President | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Director, Vice President & Chief Financial Officer | September 18, 2006 | ||||
/s/ John D. Prentice John D. Prentice | Director & Vice President | September 18, 2006 | ||||
/s/ David J. Oake David J. Oake | Director & Vice President | September 18, 2006 | ||||
/s/ William H. Holden William H. Holden | Treasurer | September 18, 2006 |
II-26
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Manager & President | September 18, 2006 | ||||
/s/ Richard E. Harris Richard E. Harris | Manager | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Chief Financial Officer & Treasurer | September 18, 2006 |
II-27
By: | /s/ Alfred C. Giammarino |
Name | Title | Date | ||||
/s/ James J. Parm James J. Parm | Director & President | September 18, 2006 | ||||
/s/ Alfred C. Giammarino Alfred C. Giammarino | Director, Vice President & Chief Financial Officer | September 18, 2006 | ||||
/s/ John D. Prentice John D. Prentice | Director & Vice President | September 18, 2006 | ||||
/s/ David J. Oake David J. Oake | Director & Vice President | September 18, 2006 | ||||
/s/ William H. Holden William H. Holden | Treasurer | September 18, 2006 |
II-28
Exhibit | ||||
Number | Description of Exhibit | |||
2(a) | Share Sale and Purchase Agreement, dated December 28, 2005, among Stratos Global Corporation, KPN Satcom B.V. and Telstra Corporation Limited(1) (2) | |||
3(a) | Amended and Restated Articles of Incorporation of Stratos Global Corporation(1) | |||
3(b) | Amended and Restated Bylaws of Stratos Global Corporation(1) | |||
3(c) | Articles of Incorporation of Stratos Canada Inc.(1) | |||
3(d) | Bylaws of Stratos Canada Inc.(1) | |||
3(e) | Articles of Incorporation of Stratos Wireless Inc.(1) | |||
3(f) | Bylaws of Stratos Wireless Inc.(1) | |||
3(g) | Certificate of Incorporation of Stratos Funding Company(1) | |||
3(h) | Memorandum and Articles of Association of Stratos Funding Company(1) | |||
3(i) | Memorandum and Articles of Association of Stratos Holdings (Cyprus) Limited(1) | |||
3(j) | Certificate of Incorporation of Stratos Finance (Ireland) Limited(1) | |||
3(k) | Memorandum and Articles of Association of Stratos Finance (Ireland) Limited(1) | |||
3(l) | Articles of Incorporation of Stratos LFC S.A.(1) | |||
3(m) | Articles of Association of Stratos Investments B.V.(1) | |||
3(n) | Certificate of Incorporation of Stratos New Zealand Limited(1) | |||
3(o) | Constitution of Stratos New Zealand Limited(1) | |||
3(p) | Certificate of Incorporation of Stratos NZ Holdings Limited(1) | |||
3(q) | Constitution of Stratos NZ Holdings Limited(1) | |||
3(r) | Certificate of Incorporation of Stratos Aeronautical Limited(1) | |||
3(s) | Memorandum and Articles of Association of Stratos Aeronautical Limited(1) | |||
3(t) | Certificate of Incorporation of Stratos Global Holdings Limited(1) | |||
3(u) | Memorandum and Articles of Association of Stratos Global Holdings Limited(1) | |||
3(v) | Certificate of Incorporation of Stratos Global Limited(1) | |||
3(w) | Memorandum and Articles of Association of Stratos Global Limited(1) | |||
3(x) | Certificate of Incorporation of Stratos Services Limited(1) | |||
3(y) | Memorandum and Articles of Association of Stratos Services Limited(1) | |||
3(z) | Certificate of Incorporation, as amended, of Stratos Communications, Inc.(1) | |||
3(aa) | Amended and Restated Bylaws of Stratos Communications, Inc.(1) | |||
3(bb) | Certificate of Formation of Stratos Financial, LLC(1) | |||
3(cc) | Limited Liability Company Agreement, as amended, of Stratos Financial, LLC(1) | |||
3(dd) | Certificate of Formation of Stratos Financing LUX, LLC(1) | |||
3(ee) | Limited Liability Company Agreement of Stratos Financing LUX, LLC(1) | |||
3(ff) | Certificate of Formation of Stratos Funding LLC(1) | |||
3(gg) | Limited Liability Company Agreement of Stratos Funding LLC(1) | |||
3(hh) | Certificate of Limited Partnership of Stratos Funding LP(1) | |||
3(ii) | Limited Partnership Agreement of Stratos Funding LP(1) | |||
3(jj) | Certificate of Incorporation of Stratos Government Services, Inc.(1) | |||
3(kk) | Bylaws of Stratos Government Services, Inc.(1) | |||
3(ll) | Certificate of Incorporation, as amended, of Stratos Holdings, Inc.(1) | |||
3(mm) | Bylaws, as amended, of Stratos Holdings, Inc.(1) | |||
3(nn) | Certificate of Incorporation, as amended, of Stratos Mobile Networks, Inc.(1) | |||
3(oo) | Amended and Restated Bylaws of Stratos Mobile Networks, Inc.(1) | |||
3(pp) | Certificate of Formation of Stratos Mobile Networks (USA), L.L.C.(1) | |||
3(qq) | Limited Liability Company Agreement of Stratos Mobile Networks (USA), L.L.C.(1) | |||
3(rr) | Certificate of Incorporation of Stratos Offshore Services Company(1) |
Exhibit | ||||
Number | Description of Exhibit | |||
3(ss) | Bylaws of Stratos Offshore Services Company(1) | |||
4(a) | Indenture, dated as of February 13, 2006, by and among Stratos Global Corporation, the Guarantors named therein and J.P. Morgan Trust Company, National Association, as Trustee, relating to the 97/8 Senior Notes due 2013 of Stratos Global Corporation(1) | |||
4(b) | Form of 97/8 Senior Note due 2013 of Stratos Global Corporation (included in 4(a)) | |||
4(c) | Registration Rights Agreement, dated as of February 13, 2006, by and among Stratos Global Corporation, the Guarantors named therein, RBC Capital Markets Corporation, Banc of America Securities LLC, CIBC World Markets Corp. and Scotia Capital (USA) Inc.(1) | |||
5(a) | Opinion of Blake Cassels & Graydon LLP, special Canadian counsel to Stratos Global Corporation(1) | |||
5(b) | Opinion of Cleary Gottlieb Steen & Hamilton LLP, special U.S. counsel to Stratos Global Corporation(1) | |||
10(a) | Commercial Framework Agreement among Stratos Wireless, Inc., Inmarsat Ventures plc and Inmarsat Ltd, dated November 30, 2003(1) (2) | |||
10(b) | Land Earth Station Operator Agreement among Stratos Wireless, Inc., Inmarsat Ventures Ltd and Inmarsat Ltd, dated January 23, 2004(1) (2) | |||
10(c) | Lease Services Provider Agreement by and between Stratos Wireless, Inc. and Inmarsat Ltd, dated March 3, 2004(1) (2) | |||
10(d) | Second Amended and Restated Credit Agreement, dated as of February 13, 2006, by and among Stratos Global Corporation, Stratos Funding LP, the financial institutions named therein, Royal Bank of Canada, as Agent, RBC Capital Markets and Banc of America Securities LLC, as Lead Arrangers and Joint Bookrunners, and Bank of America, N.A., as Syndication Agent(1) | |||
10(e) | Employment Agreement between Stratos Global Corporation and James J. Parm, dated as of September 11, 2003(1) | |||
10(f) | Employment Agreement between Stratos Global Corporation and Alfred C. Giammarino, dated as of May 10, 2004(1) | |||
10(g) | Employment Agreement between Stratos Global Corporation and David J. Oake, dated March 10, 2003(1) | |||
10(h) | Employment Agreement between Stratos Global Corporation and John D. Prentice, dated as of July 15, 2004(1) | |||
10(i) | Employment Agreement between Stratos Global Corporation and Richard Harris, dated as of August 9, 2004(1) | |||
10(j) | Stratos Global Corporation Directors’ Deferred Share Unit Plan, effective as of March 3, 2004(1) | |||
10(k) | Stratos Global Corporation Performance Share Unit Plan, effective as of February 17, 2005(1) | |||
10(l) | Stratos Global Corporation Amended and Restated Stock Option Plan, effective as of May 13, 2004(1) | |||
12 | Computation of ratio of earnings to fixed charges (included in the prospectus) | |||
21 | List of subsidiaries of Stratos Global Corporation(1) | |||
23(a) | Consent of Ernst & Young LLP(1) | |||
23(b) | Consent of Ernst & Young Accountants(1) | |||
23(c) | Consent of PricewaterhouseCoopers Accountants N.V.(1) | |||
23(d) | Consent of Blake, Cassels & Graydon LLP (included in Exhibit 5(a)) | |||
23(e) | Consent of Cleary Gottlieb Steen & Hamilton LLP (included in Exhibit 5(b)) | |||
24 | Powers of attorney for Stratos Global Corporation and the Guarantors (included on the signature pages of this registration statement) | |||
25 | Form T-1 of J.P. Morgan Trust Company, National Association, as trustee under the Indenture.(1) |
(1) | Filed herewith. | |
(2) | Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Commission. |