Exhibit 99.1
Telesat Reports Results for the Quarter
Ended March 31, 2018
OTTAWA, CANADA, May 3, 2018 -Telesat Canada (“Telesat”) today announced its financial results for the three-month period ended March 31, 2018. All amounts are in Canadian dollars and reported under International Financial Reporting Standards (“IFRS”) unless otherwise noted.
For the quarter ended March 31, 2018, Telesat reported consolidated revenues of $232 million, compared to $235 million in the same period in 2017. During the quarter, the U.S. dollar was approximately 5% weaker against the Canadian dollar than it was during the first quarter of 2016 and, as a result, there was an unfavorable impact on the conversion of U.S. dollar denominated revenues. Excluding the impact of foreign exchange rate changes, revenue increased by 2% ($4 million) compared to the same period in 2017.
Operating expenses of $38 million for the quarter were 31% ($17 million) lower than the same period in 2017, or 29% ($16 million) lower excluding the impact of changes in foreign exchange rates. The decrease in operating expenses was primarily due to a decrease in compensation and employee benefits expense arising from a special payment of $12 million made during the first quarter of 2017 to stock option holders in connection with a return of capital to Telesat’s shareholders. Adjusted EBITDA1 for the quarter was $195 million, an increase of 1% ($3 million) compared to the same period in 2017 and an increase of 4% ($8 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin1 for the first quarter of 2018 was 83.9%, compared to 81.9% in the same period in 2017.
On January 1, 2018, Telesat adopted IFRS 9, Financial Instruments, and IFRS 15, Revenue from Contracts with Customers. For the three-month period ended March 31, 2018, the adoption of IFRS 15 had a net positive impact of approximately $4 million on revenues, a reduction of approximately $5 million on operating expenses and a positive impact of approximately $9 million on Adjusted EBITDA1. The adoption of IFRS 9 had no impact on revenues, operating expenses and Adjusted EBITDA1.
Telesat’s net loss for the quarter was $15 million compared to net income of $88 million for the quarter ended March 31, 2017. The $103 million difference was the result of a higher non-cash loss on foreign exchange arising principally from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars in the first quarter of 2018.
“I am pleased with our performance for the first quarter,” commented Dan Goldberg, Telesat’s President and CEO. “Our results underscore the stability of our business, underpinned by our substantial contractual backlog, as well as our strong operating discipline. Beyond the financial results, we continue to make progress on our planned Telstar 18 VANTAGE and Telstar 19 VANTAGE satellites, which we anticipate will launch mid this year. In addition, we successfully launched and deployed our first Low Earth Orbit (LEO) satellite to support the development of our planned state-of-the-art, high capacity LEO constellation that will deliver transformative, low latency, fiber-like broadband to commercial and government users worldwide. Looking ahead, we remain focused on increasing the utilization of our in-orbit satellites and executing on our key growth initiatives.”
Business Highlights
| o | At March 31, 2018: |
| o | Telesat had contracted backlog for future services of approximately $4.0 billion. |
| o | Fleet utilization was 93% for Telesat’s North American fleet and 70% for Telesat’s international fleet. |
| o | In January 2018, Telesat announced the successful launch of its first LEO satellite, an important milestone in the company’s plans to deploy a global LEO constellation. Telesat’s LEO constellation is expected to deliver high-performing, cost-effective, fiber-like broadband anywhere in the world for business, government and individual users. Telesat subsequently announced that OmniAccess and Optus Satellite would begin testing and trials on Phase 1 LEO. |
| o | In February 2018, Telesat welcomed the Government of Canada’s commitment in Budget 2018 to support investment in new LEO satellite constellations for rural broadband communications. Budget 2018 proposes funding of $100 million over five years for the Strategic Innovation Fund, with a particular focus on supporting projects that relate to LEO satellites and next generation rural broadband. |
| o | In March 2018, Telesat welcomed the Government of Ontario’s Budget 2018 commitment to support an investment of up to $20 million towards Telesat’s LEO satellite constellation. |
2
| o | In April 2018, Telesat entered into amended Senior Secured Credit Facilities which reduced the applicable margin from 3.0% to 2.5% on the outstanding borrowings of US $2,344 million. |
Telesat’s report on Form 6-K for the quarter ended March 31, 2018, has been filed with the United States Securities and Exchange Commission (“SEC”) and may be accessed on the SEC’s website at www.sec.gov.
Conference Call
Telesat has scheduled a conference call on Thursday, May 3, 2018, at 10:30 a.m. ET to discuss its financial results for the three-month period ended March 31, 2018 and other recent developments. The call will be hosted by Daniel S. Goldberg, President and Chief Executive Officer, and Michel Cayouette, Chief Financial Officer, of Telesat.
Dial-in Instructions:
The toll-free dial-in number for the teleconference is +1 (800) 273-9672. Callers outside of North America should dial +1 (416) 340-2216. The conference reference number is 4285538. Please allow at least 15 minutes prior to the scheduled start time to connect to the teleconference.
Dial-in Audio Replay:
A replay of the teleconference will be available one hour after the end of the call on May 3, 2018, until 11:59 p.m. ET on May 17, 2018. To access the replay, please call +1 (800) 408-3053. Callers outside of North America should dial +1 (905) 694-9451. The access code is 2629668 followed by the number sign (#).
Forward-Looking Statements Safe Harbor
This news release contains statements that are not based on historical fact and are ‘‘forward-looking statements’’ within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this news release, the words “looking ahead”, “anticipate”, “planned”, and “will”, or other variations of these words or other similar expressions are intended to identify forward-looking statements and information. Actual results may differ materially from the expectations expressed or implied in the forward-looking statements as a result of known and unknown risks and uncertainties. Detailed information about some of the known risks and uncertainties is included in the “Risk Factors” section of Telesat Canada’s Annual Report on Form 20-F for the fiscal year ended December 31, 2017 which can be obtained on the SEC website athttp://www.sec.gov. Known risks and uncertainties include but are not limited to: risks associated with operating satellites and providing satellite services, including satellite construction or launch delays, launch failures, in-orbit failures or impaired satellite performance, the ability to successfully deploy an advanced global LEO satellite constellation, the availability of government funding for the LEO satellite constellation, volatility in exchange rates and risks associated with domestic and foreign government regulation. The foregoing list of important factors is not exhaustive. The information contained in this news release reflects Telesat’s beliefs, assumptions, intentions, plans and expectations as of the date of this news release. Except as required by law, Telesat disclaims any obligation or undertaking to update or revise the information herein.
3
About Telesat(www.telesat.com)
Telesat is a leading global satellite operator, providing reliable and secure satellite-delivered communications solutions worldwide to broadcast, telecom, corporate and government customers. Headquartered in Ottawa, Canada, the company’s state-of-the-art fleet consists of 15 GEO satellites, the Canadian payload on ViaSat-1 and one Phase 1 LEO satellite which is the start of Telesat's planned global LEO satellite constellation that will offer low latency, high throughput broadband services. An additional two GEO satellites are under construction with launches planned for mid-2018. Telesat is also a leading technical consultant providing high value expertise and support to satellite operators, insurers and other industry participants on a global basis. Privately held, Telesat’s principal shareholders are Canada’s Public Sector Pension Investment Board and Loral Space & Communications Inc. (NASDAQ: LORL).
For further information:
Michael Bolitho, Telesat, +1 (613) 748-8700 ext. 2336;ir@telesat.com
4
Telesat Canada
Unaudited Interim Condensed Consolidated Statements of (Loss) Income
For the three months ended March 31
| (in thousands of Canadian dollars) | 2018 | 2017 | ||||||
| Revenue | $ | 232,354 | $ | 234,669 | ||||
| Operating expenses | (38,152 | ) | (55,198 | ) | ||||
| 194,202 | 179,471 | |||||||
| Depreciation | (54,029 | ) | (56,122 | ) | ||||
| Amortization | (6,396 | ) | (6,587 | ) | ||||
| Other operating gains (losses), net | 3 | (24 | ) | |||||
| Operating income | 133,780 | 116,738 | ||||||
| Interest expense | (58,629 | ) | (49,750 | ) | ||||
| Interest income and other expenses | (527 | ) | 192 | |||||
| Gain on changes in fair value of financial instruments | 13,164 | 12,522 | ||||||
| (Loss) gain on foreign exchange | (77,444 | ) | 23,487 | |||||
| Income before tax | 10,344 | 103,189 | ||||||
| Tax expense | (25,619 | ) | (15,206 | ) | ||||
| Net (loss) income | $ | (15,275 | ) | $ | 87,983 | |||
5
Telesat Canada
Unaudited Interim Condensed Consolidated Balance Sheets
| (in thousands of Canadian dollars) | March 31, 2018 | December 31, 2017 | ||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 516,812 | $ | 479,045 | ||||
| Trade and other receivables | 64,939 | 64,986 | ||||||
| Other current financial assets | 13,672 | 2,437 | ||||||
| Prepaid expenses and other current assets | 12,168 | 8,503 | ||||||
| Total current assets | 607,591 | 554,971 | ||||||
| Satellites, property and other equipment | 1,771,327 | 1,791,847 | ||||||
| Deferred tax assets | 6,799 | 4,617 | ||||||
| Other long-term financial assets | 85,900 | 83,531 | ||||||
| Other long-term assets | 3,165 | 3,056 | ||||||
| Intangible assets | 809,996 | 812,995 | ||||||
| Goodwill | 2,446,603 | 2,446,603 | ||||||
| Total assets | $ | 5,731,381 | $ | 5,697,620 | ||||
| Liabilities | ||||||||
| Trade and other payables | $ | 32,816 | $ | 37,919 | ||||
| Other current financial liabilities | 42,754 | 26,355 | ||||||
| Other current liabilities | 107,591 | 77,324 | ||||||
| Current indebtedness | 9,208 | 14,486 | ||||||
| Total current liabilities | 192,369 | 156,084 | ||||||
| Long-term indebtedness | 3,524,575 | 3,528,891 | ||||||
| Deferred tax liabilities | 427,469 | 445,114 | ||||||
| Other long-term financial liabilities | 55,768 | 58,831 | ||||||
| Other long-term liabilities | 427,922 | 365,879 | ||||||
| Total liabilities | 4,628,103 | 4,554,799 | ||||||
| Shareholders' Equity | ||||||||
| Share capital | 152,682 | 152,682 | ||||||
| Accumulated earnings | 911,419 | 968,408 | ||||||
| Reserves | 39,177 | 21,731 | ||||||
| Total shareholders' equity | 1,103,278 | 1,142,821 | ||||||
| Total liabilities and shareholders' equity | $ | 5,731,381 | $ | 5,697,620 | ||||
6
Telesat Canada
Unaudited Interim Condensed Consolidated Statements of Cash Flows
For the three months ended March 31
| (in thousands of Canadian dollars) | 2018 | 2017 | |||||||
| Cash flows from operating activities | |||||||||
| Net (loss) income | $ | (15,275 | ) | $ | 87,983 | ||||
| Adjustments to reconcile net (loss) income to cash flows from operating activities | |||||||||
| Depreciation | 54,029 | 56,122 | |||||||
| Amortization | 6,396 | 6,587 | |||||||
| Tax expense | 25,619 | 15,206 | |||||||
| Interest expense | 58,629 | 49,750 | |||||||
| Interest income | (2,377 | ) | (1,055 | ) | |||||
| Loss (gain) on foreign exchange | 77,444 | (23,487 | ) | ||||||
| Gain on changes in fair value of financial instruments | (13,164 | ) | (12,522 | ) | |||||
| Share-based compensation | 382 | 899 | |||||||
| (Gain) loss on disposal of assets | (3 | ) | 24 | ||||||
| Other | (16,668 | ) | (12,495 | ) | |||||
| Income taxes paid, net of income taxes received | (27,584 | ) | (12,226 | ) | |||||
| Interest paid, net of capitalized interest and interest received | (30,499 | ) | (47,824 | ) | |||||
| Operating assets and liabilities | 9,264 | 23,434 | |||||||
| Net cash from operating activities | 126,193 | 130,396 | |||||||
| Cash flows used in investing activities | |||||||||
| Satellite programs, including capitalized interest | (21,971 | ) | (36,530 | ) | |||||
| Purchase of property and other equipment | (2,346 | ) | (3,746 | ) | |||||
| Purchase of intangible assets | (4,144 | ) | (7,205 | ) | |||||
| Net cash used in investing activities | (28,461 | ) | (47,481 | ) | |||||
| Cash flows used in financing activities | |||||||||
| Repayment of indebtedness | (71,930 | ) | (8,060 | ) | |||||
| Payment of debt issue costs | — | (42,867 | ) | ||||||
| Return of capital to shareholders | — | (506,135 | ) | ||||||
| Capital lease payments | (7 | ) | (7 | ) | |||||
| Satellite performance incentive payments | (2,142 | ) | (2,362 | ) | |||||
| Proceeds from exercise of stock options | — | 77 | |||||||
| Settlement of derivatives | — | 211 | |||||||
| Net cash used in financing activities | (74,079 | ) | (559,143 | ) | |||||
| Effect of changes in exchange rates on cash and cash equivalents | 14,114 | (15,208 | ) | ||||||
| Increase (decrease) in cash and cash equivalents | 37,767 | (491,436 | ) | ||||||
| Cash and cash equivalents, beginning of period | 479,045 | 782,406 | |||||||
| Cash and cash equivalents, end of period | $ | 516,812 | $ | 290,970 | |||||
7
Telesat’s Adjusted EBITDA margin(1):
Three months ended March 31, | ||||||||
| (in thousands of Canadian dollars) (unaudited) | 2018 | 2017 | ||||||
| Net (loss) income | $ | (15,275 | ) | $ | 87,983 | |||
| Tax expense | 25,619 | 15,206 | ||||||
| Gain on changes in fair value of financial instruments | (13,164 | ) | (12,522 | ) | ||||
| Loss (gain) on foreign exchange | 77,444 | (23,487 | ) | |||||
| Interest income and other expenses | 527 | (192 | ) | |||||
| Interest expense | 58,629 | 49,750 | ||||||
| Depreciation | 54,029 | 56,122 | ||||||
| Amortization | 6,396 | 6,587 | ||||||
| Other operating (gains) losses, net | (3 | ) | 24 | |||||
| Non-recurring compensation expenses(3) | 319 | 11,865 | ||||||
| Non-cash expense related to share-based compensation | 382 | 899 | ||||||
| Adjusted EBITDA | $ | 194,903 | $ | 192,235 | ||||
| Revenue | $ | 232,354 | $ | 234,669 | ||||
| Adjusted EBITDA Margin | 83.9 | % | 81.9 | % | ||||
End Notes
1 The common definition of EBITDA is “Earnings Before Interest, Taxes, Depreciation and Amortization.” In evaluating financial performance, Telesat uses revenue and deducts certain operating expenses (including share-based compensation expense and unusual and non-recurring items, including restructuring related expenses) to obtain operating income before interest expense, taxes, depreciation and amortization (“Adjusted EBITDA”) and the Adjusted EBITDA margin (defined as the ratio of Adjusted EBITDA to revenue) as measures of Telesat’s operating performance.
Adjusted EBITDA allows Telesat and investors to compare Telesat’s operating results with that of competitors exclusive of depreciation and amortization, interest and investment income, interest expense, taxes and certain other expenses. Financial results of competitors in the satellite services industry have significant variations that can result from timing of capital expenditures, the amount of intangible assets recorded, the differences in assets’ lives, the timing and amount of investments, the effects of other income (expense), and unusual and non-recurring items. The use of Adjusted EBITDA assists Telesat and investors to compare operating results exclusive of these items. Competitors in the satellite services industry have significantly different capital structures. Telesat believes the use of Adjusted EBITDA improves comparability of performance by excluding interest expense.
Telesat believes the use of Adjusted EBITDA and the Adjusted EBITDA margin along with IFRS financial measures enhances the understanding of Telesat’s operating results and is useful to Telesat and investors in comparing performance with competitors, estimating enterprise value and making investment decisions. Adjusted EBITDA as used here may not be the same as similarly titled measures reported by competitors. Adjusted EBITDA should be used in conjunction with IFRS financial measures and is not presented as a substitute for cash flows from operations as a measure of Telesat’s liquidity or as a substitute for net income as an indicator of Telesat’s operating performance.
2 Contracted revenue backlog (‘‘backlog’’) represents Telesat’s expected future revenue from existing service contracts (without discounting for present value) including any deferred revenue that Telesat will recognize in the future in respect of cash already received. The calculation of the backlog reflects the revenue recognition policies adopted under IFRS 15. The majority of Telesat’s contracted revenue backlog is generated from contractual agreements for satellite capacity. Backlog is not a presentation made in accordance with IFRS. The presentation of backlog is not comparable to other similarly titled measures of other companies because not all companies use identical calculations of backlog. Telesat believes the disclosure of the recognition of backlog provides information that is useful to an investor’s understanding of its expected known revenue recognition.
3 Includes severance payments and special compensation and benefits for executives and employees.
8