SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q/A
(MARK ONE)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________ to ___________
Commission File No. 33-63284
PanAmSat Corporation
PanAmSat Capital Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1407851
Delaware 06-1371155
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Pickwick Plaza, Greenwich, CT. 06830
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: 203-622-6664
-----------------------------------------------------------------
(Former Name, Former Address and Former
Fiscal Year if Changed Since Last Report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
As of March 31, 1997, an aggregate of 19,092,757 shares of the Company's Common
Stock, 21,459,432 shares of the Company's Class A Common Stock and 40,459,431
shares of the Company's Class B Common Stock were outstanding.
PanAmSat Corporation
For the Quarter Ended March 31, 1997
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Balance Sheets, March 31, 1997 (unaudited) and December 31, 1996.
Statements of Operations for the Three Months Ended March 31, 1997 and 1996
(unaudited).
Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996
(unaudited).
Notes to Financial Statements.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K
Signature
Cautionary Statement For Purposes Of The "Safe Harbor"
Provisions Of The Private Securities Litigation Reform Act of 1995
The Private Securities Litigation Reform Act of 1995 provides a new "safe
harbor" for certain forward-looking statements. When used in this Form 10-Q and
the documents incorporated by reference herein, the words "estimate," "project,"
"anticipate," "expect," "believe" and other expressions used to indicate future
events are intended to identify forward-looking statements. Such statements are
subject to risks and uncertainties that could cause actual results to differ
materially.
PanAmSat Corporation
BALANCE SHEETS
March 31, 1997 December 31,1996
----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $4,568,758 $1,453,055
Accounts receivable, less
allowance for doubtful
accounts of $200,000 11,278,380 10,235,520
Prepaid expenses and other
current assets 5,844,142 8,228,455
----------------- -----------------
TOTAL CURRENT ASSETS 21,691,280 19,917,030
SATELLITES AND OTHER PROPERTY
AND EQUIPMENT, AT COST 868,594,627 864,683,595
Less: Accumulated Depreciation
and Amortization (153,839,495) (138,091,220)
----------------- -----------------
714,755,132 726,592,375
MARKETABLE SECURITIES 375,581,803 379,178,538
SATELLITE SYSTEMS UNDER
DEVELOPMENT 540,518,744 479,748,974
DEBT ISSUANCE COSTS (Net of
amortization) 8,964,115 9,454,276
OTHER ASSETS 477,363 472,166
----------------- -----------------
TOTAL ASSETS $1,661,988,437 $1,615,363,359
================= =================
PanAmSat Corporation
BALANCE SHEETS - (continued)
March 31, 1997 December 31, 1996
------------------ -------------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $4,271,010 $4,166,778
Accounts payable 1,928,357 2,318,877
Accrued interest 2,843,750 7,109,375
Accrued liabilities and taxes 10,067,717 6,656,741
Deferred revenue 11,159,391 8,423,704
------------------ -------------------
TOTAL CURRENT LIABILITIES 30,270,225 28,675,475
LONG-TERM DEBT 635,701,943 626,009,539
DEFERRED INCOME TAXES 72,952,702 61,631,004
DEFERRED REVENUE 71,276,797 71,920,802
OTHER LIABILITIES 642,934 687,934
------------------ -------------------
TOTAL LIABILITIES 810,844,601 788,924,754
------------------ -------------------
COMMITMENTS AND CONTINGENCIES
PREFERRED STOCK, 12-3/4%
Mandatorily Exchangeable Senior
Redeemable Preferred Stock,
$0.01 par value, 20,000,000 shares
authorized, 341,843 shares issued
and outstanding 9,080 shares for
accrued dividends 340,199,811 329,070,909
------------------ -------------------
STOCKHOLDERS' EQUITY:
Class A Common Stock, $0.01 par
value 100,000,000 shares
authorized, 40,459,432 shares
issued and outstanding 404,594 404,594
Class B Common Stock, $.01 par
value, 100,000,000 shares
authorized, 40,459,431 shares
issued and outstanding 404,594 404,594
Common Stock, $0.01 par value,
400,000,000 shares authorized,
19,092,757 shares issued and
outstanding 190,928 190,891
Additional paid-in-capital 477,612,859 477,505,039
Retained earnings 32,331,050 18,862,578
------------------ -------------------
Total Stockholders' Equity 510,944,025 497,367,696
------------------ -------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,661,988,437 $1,615,363,359
================== ===================
PanAmSat Corporation
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1997 and 1996
March 31, 1997 March 31, 1996
------------------- -------------------
REVENUES:
Unaffiliated parties $72,116,025 $48,747,501
Related parties 3,140,392 1,675,624
------------------- -------------------
75,256,417 50,423,125
OPERATING EXPENSES:
Direct expenses-service agreements 3,747,503 1,411,462
Sales and marketing 3,094,070 3,024,931
Engineering and technical services 4,516,228 3,471,471
General and administrative 7,604,926 5,937,092
Depreciation and amortization 16,207,846 13,250,319
Reorganization costs 675,392 -
------------------- -------------------
35,845,965 27,095,275
------------------- -------------------
INCOME FROM OPERATIONS 39,410,452 23,327,850
INTEREST INCOME (5,276,177) (6,559,856)
INTEREST EXPENSE 2,886,426 7,070,519
------------------- -------------------
INCOME BEFORE INCOME TAXES 41,800,203 22,817,187
INCOME TAXES 17,202,829 9,175,000
------------------- -------------------
NET INCOME $24,597,374 $13,642,187
------------------- -------------------
PREFERRED STOCK DIVIDEND 11,128,902 9,827,869
------------------- -------------------
NET INCOME TO COMMON SHARES $13,468,472 $3,814,318
=================== ===================
EARNINGS PER COMMON SHARE $0.13 $0.04
=================== ===================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 100,419,751 100,382,104
=================== ===================
PanAmSat Corporation
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1997 and 1996
March 31, 1997 March 31, 1996
------------------ ------------------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $24,597,374 $13,642,187
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 16,207,846 13,250,319
Deferred income taxes 11,321,698 6,112,000
Accretion of interest on senior
subordinated discount notes 10,800,050 9,672,121
Accretion of interest on marketable securities (1,423,252) (1,554,688)
Interest expense capitalized (13,891,634) (8,474,069)
Compensation expense on exercise of employee
stock options 107,858 -
Changes in assets and liabilities:
Increase in accounts receivable (1,042,860) (4,027,333)
Decrease in prepaid expenses and other current
assets 2,384,313 565,988
Decrease in accounts payable (390,520) (89,701)
Decrease in accrued interest (4,265,625) (4,090,625)
Increase (decrease) in accrued liabilities
and taxes 3,410,975 (1,627,292)
Increase in deferred revenue 2,091,682 3,170,995
Decrease in other liabilities (45,000) (45,000)
------------------ ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 49,862,905 26,504,902
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (3,880,442) (3,469,107)
Expenditures for satellite systems under
development (46,878,136) (90,744,639)
Proceeds from maturity of marketable securities 5,019,987 66,925,709
Increase in other assets (5,197) -
------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (45,743,788) (27,288,037)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (1,003,414) (791,650)
------------------ ------------------
NET CASH USED IN FINANCING ACTIVITIES (1,003,414) (791,650)
------------------ ------------------
NET INCREASE [DECREASE] IN CASH AND
CASH EQUIVALENTS 3,115,703 (1,574,785)
CASH AND EQUIVALENTS, beginning of period 1,453,055 13,562,113
------------------ ------------------
CASH AND EQUIVALENTS, end of period $ 4,568,758 $11,987,328
================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash received for interest $ 3,852,925 $ 5,005,169
================== ==================
Cash paid for interest $10,243,634 $11,161,144
================== ==================
Cash paid for taxes $ 729,800 -
================== ==================
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
(1) Principles of Presentation.
On March 2, 1995, pursuant to the amended Exchange and Subscription
Agreement and Plan of Reorganization, PanAmSat Corporation, (the
"Company"), PanAmSat L.P. (the "Partnership") and its partners consummated
various transactions (the "Conversion") whereby the Company acquired the
Partnership and converted it to corporate form. In connection therewith,
(i) Rene Anselmo and affiliated persons and entities (the "Anselmo Group")
exchanged their interests in the Partnership for shares of Class A Common
Stock, representing approximately 49.66% of the outstanding common stock of
the Company, (ii) Univisa Satellite Holdings, Inc.("Univisa") exchanged its
interest in the Partnership for shares of Class B Common Stock,
representing approximately 50.15% of the outstanding common stock of the
Company and (iii) a partner of the Partnership exchanged his interest in
the Partnership for shares of common stock, representing approximately
0.19% of the outstanding common stock of the Company. The Amended and
Restated Certificate of Incorporation of the Company provides, among other
things, that holders of the Class A Common Stock will have the right to
elect the majority of the members of the Company's board of directors and
the Anselmo Group and Univisa with a veto over certain extraordinary
transactions of the Company. On April 21, 1995, the Company completed the
sale of 275,000 shares of Preferred Stock in a public offering and received
net proceeds of approximately $262 million. On September 27, 1995 the
Company completed an initial public offering of 18,920,000 shares of Common
Stock, including 4,595,676 shares held by certain selling stockholders, and
received net proceeds of approximately $229 million.
The interim unaudited Financial Statements should be read in conjunction
with the audited Financial Statements and the notes thereto for the year
ended December 31, 1996 included in the Company's Annual Report on Form
10-K, as filed with the Securities and Exchange Commission (Commission File
Number 33-63284) (the "Annual Form 10-K"). The balance sheet as of March
31, 1997, and the related statements of operations and cash flows for the
three months ended March 31, 1997 and 1996 have been prepared by the
Company and are unaudited. In the opinion of management, all adjustments
which are of a normal recurring nature necessary to present fairly the
financial position, results of operations and cash flows as of and for the
three month periods ended March 31, 1997 and 1996 have been made. The
accounting policies followed during the interim periods reported are in
conformity with generally accepted accounting principles and are consistent
with those applied for annual periods and described in the Company's Annual
Form 10-K. The results of operations for the three month periods ended
March 31, 1997 and 1996 are not necessarily indicative of the operating
results for the full year.
(2) Income Taxes.
Substantially all of the difference between the Company's book income from
operations and taxable income for the three months ended March 31, 1997 and
1996 is attributable to the difference in depreciation for tax and
financial reporting purposes and certain deposits, and, in 1997, the
permanent difference created by certain expenditures incurred in connection
with the Company's Agreement and Plan of Reorganization (see Note 4).
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Satellite Capacity for DTH Services.
In November 1995, the Company announced that it would serve as a satellite
service provider for a Latin America DTH service ("Latin America DTH") to
be offered by the Globo Organization ("Globo"), Televisa, The News
Corporation Limited ("News Corp.") and Tele-Communications International,
Inc. ("TCI"). On February 29, 1996, the Company signed a binding letter
agreement with Globo, Televisa and News Corp. (the "1996 Letter Agreement")
to provide service to a series of joint ventures (the "Latin America JVs")
to be formed by them and TCI on 48 transponders ultimately on PAS-5 and
PAS-6, with temporary service on PAS-3 pending the commencement of service
on PAS-6. Also under the 1996 Letter Agreement, Globo, Televisa, and News
Corp. have agreed to proportionally guarantee 100 percent of the fees for
transponder services to the Latin America JVs. These guarantee obligations
may be assigned to TCI and, with the Company's prior written consent, to
new equity participants in the Latin America JVs. The Company will receive
minimum service fees equivalent to the Company's best estimate of the cost
per transponder to the Company of designing, launching, operating and
insuring each satellite for the transponders used by the Latin America JVs.
The Company also will receive additional revenue based on subscriber
revenues of the Latin America JVs above a certain threshold, except that
the transponders that will be used by the Latin America JV operating in
Brazil will be charged on a fixed fee basis. On June 26, 1996, a full-scale
agreement was executed for service in Brazil on twelve transponders (the
"Brazil Agreement"). The 1996 Letter Agreement remains in force for the
remaining 36 transponders. Globo and News Corp have proportionately
guaranteed the obligations under the Brazil Agreement.
On September 20, 1996, the Company entered into an agreement with Televisa
S.A. de C.V., an affiliate of Televisa, to provide transponder service on
up to five PAS-3 Ku-band transponders, at least three of which will be used
for distribution of television services in Spain, which may include DTH
services. The service fees reflect market rates. This agreement superseded
a verbal agreement in principle with Televisa whereby the Company and
Televisa had intended to form a joint venture to offer DTH services in the
Iberian Peninsula.
Concurrently with the Combination (see Note 4) and immediately following
the Univisa Contribution, 7.5 million shares of New PanAmSat common stock
received by Satellite Company, L.L.C., a Nevada limited liability company
("S Company") and a subsidiary of Televisa, in connection with the Univisa
Contribution will be repurchased by New PanAmSat for $225 million.
Following such repurchase, either Televisa, S Company and/or their
designees will purchase for $225 million all of PanAmSat's rights to
purchase from Televisa equity interests in certain joint ventures to be
formed to offer DTH services in Latin America and the Iberian Peninsula.
(4) Agreement and Plan of Reorganization.
On September 20, 1996 (the "Announcement Date"), the Company and Hughes
Electronics Corporation ("Hughes") announced their agreement to combine
their respective satellite service operations (the "Combination") into a
new publicly held company ("New PanAmSat"). Under the terms of the
Agreement and Plan of Reorganization that was entered into on the
Announcement Date, the Galaxy Business
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
(Continued)
of Hughes will be combined with the Company to form New PanAmSat. Holders
of PanAmSat Common Stock and Class A Common Stock will have three options
to receive payment with respect to their outstanding shares: (a) one half
share of common stock of New PanAmSat and $15 in cash, (b) one share of
common stock of New PanAmSat (subject to proration, as applicable), or (c)
$30 in cash (subject to proration, as applicable). The maximum cash
consideration to be paid to the Company's direct and indirect stockholders
will be equal to $15 multiplied by the number of shares of Common Stock
outstanding and Hughes may elect to limit the number of shares of New
PanAmSat Stock issued to one-half of the number of shares of PanAmSat
Common Stock outstanding at the time. Immediately after the Combination,
Hughes will own 71.5% of New PanAmSat unless the Company's direct and
indirect stockholders request more shares of New PanAmSat Common Stock than
cash and New PanAmSat permits additional shares of its common stock to be
issued in lieu of cash to the Company's direct and indirect stockholders.
In a separate but related transaction, New PanAmSat will acquire all of the
outstanding shares of Univisa, Inc., the indirect holder of all of the
Class B Common Stock of the Company, for consideration that is equal in
amount and form (subject to proration, as applicable) to the consideration
payable on account of each share of PanAmSat Common Stock and Class A
Common Stock (the "Univisa Contribution"). Assuming that New PanAmSat pays
half stock and half cash as consideration in the Combination and the
Univisa Contribution, immediately after the Combination, Hughes will own
71.5% of New PanAmSat, unless the Company's direct and indirect
stockholders request more shares of New PanAmSat Common Stock than cash and
New PanAmSat permits additional shares of its common stock to be issued in
lieu of cash to the Company's direct and indirect stockholders.
In connection with the above transactions, the Company has incurred certain
professional and advisory fees totaling $5.4 million through March 31,
1997. Of this total, $4.8 million was recognized during 1996. The Company
expects these fees will aggregate approximately $20 million, with the
majority of the remaining fees payable upon the successful completion of
the Combination. The Reorganization Agreement includes termination
provisions which require that, in the event that the Reorganization
Agreement is terminated by the Company, and the Company consummates or
agrees to consummate certain business combination transactions, PanAmSat
will pay $80 million to Hughes Communications, Inc.
In November 1996, filings were made by the parties pursuant to relevant
U.S. antitrust laws. The specified waiting periods thereunder expired
without a Request for Additional Information by the applicable federal
agencies. No antitrust approvals are required. In October 1996, the parties
filed applications with the Federal Communications Commission ("FCC")
requesting approval of the Combination. The FCC granted these applications
in April 1997 and the applicable appeal period will expire on May 5, 1997.
Also in April 1997, New PanAmSat's registration statement on Form S-4 was
declared effective by the Securities and Exchange Commission. The Company
then mailed proxy statements to its stockholders for a Special Meeting to
be held on May 8, 1997 for the purpose of approving, among other things,
the Combination.
PanAmSat Corporation
NOTES TO FINANCIAL STATEMENTS
(Continued)
(5) PAS-6 Launch Delay.
Based on the recommendations of the PAS-6 spacecraft supplier, the Company
has postponed the launch of PAS-6, previously scheduled for mid-May, to
August 1997. The decision to reschedule the PAS-6 launch is in response to
the spacecraft supplier's ongoing investigation into the cause of a power
decrease in another spacecraft with a similar power system. The spacecraft
supplier will continue to investigate the cause of that anomaly, identify
potential fixes to the power system and integrate those changes, if any,
into the PAS-6 satellite. The PAS-6 launch provider has indicated its
ability to accommodate the revised launch timetable.
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW. The Company's first satellite, PAS-1, was launched in 1988 for
service over the Atlantic Ocean Region and is the leading satellite for
television and cable programming distribution in Latin America. The
Company's second satellite, PAS-2, was launched in July 1994 for service
over the Pacific Ocean Region and is a leading satellite for distribution
in the Asia-Pacific region. The Company's PAS-4 satellite was launched in
August 1995 for service over the Indian Ocean Region and commenced service
on September 5, 1995. PAS-4 is the leading satellite for program
distribution in South Asia and Africa. The Company's PAS-3 satellite (a
replacement for a satellite lost as a result of a launch failure in
December 1994) was launched on January 12, 1996 and commenced service on
February 19, 1996 over the Atlantic Ocean Region.
During the construction period of each of its new satellites, and
thereafter, the Company may incur increased operating expenses, including
expenditures for sales and marketing in excess of the levels historically
incurred, increased engineering and technical expenses, as well as
increased general and administrative expenses, which increased expenses may
not be offset by additional revenues until the new satellites are
successfully launched and commence service. Also, commencing at the
in-service date of any successfully launched satellite, all satellite
construction costs, launch, launch insurance, capitalized interest and
development costs for such satellite will be depreciated on a straight-line
basis over the estimated useful life of the satellite. Further, after the
in-service date of any successfully launched satellite (or upon a launch
failure), the Company will be required to expense, and no longer will be
able to capitalize, interest allocable to such satellite's construction,
launch and development costs.
REVENUES. Total revenues for the three months ended March 31, 1997 were
$75.3 million, an increase of $24.9 million or 49% as compared to the
comparable period in 1996.
Broadcasting services revenue for the three months ended March 31, 1997 was
$64.7 million, an increase of $25.0 million, or 63% over the same period in
1996. The growth in broadcasting services revenue during the three month
period was due primarily to the commencement of new video service
agreements on the PAS-3 satellite and continuing increases in broadcast
traffic and revenue on the PAS-2 and PAS-4 satellites. The Company also
experienced record increases in ad-hoc and special events traffic and
revenue during the first quarter of 1997.
Business communications services revenue was $10.0 million in the three
months ended March 31, 1997, decreasing $0.3 million or 3%, over the
comparable period in 1996. The decrease during the three month period was
primarily due to the completion during 1996 of several short-term business
communications service agreements.
Long-distance telephony services revenue increased from $0.4 million for
the three months ended March 31, 1996 to $0.6 million for the three months
ended March 31, 1997, an increase of $0.2 million or 50%.
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
DIRECT EXPENSES. Direct expenses were $3.7 million, or 5% of total
revenues, in the three months ended March 31, 1997, an increase of $2.3
million or 164%, from the same period in 1996 when direct expenses were 3%
of total revenues. The increase in direct expenses over the three month
period was primarily attributable to costs associated with the increased
ad-hoc and special events revenue recognized during the quarter.
SALES AND MARKETING EXPENSES. Sales and marketing expenses were $3.1
million, or 4% of total revenues, in the three months ended March 31, 1997,
compared to $3.0 million, or 6% of total revenues, in the three months
ended March 31, 1996. The increase in sales and marketing expenses over the
three month period was primarily attributable to the Company's efforts in
marketing capacity on the PAS Global System.
ENGINEERING AND TECHNICAL EXPENSES. Engineering and technical expenses were
$4.5 million in the three month period ended March 31, 1997, or 6% of total
revenues, compared to $3.5 million, or 7% of total revenues, for the
comparable period in 1996. The dollar increase in engineering and technical
expenses during the three month period was primarily due to increased costs
associated with its new teleport facilities, as well as the additional
telemetry, tracking and control costs associated with PAS-3.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $7.6 million, or 10% of total revenues, in the three months ended
March 31, 1997, an increase of $1.7 million or 29%, as compared to the same
period in 1996, when general and administrative expenses were $5.9 million,
or 12% of total revenues. The dollar increase in general and administrative
expenses during the three month period was primarily attributable to
in-orbit insurance costs associated with PAS-3 and additional personnel
costs associated with the Company's expansion.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $16.2
million in the three months ended March 31, 1997, as compared to $13.3
million in the three months ended March 31, 1996, an increase of $2.9
million or 22%. The dollar increase in the three month period was primarily
due to increased depreciation expense associated with PAS-3, and additional
depreciation expense related to communication equipment at the Company's
new teleports.
INTEREST. Interest income, primarily earned from highly liquid investment
funds, was $5.3 million for the three months ended March 31, 1997 compared
to $6.6 million for the comparable period in 1996, a decrease of $1.3
million. The decrease in interest income during the three month period was
primarily a result of the maturity of marketable securities during 1996,
the proceeds of which were used to finance construction in progress.
Interest expense, net of capitalized interest, decreased from $7.1 million
in the quarter ended March 31, 1996 to $2.9 million in the same quarter in
1997. The decrease in interest expense during the three month period was
primarily the result of an increase in the amount of interest eligible for
capitalization on construction in progress.
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
INCOME TAXES. The Company had an income tax provision of $17.2 million for
the three months ended March 31, 1997 as compared to $9.2 million for the
comparable period in 1996. The increase in income taxes during the three
month period was due to the increase in income before income taxes.
PREFERRED STOCK DIVIDEND. The Company had Preferred Stock dividends of
$11.1 million for the three months ended March 1997 as compared to $9.8
million for the comparable period in 1996. The Preferred Stock dividends in
1996 are a result of the issuance of the Company's Preferred Stock on April
21, 1995.
EBITDA. EBITDA was $55.6 million in the three months ended March 31, 1997,
an increase of $19.0 million or 52%, as compared to $36.6 million for the
comparable period in 1996. EBITDA was 74% of total revenues in the first
three months of 1997 as compared to 73% of total revenues for the same
period in the prior fiscal year. The dollar increase in EBITDA for the
three month period ended March 31, 1997 was due primarily to the increase
in total revenues.
LIQUIDITY AND CAPITAL RESOURCES. Since inception, the Company and its
predecessors have financed their operations through a combination of debt
and equity financing, vendor financing, bank financing, equipment leases
and cash flow from operations. On August 5, 1993 the Company completed the
sale of the $175 million aggregate principal amount of the Senior Secured
Notes and $460.2 million aggregate principal amount of the Discount Notes
(collectively, the "Notes") and received net proceeds of approximately
$425.5 million. The original PAS-3 satellite was destroyed during a launch
failure on December 1, 1994. The Company collected in 1995 the insurance
proceeds in the amount of $214.0 million for the original PAS-3 satellite.
On April 21, 1995, the Company completed the sale of 275,000 shares of the
Preferred Stock in a public offering and received net proceeds of
approximately $261.8 million. On September 27, 1995, the public offering of
18,920,000 shares of the Common Stock was completed and the Company
received net proceeds of approximately $229 million.
The total cost for the construction and launch of PAS-5 and PAS-6,
including launch insurance, certain components for spare satellites, ground
facilities and related development expenses (but excluding capitalized
interest expense) is estimated to be approximately $473 million. The
Company expects to fund $296.3 million of such costs with the net proceeds
of the offering of the Preferred Stock and $70.0 million of vendor
financing. The balance of such costs and any additional costs due to cost
overruns, delays or other unanticipated expenses is anticipated to be
funded from vendor financing and future cash flow from operations.
The total cost for the construction and launch of PAS-7 and PAS-8,
including launch insurance, ground facilities and related development
expenses (but excluding capitalized interest expense) is estimated to be
approximately $420.0 million. The Company expects to fund $224.6 million of
such costs with the net proceeds to it from the offering of the Common
Stock. The balance of such costs and any additional costs due to cost
overruns, PanAmSat Corporation delays or other unanticipated expenses is
expected to be funded from vendor financing and future cash flow from
operations.
PanAmSat Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The Company believes that the net proceeds to it from the offerings of
Preferred Stock and Common Stock, vendor financing, future cash flow from
operations (assuming PAS-5 and PAS-6 are successfully launched and commence
service on the schedule currently contemplated) and cash on hand will be
sufficient to fund the Company's operations, its remaining costs for the
construction and launch of PAS-5, PAS-6, PAS-7 and PAS-8, as well as to
pursue international opportunities for DTH services which may be identified
by the Company in the future. Any additional costs due to cost overruns,
delays or other unanticipated expenses are expected to be funded from
additional vendor financing and future cash flow from operations.
Cash flows provided by operating activities increased to $49.9 million in
the three months ended March 31, 1997, from $26.5 million in the three
months ended March 31, 1996. The 1997 increase is due primarily to the
significant growth in revenues for the three months ended March 31, 1997
and the effect of non-cash charges. The Company has and will continue to
have significant non-cash charges including depreciation of satellites and
other equipment and amortization of original issue discount on its Senior
Subordinated Discount Notes, as well as significant cash payments that are
capitalized rather than being currently expensed, including capitalized
interest.
Net cash used in investing activities increased to $45.7 million in the
three months ended March 31, 1997 from $27.3 million in the three months
ended March 31, 1996. This increase primarily reflects $46.9 million of
expenditures for satellite systems under development partially funded by
$5.0 million of proceeds from maturity of marketable securities. This
compares to $90.7 million in expenditures for satellite systems under
development during the first three months of 1996 partially funded by $66.9
million of proceeds from maturity of marketable securities.
Net cash used in financing activities increased to $1.0 million in the
three months ended March 31, 1997 from $0.8 million in the three months
ended March 31, 1996.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PanAmSat Corporation
Date: May 9, 1997 /s/ Patrick J. Costello
-----------------------
Patrick J. Costello
Chief Financial Officer and a
Duly Authorized Officer of the Company