Exhibit 1.1
[NEW SKIES SATELLITES LOGO]
New Skies Reports Strong Second Quarter 2003 Performance
THE HAGUE, the Netherlands, August 12, 2003 - New Skies Satellites N.V. (AEX,
NYSE: NSK), the global satellite communications company, today reported strong
financial results for the three- and six-month periods ended June 30, 2003.
Revenues for the quarter were $54.7 million, EBITDA (adjusted)(1) (earnings
before interest, taxes, depreciation and amortization) was $30.7 million, and
net income was $3.1 million.
Highlights
=======================================================================================================
3 months ended 6 months ended
June 30 June 30
US$ millions 2003 2002 2003 2002
---- ---- ---- ----
(except per share amounts)
Revenues $54.7 $49.2 $106.7 $101.0
Net income (loss) 3.1 4.4 6.7 (12.6)(2)
EBITDA (adjusted) 30.7 26.9 59.7 55.5
EBITDA (adjusted) margin 56% 55% 56% 55%
Basic and diluted earnings per share 0.03 0.03 0.06 (0.10)(2)
=======================================================================================================
New Skies CEO Dan Goldberg said:
"Even though the market for satellite services remains
challenging, I am pleased to report that New Skies achieved
excellent results in the second quarter, growing revenues 11
percent and EBITDA (adjusted) 14 percent relative to the same
period last year. Indeed, excluding a one-time early termination
payment received in the third quarter of 2000, last quarter marks
a record revenue performance for New Skies. Strong top line
performance combined with careful management of our operating
costs and capital expenditures also resulted in positive free cash
flow(3) last quarter of $26.3 million, compared to a negative free
cash flow of $18.3 million in the second quarter last year. As
expected, net income was lower relative to the same period last
year as a result of higher depreciation costs arising from the
introduction of our two new satellites, NSS-6 and NSS-7.
- --------
(1) See definition of EBITDA (adjusted) and "Reconciliation of EBITDA
(adjusted) to net income (loss)" in "Note 1 of Notes to the consolidated
quarterly financial information".
(2) Net loss for the six-month period ended June 30, 2002 included the non-cash
impact of the cumulative effect of change in accounting principle of $23.4
million relating to goodwill. Excluding this goodwill charge, net income
for the first half last year was $10.8 million and the basic and diluted
earnings per share was $0.08.
"We continue to operate in a market environment that remains
difficult and, as a result, we anticipate some price compression
in the second half of the year. Notwithstanding these challenges,
I am pleased to report that during the quarter our contractual
backlog grew by $4 million over the first quarter of this year and
by $65 million year-on-year, ending the quarter at $700 million.
We also saw stability in our average rate per transponder. Lastly,
by continuing to focus our resources and state-of-the-art
satellite capacity on those regions exhibiting the strongest
demand, we remain comfortable with the full-year financial
guidance ranges we gave at the outset of this year."
For the three and six months ended June 30, 2003, New Skies achieved the
following financial results:
o Revenues for the three months ended June 30, 2003 grew by $5.5 million, or
11 percent, to $54.7 million as compared to $49.2 million for the same
period in 2002. For the first six months of the year, revenues were $106.7
million, up $5.7 million, or 6 percent, compared to $101.0 million in 2002.
o Operating expenses, excluding depreciation, increased $1.8 million for the
quarter, and $1.5 million for the six months ended June 30, 2003, as
compared to the same periods in 2002. These net increases are primarily due
to increased in-orbit insurance costs and stock compensation expense,
partially offset by savings arising from careful management of our
discretionary costs.
o Net income for the second quarter 2003 was $3.1 million compared to $4.4
million in the same period in the prior year. The decrease primarily
relates to an increase in depreciation stemming from the launches of the
NSS-7 and NSS-6 satellites. Net income for the six-month period ended June
30, 2003 was $6.7 million compared to a net loss of $12.6 million in the
same period in the prior year. Net income for the six months ended June 30,
2002 included the non-cash impact of the cumulative effect of change in
accounting principle of $23.4 million relating to goodwill. Excluding this
goodwill charge, net income for the first half 2002 was $10.8 million.
o In the second quarter 2003, EBITDA (adjusted) increased $3.8 million, or 14
percent, to $30.7 million compared to $26.9 million for the same period in
the prior year. EBITDA (adjusted) for the six months ended June 30, 2003
was $59.7 million, as compared to $55.5 million for the same period in
2002, reflecting an increase of $4.2 million or 7 percent.
o The company achieved a positive free cash flow position of $26.3 million in
the second quarter 2003 compared to negative free cash flow of $18.3
million in the same period in 2002. Free cash flow for the six months ended
June 30, 2003 was $36.1 million compared to negative cash flow of $82.7
million in the same period in the prior year.
- --------
(3) See definition of free cash flow and "Reconciliation of net cash provided
by operating activities to free cash flow from operations" in Note 2 of
Notes to the consolidated quarterly financial information.
Second quarter operating highlights
>> New Skies signed significant video contracts with:
o The European Broadcasting Union (EBU) for satellite capacity and
special events transmission services on NSS-7, giving its 119 member
broadcasters from 79 countries coverage for some of the world's most
prominent sports and political events taking place over the next two
years; and
o Telediffusion d'Algerie, a major North African broadcaster, for
capacity on NSS-7 for full-time distribution of Algeria's national
television and radio broadcast stations; Internet backbone
connectivity for corporate IP customers; and occasional-use
transmissions for video contribution and satellite newsgathering.
>> Major IP, voice and data agreements were signed with:
o Star One, one of the largest companies providing satellite services in
Latin America and the only company providing broadband services
nationwide in Brazil, which has increased its capacity on the New
Skies satellite network by nearly 50 percent with a multiple
transponder deal on NSS-7;
o Embratel for a VSAT network to serve Brazilian post offices throughout
the country;
o KMS (Kuwait Messaging Services)/FalconStream, a Kuwaiti information
technology firm that provides Internet connectivity services via
satellite, for a long-term, multi-transponder agreement for capacity
on the NSS-6 and NSS-7 satellites to offer high-speed Internet access
services to more than 2,000 customer sites throughout the Middle East,
the Indian Subcontinent and North Africa; and
o A number of U.S.-based companies for services in support of the U.S.
Government's communications requirements.
>> Backlog was strengthened to $700 million at the end of June 2003, an
increase of $65 million, or 10 percent, as compared to the second quarter
2002 and an increases of $4 million from the end of the first quarter 2003.
About New Skies Satellites (AEX, NYSE: NSK)
New Skies Satellites is one of only four fixed satellite communications
companies with truly global satellite coverage, offering video, voice, data and
Internet communications services to a range of telecommunications carriers,
broadcasters, large corporations, Internet service providers and government
organizations around the world. New Skies has five satellites in orbit, ground
facilities around the world and one additional spacecraft under construction.
The company also has secured certain rights to make use of additional orbital
positions for future growth. New Skies is headquartered in The Hague, the
Netherlands, and has offices in Beijing, Hong Kong, Johannesburg, New Delhi, Sao
Paulo, Singapore, Sydney and Washington, D.C. Additional information is
available at www.newskies.com.
Conference call:
CEO Dan Goldberg and CFO Andrew Browne will host a conference call today at 5
p.m. (CET). To listen in please dial +44 20 8240 8240, passcode "New Skies".
The call will also be webcast live on the New Skies web site at:
http://www.newskies.com/ir .
The conference call will be available for replay, 24 hours a day for the
subsequent 5 working days and will also be archived on New Skies' website. The
international dial in number is + 44 20 8288 4459 and the UK freephone number is
0500 637 880. Passcode: 424402.
In the unlikely event of a technical problem, with the call, please dial the
back-up number in the listen-only mode: +44 20 8400 6340, passcode "New Skies".
For more information, please contact:
Elizabeth Hess,
Corporate Communications, New Skies Satellites +31 70 306 4133
ehess@newskies.com +31 6 2906 2492
Boris Djordjevic,
Investor Relations, New Skies Satellites +31 70 306 4183
bdjordjevic@newskies.com
Frank De Maria, Brunswick (New York) +1 212 333 3810
fdemaria@brunswickgroup.com
Pamela Small, Brunswick (London) +44 20 7404 5959
psmall@brunswickgroup.com
Safe Harbor
Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S.
Securities Exchange Act of 1934 provide a "safe harbor" for forward-looking
statements made by an issuer of publicly traded securities and persons acting on
its behalf. New Skies Satellites N.V. has made certain forward-looking
statements in this document in reliance on those safe harbors. A forward-looking
statement concerns the company's or management's intentions or expectations, or
are predictions of future performance. These statements are identified by words
such as "intends", "expects", "anticipates", "believes", "estimates", "may",
"will", "should" and similar expressions. By their nature, forward-looking
statements are not a matter of historical fact and involve risks and
uncertainties that could cause New Skies' actual results to differ materially
from those expressed or implied by the forward-looking statements for a number
of reasons. Factors which may affect the future performance of New Skies
include: delays or problems in the construction or launch of future satellites;
technical performance of in-orbit satellites and earth-based infrastructure;
increased competition and changes in technology; growth of and access to the
company's target markets; legal and regulatory developments affecting the
company's business; and worldwide business and economic conditions, among other
things. These risks and other risks affecting New Skies' business are described
in the company's periodic filings with the U.S. Securities and Exchange
Commission, including but not limited to New Skies' Annual Report on Form 20-F
for the year ended December 31, 2002. Copies of these filings may be obtained by
contacting the SEC. New Skies disclaims any obligation to update the
forward-looking statements contained in this document.
New Skies Satellites N.V. and Subsidiaries
- --------------------------------------------------------------------------------
Consolidated balance sheets
June 30, 2003 and December 31, 2002
(In thousands of U.S. Dollars, except share data)
June 30, December 31,
2003 2002
------------------ --------------------
Assets (unaudited)
Current Assets
Cash and cash equivalents $ 5,109 $ 8,329
Trade receivables 42,233 39,109
Prepaid expenses and other assets 9,519 10,885
------------------ --------------------
Total Current Assets 56,861 58,323
Communications, plant and other property, net 1,052,590 1,058,119
Deferred tax asset 9,445 10,087
Other assets 1,000 1,226
------------------ --------------------
TOTAL $ 1,119,896 $ 1,127,755
================== ====================
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt $ 5,000 $ 10,000
Accounts payable and accrued liabilities 20,451 18,396
Income taxes payable 30,534 29,124
Deferred revenues and other liabilities 7,005 8,994
Satellite performance incentives 8,100 6,218
------------------ --------------------
Total Current Liabilities 71,090 72,732
Long Term Liabilities 53,093 35,990
Shareholders' Equity
Governance preference shares (227,530,000 shares authorized, par - -
value (euro)0.05; none issued)
Cumulative preferred financing shares (22,753,000 shares authorized, - -
par value(euro)0.05; none issued)
Ordinary Shares (204,777,000 shares authorized, par value(euro)0.05;
130,570,241 shares issued) 6,026 6,026
Additional paid-in capital 977,888 977,506
Retained earnings 62,729 56,019
Unearned compensation (410) (685)
Accumulated other comprehensive income (loss) 672 (492)
Treasury stock, at cost (12,601,467 and 5,194,030 ordinary shares,
respectively) (51,192) (19,341)
------------------ --------------------
Total Shareholders' Equity 995,713 1,019,033
------------------ --------------------
TOTAL $ 1,119,896 $ 1,127,755
================== ====================
New Skies Satellites N.V. and Subsidiaries
Consolidated statements of income
Three-month periods ended June 30, 2003 and 2002 (Unaudited)
(In thousands of U.S. dollars, except share data) Three-month period ended June 30
2003 2002
---- ----
Revenues $ 54,650 $ 49,167
---------------- ------------------
Operating expenses:
Cost of operations 13,114 12,521
Selling, general and administrative 10,874 9,712
Depreciation 25,701 19,980
---------------- ------------------
Total Operating Expenses 49,689 42,213
---------------- ------------------
Operating Income 4,961 6,954
Interest expense and other, net 68 133
---------------- ------------------
Income Before Income Tax Expense 4,893 6,821
Income tax expense 1,761 2,456
---------------- ------------------
Net Income $ 3,132 $ 4,365
================ ==================
Basic and Diluted Earnings Per Share $ 0.03 $ 0.03
================ ==================
Six-month periods ended June 30, 2003 and 2002 (Unaudited)
(In thousands of U.S. Dollars, except share data) Six-month period ended June 30,
2003 2002
---- ----
Revenues $ 106,661 $ 100,960
---------------- ----------------
Operating expenses:
Cost of operations 25,694 25,510
Selling, general and administrative 21,307 19,951
Depreciation 48,626 38,632
---------------- ----------------
Total Operating Expenses 95,627 84,093
---------------- ----------------
Operating Income 11,034 16,867
Interest expense and other, net 549 27
---------------- ----------------
Income Before Income Tax Expense 10,485 16,840
Income tax expense 3,775 6,063
---------------- ----------------
Income Before Cumulative Effect of Change In Accounting Principle (A) 6,710 10,777
Cumulative effect of change in accounting principle, relating to
goodwill, net of taxes - (23,375)
--------------- ---------------
Net Income (Loss) $ 6,710 $ (12,598)
=============== ===============
Basic and Diluted Earnings Per Share:
Income Before Cumulative Effect of Change In Accounting Principle $ 0.06 0.08
Cumulative effect of change in accounting principle - (0.18)
--------------- ---------------
Basic and diluted earnings per share $ 0.06 $ (0.10)
=============== ===============
(A) The Company adopted the new accounting standard, SFAS 142, "Goodwill and
Other Intangible Assets" as of January 1, 2002, which resulted in a one-time
non-cash write-down of $23.4 million in respect of the acquisition of the New
Skies Networks subsidiary in Australia in March 2000.
New Skies Satellites N.V. and subsidiaries
Consolidated statements of cash flows
Six-month periods ended June 30, 2003 and 2002 (unaudited)
(In thousands of U.S. Dollars)
- --------------------------------------------------------------------------------
Six-month period ended June 30
2003 2002
------------ ------------
Cash flows from operating activities:
Net income (loss) $ 6,710 $ (12,598)
Adjustments for non-cash items:
Depreciation 48,626 38,632
Cumulative effect of change in accounting principle - 23,375
Deferred taxes 641 656
Stock compensation expense 968 417
Changes in operating assets and liabilities:
Trade receivables (3,048) 901
Prepaid expenses and other assets 1,476 3,128
Accounts payable and accrued liabilities 1,776 19
Income taxes payable 1,563 3,701
Other liabilities (2,449) 4,921
-------------- ----------------
Net Cash Provided By Operating Activities 56,263 63,152
-------------- ----------------
Cash flows from investing activities:
Payments for communication, plant and other
Property (20,210) (145,824)
-------------- ----------------
Net Cash Used In Investing Activities (20,210) (145,824)
-------------- ----------------
Cash flows from financing activities:
Repayment of short-term borrowings (5,000) -
Treasury stock acquired (32,162) -
Satellite performance incentives and other (2,421) (1,485)
-------------- ----------------
Net Cash Used In Financing Activities (39,583) (1,485)
-------------- ----------------
Effect of exchange rate differences 310 108
-------------- ----------------
Net change in cash and cash equivalents (3,220) (84,049)
Cash and cash equivalents, beginning of period 8,329 138,268
-------------- ----------------
Cash and cash equivalents, end of period $ 5,109 $ 54,219
============== ================
Cash payments for interest (net of amounts capitalized) were nil for the
six-month periods ended June 30, 2003 and 2002. Income taxes paid amounted to
$1.8 million and $2.0 million for the six-month periods ended June 30, 2003 and
2002, respectively.
New Skies Satellites N.V. and subsidiaries
Notes to the consolidated quarterly financial information
Three- and six month periods ended June 30, 2003 and 2002 (unaudited)
(1) Reconciliation of EBITDA (adjusted) to net income (loss)
New Skies believes earnings before interest, taxes, depreciation,
amortization and other expenses, primarily financing costs relating to the
$300 million revolving credit facility, (EBITDA adjusted) is a measure of
performance used by some investors, equity analysts and others to make
informed investment decisions. EBITDA (adjusted) is not presented as an
alternative measure of operating results or cash flow from operations, as
determined in accordance with generally accepted accounting principles in
the U.S. EBITDA (adjusted) as presented herein may not be comparable to
similarly titled measures reported by other companies. EBITDA (adjusted) is
reconciled to net income (loss) as follows:
(in thousands of U.S. dollars) Three-month period ended Six-month period ended
June 30, June 30,
2003 2002 2003 2002
--------- -------- -------- --------
Net income (loss) $ 3,132 $ 4,365 $ 6,710 $ (12,598)
Cumulative effect of change in
accounting principle (see note 3) - - - 23,375
Income tax expense 1,761 2,456 3,775 6,063
Interest expense 696 307 1,187 636
Interest expense capitalized (696) (307) (1,187) (636)
Other 68 133 549 27
Depreciation 25,701 19,980 48,626 38,632
------------ -------------- -------------- --------------
EBITDA (adjusted) $ 30,662 $ 26,934 $ 59,660 $ 55,499
============ ============== ============== ==============
(2) Reconciliation of net cash provided by operating activities to free cash
flow from operations
New Skies believes free cash flow from operations is a measure of
performance used by some investors, equity analysts and others to make
informed investment decisions. Free cash flow from operations is not
presented as an alternative measure of cash flow from operations, as
determined in accordance with generally accepted accounting principles in
the U.S. Free cash flow from operations as presented herein may not be
comparable to similarly titled measures reported by other companies. Free
cash flow from operations is reconciled to net cash provided by operating
activities as follows:
(in thousands of U.S. dollars) Three-month period ended Six-month period ended
June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
Net cash provided by operating activities $ 31,102 $ 26,199 $ 56,263 $ 63,152
Payments for communication, plant
and other property (4,776) (44,538) (20,210) (145,824)
------------ --------------- -------------- --------------
Free cash flow from operations $ 26,326 $ (18,339) $ 36,053 $ (82,672)
============ =============== ============== ==============
(3) Cumulative effect of change in accounting principle
The Company adopted the new accounting standard, SFAS 142, Goodwill and
Other Intangible Assets, as of January 1, 2002, which resulted in a
one-time non-cash write-down of $23.4 million of goodwill relating to the
acquisition of NSN Pty Ltd in Australia in March 2000.
(4) Stock based compensation
Effective January 1, 2003, New Skies adopted the fair value based method of
accounting for stock compensation under SFAS 123, Accounting for
Stock-Based Compensation, transitioning via the prospective method. The
following table illustrates the effect on net income and earnings per share
if New Skies had applied the fair value recognition provisions of SFAS 123
for all stock-based compensation awards.
(in thousands of U.S. dollars, Three-month period ended Six-month period ended
except earnings per share data) June 30, June 30,
2003 2002 2003 2002
-------- -------- -------- --------
Net income (loss), as reported $ 3,132 $ 4,365 $ 6,710 $ (12,598)
Add: Stock-based employee compensation expense
included in reported net income, net of taxes 425 227 666 342
Less: Total stock-based employee compensation
expense determined under fair value based
Method for all awards, net of taxes (1,270) (1,394) (2,632) $ (2,673)
------------- ------------ ------------- -----------
Pro forma net income (loss) $ 2,287 $ 3,198 $ 4,744 $ (14,929)
============= ============ ============= ===========
Earnings per share:
Basic and diluted, as reported $ 0.03 $ 0.03 $ 0.06 $ (0.10)
============= ============ ============= ===========
Basic and diluted, pro forma $ 0.02 $ 0.02 $ 0.04 $ (0.11)
============= ============ ============= ===========