SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 0-23044
AMERICAN MOBILE SATELLITE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 93-0976127
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
10802 Parkridge Boulevard
Reston, VA 20191-5416
(Address of principal (Zip Code)
executive offices)
(703) 758-6000
(Registrant's telephone number,
including area code)
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 report(s)), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Number of shares of Common Stock outstanding at June 30, 1996: 25,014,838
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
AMERICAN MOBILE SATELLITE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF LOSS
-------------------------------
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended May 3, 1988
June 30 June 30 (date of inception)
1996 1995 1996 1995 through June 30, 1996
Revenues:
Services $1,798 $1,793 $3,591 $3,601 $15,255
Sales of equipment 4,951 20 7,527 66 9,451
------ ------ ------ ------ -------
Total Revenues $6,749 $1,813 11,118 3,667 $24,706
Costs and Expenses:
Cost of service and operations 8,839 4,107 15,642 8,204 74,862
Cost of equipment sold 14,446 120 16,889 158 21,565
Sales and advertising 6,302 1,916 12,320 3,532 51,450
General and administrative 4,430 4,269 9,393 7,610 69,098
Depreciation and amortization 11,730 873 22,874 1,738 55,309
------ ------ ------ ------ -------
Operating Loss (38,998) (9,472) (66,000) (17,575) (247,578)
Interest Income 196 1,339 305 3,113 19,318
Interest Expense (4,707) -- (7,691) -- (8,674)
------ ------ ------ ------ -------
Loss before extraordinary item (43,509) (8,133) (73,386) (14,462) (236,934)
Extraordinary gain on early
extinguishment of debt -- -- -- -- (1,372)
------ ------ ------ ------ -------
Net Loss $(43,509) $(8,133) $(73,386) $(14,462) $(238,306)
======== ======= ======== ======== =========
Loss per share of common stock $(1.72) $(0.33) $(2.94) $(0.58)
====== ====== ====== ======
Weighted-average number
of common
shares outstanding
during the period 25,286 24,899 25,003 24,854
====== ====== ====== ======
See notes to consolidated financial statements.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
AMERICAN MOBILE SATELLITE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
---------------------------
(in thousands)
(Unaudited)
June 30, December 31,
1996 1995
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $15,939 $8,865
Inventory 30,552 15,104
Prepaid in-orbit insurance 1,608 4,823
Accounts receivable-trade 6,631 1,375
Other current assets 1,809 2,860
------ ------
Total current assets 56,539 33,027
PROPERTY AND EQUIPMENT IN SERVICE - NET 346,771 362,105
DEFERRED CHARGES AND OTHER ASSETS - NET 17,124 3,219
------- -------
Total assets $420,434 $398,351
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings
(including $ 10.0 million owed to related party) $70,000 $ --
Accounts payable and accrued expenses 65,793 34,462
Obligations under capital leases due within one year 4,501 2,446
Obligation to related party for equipment financing 6,297 6,874
Current portion of long-term debt 51,943 60,990
------- -------
Total current liabilities 198,534 104,772
Long-term Liabilities:
Capital lease obligations 4,353 6,052
----- -----
Total liabilities 202,887 110,824
Stockholders' Equity:
Preferred stock, par value $0.01; no shares issued -- --
Common stock, voting, par value $0.01 250 250
Additional paid-in capital 449,911 448,757
Common stock purchase warrants 25,692 3,440
Unamortized guarantee warrants (20,000) --
Deficit accumulated during the development stage (238,306) (164,920)
--------- ---------
Total stockholders' equity 217,547 287,527
------- -------
Total liabilities and stockholders' equity $420,434 $398,351
======== ========
See notes to consolidated financial statements.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
AMERICAN MOBILE SATELLITE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six months Ended May 3, 1988
June 30, (date of inception)
1996 1995 through June 30, 1996
---- ---- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(73,386) $(14,462) $(238,306)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Extraordinary loss on early
extinguishment of debt -- -- 1,372
Amortization of debt discount 2,253 -- 2,253
Depreciation and amortization 22,874 1,738 55,309
Deferred and other items, net 707 (505) (114)
Changes in assets and liabilities:
Prepaid in-orbit insurance 3,215 -- (1,608)
Trade accounts receivable (5,257) 1,000 (3,882)
Other current assets 648 (746) (3,732)
Inventory (15,448) (3,493) (30,552)
Accounts payable and accrued expenses 20,050 (222) 49,229
------- ------- --------
Net cash used in operating activities (44,344) (16,690) (170,031)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property under construction -- (62,802) (288,435)
Additions to property and equipment
in service (7,090) (5,302) (25,925)
Proceeds from sales of short-term
investments -- 28,717 202,756
Purchases of short-term investments -- -- (202,756)
Deferred charges and other assets -- (1,133) (11,999)
Non-inventory asset sales - net -- -- 2,176
Net cash used in investing ------- ------- --------
activities (7,090) (40,520) (324,183)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock 904 2,112 390,987
Principal payments under capital leases (1,372) (178) (2,162)
Payments on notes payable -- -- (34,667)
Proceeds from short-term borrowings 70,000 -- 70,000
Proceeds from debt 1,700 7,630 143,330
Payments on long-term debt (12,269) (11,379) (55,755)
Debt issuance costs (455) -- (1,536)
Redemption of Common Stock -- -- (44)
------ ------ -------
Net cash provided by (used in)
financing activities 58,508 (1,815) 510,153
Net (decrease) increase in cash and
cash equivalents 7,074 (59,025) 15,939
CASH AND CASH EQUIVALENTS, beginning of period 8,865 137,287 --
------ ------- -------
CASH AND CASH EQUIVALENTS, end of period $15,939 $78,262 $15,939
====== ======= =======
See notes to consolidated financial statements.
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (continued)
AMERICAN MOBILE SATELLITE CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
June 30, 1996
(Unaudited)
1. Organization and Business
American Mobile Satellite Corporation was incorporated on May 3, 1988, by eight
of the initial applicants for the mobile satellite services license, following a
determination by the Federal Communications Commission ("FCC") that the public
interest would best be served by granting the license to a consortium of all
willing, qualified applicants. The FCC has authorized American Mobile Satellite
Corporation to construct, launch, and operate a mobile satellite services system
(the "SKYCELL System") to provide a full range of mobile voice and data services
via satellite to land, air and sea-based customers in a service area consisting
of the continental United States, Alaska, Hawaii, Puerto Rico, the U.S. Virgin
Islands, U.S. coastal waters, international waters and airspace and any foreign
territory where the local government has authorized the provision of service. In
March 1991, American Mobile Satellite Corporation transferred the mobile
satellite services license ("MSS license") to a wholly owned subsidiary, AMSC
Subsidiary Corporation ("AMSC Subsidiary"). American Mobile Satellite
Corporation has six other subsidiaries, two of which are inactive and four whose
limited activities do not require material resources at this time. On April 7,
1995, the Company successfully launched its first satellite ("AMSC-1"), from
Cape Canaveral, Florida.
American Mobile Satellite Corporation (together with its subsidiaries "AMSC" or
the "Company") is devoting its efforts to establishing a new business. As
further discussed in Management's Discussion and Analysis of Financial Condition
and Results of Operations, this effort involves substantial risk. Specifically,
future operating results will be subject to significant business, economic,
regulatory, technical, and competitive uncertainties and contingencies. The
integration of the components of the SKYCELL System is a complex undertaking.
Delays in the integration of the SKYCELL System have already occurred, and there
can be no assurance that further delays will not occur. Depending on their
extent and timing, these factors individually or in the aggregate could have an
adverse effect on the Company's financial condition and future operating
results.
2. Basis of Presentation
The consolidated balance sheet as of June 30, 1996, and the consolidated
statements of loss and cash flows for the six months ended June 30, 1996 and
1995, and for the period May 3, 1988 through June 30, 1996, have been prepared
by the Company without audit. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at June 30, 1996, and
for all periods presented have been made. The balance sheet at December 31, 1995
has been taken from the audited financial statements.
The unaudited consolidated condensed financial statements included herein have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. While the Company believes
that the disclosures made are adequate to make the information presented not
misleading, these consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's 1995 Annual Report on Form 10-K ("1995 Annual
Report").
The Company paid approximately $3.0 million and $2.0 million in the six-month
periods ended June 30, 1996 and 1995, respectively, to related parties for
construction and service-related obligations and payments under financing
agreements. Payments to related parties from May 3, 1988 (date of inception) to
June 30, 1996, aggregated approximately $157.1 million. Total indebtedness to
related parties as of June 30, 1996 approximated $24.5 million.
Loss per common share is based on the weighted-average number of shares of
Common Stock outstanding during the period. Stock options and common stock
purchase warrants are not reflected since their effect would be antidilutive.
Certain amounts for the three months and six months ended June 30, 1995 and for
the period from inception to June 30, 1996 have been reclassified to conform
with the current period presentation.
3. Liquidity and Financing
Adequate liquidity and capital are critical to the ability of the Company to
transition successfully from being a development stage company to deploying and
operating the SKYCELL System. During 1996, the Company will require significant
additional financing aggregating approximately $150.0 million to cover expected
substantial operating losses, debt service requirements, capital expenditures,
inventory purchases and other working capital.
The Company does not expect to be in compliance with certain financial covenants
of its existing vendor debt arrangements (the "Vendor Financing") at September
30, 1996. Debt service requirements during 1996 are therefore expected to
include the repayment of existing Vendor Financing which approximates $51.9
million at June 30, 1996.
To satisfy its near term financing requirements, the Company on January 19, 1996
established a $40.0 million note purchase facility (the "Interim Financing")
with Morgan Guaranty Trust Company of New York ("Morgan"), Toronto Dominion
Investments, Inc. (an affiliate of The Toronto Dominion Bank) and Hughes
Communications Satellite Services, Inc. ("Hughes"), an AMSC stockholder. The
Company commenced borrowings under the Interim Financing on January 24, 1996,
and had borrowed the full $40.0 million available under that facility at April
4, 1996. To satisfy its financing requirements beyond April 1996, the Company on
April 22 and on June 12, 1996 issued notes (the "Short-Term Notes") in the
aggregate principal amount of $30.0 million to Morgan and Toronto Dominion
(Texas) Inc. (an affiliate of The Toronto Dominion Bank). The proceeds from the
issuance of the Short-Term Notes satisfied the Company's liquidity needs through
June 1996. In connection with its near term financing, the Company recognized
that it could not obtain such financing on commercially reasonable terms without
substantial credit support from its principal stockholders. In April 1996, the
Company entered into an agreement with Hughes Electronics Corporation ("HEC"),
pursuant to which HEC agreed to guaranty the Company's performance of its
obligations under the Interim Financing and the Short-Term Notes. HEC is the
parent Company of Hughes. In consideration of such guaranty and contingent on
the timing of the repayment of the Interim Financing and the Short-Term Notes,
and whether HEC guaranteed the facility through which the Interim Financing and
Short-Term Notes would be repaid, the Company agreed to pay HEC compensation
consisting of cash fees and the issuance of warrants exercisable for shares of
the Company's Common Stock. On June 7, 1996, Singapore Telecommunications, Ltd.
("Singapore") and the Company entered into an agreement pursuant to which
Singapore agreed to guaranty a portion of the Short-Term Notes on the same terms
as the guaranty extended by HEC. HEC and Singapore agreed that no compensation
would be payable to them in return for their guaranty of the Interim Financing
and the Short-Term Notes if they received compensation for their guaranty of the
Bank Financing, discussed below. Therefore, no fees were paid or are due to HEC
or Singapore for their guarantee of the Interim Financing and Short-Term Notes.
The terms of the Interim Financing were amended in connection with HEC's
guaranty of that facility. As amended, the Interim Financing bore interest at an
annual rate increasing from 11% to 15% until April 18, 1996, and at an annual
rate of 5.75% thereafter. The Interim Financing, as amended, matured and was
repaid on July 1, 1996. Additionally, the lenders received 100,000 warrants (the
"Interim Financing Warrants"), valued at $2.2 million at date of issue, that
allow them to purchase Common Stock at $.01 per share. The Interim Financing
Warrants expire in January 2001. The Short-Term Notes bore interest at an annual
rate of 5.6914%, and, as amended, matured and were repaid on July 1,1996.
To satisfy its ongoing financing needs, the Company on June 28, 1996,
established a $225.0 million debt facility with Morgan and The Toronto Dominion
Bank (the "Bank Financing") consisting of two facilities: (i) a $150.0 million
five-year, multi-draw term loan facility (the "Term Loan Facility"), and (ii) a
$75.0 million five-year revolving credit facility with a bullet maturity on June
30, 2001 (the "Working Capital Facility"). Proceeds from the Bank Financing were
used to repay the Interim Financing and the Short-Term Notes, and will be used
to refinance short-term Vendor Financing, and for general working capital
purposes. As of August 8, the Company has drawn down $35.0 million of the Term
Loan Facility at annual interest rates ranging from 5.6875% to 5.75%. The
Company concluded that it could not complete the Bank Financing without
substantial credit support from its principal stockholders (the "Guarantees").
HEC, Singapore and certain of the Company's other principal stockholders (the
Guarantors") guaranteed $200.0 million of the Bank Financing in exchange for
compensation consisting principally of cash fees and warrants (the "Guarantee
Warrants"). The Guarantee Warrants have been preliminarily valued at $20.0
million at date of issue subject to a final valuation opinion by an independent
third party. The Guarantee Warrants allow the Guarantors to purchase 5 million
shares of the Company's Common Stock at a price of $24 per share. The Guarantee
Warrants expire on June 28, 2001. The Guarantees will remain in place until
certain financial and operational covenants are met for two consecutive
quarterly periods during 1997. Until such time as the Guarantees are released,
subsequent borrowings under both facilities are contingent upon the Company
meeting certain future performance tests related to quarterly revenues, the
number of subscribers, operating cash flow, and earnings before interest, taxes,
depreciation and amortization. If these performance measures are not satisfied,
the Guarantors can direct that no further borrowings be made under the
facilities. There can be no assurance that such performance levels will be
achieved. Subsequent to the release of the Guarantees, anticipated to occur in
1997, the Company will continue to be subject to maintaining certain subscriber,
revenue and debt to subscriber ratios. The Bank Financing is secured by the
pledge of substantially all of the assets of the Company. The Company believes
that the proceeds from the Bank Financing, together with proceeds from certain
claims under its launch insurance as described in Note 5, will provide it with
sufficient liquidity for its operations through its peak financing requirements.
In February 1995, in return for a $10.0 million prepayment of certain of the
Company's ground segment obligations ("Ground Segment Obligations"), the
contractor agreed to reduce the cost of the ground segment asset being
constructed by waiving $2.0 million of the amounts owed. At the time of the
$10.0 million prepayment, the Company reduced the ground segment asset by $1.4
million representing unpaid interest on its Ground Segment Obligations.
Since the Company expected that it would not be in compliance with certain
financial covenants under its Vendor Financing agreements during the first
quarter of 1996, the agreements were amended to defer the date of required
compliance to September 30, 1996.
4. Legal and Regulatory Matters
Like other mobile service providers in the telecommunications industry, the
Company is subject to substantial domestic, foreign and international regulation
including the need for regulatory approvals to both complete and operate the
SKYCELL System and operate mobile data terminals and mobile telephones. The
successful operation of the SKYCELL System is dependent on a number of factors,
including the amount of L-band spectrum made available to the Company pursuant
to an international coordination process. The United States is currently engaged
in an international process of coordinating the Company's access to the spectrum
that the FCC has assigned to the Company. While the Company believes that
substantial progress has been made in the coordination process and expects that
the United States government will be successful in securing the necessary
spectrum, the process is not yet complete. The inability of the United States
government to secure sufficient spectrum could have an adverse effect on the
Company's financial position, results of operations, and its cash flows.
The Company has filed applications with the FCC and expects to file applications
in the future with respect to the operation of its SKYCELL System and certain
types of mobile data terminals and mobile telephones. Certain of its
applications pertaining to future service have been opposed. While the Company,
for various reasons, believes that it will receive the necessary approvals on a
timely basis, there can be no assurance that the requests will be granted on a
timely basis or that they will be granted on conditions favorable to the
Company. Any significant changes to the applications resulting from the FCC's
review process or any significant delay in their approval could adversely affect
the Company's financial position, results of operations, and its cash flows. The
Company's license requires that it comply with a construction and launch
schedule specified by the FCC for each of the three authorized satellites. The
second and third satellites are not in compliance with the schedule for
commencement of construction. The Company has asked the FCC to grant extensions
of the deadlines for the second and third satellites. Certain of these extension
requests have been opposed by third parties. The FCC has not acted on the
Company's requests. The FCC has the authority to revoke the authorizations for
the second and third satellites and in connection with any such revocation could
exercise its authority to rescind the Company's license. The Company believes
that the exercise of such authority to rescind the license is unlikely.
In 1992, a former director of AMSC filed an Amended Complaint against the
Company alleging violations of the Communications Act of 1934, as amended, and
of the Sherman Act and breach of contract. The suit seeks damages for not less
than $100 million trebled under the antitrust laws plus punitive damages,
interest, attorneys' fees and costs. In mid-1992, the Company filed its response
denying all allegations. The Company's motion for summary judgement, filed on
June 30, 1994, was denied on April 18, 1996. The matter has now been set for
trial beginning November 25, 1996. Management believes that the ultimate outcome
of this matter will not be material to the Company's financial position, results
of operations, and its cash flows.
5. Other Matters
At June 30, 1996, the Company had remaining contractual commitments to purchase
both mobile data terminal inventory and mobile telephone inventory approximating
$43.9 million. During the second quarter of 1996, the Company charged cost of
sales for a $4.0 million provision to reconfigure certain inventory to better
meet customer requirements. The Company also charged cost of sales in the amount
of $4.1 million for the writedown of certain assets, including inventory, to net
realizable value.
In connection with testing of the Communications Ground Segment ("CGS") in May
1995, a transmission was sent to AMSC-1 which caused certain components of the
communications payload to overheat, damaging one of the eight hybrid matrix
amplifier output ports that serve the spotbeams covering the eastern and central
United States. Beginning in December 1995, AMSC-1 experienced an intermittent
degradation of power in the eastern spotbeam. Although the Company attempted to
make adjustments to the SKYCELL System to compensate and correct for this power
loss, it was unable to eliminate recurrences of this power degradation.
Accordingly, in March 1996 the Company decided to stop using the eastern
spotbeam and to expand the coverage of the other three CONUS spotbeams to
include the territory previously covered by the eastern spotbeam. The Company
believes that the reconfiguration will provide substantially the same
geographical coverage as the original four spotbeam configuration without
affecting the quality of the service provided by AMSC-1. The reconfiguration
does not significantly change the coverage of the AMSC-1's two other spotbeams,
which cover Alaska, Hawaii, the Caribbean and portions of South America.
Expanding the three CONUS spotbeams to cover the territory previously covered by
the eastern spotbeam will require the use of additional power for subscriber
channels in certain locations. This power adjustment will not affect the
anticipated in-orbit life of AMSC-1, but will eventually result in the
availability of fewer channels for the SKYCELL System when the full capacity of
AMSC-1 is approached. Any reduction in the number of available channels will
depend on a variety of factors including the actual geographical mix of the
Company's subscriber base and the types of subscriber equipment used. Based on
its analyses to date, the Company believes that AMSC-1's channel capacity will
not be reduced by more than 15%. The Company also believes that any such
reduction will not affect its anticipated revenue growth until early 1999. The
timing and amount of any impact on revenue growth cannot be predicted with
precision and will depend upon, among other things, the results of the Company's
marketing efforts and the availability of alternative satellite capacity,
including capacity from a second generation satellite, should the Company decide
to proceed with its development, or pursuant to the Company's Satellite Capacity
Agreement with TMI Communications and Company, Limited Partnership, which
launched a satellite similar to AMSC-1 in April 1996. The Company filed a claim
for indemnity under its launch insurance with respect to the events leading to
the reconfiguration of AMSC-1. On August 1, 1996, the Company reached a
resolution of the claims under its satellite insurance contracts and policies
and received proceeds in the amount of $66.0 million which will be used to repay
the Working Capital Facility and portions of the Term Loan Facility and the
Vendor Financing. The carrying value of the satellite will be reduced by the net
insurance proceeds, which will result in a reduction of future depreciation
charges beginning in the third quarter of 1996.
In occurrences not directly related to testing and deployment of the CGS, AMSC-1
has experienced on separate occasions the failure of two solid state power
amplifiers ("SSPA") serving the Mountain, West, Alaska/Hawaii and Caribbean
spotbeams. These spotbeams were designed to be served by eight SSPAs with two
spares. The Company is currently operating these spotbeams in a seven SSPA
configuration and preserving one spare SSPA. AMSC-1 has also experienced the
failure of an L-band receiver supporting the Alaska/Hawaii spotbeam. While the
Company and its contractors were not able to identify the specific cause of the
failure, it is believed that it may be attributable to a defective receiver and
not a problem inherent in the design of AMSC-1. The Company is using a spare
back-up L-band receiver on AMSC-1 to service the Alaska/Hawaii spotbeam. As a
result of reconfiguring AMSC-1 to operate with five spotbeams, there is one
other back-up L-band receiver on AMSC-1.
PART I--FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Interim Financial Condition and Results of Operations
General
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the consolidated
financial condition and results of operations of American Mobile Satellite
Corporation (with its subsidiaries, "AMSC" or the "Company"). The discussion
should be read in conjunction with the consolidated financial statements and
notes thereto.
American Mobile Satellite Corporation was incorporated in May 1988. Since May
1988, the Company has been a development stage company, engaged primarily in the
design, development, construction, deployment and financing of a mobile
satellite communications system (the "SKYCELL System"). The SKYCELL System
includes the Company's first satellite ("AMSC-1") launched successfully in April
1995, and a fixed communications ground segment (the "CGS"). In December 1995,
the Company began to introduce certain voice products and services, including
its Satellite Telephone Service.
Factors that could affect Future Operating Results
The Company's future operating results could be adversely affected by a number
of uncertainties and factors, including (i) the timely completion and deployment
of all the Company's products and related services, including among other
things, availability of mobile telephones, data terminals and other equipment to
be used with the SKYCELL System ("Subscriber Equipment") being manufactured by
third parties over which the Company has limited control, (ii) the market
acceptance of the Company's services, (iii) the ability and the commitment of
the Company's Authorized Service Providers and Authorized Sales Agents to market
and distribute the Company's services, (iv) competition from existing companies
which provide services using existing communications technologies and the
possibility of competition from companies using new technology in the future,
(v) capacity constraints arising from the reconfiguration of AMSC-1 discussed
below, and (vi) additional technical anomalies that may occur within the SKYCELL
System, including those relating to AMSC-1, which could impact, among other
things, the operation of the SKYCELL System and the cost, scope or availability
of in-orbit insurance.
The Company's operating results and capital and liquidity needs have been
materially affected by delays experienced in the development and deployment of
the SKYCELL System. In particular, the Company's marketing efforts have been
materially affected by delays experienced in the development and availability of
Subscriber Equipment. Initial Subscriber Equipment for Satellite Telephone
Service ("STS") use did not become commercially available until December 1995
with additional configurations not available until the second quarter of 1996.
In addition, the CGS currently does not support facsimile capability. The
Company anticipates that facsimile capability will become available in the
fourth quarter of 1996. The impact of these delays on the Company's marketing
efforts has substantially decreased the Company's anticipated revenues and
increased the Company's capital and liquidity needs. No assurance can be given
that additional delays relating to the SKYCELL System or Subscriber Equipment
will not be encountered in the future and have an adverse impact on the Company.
In addition, the markets for wireless communications services are characterized
by rapid technological and other changes. The Company's success depends, in
part, on its ability to respond and adapt to such changes. The delays
experienced in the deployment of the SKYCELL System and the availability of
Subscriber Equipment, together with changes in market conditions, have already
caused the Company to redefine its focus on various products and markets, and to
modify its intended distribution arrangements. For instance, the rapid build-out
of cellular and other terrestrial-based wireless communications systems has
impacted the Company's Satellite Roaming Service business by preempting the
attention of the cellular carriers who are the Company's Authorized Service
Providers. To date, the ASPs have not expended significant efforts in marketing
the Company's services. By contrast, perceived demand has resulted in more
emphasis on the maritime market. The Company expects that sales and marketing
expenses will continue to increase from previous levels in 1995 as increased
resources are devoted to its subscriber acquisition programs. As of June 30,
1996, there were approximately 9,200 subscribers on the SKYCELL System. Charges
to operations for depreciation expense for the SKYCELL System began in the
fourth quarter of 1995 and accordingly, it is expected that future charges will
be significant. Additionally, the Company discontinued capitalization of
interest costs in the fourth quarter of 1995 upon the commencement of full
commercial service. Interest expense in 1996 is expected to be significant as a
result of borrowings under the Interim Financing, the Short-Term Notes, and
borrowings under the Bank Financing as discussed below.
In March 1996, due to certain technical anomalies, the Company reconfigured
AMSC-1 to provide service using five, instead of the previous six, spotbeams.
Although this reconfiguration will not affect the in-orbit life of AMSC-1 or the
quality of service provided, it will eventually result in the availability of
fewer subscriber channels as full capacity of AMSC-1 is approached. Although any
actual reduction in the number of available channels will be dependent on a
variety of factors, based on its analyses to date, the Company believes that
AMSC-1's channel capacity will not be reduced by more than 15%, or that any such
reduction will affect the Company's anticipated revenue growth until early 1999.
See "Technological Developments."
Results of Operations
Operating Revenues
Service revenues, which include both the Company's Satellite Telephone Services
and its Fleet Management Data services, approximated $1.8 million and $3.6
million for the three-month and six-month periods ended June 30, 1996,
respectively. Service revenue from Satellite Telephone Services approximated
$849,000 and $1.8 million for the three-month and six-month periods ended June
30, 1996 including approximately $1.3 million for the six-month period ended
June 30, 1996 attributable to satellite capacity leased to TMI Communications
and Company, Limited Partnership ("TMI"), a Canadian limited partnership, under
a commitment which was completed in May 1996. Service revenue from Fleet
Management Data Services approximated $949,000 and $1.8 million for the
three-month and six-month periods ended June 30, 1996, respectively, compared to
$1.8 million and $3.6 million for the same period in 1995, a reduction of
$851,000 and $1.8 million respectively. Prior to 1996, the Company provided its
Fleet Management Data Service using satellite capacity leased from the
Communications Satellite Corporation ("COMSAT"), the cost of which was passed
through to one customer ("Major Customer"). The decrease in Fleet Management
Data Service revenue of $1.8 million for the six-month period ended June 30,
1996 reflects the reduced revenue from the Major Customer resulting from lower
billings for the use o the lower cost AMSC-1 versus billings attributable to the
leased COMSAT satellite applied on a pass-through basis. Of the Fleet Management
Data Services revenues, 42% and 47% were attributable to the Major Customer for
the three months and six months ended June 30, 1996, respectively compared to
71% and 72% for the respective periods in 1995. Revenue from the sale of mobile
data terminals and mobile telephones increased from $20,000 for the three months
ended June 30, 1995 to $5.0 million for the three months ended June 30, 1996,
and increased to $7.5 million for the six months ended June 30, 1996 compared to
$66,000 for the same period in 1995. This increase is attributable to (i) the
Company's introduction of certain voice products in the fourth quarter of 1995
and the resulting sale of mobile telephones, and (ii) the increased availability
of mobile data terminals in 1996 compared to the first six months of 1995
following a contract signed with a mobile data terminal manufacturer in February
1995.
Costs and Expenses
The Company's costs and expenses have primarily increased in connection with the
commencement of full commercial service in December 1995. Cost of service and
operations for the three-month and six-month periods ended June 30, 1996, which
includes costs to support subscribers and to operate the SKYCELL System, were
$8.8 million and $15.6 million, respectively, $4.7 million and $7.4 million
greater than the comparable periods in 1995. Cost of service and operations for
the three-month and six-month periods ended June 30, 1996 were 19% and 20%, as a
percentage of operating expenses, compared to 36% and 39% for the comparable
periods in 1995. The dollar increase in cost of service and operations was
primarily attributable to (i) additional personnel and related costs to support
both existing and anticipated customer demand, (ii) increased costs associated
with the on-going maintenance of the Company's billing systems and the CGS, and
(iii) $3.2 million of insurance expense for in-orbit insurance coverage for
AMSC-1, offset by the elimination of COMSAT lease expense reflecting the
transition of the Company's customers from the leased satellite to AMSC-1. The
decrease as a percentage of operating expenses was attributable to the overall
increase in total operating expenses. The cost of equipment sold increased to
$14.4 million from $120,000 for the three months ended June 30, 1996 and 1995,
respectively, and to $16.9 million from $158,000 for the six months ended June
30, 1996 and 1995, respectively, and represented 32% and 1% of total operating
expenses for the three months ended June 30, 1996 and 1995, and 22% and less
than 1% for the six-month periods ended June 30, 1996 and 1995, respectively.
The increase in both dollars and as a percentage of operating expenses of the
cost of equipment sold is primarily attributable to (i) the Company's
introduction of certain voice products in the fourth quarter of 1995 and the
resulting sale of mobile telephones, (ii) the availability of mobile data
terminals in 1996 compared to the first six months of 1995, (iii) a $4.0 million
charge for the reconfiguration of certain inventory components to better meet
customer requirements, and (iv) a $4.1 million writedown of certain assets,
including inventory, to net realizable value. Sales and advertising expenses
were $6.3 million and $12.3 million for the three-month and six-month periods
ended June 30, 1996, respectively, compared with $1.9 million and $3.5 million
for the same periods in 1995. Sales and advertising expenses for the three-month
and six-month periods ended June 30, 1996 were 14% and 16%, respectively, as a
percentage of operating expenses, compared to 17% for both the comparable
periods in 1995. The dollar increase of sales and advertising expenses were
primarily attributable to (i) additional headcount and personnel related costs
associated with the increase in sales staff, and (ii) increased costs directly
associated with the increased subscriber acquisition programs. The decrease as a
percentage of operating expenses was attributable to the overall increase in
total operating expenses. General and administrative expenses for the
three-month and six-month periods ended June 30, 1996 were $4.4 million and $9.4
million, respectively, $161,000 and $1.8 million greater than the comparable
periods in 1995. General and administrative expenses for the three-month and
six-month periods ended June 30, 1996 were 10% and 12%, respectively, as a
percentage of operating expenses, compared to 38% and 36% for the same periods
in 1995. The dollar increase in general and administrative expenses for the
first six months of 1996 compared to 1995 was primarily attributable to a $1.2
million increase in personnel-related costs associated with hiring and training
staff to support full commercial service and increased facilities and related
support costs approximating $610,000. The decrease as a percentage of operating
expenses was attributable to the overall increase in total operating expenses.
Depreciation and amortization expense was $11.7 million and $22.9 million for
the three-month and six-month periods ended June 30, 1996, respectively,
compared with $873,000 and $1.7 million for the same periods in 1995.
Depreciation and amortization for the three-month and six-month periods ended
June 30, 1996 were 25% and 30%, respectively, as a percentage of operating
expenses, compared with 8% for both the comparable periods in 1995. Both the
dollar increase and the increase as a percentage of operating expenses in
depreciation and amortization expense were attributable to the commencement of
depreciation of both AMSC-1 and related assets and the CGS in the fourth quarter
of 1995.
Interest
Interest income was $196,000 and $305,000 in the three-month and six-month
periods ended June 30, 1996, respectively, compared to $1.3 million and $3.1
million in the same periods in 1995. The decreases were a result of lower
average cash balances in the first six months of 1996. The Company incurred $4.7
million and $7.7 million of interest expense for the three-month and six-month
periods ended June 30, 1996, respectively, compared to no interest expense for
the comparable periods of 1995 reflecting (i) the discontinuation of interest
cost capitalization as a result of substantially completing the SKYCELL System
in the fourth quarter of 1995, and (ii) the amortization of debt discount in the
first six months of 1996 of approximately $2,253,000.
Capital Expenditures
Capital expenditures, including additions financed through vendor financing
arrangements, for the first six months of 1996 were $7.5 million compared to
$62.1 million for the same period in 1995. The decrease was largely attributable
to the purchase, in the first quarter of 1995, of launch insurance at a cost to
the Company of $42.8 million in connection with the Company's launch contract
with Martin Marietta Commercial Launch Services, Inc.
Liquidity and Capital Resources
Adequate liquidity and capital are critical to the ability of the Company to
transition successfully from being a development stage Company to deploying and
operating the SKYCELL System. During 1996, the Company will require significant
additional financing aggregating approximately $150.0 million to cover expected
substantial operating losses, debt service requirements, capital expenditures,
inventory purchases and other working capital. The Company does not expect to be
in compliance with certain financial covenants of its existing vendor debt
arrangements (the "Vendor Financing") at September 30, 1996. Debt service
requirements during 1996 are therefore expected to include the repayment of
existing Vendor Financing which approximates $51.9 million at June 30, 1996. In
addition, the Company expects that operating revenues will be insufficient to
cover operating expenses until sometime in 1997.
The effect of these matters, among others, is that the Company estimates that
its peak financing requirement will be approximately $200.0 million in early
1998. The Company's actual peak financing requirements may differ materially
from this estimate based on, among other factors, shortfalls from estimated
levels of operating cashflows due to delays in the introduction of certain
products and services, the unavailability of Subscriber Equipment, and
insufficient demand for the Company's services. See "Factors that could affect
Future Operating Results."
To satisfy its near term financing requirements, the Company on January 19, 1996
established a $40.0 million note purchase facility (the "Interim Financing")
with Morgan Guaranty Trust Company of New York ("Morgan"), Toronto Dominion
Investments, Inc. (an affiliate of The Toronto Dominion Bank) and Hughes
Communications Satellite Services, Inc. ("Hughes"), an AMSC stockholder. The
Company commenced borrowings under the Interim Financing on January 24, 1996,
and had borrowed the full $40.0 million available under that facility at April
4, 1996. To satisfy its financing requirements beyond April 1996, the Company on
April 22, 1996 and June 12, 1996 issued notes (the "Short-Term Notes") in the
aggregate principal amount of $30.0 million to Morgan and Toronto Dominion
(Texas) Inc. (an affiliate of The Toronto Dominion Bank). The proceeds from the
issuance of the Short-Term Notes satisfied the Company's liquidity needs through
June 1996.
In connection with its near term financing, the Company recognized that it could
not obtain such financing on commercially reasonable terms without substantial
credit support from its principal stockholders. In April 1996, the Company
entered into an agreement with Hughes Electronics Corporation ("HEC"), pursuant
to which HEC agreed to guaranty the Company's performance of its obligations
under the Interim Financing and the Short-Term Notes. HEC is the parent Company
of Hughes. In consideration of such guaranty and contingent on the timing of the
repayment of the Interim Financing and the Short-Term Notes, and whether HEC
guarantees the facility through which the Interim Financing and Short-Term Notes
would be repaid, the Company agreed to pay to HEC compensation consisting of
cash fees and the issuance of warrants exercisable for shares of the Company's
Common Stock. On June 7, 1996, Singapore Telecommunications, Ltd. ("Singapore")
and the Company entered into an agreement pursuant to which Singapore agreed to
guaranty a portion of the Short-Term Notes on the same terms as the guaranty
extended by HEC. HEC and Singapore agreed that no compensation would be payable
to them in return for their guaranty of the Interim Financing and the Short-Term
Notes if they received compensation for their guaranty of the Bank Financing,
discussed below. Therefore, no fees were paid or are due to HEC or Singapore for
their guarantee of the Interim Financing and Short-Term Notes.
The terms of the Interim Financing were amended in connection with HEC's
guaranty of that facility. As amended, the Interim Financing bore interest at an
annual rate increasing from 11% to 15% until April 18, 1996, and at an annual
rate of 5.75% thereafter. The Interim Financing, as amended, matured and was
repaid on July 1, 1996.
The terms of the Interim Financing were also amended to delete certain covenants
the Company had not satisfied, including certain covenants relating to the
attainment of certain numbers of subscribers. The lenders under the Interim
Financing had previously waived compliance with those covenants.
The Short-Term Notes bore interest at an annual rate of 5.6914%, and, as
amended, matured and were paid on July 1, 1996.
To satisfy its ongoing financing needs, the Company on June 28, 1996,
established a $225.0 million debt facility with Morgan and The Toronto Dominion
Bank (the "Bank Financing") consisting of two facilities: (i) a $150.0 million
five-year, multi-draw term loan facility (the "Term Loan Facility"), and (ii) a
$75.0 million five-year revolving credit facility with a bullet maturity on June
30, 2001 (the "Working Capital Facility"). Proceeds from the Bank Financing were
used to repay the Interim Financing and the Short-Term Notes, and will be used
to refinance short-term Vendor Financing, and for general working capital
purposes. As of August 8, the Company has drawn down $35.0 million of the Term
Loan Facility at annual interest rates ranging from 5.6875% to 5.75%. The
Company concluded that it could not complete the Bank Financing without
substantial credit support from its principal stockholders (the "Guarantees").
HEC, Singapore and certain of the Company's other principal stockholders (the
Guarantors") guaranteed $200.0 million of the Bank Financing in exchange for
compensation consisting principally of cash fees and warrants (the "Guarantee
Warrants"). The Guarantee Warrants have been preliminarily valued at $20.0
million at date of issue subject to a final valuation opinion by an independent
third party. The Guarantee Warrants allow the Guarantors to purchase 5 million
shares of the Company's Common Stock at a price of $24 per share. The Bank
Financing Warrants expire on June 28, 2001. The Guarantees will remain in place
until certain financial and operational covenants are met for two consecutive
quarterly periods during 1997. Until such time as the Guarantees are released,
subsequent borrowings under both facilities are contingent upon the Company
meeting certain future performance tests related to quarterly revenues, the
number of subscribers, operating cash flow, and earnings before interest, taxes,
depreciation and amortization. If these performance measures are not satisfied,
the Guarantors can direct that no further borrowings be made under the
facilities. There can be no assurance that such performance levels will be
achieved. Subsequent to the release of the Guarantees, anticipated to occur in
1997, the Company will continue to be subject to maintaining certain subscriber,
revenue and debt to subscriber ratios. The Bank Financing is secured by the
pledge of substantially all of the assets of the Company. The Company believes
that the proceeds from the Bank Financing, together with proceeds from certain
claims under its launch insurance as described below, will provide it with
sufficient liquidity for its operations through its peak financing requirements.
On February 7, 1996, the Company filed a registration statement relating to the
offering of up to 4,600,000 shares of the Company's Common Stock. In light of
the current market price of its Common Stock, the Company has concluded that
such offering cannot presently be completed on commercially reasonable terms.
The Company filed a claim for indemnity under its launch insurance with respect
to the anomalies leading to the reconfiguration of AMSC-1 discussed below. See
"Technological Developments." On August 1, 1996, the Company reached a
resolution of the claims under its satellite insurance contracts and policies,
and received proceeds in the amount of $66.0 million which will be used to repay
the Working Capital Facility and portions of the Term Loan Facility and the
Vendor Financing. The carrying value of the satellite will be reduced by the
amount of the net insurance proceeds, which will result in a reduction of future
depreciation charges beginning in the third quarter of 1996.
At June 30, 1996, the Company had remaining contractual commitments to purchase
both mobile data terminal inventory and mobile telephone inventory approximating
$43.9 million.
For the period from inception through June 30, 1996, the Company has used $170.0
million of cash in operating activities and $324.2 million of cash in investing
activities and has generated $510.2 million of cash from financing activities.
The Company's primary investing activity since inception has been capital
expenditures related to the SKYCELL System. The Company has financed its capital
and operating requirements through a combination of private debt and equity
placements, a public equity offering, borrowings from financial institutions,
and vendor financing arrangements.
Cash used in operating activities was $44.3 million for the first six months of
1996 compared to cash used of $16.7 million for the same period in 1995, an
increase of $27.6 million. The increase in cash used in operating activities was
primarily attributable to (i) increased operating losses, (ii) increased trade
receivables as a result of increased equipment and service revenue, and (iii)
increased inventory acquisitions, offset by the net increase in operating
accounts payable and accrued expenses. Cash used in investing activities was
$7.1 million for the first six months of 1996 compared to $40.5 million for the
same period in 1995, a decrease of $33.4 million. The decrease was primarily
attributable to the decrease in construction activity, which included a $42.8
million purchase of launch insurance in the first quarter of 1995, offset
partially by the sale of $28.7 million of short-term investments in the first
quarter of 1995. Cash provided by financing activities was $58.5 million for the
first six months of 1996 compared to cash used in financing activities of $1.8
million for the same period in 1995, an increase of $60.3 million. The increase
was largely attributable to the $70.0 million of borrowings under the Interim
Financing and Short-Term Notes in the first six months of 1996. As of June 30,
1996, the Company had $15.9 million of cash and cash equivalents and a working
capital deficit of $142.0 million.
Technological Developments
In connection with testing of the CGS in May 1995, a transmission was sent to
AMSC-1 which caused certain components of the communications payload to
overheat, damaging one of the eight hybrid matrix amplifier output ports that
serve the spotbeams covering the eastern and central United States. Beginning in
December 1995, AMSC-1 experienced an intermittent degradation of power in the
eastern spotbeam. Although the Company attempted to make adjustments to the
SKYCELL System to compensate and correct for this power loss, it was unable to
eliminate recurrences of this power degradation. Accordingly, in March 1996 the
Company decided to stop using the eastern spotbeam and to expand the coverage of
the other three CONUS spotbeams to include the territory previously covered by
the eastern spotbeam. The Company believes that the reconfiguration will provide
substantially the same geographical coverage as the original four spotbeam
configuration without affecting the quality of the service provided by AMSC-1.
The reconfiguration will not significantly change the coverage of AMSC- 1's two
other spotbeams, which cover Alaska, Hawaii, the Caribbean and portions of South
America.
Expanding the three CONUS spotbeams to cover the territory previously covered by
the eastern spotbeam will require the use of additional power for subscriber
channels in certain locations. This power adjustment will not affect the
anticipated in-orbit life of AMSC-1, but will eventually result in the
availability of fewer channels for the SKYCELL System when the full capacity of
AMSC-1 is approached. Any reduction in the number of available channels will
depend on a variety of factors including the actual geographical mix of the
Company's subscriber base and the types of Subscriber Equipment used. Based on
its analyses to date, the Company believes that AMSC-1's channel capacity will
not be reduced by more than 15%. The Company also believes that any such
reduction will not affect its anticipated revenue growth until early 1999. The
timing and amount of any impact on revenue growth cannot be predicted with
precision and will depend upon, among other things, the results of the Company's
marketing efforts and the availability of alternative satellite capacity,
including capacity from a second generation satellite, should the Company decide
to proceed with its development, or pursuant to the Company's Satellite Capacity
Agreement with TMI, which launched a satellite similar to AMSC-1 in April 1996.
In occurrences not directly related to testing and deployment of the CGS, AMSC-1
has experienced on separate occasions the failure of two solid state power
amplifiers ("SSPA") serving the Mountain, West, Alaska/Hawaii and Caribbean
spotbeams. These spotbeams were designed to be served by eight SSPAs with two
spares. The Company is currently operating these spotbeams in a seven SSPA
configuration and preserving one spare SSPA. AMSC-1 has also experienced the
failure of an L-band receiver supporting the Alaska/Hawaii spotbeam. While the
Company and its contractors were not able to identify the specific cause of the
failure, it is believed that it may be attributable to a defective receiver and
not a problem inherent in the design of AMSC-1. The Company is using a spare
back-up L-band receiver on AMSC-1 to service the Alaska/Hawaii spotbeam. As a
result of reconfiguring AMSC-1 to operate with five spotbeams, there is one
other back-up L-band receiver on AMSC-1.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 -- Restated Certificate of Incorporation of AMSC (as restated effective May
1, 1996) (Incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the period ending March 31,1996 (File No.
0-23044))
3.2 -- Amended and Restated Bylaws of AMSC (as amended and restated effective
February 29, 1996) (Incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the fiscal year ending December
31, 1995 (File No. 0-23044))
9.3 -- Standstill Agreement dated as of June 28, 1996, among American Mobile
Satellite Corporation, AMSC Subsidiary Corporation, Hughes Electronics
Corporation and Hughes Communications Satellite Services, Inc.
(Incorporated by reference to Exhibit X to the Amended and Restated
Schedule 13D dated July 1, 1996, filed by Hughes Communications Satellite
Services, Inc., Hughes Communications, Inc., Hughes Aircraft Company,
Hughes Electronics Corporation and General Motors Corporation with respect
to shares of Common Stock, $.01 par value, of American Mobile Satellite
Corporation)
10.11a -- Amendment No. 1 dated June 28, 1996, to Right of First Offer Agreement
among American Mobile Satellite Corporation, Hughes Communications
Satellite Services, Inc., Singapore Telecommunications Ltd., Satellite
Communications Investments Corporation, Space Technologies Investments,
Inc., and Transit Communications, Inc. (Incorporated by reference to
Exhibit XI to the Amended and Restated Schedule 13D dated July 1, 1996,
filed by Hughes Communications Satellite Services, Inc., Hughes
Communications, Inc., Hughes Aircraft Company, Hughes Electronics
Corporation and General Motors Corporation with respect to shares of Common
Stock, $.01 par value, of American Mobile Satellite Corporation)
10.13* -- Amended and Restated Stock Option Plan (as amended effective April 25,
1996) (filed herewith)
10.55-- $150,000,000 Credit Agreement dated as of June 28, 1996, among AMSC
Subsidiary Corporation, American Mobile Satellite Corporation, the Banks
Listed Therein, Morgan Guaranty Trust Company of New York, as Documentation
Agent, and Toronto Dominion (Texas), Inc., as Administrative Agent (filed
herewith)
10.56-- $75,000,000 Credit Agreement dated as of June 28, 1996, among AMSC
Subsidiary Corporation, American Mobile Satellite Corporation, the Banks
Listed Therein, Morgan Guaranty Trust Company of New York, as Documentation
Agent, and Toronto Dominion (Texas), Inc., as Administrative Agent (filed
herewith)
10.57-- Guaranty Issuance Agreement dated as of June 28, 1996, by and among
Hughes Electronics Corporation, Singapore Telecommunications Ltd., Baron
Capital Partners, L.P., AMSC Subsidiary Corporation and American Mobile
Satellite Corporation (Incorporated by reference to Exhibit XII to the
Amended and Restated Schedule 13D dated July 1, 1996, filed by Hughes
Communications Satellite Services, Inc., Hughes Communications, Inc.,
Hughes Aircraft Company, Hughes Electronics Corporation and General Motors
Corporation with respect to shares of Common Stock, $.01 par value, of
American Mobile Satellite Corporation)
10.58-- Guaranty dated as of June 28, 1996, made by Hughes Electronics
Corporation to Toronto Dominion (Texas), Inc., as Administrative Agent
(filed herewith)
10.59-- Warrant No. 1 for the Purchase of 3,750,000 Shares (subject to
adjustment) of Common Stock of American Mobile Satellite Corporation issued
to Hughes Electronics Corporation, dated June 28, 1996 (Incorporated by
reference to Exhibit XIII to the Amended and Restated Schedule 13D dated
July 1, 1996, filed by Hughes Communications Satellite Services, Inc.,
Hughes Communications, Inc., Hughes Aircraft Company, Hughes Electronics
Corporation and General Motors Corporation with respect to shares of Common
Stock, $.01 par value, of American Mobile Satellite Corporation)
10.60-- Registration Rights Agreement dated as of June 28, 1996, among American
Mobile Satellite Corporation, Hughes Electronics Corporation, Singapore
Telecommunications Ltd., and Baron Capital Partners, L.P. (Incorporated by
reference to Exhibit XIV to the Amended and Restated Schedule 13D dated
July 1, 1996, filed by Hughes Communications Satellite Services, Inc.,
Hughes Communications, Inc., Hughes Aircraft Company, Hughes Electronics
Corporation and General Motors Corporation with respect to shares of Common
Stock, $.01 par value, of American Mobile Satellite Corporation)
11.1 -- Computation of Net Loss Per Share (filed herewith)
27.0 -- Financial Data Schedule
99.8 -- Schedule of Exhibits Omitted Pursuant to Instruction 2 to Item 601 of
Regulation S-K (filed herewith)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN MOBILE SATELLITE CORPORATION
(Registrant)
Date: August 14, 1996 /s/Patrick C. FitzPatrick
Patrick C. FitzPatrick
Chief Financial Officer and Vice President
(principal financial officer)
/s/Christopher Colavito
Controller and Vice President
(principal accounting officer)
EXHIBIT INDEX
Exhibit
Number Exhibit
3.1 -- Restated Certificate of Incorporation of AMSC (as restated effective May
1, 1996) (Incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the period ending March 31, 1996 (File
No. 0-23044))
3.2 -- Amended and Restated Bylaws of AMSC (as amended and restated effective
February 29, 1996) (Incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the fiscal year ending December
31, 1995 (File No. 0-23044))
9.3 -- Standstill Agreement dated as of June 28, 1996, among American Mobile
Satellite Corporation, AMSC Subsidiary Corporation, Hughes Electronics
Corporation and Hughes Communications Satellite Services, Inc.
(Incorporated by reference to Exhibit X to the Amended and Restated
Schedule 13D dated July 1, 1996, filed by Hughes Communications Satellite
Services, Inc., Hughes Communications, Inc., Hughes Aircraft Company,
Hughes Electronics Corporation and General Motors Corporation with respect
to shares of Common Stock, $.01 par value, of American Mobile Satellite
Corporation)
10.11a -- Amendment No. 1 dated June 28, 1996, to Right of First Offer Agreement
among American Mobile Satellite Corporation, Hughes Communications
Satellite Services, Inc., Singapore Telecommunications Ltd., Satellite
Communications Investments Corporation, Space Technologies Investments,
Inc., and Transit Communications, Inc. (Incorporated by reference to
Exhibit XI to the Amended and Restated Schedule 13D dated July 1, 1996,
filed by Hughes Communications Satellite Services, Inc., Hughes
Communications, Inc., Hughes Aircraft Company, Hughes Electronics
Corporation and General Motors Corporation with respect to shares of Common
Stock, $.01 par value, of American Mobile Satellite Corporation)
10.13* -- Amended and Restated Stock Option Plan (as amended effective April 25,
1996) (filed herewith)
10.55-- $150,000,000 Credit Agreement dated as of June 28, 1996, among AMSC
Subsidiary Corporation, American Mobile Satellite Corporation, the Banks
Listed Therein, Morgan Guaranty Trust Company of New York, as Documentation
Agent, and Toronto Dominion (Texas), Inc., as Administrative Agent (filed
herewith)
10.56-- $75,000,000 Credit Agreement dated as of June 28, 1996, among AMSC
Subsidiary Corporation, American Mobile Satellite Corporation, the Banks
Listed Therein, Morgan Guaranty Trust Company of New York, as Documentation
Agent, and Toronto Dominion (Texas), Inc., as Administrative Agent (filed
herewith)
10.57-- Guaranty Issuance Agreement dated as of June 28, 1996, by and among
Hughes Electronics Corporation, Singapore Telecommunications Ltd., Baron
Capital Partners, L.P., AMSC Subsidiary Corporation and American Mobile
Satellite Corporation (Incorporated by reference to Exhibit XII to the
Amended and Restated Schedule 13D dated July 1, 1996, filed by Hughes
Communications Satellite Services, Inc., Hughes Communications, Inc.,
Hughes Aircraft Company, Hughes Electronics Corporation and General Motors
Corporation with respect to shares of Common Stock, $.01 par value, of
American Mobile Satellite Corporation)
10.58-- Guaranty dated as of June 28, 1996, made by Hughes Electronics
Corporation to Toronto Dominion (Texas), Inc., as Administrative Agent
(filed herewith)
10.59-- Warrant No. 1 for the Purchase of 3,750,000 Shares (subject to
adjustment) of Common Stock of American Mobile Satellite Corporation issued
to Hughes Electronics Corporation, dated June 28, 1996 (Incorporated by
reference to Exhibit XIII to the Amended and Restated Schedule 13D dated
July 1, 1996, filed by Hughes Communications Satellite Services, Inc.,
Hughes Communications, Inc., Hughes Aircraft Company, Hughes Electronics
Corporation and General Motors Corporation with respect to shares of Common
Stock, $.01 par value, of American Mobile Satellite Corporation)
10.60-- Registration Rights Agreement dated as of June 28, 1996, among American
Mobile Satellite Corporation, Hughes Electronics Corporation, Singapore
Telecommunications Ltd., and Baron Capital Partners, L.P. (Incorporated by
reference to Exhibit XIV to the Amended and Restated Schedule 13D dated
July 1, 1996, filed by Hughes Communications Satellite Services, Inc.,
Hughes Communications, Inc., Hughes Aircraft Company, Hughes Electronics
Corporation and General Motors Corporation with respect to shares of Common
Stock, $.01 par value, of American Mobile Satellite Corporation)
11.1 -- Computation of Net Loss Per Share (filed herewith)
27.0 -- Financial Data Schedule
99.8 -- Schedule of Exhibits Omitted Pursuant to Instruction 2 to Item 601 of
Regulation S-K (filed herewith)