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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF MAY 2000
COMMISSION FILE NO. 333-8880
SATELITES MEXICANOS, S.A. de C.V.
BLVD. M. AVILA CAMACHO NO. 40
COL. LOMAS DE CHAPULTEPEC
11000 MEXICO, D.F.
MEXICO
(525) 201-0800
The registrant files annual reports under cover of Form 20-F.
The registrant is not furnishing the information contained in this form to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
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SATELITES MEXICANOS, S.A. de C.V.
FINANCIAL INFORMATION
INDEX
PAGE
----
Financial Statements (Unaudited):
Condensed Balance Sheets as of March 31, 2000 and December
31, 1999............................................... 2
Condensed Statements of Operations for the three months
ended March 31, 2000 and 1999.......................... 3
Condensed Statements of Cash Flows for the three months
ended March 31, 2000 and 1999.......................... 4
Notes to Unaudited Condensed Financial Statements......... 5
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 7
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SATELITES MEXICANOS, S.A. DE C.V.
(SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)
CONDENSED BALANCE SHEETS
(Amounts in thousands of U.S. dollars )
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED) (NOTE)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 8,655 $ 6,450
Accounts receivable....................................... 5,492 7,341
Due from related parties.................................. 3,214 2,889
Prepaid insurance......................................... 10,493 13,069
---------- ----------
Total current assets.............................. 27,854 29,749
Satellites and equipment, net............................... 489,891 501,174
Concessions, net............................................ 486,105 489,331
Prepaid insurance, noncurrent............................... 9,177 10,031
Deferred financing costs, net............................... 9,390 9,368
Other assets................................................ 483 460
Deferred income taxes....................................... 1,621
---------- ----------
Total assets...................................... $1,022,900 $1,041,734
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 1,000 $ 1,000
Accounts payable.......................................... 4,434 3,341
Accrued expenses.......................................... 3,267 3,480
Interest payable.......................................... 5,588 13,500
Deferred income taxes..................................... 2,557 3,387
Due to related parties.................................... 3,978 2,277
---------- ----------
Total current liabilities......................... 20,824 26,985
Deferred revenue -- customers............................... 6,896 7,878
Deferred revenue -- Mexican government...................... 82,785 83,335
Deferred income taxes....................................... 2,211
Long-term debt.............................................. 586,750 587,000
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Total liabilities................................. 699,466 705,198
---------- ----------
Commitments and contingencies (Note 5)
Stockholders' equity:
Common stock.............................................. 380,910 380,533
Preferred stock........................................... 31,886 31,886
Accumulated deficit....................................... (89,362) (75,883)
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Total stockholders' equity........................ 323,434 336,536
---------- ----------
Total liabilities and stockholders' equity........ $1,022,900 $1,041,734
========== ==========
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Note: The December 31, 1999 balance sheet has been derived from the audited
financial statements at that date.
See notes to unaudited condensed financial statements.
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SATELITES MEXICANOS, S.A. DE C.V.
(SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)
CONDENSED STATEMENTS OF OPERATIONS
(Amounts in thousands of U.S. dollars)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
Service revenue............................................. $ 32,315 $ 27,977
-------- --------
Operating expenses:
Satellite operations...................................... 4,649 4,207
Selling and administrative expenses....................... 4,988 2,053
License and management fees............................... 1,026 394
Depreciation expense and amortization of concessions...... 15,370 14,172
-------- --------
26,033 20,826
-------- --------
Operating income............................................ 6,282 7,151
Interest expense and amortization of deferred financing
costs..................................................... (16,400) (15,868)
Net foreign exchange gain................................... 18 45
-------- --------
Loss before income taxes.................................... (10,100) (8,672)
Deferred income tax (provision) credit...................... (3,002) 175
-------- --------
Net loss.................................................... (13,102) (8,497)
Preferred stock dividend requirement........................ (377)
-------- --------
Net loss applicable to common stockholders.................. $(13,479) $ (8,497)
======== ========
See notes to unaudited condensed financial statements.
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SATELITES MEXICANOS, S.A. DE C.V.
(SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands of U.S. dollars)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
---------------------
2000 1999
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OPERATING ACTIVITIES
Net loss.................................................... $(13,102) $ (8,497)
Non-cash items:
Depreciation expense and amortization of concessions...... 15,370 14,172
Amortization of deferred financing costs.................. 526 1,081
Deferred revenue -- customers............................. (982)
Deferred revenue -- Mexican Government.................... (550) (550)
Deferred income taxes..................................... 3,002 (175)
Changes in assets and liabilities:
Accounts receivable....................................... 1,849 (3,500)
Prepaid insurance......................................... 3,430 3,594
Accounts payable and accrued expenses..................... 880 (12,469)
Interest payable.......................................... (7,912) (8,424)
Due from/to related parties............................... 1,376 (1,167)
Deferred revenue -- customers............................. 5,000
Deferred financing costs and other assets................. (591) (400)
-------- ---------
Cash flow provided by (used in) operating activities........ 3,296 (11,335)
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INVESTING ACTIVITIES
Acquisition of satellites and equipment..................... (841) (1,877)
-------- ---------
Cash flow used in investing activities...................... (841) (1,877)
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FINANCING ACTIVITIES
Repayment of senior secured notes........................... (250) (35,250)
Interest reserve account.................................... 9,765
Capital contributions....................................... 31,886
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Cash flow (used in) provided by financing activities........ (250) 6,401
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Increase (decrease) in cash and cash equivalents............ 2,205 (6,811)
Cash and cash equivalents -- beginning of period............ 6,450 11,883
-------- ---------
Cash and cash equivalents -- end of period.................. $ 8,655 $ 5,072
======== =========
SUPPLEMENTAL DISCLOSURE
Interest paid............................................... $ 23,118 $ 23,782
======== =========
See notes to unaudited condensed financial statements.
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SATELITES MEXICANOS, S.A. DE C.V.
(SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(Amounts in U.S. dollars)
1. ACTIVITY AND FORMATION OF THE COMPANY
Satelites Mexicanos, S.A. de C.V. ("Satmex" or the "Company") owns and
operates three geosynchronous communications satellites, Solidaridad 1,
Solidaridad 2 and Satmex 5. Satmex also owns another satellite, Morelos 2, which
is in an inclined orbit. Satmex operates in one segment and is the leading
provider of fixed satellite services ("FSS") to broadcasting and
telecommunications customers in Mexico. Satmex has landing rights to provide
broadcasting and telecommunications transmission capacity in the United States,
Canada and 23 nations and territories in the Latin American region.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules of the Securities and Exchange Commission ("SEC")
and, in the opinion of the Company, include all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of results of
operations, financial position and cash flows. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed as permitted pursuant to such SEC rules. The Company believes that the
disclosures made are adequate to keep the information presented from being
misleading. The results of operations for the three months ended March 31, 2000,
are not necessarily indicative of the results to be expected for the year. It is
suggested that these financial statements be read in conjunction with the
audited financial statements and notes thereto of the Company as of December 31,
1999.
3. ACCOUNTS RECEIVABLE
MARCH 31, DECEMBER 31,
2000 1999
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(IN THOUSANDS)
Customers................................................... $ 4,136 $3,870
Value added tax recoverable................................. 1,261 3,139
Other....................................................... 1,139 1,174
Allowance for uncollectible accounts........................ (1,044) (842)
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$ 5,492 $7,341
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4. SATELLITES AND EQUIPMENT
MARCH 31, DECEMBER 31,
2000 1999
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(IN THOUSANDS)
Satellites........................................... $561,453 $561,362
Equipment............................................ 22,059 22,059
Furniture and fixtures............................... 4,633 4,394
Leasehold improvements............................... 2,023 2,008
Construction in progress............................. 3,957 3,461
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594,125 593,284
Accumulated depreciation............................. (104,234) (92,110)
-------- --------
$489,891 $501,174
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SATELITES MEXICANOS, S.A. DE C.V.
(SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
5. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
MARCH 31, DECEMBER 31,
2000 1999
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(IN THOUSANDS)
AMOUNTS RECEIVABLE:
Holdings............................................. $ 122 $ 112
Servicios............................................ 153 145
Principia............................................ 481 470
Loral................................................ 503 335
Mexican government agencies.......................... 1,955 1,827
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$ 3,214 $ 2,889
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AMOUNTS PAYABLE:
Loral................................................ $ 2,773 $ 1,501
Principia............................................ 295 97
Holdings............................................. 910 679
-------- --------
$ 3,978 $ 2,277
======== ========
Revenue
Revenue from related parties, primarily the Mexican government, was $2.7
million for both quarters ended March 31, 2000 and 1999.
Management fee
Loral and Principia are responsible for managing the Company. Loral and
Principia receive a management fee, based on a sliding scale, up to a maximum of
3.75% of the Company's quarterly gross revenue, as defined. For the three months
ended March 31, 2000 and 1999, the management fee was $566,000 and $16,000,
respectively.
License fee
Loral has licensed certain intellectual property to the Company for an
annual fee of 1.5% of the Company's gross revenue, as defined. Fees for the
three months ended March 31, 2000 and 1999 were $460,000 and $378,000,
respectively.
Rent
The equipment in the satellite control centers is owned by the Company,
while the buildings and land that house these centers are property of the
Mexican government. The Company pays rent to the Mexican government for the use
of the building. The rent expense under this agreement was $71,000 and $60,000
for the three months ended March 31, 2000 and 1999, respectively.
Service companies
Satmex uses external services from affiliated companies to perform its
activities. Satmex pays these companies for the actual personnel costs incurred
plus a fee equal to 5% of the gross payroll and benefits, excluding payroll
taxes. For the quarter ended March 31, 2000 this fee was $162,000.
Guarantee arrangements
In connection with the loan agreements certain related parties have
provided and continue to provide guarantees on behalf of the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Except for the historical information contained herein, the matters
discussed in the following Management's Discussion and Analysis of Results of
Operations and Financial Condition of Satelites Mexicanos, S.A. de C.V.
("Satmex" or the "Company") are not historical facts, but are "forward-looking
statements," as that term is defined in the Private Securities Litigation Reform
Act of 1995. In addition, the Company or its representatives have made and may
continue to make forward-looking statements, orally or in writing, in other
contexts, such as in reports filed with the SEC, press releases or statements
made with the approval of an authorized executive officer of the Company. These
forward-looking statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "plans," "may," "will," "would,"
"could," "should," "anticipates," "estimates," "projects," "intend," or
"outlook" or the negative of these words or other variations of these words or
other comparable words, or by discussion of strategy that involve risks and
uncertainties. These forward-looking statements are only predictions, and actual
events or results may differ materially as a result of a wide variety of factors
and conditions, many of which are beyond the Company's control. Some of these
factors and conditions include: partial or total failure of the Company's
in-orbit satellites; the Company's reliance on certain customers; the Company's
operations are located in Mexico; competition in the Company's industry; and the
Company owes significant amounts of money. For a detailed discussion of these
factors and conditions, please refer to the periodic reports filed by the
Company with the SEC. In addition, the Company operates in an industry sector
where securities values may be volatile and may be influenced by economic and
other factors beyond the Company's control.
The following should be read in conjunction with the financial statements
of the Company for the three months ended March 31, 2000 and 1999.
OVERVIEW
Satmex owns and operates three geosynchronous communications satellites,
Solidaridad 1, Solidaridad 2 and Satmex 5. Satmex also owns another satellite,
Morelos 2, which is in an inclined orbit. Satmex operates in one segment and is
the leading provider of fixed satellite services ("FSS") to broadcasting and
telecommunications customers in Mexico. Satmex has landing rights to provide
broadcasting and telecommunications transmission capacity in the United States,
Canada and 23 nations and territories in the Latin American region.
RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO MARCH 31,
1999
Revenue
Revenue for the first quarter of 2000 was $32.3 million, as compared to
$28.0 million during the first quarter of 1999. The increase in revenue is
primarily due to the increased utilization of Satmex 5.
Operating expenses
Operating expenses increased to $26.0 million in the first quarter of 2000,
from $20.8 million in the first quarter of 1999. The increase is due to
increased satellite operations costs of $0.4 million, selling and administrative
expenses of $2.9 million, depreciation expense and amortization of concessions
of $1.2 million and license and management fee expense of $0.8 million as
described below.
Satellite operations. Satellite operations costs, which consist primarily
of satellite insurance and the personnel costs related to the operation of the
satellites, were $4.6 million for the first quarter of 2000, as compared to $4.2
million in the first quarter of 1999. The increase is primarily due to increased
salaries for engineering and operations personnel.
Selling and administrative expenses. Selling and administrative expenses
in the first quarter of 2000 were $5.0 million as compared to $2.1 million in
the first quarter of 1999. The increase is primarily due to salaries and
benefits associated with the hiring of additional personnel, incentive
compensation and increased professional fees.
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License and management fees. Loral and Principia are responsible for
managing the Company. Loral and Principia receive a management fee, based on a
sliding scale, up to a maximum of 3.75% of the Company's quarterly gross
revenue, as defined. For the three months ended March 31, 2000 and 1999, the
management fee was $566,000 and $16,000, respectively. Loral has licensed
certain intellectual property to the Company for an annual fee of 1.5% of the
Company's gross revenue, as defined. Fees for the three months ended March 31,
2000 and 1999 were $460,000 and $378,000, respectively. License and management
fees increased due to the Company's increased revenue.
Depreciation and amortization. Depreciation expense for the first quarter
of 2000 was $12.2 million as compared to $11.0 million during the first quarter
of 1999. The increase in depreciation expense is primarily due to a full quarter
of depreciation in 2000 on Satmex 5, which entered service on January 22, 1999.
Amortization expense relating to the concessions remained constant at $3.2
million for the first quarter of 2000 and 1999.
Interest
Total interest cost was $16.4 million in the quarter of 2000 as compared to
$17.5 million (before deducting $1.6 million of capitalized interest related to
the construction and launch of Satmex 5) in 1999. The decrease in total interest
cost is due to lower outstanding debt in 2000.
Net foreign exchange gain
The Company recorded a net foreign exchange gain of $18,000 and $45,000 in
the first quarter of 2000 and 1999, respectively. During the first quarter of
2000, the peso remained stable against the dollar.
Deferred income tax provision credit
Income tax is determined following interperiod allocation procedures under
the liability method. Under this method, deferred income taxes are recognized
for the estimated future tax effects attributable to temporary differences and
tax loss and tax credit carryforwards. The Company recorded a deferred income
tax provision of $3.0 million in the first quarter of 2000 as compared to a
benefit of $175,000 during the first quarter of 1999.
Preferred stock dividend requirement
The preferred stock dividend requirement in the first quarter of 2000, of
$377,000, relates to the value of the stock dividend issuable on the 606,730
shares of preferred stock issued on March 30, 1999.
CAPITAL EXPENDITURES
Substantially all capital expenditures are denominated in U.S. dollars.
Capital expenditures in the first quarter of 2000 were $841,000 as compared to
$1.9 million, including capitalized interest, in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had total debt of $587.8 million, and the
Company was in compliance with all covenants governing its debt agreements. The
Company's primary source of liquidity for working capital purposes is cash flow
from operations. At March 31, 2000, the Company had cash and cash equivalents of
$8.7 million. In February 2000, the Company amended certain financial covenants
in its debt agreements. In connection with these amendments, the Company paid a
consent fee to approving lenders and debtholders and agreed to increase the
applicable interest rates on the debt by up to 0.75%. The Company believes that
its cash flow from operations and the availability of its revolving credit
facility will be adequate to service its interest and debt repayment
requirements and ensure compliance with the covenants of its debt agreements.
Cash used and provided. Net cash provided by operating activities for the
quarter ended March 31, 2000 of $3.3 million, consisted primarily of $4.3
million of funds generated by earnings before non-cash items
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and a decrease in accounts receivable of $1.8 million, a decrease in prepaid
insurance of $3.4 million, a net increase in amounts due from/to related parties
of $1.4 million and an increase in accounts payable and accrued expenses of $0.9
million, offset by a decrease in interest payable of $7.9 million and an
increase in deferred financing costs and other assets of $0.6 million.
Cash used in investing activities for the first quarter of 2000 was
$841,000 for capital expenditures.
Cash used in financing activities for 2000 was $250,000 for the scheduled
repayment of the Company's senior secured notes.
OTHER MATTERS
Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board issued Statement No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS" 133"), which requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The Company
has not yet determined the impact that adoption of SFAS 133 will have on its
earnings or financial position. The Company is required to adopt SFAS 133, as
amended, on January 1, 2001.
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SIGNATURES
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.
SATELITES MEXICANOS, S.A. de C.V.
By: Cynthia Pelini
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Cynthia Pelini
Chief Financial Officer
Date: May 12, 2000