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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 NOVEMBER 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 its annual report on Form 20-F.
The registrant is not furnishing the information contained in this form to
the Commission pursuant to Rule 12g3-2(b) of the Securities Exchange Act of
1934.
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SATELITES MEXICANOS, S.A. de C.V.
FINANCIAL INFORMATION
INDEX
PAGE
----
Condensed Financial Statements (Unaudited):
Condensed Balance Sheets as of September 30, 2000 and
December 31, 1999...................................... 2
Condensed Statements of Operations for the three and nine
months ended September 30, 2000
and 1999............................................... 3
Condensed Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999...................... 4
Notes to Unaudited Condensed Financial Statements......... 5
Management's Discussion and Analysis of Results of
Operations and Financial Condition........................ 8
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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 )
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED) (NOTE)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 13,779 $ 6,450
Insurance proceeds receivable (Note 1).................... 237,500
Accounts receivable, net.................................. 4,931 7,341
Due from related parties.................................. 3,277 2,889
Prepaid insurance......................................... 4,247 13,069
Deferred income taxes..................................... 7,144
---------- ----------
Total current assets.............................. 270,878 29,749
Satellites and equipment, net............................... 357,558 501,174
Concessions, net............................................ 479,653 489,331
Prepaid insurance, noncurrent............................... 7,460 10,031
Deferred financing costs, net............................... 8,476 9,368
Other assets................................................ 235 460
Deferred income taxes....................................... 1,621
---------- ----------
Total assets...................................... $1,124,260 $1,041,734
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 1,000 $ 1,000
Accounts payable.......................................... 5,068 3,341
Accrued expenses (Note 1)................................. 10,556 3,480
Interest payable.......................................... 5,678 13,500
Due to related parties.................................... 6,859 2,277
Deferred income taxes..................................... 3,387
---------- ----------
Total current liabilities......................... 29,161 26,985
Accrued expenses, noncurrent (Note 1)....................... 15,182
Deferred revenue -- customers............................... 4,937 7,878
Deferred revenue -- Mexican government...................... 81,685 83,335
Long-term debt.............................................. 571,250 587,000
Deferred income taxes....................................... 38,868
---------- ----------
Total liabilities................................. 741,083 705,198
---------- ----------
Commitments and contingencies (Note 5)
Stockholders' equity:
Common stock.............................................. 381,664 380,533
Preferred stock........................................... 31,886 31,886
Accumulated deficit....................................... (30,373) (75,883)
---------- ----------
Total stockholders' equity........................ 383,177 336,536
---------- ----------
Total liabilities and stockholders' equity........ $1,124,260 $1,041,734
========== ==========
- ---------------
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenue:
Service revenue............................... $ 34,979 $ 27,019 $101,232 $ 80,030
Sales-type lease.............................. 8,500 25,500
-------- -------- -------- --------
34,979 35,519 101,232 105,530
-------- -------- -------- --------
Operating expenses:
Satellite operations.......................... 4,890 4,579 14,465 13,218
Selling and administrative expenses........... 5,360 4,804 15,311 12,245
Cost of transponders under sales-type lease... 4,691 14,234
License and management fees................... 1,878 543 4,095 1,274
Depreciation expense and amortization of
concessions................................ 14,082 15,582 44,876 45,983
-------- -------- -------- --------
26,210 30,199 78,747 86,954
-------- -------- -------- --------
Operating income................................ 8,769 5,320 22,485 18,576
Gain on in-orbit failure of Solidaridad 1 (Note
1)............................................ 103,114 103,114
Interest expense and amortization of deferred
financing costs............................... (16,440) (17,439) (48,840) (49,417)
Net foreign exchange loss....................... (151) (42) (160) (26)
-------- -------- -------- --------
Income (loss) before income taxes............... 95,292 (12,161) 76,599 (30,867)
Deferred income tax (provision) benefit......... (33,912) 1,433 (29,958) 3,678
-------- -------- -------- --------
Net income (loss)............................... 61,380 (10,728) 46,641 (27,189)
Preferred stock dividend requirement............ (377) (377) (1,131) (754)
-------- -------- -------- --------
Net income (loss) applicable to common
stockholders.................................. $ 61,003 $(11,105) $ 45,510 $(27,943)
======== ======== ======== ========
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)
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
2000 1999
--------- --------
OPERATING ACTIVITIES
Net income (loss)........................................... $ 46,641 $(27,189)
Non-cash items:
Depreciation expense and amortization of concessions...... 44,876 45,983
Amortization of deferred financing costs.................. 1,625 3,215
Gain on in-orbit failure of Solidaridad 1 (Note 1)........ (103,114)
Cost of transponders under sales-type lease............... 14,234
Deferred revenue -- customers............................. (2,941)
Deferred revenue -- Mexican Government.................... (1,650) (1,650)
Deferred income taxes..................................... 29,958 (3,678)
Changes in assets and liabilities:
Accounts receivable....................................... 2,410 2,529
Prepaid insurance......................................... 9,773 10,583
Accounts payable and accrued expenses..................... 852 (18,860)
Interest payable.......................................... (7,822) (8,370)
Due from/to related parties............................... 4,194 (133)
Deferred revenue -- customers............................. 6,919
Deferred financing costs and other assets................. (508) (1,146)
--------- --------
Net cash flow provided by operating activities.............. 24,294 22,437
--------- --------
INVESTING ACTIVITIES
Acquisition of satellites and equipment..................... (1,215) (3,658)
--------- --------
Net cash flow used in investing activities.................. (1,215) (3,658)
--------- --------
FINANCING ACTIVITIES
Repayment of senior secured notes........................... (750) (85,750)
Borrowings (repayments) under revolving credit facility,
net....................................................... (15,000) 20,000
Decrease in interest reserve account........................ 9,765
Capital contributions....................................... 31,886
--------- --------
Net cash flow used in financing activities.................. (15,750) (24,099)
--------- --------
Increase (decrease) in cash and cash equivalents............ 7,329 (5,320)
Cash and cash equivalents -- beginning of period............ 6,450 11,883
--------- --------
Cash and cash equivalents -- end of period.................. $ 13,779 $ 6,563
========= ========
SUPPLEMENTAL DISCLOSURE
Interest paid............................................... $ 55,962 $ 55,539
========= ========
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. THE COMPANY
Satelites Mexicanos, S.A. de C.V. ("Satmex" or the "Company") owns and
operates two geosynchronous communications satellites, 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 to broadcasting and telecommunications customers in Mexico. Satmex has
landing rights to provide broadcasting and telecommunications transmission
capacity in Mexico, the United States, Canada and 23 nations and territories in
the Latin American region.
On August 29, 2000, Satmex's Solidaridad 1 satellite ceased operation and
was considered irretrievably lost. The loss was caused by the failure of the
back-up control processor on board the satellite. Solidaridad 1, which was built
by Hughes Space and Communications and commenced service in January 1994,
experienced a failure of its primary control processor in April 1999, and the
satellite had been operating on its back-up processor since that time.
Solidaridad 1 was insured for $250 million, and Satmex filed a claim with the
in-orbit insurance carrier on September 13, 2000. Satmex intends to apply the
net insurance proceeds towards the construction, launch and insurance of a
replacement satellite as well as for debt service. At the date of the loss,
Solidaridad 1 had a net book value of approximately $109.6 million. After
deducting prepaid insurance of $1.6 million, the unpaid insurance premiums of
$12.5 million and on-going monitoring costs and the excess of the estimated cost
over revenue for the currently committed transponder capacity to be provided to
customers of $23.2 million, the net gain on the in-orbit failure of Solidaridad
1 is approximately $103.1 million.
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 and nine months ended
September 30, 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
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(IN THOUSANDS)
Customers.................................................. $ 5,192 $3,870
Value added tax recoverable................................ 3,139
Other...................................................... 1,147 1,174
Allowance for uncollectible accounts....................... (1,408) (842)
------- ------
$ 4,931 $7,341
======= ======
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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)
4. SATELLITES AND EQUIPMENT
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(IN THOUSANDS)
Satellites (Note 1)........................................ $409,119 $561,362
Equipment.................................................. 24,557 22,059
Furniture and fixtures..................................... 5,040 4,394
Leasehold improvements..................................... 2,763 2,008
Construction in process.................................... 771 3,461
-------- --------
442,250 593,284
Accumulated depreciation................................... (84,692) (92,110)
-------- --------
$357,558 $501,174
======== ========
5. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(IN THOUSANDS)
AMOUNTS RECEIVABLE:
Holdings................................................. $ 211 $ 112
Servicios................................................ 156 145
Principia................................................ 547 470
Loral.................................................... 397 335
Mexican government agencies.............................. 1,966 1,827
------ ------
$3,277 $2,889
====== ======
AMOUNTS PAYABLE:
Loral.................................................... $3,770 $1,501
Holdings................................................. 2,623 679
Principia................................................ 466 97
------ ------
$6,859 $2,277
====== ======
Revenue
In 1999, Loral Skynet entered into an end-of-life lease with Satmex for
three Ku-band transponders on Satmex 5. The lease provided for an up-front
payment of $8.5 million for each transponder. The cost of each transponder was
approximately $4.8 million. For the nine months ended September 30, 1999, Satmex
accounted for this transaction as a sales-type lease and, accordingly, recorded
revenue of $25.5 million and an operating expense of $14.2 million for the cost
of the transponders.
In addition, other revenue from related parties, principally the Mexican
government, a stockholder of the Company, was $9.0 million and $6.8 million for
the nine months ended September 30, 2000 and 1999, respectively.
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
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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)
defined. For the nine months ended September 30, 2000 and 1999, the management
fee was $2.6 million and $139,000, 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 nine
months ended September 30, 2000 and 1999 were $1.5 million and $1.1 million,
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 buildings and land. The rent expense under this agreement was $213,000
and $184,000 for the nine months ended September 30, 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 nine months ended September 30, 2000, this fee was $740,000.
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: the Company is highly leveraged; 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's concessions may be revoked under
certain circumstances. 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 and nine months ended September 30, 2000 and 1999.
OVERVIEW
Satmex owns and operates two geosynchronous communications satellites,
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 to broadcasting and telecommunications
customers in Mexico. Satmex has landing rights to provide broadcasting and
telecommunications transmission capacity in Mexico, the United States, Canada
and 23 nations and territories in the Latin American region.
On August 29, 2000, Satmex's Solidaridad 1 satellite ceased operation and
was considered irretrievably lost. The loss was caused by the failure of the
back-up control processor on board the satellite. Solidaridad 1, which was built
by Hughes Space and Communications and commenced service in January 1994,
experienced a failure of its primary control processor in April 1999, and the
satellite had been operating on its back-up processor since that time.
Solidaridad 1 was insured for $250 million, and Satmex filed a claim with the
in-orbit insurance carrier on September 13, 2000. Satmex intends to apply the
net insurance proceeds towards the construction, launch and insurance of a
replacement satellite as well as for debt service. At the date of the loss,
Solidaridad 1 had a net book value of approximately $109.6 million. After
deducting prepaid insurance of $1.6 million, the unpaid insurance premiums of
$12.5 million and on-going monitoring costs and the excess of the estimated cost
over revenue for the currently committed transponder capacity to be provided to
customers of $23.2 million, the net gain on the in-orbit failure of Solidaridad
1 is approximately $103.1 million.
In 1999, Loral Skynet entered into an end-of-life lease with Satmex for
three Ku-band transponders on Satmex 5. The lease provided for an up-front
payment of $8.5 million for each transponder. The cost of each transponder was
approximately $4.8 million. For the nine months ended September 30, 1999, Satmex
accounted for this transaction as a sales-type lease and, accordingly, recorded
revenue of $25.5 million and an operating expense of $14.2 million for the cost
of the transponders.
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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
SEPTEMBER 30, 1999
Revenue
Service revenue for the third quarter of 2000 increased $8.0 million to
$35.0 million, from $27.0 million for the third quarter of 1999, primarily due
to higher utilization on Satmex 5. Revenue for the quarter ended September 30,
1999 included $8.5 million related to the lease with Loral Skynet which was
accounted for as a sales-type lease.
Operating expenses
Operating expenses were $26.2 million for the quarter ended September 30,
2000, as compared to $25.5 million, excluding the cost of the transponder
related to the lease with Loral Skynet, for the quarter ended September 30,
1999.
Satellite operations. Satellite operations, which consists primarily of
satellite insurance and the personnel costs related to the operation of the
satellites, was $4.9 million for the quarter ended September 30, 2000, as
compared to $4.6 million for the quarter ended September 30, 1999. The increase
is primarily due to salary increases for engineering and operations personnel
effective in the third quarter of 1999.
Selling and administrative expenses. Selling and administrative expenses
for the quarter ended September 30, 2000 increased $600,000 to $5.4 million,
from $4.8 million for the quarter ended September 30, 1999. The increase is
primarily due to increased compensation cost associated with increased headcount
to support higher sales volume.
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. Also, 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 September 30, 2000 and 1999 were $1.9
million and $543,000, respectively. License and management fees increased due to
the Company's increased revenue.
Depreciation and amortization. Depreciation expense for the quarter was
$10.8 million as compared to $12.3 million during 1999. The decrease in
depreciation expense is due to the write-off of Solidaridad 1 after its in-orbit
failure on August 29, 2000. Amortization expense relating to the concessions
amounted to $3.3 million during each quarter.
Interest
Total interest cost for the quarter ended September 30, 2000 decreased $1.0
million to $16.4 million from $17.4 million for the quarter ended September 30,
1999. The decrease is due to the decrease in the Company's average outstanding
debt from 1999 to 2000.
Net foreign exchange loss
During each quarter the peso remained relatively stable against the dollar.
Deferred income tax benefit
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 effect of temporary differences between the
carrying amount of assets and liabilities for financial and income tax
reporting, as well as tax loss and tax credit carryforwards. The Company
recorded a deferred income tax provision of $33.9 million in 2000, which
included a provision of $36.7 million on the net gain from the in-orbit failure
of Solidaridad 1, as compared to a benefit of $1.4 million for 1999.
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Preferred stock dividend requirement
The preferred stock dividend requirement in each quarter, of $377,000,
relates to the value of the stock dividend issuable on the 606,730 shares of
preferred stock issued in March 1999.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
SEPTEMBER 30, 1999
Revenue
Service revenue for the nine months ended September 30, 2000 increased
$21.2 million to $101.2 million, from $80.0 million for 1999, primarily due to
higher utilization on Satmex 5. Revenue for the nine months ended September 30,
1999 included $25.5 million related to the lease with Loral Skynet, which was
accounted for as a sales-type lease.
Operating expenses
Operating expenses were $78.7 million for the nine months ended September
30, 2000, as compared to $72.7 million for 1999, excluding the cost of the
transponders related to the lease with Loral Skynet, for the nine months ended
September 30, 1999.
Satellite operations. Satellite operations, which consists primarily of
satellite insurance and the personnel costs related to the operation of the
satellites, was $14.5 million for 2000, as compared to $13.2 million for 1999.
The increase is primarily due to salary increases for engineering and operations
personnel effective in the third quarter of 1999.
Selling and administrative expenses. Selling and administrative expenses
for 2000 were $15.3 million, as compared to $12.2 million for 1999. The increase
is primarily due to higher compensation cost associated with increased headcount
to support increased sales volume.
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. Also, 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 nine months ended September 30, 2000 and 1999 were $4.1
million and $1.3 million, respectively. License and management fees increased
due to the Company's increased revenue.
Depreciation and amortization. Depreciation expense for 2000 was $35.0
million as compared to $36.3 million for 1999. The decrease in depreciation
expense is due to the write-off of Solidaridad 1 after its in-orbit failure on
August 29, 2000. Amortization expense relating to the concessions amounted to
$9.7 million during each period.
Interest
Total interest cost was $48.8 million in 2000 as compared to $51.0 million
(before deducting $1.6 million of capitalized interest related to the
construction and launch of Satmex 5) for 1999. Total interest cost decreased due
to lower average outstanding debt during 2000, partially offset by higher
interest rates on the Company's variable rate debt.
Net foreign exchange loss
The peso remained relatively stable against the dollar in each period.
Deferred income tax benefit
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 effect of temporary difference between the carrying
amount of assets and liabilities for financial and income tax reporting, as well
as tax loss and tax credit carryforwards. The Company recorded a deferred income
tax provision of $30.0 million in 2000,
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which included a provision of $36.7 million on the net gain from the in-orbit
failure of Solidaridad 1, as compared to a benefit of $3.7 million in 1999.
Preferred stock dividend requirement
The preferred stock dividend requirement of $1.1 million and $754,000 in
2000 and 1999, respectively, relates to the value of the stock dividend issuable
on the 606,730 shares of preferred stock issued in March 1999.
CAPITAL EXPENDITURES
Substantially all capital expenditures are denominated in U.S. dollars.
Capital expenditures were $1.2 million for the nine months ended September 30,
2000, as compared to $3.7 million, including capitalized interest of $1.6
million, for the nine months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had total debt of $572.3 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 September 30, 2000, the Company had cash and cash
equivalents of $13.8 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
nine months ended September 30, 2000 of $24.3 million, consisted primarily of
$15.4 million of funds generated by earnings before non-cash items and decreases
in accounts receivable of $2.4 million, and prepaid insurance of $9.8 million, a
net increase in amounts due from/to related parties of $4.2 million and an
increase in accounts payable and accrued expenses of $0.9 million, offset by a
decrease in interest payable of $7.8 million and an increase in deferred
financing costs and other assets of $0.5 million.
Cash used in investing activities for capital expenditures for the first
nine months of 2000 was $1.2 million.
Cash used in financing activities for the first nine months of 2000 was
$15.8 million, and comprised a $15.0 million repayment of outstanding borrowings
under the Company's revolving credit facility and $750,000 for the scheduled
repayment of the Company's senior secured notes.
OTHER MATTERS
Accounting Pronouncements. In June 1998, the Financing 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 completed its review of the impact that adoption of SFAS 133 will have;
however, based on its evaluation to date, the Company does not believe that it
will have a significant effect 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: November 13, 2000