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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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 2002
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) 55-5201-0800
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
<Table>
<Caption>
PAGE
----
Financial Statements (Unaudited):
Condensed Balance Sheets as of March 31, 2002 and December
31, 2001............................................... 2
Condensed Statements of Operations for the three months
ended March 31, 2002 and 2001.......................... 3
Condensed Statements of Cash Flows for the three months
ended March 31, 2002 and 2001.......................... 4
Notes to Unaudited Condensed Financial Statements......... 5
Operating and Financial Review and Prospects................ 8
</Table>
1
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 )
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
----------- ------------
(UNAUDITED) (NOTE)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 20,102 $ 26,194
Restricted and segregated cash............................ 122,814 155,496
Accounts receivable, net.................................. 3,831 2,042
Prepaid insurance......................................... 6,351 7,414
Due from related parties.................................. 6,774 7,200
Deferred income taxes..................................... 3,337 2,161
---------- ----------
Total current assets.............................. 163,209 200,507
Satellites and equipment, net............................... 312,292 320,725
Construction in process -- Satmex 6 (Note 1)................ 125,301 95,092
Concessions, net............................................ 460,295 463,521
Prepaid insurance, non current.............................. 2,328 3,172
Deferred financing costs, net............................... 5,353 5,929
Other assets................................................ 520 332
---------- ----------
Total assets...................................... $1,069,298 $1,089,278
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 13,626 $ 13,626
Accounts payable.......................................... 4,226 4,227
Accrued expenses (Note 1)................................. 15,560 18,759
Interest payable.......................................... 5,741 14,196
Due to related parties.................................... 4,520 4,370
Deferred revenue -- customers............................. 44 39
Deferred revenue -- Mexican government.................... 2,200 2,200
---------- ----------
Total current liabilities......................... 45,917 57,417
Accrued expenses, non current (Note 1)...................... 4,337 4,337
Deferred revenue -- Mexican government...................... 76,185 76,735
Deferred income taxes....................................... 19,780 19,807
Long-term debt.............................................. 542,124 542,374
---------- ----------
Total liabilities................................. 688,343 700,670
---------- ----------
Commitments and contingencies (Note 5)
Stockholders' equity:
Common stock.............................................. 383,924 383,547
Preferred stock........................................... 31,886 31,886
Accumulated deficit....................................... (34,855) (26,825)
---------- ----------
Total stockholders' equity........................ 380,955 388,608
---------- ----------
Total liabilities and stockholders' equity........ $1,069,298 $1,089,278
========== ==========
</Table>
- ---------------
Note: The December 31, 2001 balance sheet has been derived from the audited
financial statements at that date.
See notes to unaudited condensed financial statements.
2
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)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
--------------------
2002 2001
-------- --------
Service revenue............................................. $ 22,609 $ 33,857
-------- --------
Operating expenses:
Satellite operations...................................... 4,909 4,995
Selling and administrative expenses....................... 4,418 5,474
License and management fees............................... 303 1,112
Depreciation expense and amortization of concessions...... 11,804 11,743
-------- --------
21,434 23,324
-------- --------
Operating income............................................ 1,175 10,533
Interest income............................................. 915 3,084
Interest expense and amortization of deferred financing
costs..................................................... (10,922) (16,277)
Net foreign exchange gain (loss)............................ (24) 29
-------- --------
Loss before income taxes.................................... (8,856) (2,631)
Deferred income tax benefit................................. 1,203 1,593
-------- --------
Net loss.................................................... (7,653) (1,038)
Preferred stock dividend requirement........................ (377) (377)
-------- --------
Net loss applicable to common stockholders.................. $ (8,030) $ (1,415)
======== ========
</Table>
See notes to unaudited condensed financial statements.
3
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)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
--------------------
2002 2001
-------- --------
OPERATING ACTIVITIES
Net loss.................................................... $ (7,653) $ (1,038)
Adjustments to reconcile net loss to operating cash flow:
Depreciation expense and amortization of concessions...... 11,804 11,743
Amortization of deferred financing costs.................. 575 575
Deferred revenue -- customers............................. 5 (979)
Deferred revenue -- Mexican Government.................... (550) (550)
Deferred income taxes..................................... (1,203) (1,593)
Interest income from restricted and segregated cash....... (691) (2,030)
Changes in assets and liabilities:
Accounts receivable....................................... (1,789) 2,479
Prepaid insurance......................................... 1,907 1,867
Accounts payable and accrued expenses..................... (3,038) (589)
Interest payable.......................................... (4,791) (8,727)
Due from/to related parties............................... 576 (4,803)
Deferred financing costs and other assets................. (188) (108)
-------- --------
Cash flow used in operating activities...................... (5,036) (3,753)
-------- --------
INVESTING ACTIVITIES
Use of restricted and segregated cash....................... 29,297 7,000
Construction in progress -- Satmex 6........................ (30,209) (9,120)
Acquisition of equipment, net............................... (144) (93)
-------- --------
Cash flow used in investing activities...................... (1,056) (2,213)
-------- --------
FINANCING ACTIVITIES
Use of restricted and segregated cash....................... 250
Repayment of senior secured notes........................... (250) (250)
Repayment of revolving credit facility...................... (10,000)
-------- --------
Cash flow used in financing activities...................... (10,250)
-------- --------
Decrease in cash and cash equivalents....................... (6,092) (16,216)
Cash and cash equivalents -- beginning of period............ 26,194 24,625
-------- --------
Cash and cash equivalents -- end of period.................. $ 20,102 $ 8,409
======== ========
SUPPLEMENTAL DISCLOSURE
Interest paid............................................... $ 20,824 $ 24,390
======== ========
</Table>
See notes to unaudited condensed financial statements.
4
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 business 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 Mexico, the United States, Canada and 35 nations and
territories in the Latin American region.
On November 17, 1997, Loral Space & Communications Ltd. (together with its
subsidiaries "Loral") and Principia, S.A. de C.V., ("Principia") acquired 75% of
the issued and outstanding capital stock of Satmex from the government of Mexico
for $647 million through Firmamento Mexicano, S. de R. L. de C.V.
("Firmamento"). Loral owns 65% of Firmamento and Principia owns 35%. Principia
holds 51% of Firmamento's voting interests. The remaining 25% of the capital
stock of Satmex was retained by the Mexican government.
In August 2000, the Company's Solidaridad 1 satellite ceased operating and
was considered irretrievably lost. The loss was caused by the failure of the
back-up control processor on board the satellite. Solidaridad 1 was insured for
$250 million. 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 was approximately $103.1 million. In
December 2001, Satmex reduced the liability for the cost over revenue for the
committed transponder capacity to be provided to customers by $7.3 million. This
reduction was recorded as additional gain on the in-orbit failure of Solidaridad
1. In January 2001, Satmex received insurance proceeds of approximately $235.3
million, net of the unpaid insurance premiums and related value added tax.
Satmex is using the net insurance proceeds towards the construction, launch and
insurance of a replacement satellite, Satmex 6, as well as for debt service.
Satmex has contracted with Space Systems/Loral, Inc., a wholly owned subsidiary
of Loral, to build Satmex 6, which is scheduled to be launched in the first
quarter of 2003, and is designed to provide broader coverage and higher power
levels than any other satellite currently in the Satmex fleet.
On August 10, 2001, the Mexican government granted licenses to provide
satellite service in Mexico to PanAmSat, SES Global, Televisa and Enlaces
Integra. PanAmSat registered 11 satellites and SES Global registered seven
satellites to provide satellite service in Mexico.
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, 2002,
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 Satmex, included in Satmex's
Annual Report on Form 20-F for the year ended December 31, 2001.
5
SATELITES MEXICANOS, S.A. DE C.V.
(SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
3. ACCOUNTS RECEIVABLE
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
--------- ------------
(IN THOUSANDS)
Customers................................................... $ 4,773 $ 3,827
Value added tax recoverable................................. 539
Other....................................................... 565 261
Allowance for uncollectible accounts........................ (2,046) (2,046)
------- -------
$ 3,831 $ 2,042
======= =======
</Table>
4. SATELLITES AND EQUIPMENT
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
--------- ------------
(IN THOUSANDS)
Satellites.................................................. $409,119 $409,119
Equipment................................................... 25,647 25,647
Furniture and fixtures...................................... 6,495 6,321
Leasehold improvements...................................... 2,846 2,772
Construction in progress.................................... 4,141 4,245
-------- --------
448,248 448,104
Accumulated depreciation.................................... (135,956) (127,379)
-------- --------
$312,292 $320,725
======== ========
</Table>
5. BALANCES AND TRANSACTIONS WITH RELATED PARTIES
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
--------- ------------
(IN THOUSANDS)
AMOUNTS RECEIVABLE:
Enlaces..................................................... $ 3,865 $ 3,672
Mexican government agencies................................. 2,780 2,557
Loral....................................................... 117 517
Principia................................................... 12 386
Service companies........................................... 68
-------- --------
$ 6,774 $ 7,200
======== ========
AMOUNTS PAYABLE:
Loral....................................................... $ 2,092 $ 768
Principia................................................... 1 109
Service companies........................................... 2,427 3,493
-------- --------
$ 4,520 $ 4,370
======== ========
</Table>
6
SATELITES MEXICANOS, S.A. DE C.V.
(SUBSIDIARY OF SERVICIOS CORPORATIVOS SATELITALES, S.A. DE C.V.)
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Transactions with related parties, not otherwise disclosed, are as follows:
Enlaces
Enlaces Integra ("Enlaces"), a company owned by Principia and Loral, leases
transponder capacity from Satmex. Service revenue from this lease was $84,000
for the three months ended March 31, 2002. Also, Satmex agreed to loan Enlaces
up to $5 million of which $3.9 million was outstanding as of March 31, 2002. The
loan to Enlaces matures January 4, 2006 and accrues interest at a rate equal to
Satmex's weighted average interest cost plus 1%. The maximum available borrowing
is $5 million including accrued interest. Further, Enlaces uses services
provided from affiliated companies to perform its activities.
Revenue
Revenue from related parties, primarily the Mexican government, was $2.4
million and $4.6 million for the three months ended March 31, 2002 and 2001,
respectively.
Replacement Capacity
Loral Skynet, a wholly owned subsidiary of Loral, billed Satmex $1.6
million and $1.7 million, for the three months ended March 31, 2002 and 2001,
respectively, for providing capacity on Loral Skynet satellites.
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, 2002, no management fee was earned. For the three months ended
March 31, 2001, the management fee was $641,000.
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. For the three
months ended March 31, 2002 and 2001, the fee was $328,000 and $471,000,
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 buildings and land equal to 7.5% of appraised value. The rent expense
under this agreement was $85,000 and $75,000 for the three months ended March
31, 2002 and 2001, 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 of 6% of the gross payroll and benefits, excluding payroll taxes. For
the three months ended March 31, 2002 and 2001, the fee was $131,000 and
$304,000, respectively.
Guarantee arrangements
In connection with the loan agreements Firmamento and Servicios have
provided and continue to provide guarantees on behalf of the Company.
7
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Except for the historical information contained herein, the matters
discussed in the following Operating and Financial Review and Prospects 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 Company undertakes no obligation to update any forward-
looking statements.
The following should be read in conjunction with the condensed financial
statements of the Company for the three months ended March 31, 2002 and 2001 and
the audited financial statements and notes thereto of Satmex, included in
Satmex's Annual Report on Form 20-F for the year ended December 31, 2001.
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 business 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 Mexico, the United
States, Canada and 35 nations and territories in the Latin American region.
In August 2000, the Company's Solidaridad 1 satellite ceased operating and
was considered irretrievably lost. The loss was caused by the failure of the
back-up control processor on board the satellite. Solidaridad 1 was insured for
$250 million. 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 was approximately $103.1 million. In
December 2001, Satmex reduced the liability for the cost over revenue for the
committed transponder capacity to be provided to customers by $7.3 million. This
reduction was recorded as additional gain on the in-orbit failure of Solidaridad
1. In January 2001, Satmex received insurance proceeds of approximately $235.3
million, net of the unpaid insurance premiums and related value added tax.
Satmex is using the net insurance proceeds towards the construction, launch and
insurance of a replacement satellite, Satmex 6, as well as for debt service.
Satmex has contracted with Space Systems/Loral, Inc., a wholly owned subsidiary
of Loral, to build Satmex 6, which is scheduled to be launched in the first
quarter of 2003, and is designed to provide broader coverage and higher power
levels than any other satellite currently in the Satmex fleet.
8
In April 2001, Satmex 5 experienced temporary difficulties starting the
back-up propulsion subsystem of the Xenon Ion Propulsion System ("XIPS"). The
XIPS provides station-keeping capability for the satellite. Using procedures
provided by the satellite manufacturer, the Company was able to start the
back-up propulsion subsystem, and at no time was service on Satmex 5
interrupted. Both the primary and the back-up subsystems are currently operating
normally.
On August 10, 2001, the Mexican government granted licenses to provide
satellite service in Mexico to PanAmSat, SES Global, Televisa and Enlaces
Integra. PanAmSat registered 11 satellites and SES Global registered seven
satellites to provide satellite service in Mexico.
RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO MARCH 31,
2001
Revenue
Revenue for the first quarter of 2002 was $22.6 million, as compared to
$33.9 million for the first quarter of 2001. The decrease is due to lower
utilization of Solidaridad 2 and Satmex 5 caused by contract cancellations and
non-renewals. As previously disclosed, the transponder lease for the Company's
largest customer, Innova, ended on March 31, 2002. Innova represented
approximately 7% and 18% of service revenue for the quarters ended March 31,
2002 and 2001, respectively.
Operating expenses
Operating expenses decreased to $21.4 million in the first quarter of 2002,
from $23.3 million in the first quarter of 2001, 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 $4.9 million for the first quarter of 2002, as compared to $5.0
million in the first quarter of 2001.
Selling and administrative expenses. Selling and administrative expenses
in the first quarter of 2002 were $4.4 million as compared to $5.5 million in
the first quarter of 2001. The decrease is primarily due to planned expense and
personnel reductions.
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, 2002, no management
fee was earned. For the three months ended March 31, 2001, the management fee
was $641,000. Loral has licensed certain intellectual property to the Company
for an annual fee of 1.5% of the Company's gross revenue, as defined. For the
three months ended March 31, 2002 and 2001, the fee was $328,000 and $471,000,
respectively. The license fee decreased due to the Company's lower revenue.
Depreciation and amortization. Depreciation expense for the first quarter
of 2002 was $8.6 million as compared to $8.5 million during the first quarter of
2001. Amortization expense relating to the concessions was $3.2 million in each
quarter.
Interest income
Interest income for the first quarter of 2002 was $0.9 million as compared
to $3.1 million for 2001. The decrease is primarily due to lower levels of
restricted and segregated cash available for investment, as well as lower
interest rates.
Interest
Total interest cost, including $2.2 million of capitalized interest related
to the construction of Satmex 6, was $13.1 million in the first quarter of 2002
as compared to $16.3 million for the first quarter of 2001. Total interest cost
decreased due to lower average outstanding debt during 2002 and lower interest
rates on the Company's variable rate debt.
9
Net foreign exchange gain (loss)
The Company recorded a net foreign exchange loss of $24,000 in the first
quarter of 2002 as compared to a foreign exchange gain of $29,000 in the first
quarter of 2001. The peso remained stable against the dollar in each quarter.
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 effects attributable to temporary differences,
including tax losses and tax credit carryforwards, using enacted rates.
On January 1, 2002, the Mexican government enacted a new income tax law
that reduces the 35% statutory income tax rate by 1% per year beginning January
1, 2003 through January 1, 2005. The Company recorded a deferred income tax
benefit of $1.8 million in 2002 for the effect of this change on its deferred
tax assets and liabilities.
For the three months ended March 31, 2002, the Company recorded a deferred
income tax expense of $0.6 million, excluding the deferred income tax benefit of
$1.8 million relating to the change in statutory rate, on a loss before income
taxes of $8.9 million and a benefit of $1.6 million on a loss of $2.6 million
for 2001. The change from 2001 to 2002 relates primarily to the Mexican income
tax effect of inflation and currency remeasurement in the current period.
Preferred stock dividend requirement
The preferred stock dividend requirement was $377,000 in each quarter.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, the Company had total debt of $555.8 million. At
December 31, 2001, a technical default existed with respect to the Company's
senior secured notes due to the failure to make a principal prepayment from
excess cash flow for the year ended December 31, 2000, as defined under the
senior secured note indenture. On April 23, 2002, the Company made the required
principal prepayment of $11.9 million, plus accrued interest of $228,000, as
well as a principal prepayment for 2001 excess cash flow of $749,000.
Concurrently with these payments, the Company retroactively reduced the amount
available for borrowing under its revolving credit facility by $34.2 million.
The Company believes that the payment on April 23, 2002 cured the technical
default of the senior secured notes. At December 31, 2001, the Company
classified $12.6 million, representing the 2001 and 2000 principal payments, as
current maturities of long-term debt. At March 31, 2002, except as noted above,
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, 2002, the Company had cash and cash
equivalents of $20.1 million and following the retroactive reduction, $15.8
million available under its revolving credit facility. At March 31, 2002, Satmex
had $122.8 million of restricted and segregated cash of which $37.9 million is
available for debt service on the senior secured notes and revolving credit
facility and $84.9 million is available for the construction and launch of
Satmex 6. The Company believes that the funds available in the restricted and
segregated cash account allocated for the construction and launch and cash flow
from operations will be sufficient to fund the on-orbit delivery of Satmex 6.
Cash used and provided. Net cash used in operating activities for the
quarter ended March 31, 2002 of $5.0 million, consisted primarily of an increase
in accounts receivable of $1.8 million, a decrease in interest payable of $4.8
million, a decrease in accounts payable and accrued expenses of $3.0 million and
an increase in deferred financing costs and other assets of $0.2 million, offset
by $2.3 million of funds generated by earnings before non-cash items and
interest income on the restricted and segregated cash, a net decrease in amounts
due from/to related parties of $0.6 million and a decrease in prepaid insurance
of $1.9 million. During the first quarter of 2002, Satmex used $4.1 million of
the restricted and segregated cash for debt service.
Cash used in investing activities in the first quarter of 2002 was $1.1
million. Capital expenditures for the first quarter of 2002 were $30.3 million,
which included $30.2 million for the construction of Satmex 6.
10
$29.3 million of the expenditures for Satmex 6 in the first quarter of 2002, was
funded through the use of the restricted and segregated cash account.
Substantially all capital expenditures are denominated in U.S. dollars.
Satmex did not use any cash in financing activities for the quarter ended
March 31, 2002, which reflects the repayment of $250,000 of the Company's senior
secured notes which was funded through the use of restricted and segregated
cash.
OTHER MATTERS
Insurance Costs
The Company, like others in the satellite industry is faced with
significantly higher premiums for launch and in-orbit insurance and
significantly shorter coverage periods than those that have been available in
the past, which is due in part to the events of September 11, 2001. This
development in the insurance industry will increase the cost of doing business
for the Company. The Company intends to pass on such increased cost to its
customers. There can be no assurance, however, that it will be able to do so.
Insurance market conditions have historically been cyclical in nature. While the
Company anticipates that these conditions will improve in the future, there can
be no assurance that they will.
RELATED PARTY TRANSACTIONS
See Footnote 5 -- Balances and Transactions With Related Parties in the
notes to unaudited condensed financial statements for a discussion of related
party transactions.
ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standard Board ("FASB") issued
Statement No. 141, "Business Combinations" ("SFAS 141") and Statement No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires that all
business combinations initiated after June 30, 2001, be accounted for under the
purchase method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. SFAS
142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition. SFAS 142 provides that
intangible assets with finite useful lives be amortized and that goodwill and
intangible assets with indefinite lives not be amortized, but will rather be
tested at least annually for impairment. The adoption of SFAS 142 on January 1,
2002 did not have an effect on the Company's financial position or results of
operations.
In June 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and the normal operations of a
long-lived asset, except for certain obligations of lessees. The Company is
required to adopt SFAS 143 on January 1, 2003. The Company has not yet
determined the impact that the adoption of SFAS 143 will have on the Company's
financial position or results of operations.
In August 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses
financial accounting and reporting for the impairment of disposal of long-lived
assets. It supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", and the accounting and
provisions of APB 30, "Reporting the Results of Operations -- Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions", for the disposal of a segment
or a business. The adoption of SFAS 144 on January 1, 2002 did not have an
effect on the Company's financial position or results of operations.
In April 2002, the FASB issued Statement No. 145, Rescission of FASB
Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections ("SFAS 145"). SFAS 145 generally requires that any gains or losses
on extinguishment of debt in current or prior periods be classified as other
income (expense), beginning in fiscal 2003, with early adoption encouraged. The
Company is currently evaluating the impact of adopting the provisions of SFAS
No. 145 on its financial statements.
11
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: /s/ Cynthia Pelini
-------------------------------------
Cynthia Pelini
Chief Financial Officer
Date: May 14, 2002