SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
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/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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OR
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________ to ___________
Commission File No. 0-26712
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PanAmSat International Systems, Inc. *
PanAmSat Capital Corporation
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(Exact Name of Registrant as Specified in its Charter)
Delaware 06-1407851
Delaware 06-1371155
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Pickwick Plaza, Greenwich, CT. 06830
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: 203-622-6664
PanAmSat Corporation
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(Former Name, Former Address and Former
Fiscal Year if Changed Since Last Report)
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 reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES x NO
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As of June 30, 1997, an aggregate of 38,309,154 shares of the Company's Common
Stock, 21,231,415 shares of the Company's Class A Common Stock and 40,459,431
shares of the Company's Class B Common Stock were outstanding.
* PanAmSat International Systems, Inc. ("Old PanAmSat" or the
"Company") which was known as "PanAmSat Corporation" until May
16, 1997, became a wholly owned subsidiary of PanAmSat
Corporation ("New PanAmSat")(Commission File No. 0-22531; IRS
Employer Identification No. 95-4607698) as a consequence of
the combination of Old PanAmSat and the commercial satellite
business of Hughes Communications, Inc. ("HCI"), as more fully
described herein.
<PAGE>
PanAmSat International Systems, Inc.
For the Quarter Ended June 30, 1997
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PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Balance Sheets, June 30, 1997 (unaudited) and December 31, 1996.
Statements of Operations for the Six Months Ended June 30, 1997 and 1996
(unaudited).
Statements of Operations for the Three Months Ended June 30, 1997 and 1996
(unaudited).
Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996
(unaudited).
Notes to Financial Statements.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II - OTHER INFORMATION
ITEM 6 - Exhibits and Reports on Form 8-K
Signature
Cautionary Statement For Purposes Of The "Safe Harbor"
Provisions Of The Private Securities Litigation Reform Act of 1995
This Quarterly Report contains historical information and forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for certain forward-looking statements. When used in this Form
10-Q and the documents incorporated by reference herein, the words "estimate,"
"project," "anticipate," "expect," "believe" and other expressions used to
indicate future events are intended to identify forward-looking statements. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results in future periods to be materially different from any future
performance suggested herein. Further, 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. In the context of the
forward-looking information provided in this Quarterly Report and in other
reports, please refer to the discussions of risk factors detailed in, as well as
the other information contained in, the Company's other filings with the
Securities and Exchange Commission.
<PAGE>
PanAmSat International Systems, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 286,752,727 $ 1,453,055
Accounts receivable, less allowance
for doubtful accounts of $200,000 10,962,565 10,235,520
Prepaid expenses and other current asse 15,654,835 8,228,455
--------------- ---------------
TOTAL CURRENT ASSETS 313,370,127 19,917,030
SATELLITES AND OTHER PROPERTY AND
EQUIPMENT, AT COST 872,673,532 864,683,595
Less: Accumulated Depreciation and
Amortization (169,748,366) (138,091,220)
--------------- ---------------
702,925,166 726,592,375
MARKETABLE SECURITIES 330,000,000 379,178,538
SATELLITE SYSTEMS UNDER DEVELOPMENT 583,612,534 479,748,974
DEBT ISSUANCE COSTS (Net of amortization 8,473,954 9,454,276
OTHER ASSETS 1,005,382 472,166
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TOTAL ASSETS $ 1,939,387,163 $ 1,615,363,359
--------------- ---------------
--------------- ---------------
</TABLE>
The Accompanying notes are an integral part
of these financial statements
<PAGE>
PanAmSat International Systems, Inc.
BALANCE SHEETS - (continued)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
--------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 4,341,944 $ 4,166,778
Accounts payable 121,102 2,318,877
Accrued interest 7,109,375 7,109,375
Accrued liabilities and taxes 108,211,943 6,656,741
Deferred revenue 7,889,552 8,423,704
--------------- ---------------
TOTAL CURRENT LIABILITIES 127,673,916 28,675,475
LONG-TERM DEBT 645,808,409 626,009,539
DEFERRED INCOME TAXES 84,265,494 61,631,004
DEFERRED REVENUE 70,625,808 71,920,802
OTHER LIABILITIES 636,087 687,934
--------------- ---------------
TOTAL LIABILITIES 929,009,714 788,924,754
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COMMITMENTS AND CONTINGENCIES
PREFERRED STOCK, 12-3/4% Mandatorily
Exchangeable Senior Redeemable Preferred
Stock, $0.01 par value, 20,000,000 shares
authorized, 352,740 shares issued and
outstanding 9,389 shares for accrued dividend 351,732,130 329,070,909
--------------- ---------------
STOCKHOLDERS' EQUITY:
Class A Common Stock, $0.01 par value
100,000,000 shares authorized, 21,231,415
shares issued and outstanding 212,314 404,594
Class B Common Stock, $.01 par value, 100,000,000
shares authorized, 40,459,431 shares issued
and outstanding 404,594 404,594
Common Stock, $0.01 par value, 400,000,000
shares authorized, 38,309,154 shares issued
and outstanding 383,092 190,891
Additional paid-in-capital 490,586,935 477,505,039
Retained earnings 167,058,384 18,862,578
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Total Stockholders' Equity 658,645,319 497,367,696
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,939,387,163 $ 1,615,363,359
--------------- ---------------
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</TABLE>
The accompanying notes are an integral part
of these financial statements
<PAGE>
PanAmSat International Systems, Inc.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Six Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
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<S> <C> <C>
REVENUES:
Unaffiliated parties $ 144,450,643 $ 106,510,394
Related parties 20,053,148 4,196,772
--------------- ---------------
164,503,791 110,707,166
OPERATING EXPENSES:
Direct expenses-service agreements 14,556,564 3,724,571
Sales and marketing 5,948,166 7,233,472
Engineering and technical services 9,122,794 7,772,119
General and administrative 22,356,857 12,046,740
Depreciation and amortization 32,482,619 29,091,687
Reorganization costs 15,634,251 -
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100,101,251 59,868,589
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INCOME FROM OPERATIONS 64,402,540 50,838,577
INTEREST INCOME (11,640,959) (12,269,345)
INTEREST EXPENSE 4,372,296 14,883,918
OTHER INCOME (225,000,000) -
--------------- ---------------
INCOME BEFORE INCOME TAXES 296,671,203 48,224,004
INCOME TAXES 125,814,176 19,386,000
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NET INCOME $ 170,857,027 $ 28,838,004
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PREFERRED STOCK DIVIDEND 22,661,221 20,019,500
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NET INCOME TO COMMON SHARES $ 148,195,806 $ 8,818,504
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EARNINGS PER COMMON SHARE $ 0.09
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 100,359,533
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---------------
</TABLE>
The accompanying notes are an integral part
of these financial statements
<PAGE>
PanAmSat International Systems, Inc.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
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<S> <C> <C>
REVENUES:
Unaffiliated parties $ 72,334,618 $ 57,762,893
Related parties 16,912,756 2,521,148
--------------- ---------------
89,247,374 60,284,041
OPERATING EXPENSES:
Direct expenses-service agreements 10,809,061 2,313,109
Sales and marketing 2,854,096 4,208,541
Engineering and technical services 4,606,566 4,300,648
General and administrative 14,751,931 6,109,648
Depreciation and amortization 16,274,773 15,841,368
Reorganization costs 14,958,859 -
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64,255,286 32,773,314
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INCOME FROM OPERATIONS 24,992,088 27,510,727
INTEREST INCOME (6,364,782) (5,709,489)
INTEREST EXPENSE 1,485,870 7,813,399
OTHER INCOME (225,000,000) -
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INCOME BEFORE INCOME TAXES 254,871,000 25,406,817
INCOME TAXES 108,611,347 10,211,000
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NET INCOME $ 146,259,653 $ 15,195,817
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PREFERRED STOCK DIVIDEND 11,532,319 10,191,631
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NET INCOME TO COMMON SHARES $ 134,727,334 $ 5,004,186
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EARNINGS PER COMMON SHARE $ 0.05
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 100,462,257
---------------
---------------
</TABLE>
The accompanying notes are an integral part
of these financial statements
<PAGE>
PanAmSat International Systems, Inc.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 1997 and 1996
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 170,857,027 $ 28,838,004
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 32,482,619 29,091,687
Deferred income taxes 22,634,490 12,232,000
Accretion of interest on senior
subordinated discount notes 21,902,052 19,614,741
Accretion of interest on marketable securities (812,887) (1,363,871)
Interest expense capitalized (29,411,832) (16,727,322)
Compensation expense on exercise of employee
stock options 13,081,818 -
Changes in assets and liabilities:
Increase in accounts receivable (727,045) (3,221,182)
Increase in prepaid expenses and other current
assets (7,426,380) (12,220,258)
Increase (decrease) in accounts payable (2,197,775) 291,248
Increase in accrued liabilities
and taxes 105,897,144 (4,055,547)
Increase (decrease) in deferred revenue (1,829,146) 29,900,420
Decrease in other liabilities (51,847) (90,000)
--------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 324,398,238 82,289,920
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property and equipment (7,835,087) (8,123,439)
Expenditures for satellite systems under
development (74,451,728) (161,180,546)
Proceeds from maturity of marketable securities 49,991,425 82,952,835
Increase in other assets (533,216) (377,004)
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NET CASH USED IN INVESTING ACTIVITIES (32,828,606) (86,728,154)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (6,269,960) (1,723,387)
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NET CASH USED IN FINANCING ACTIVITIES (6,269,960) (1,723,387)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 285,299,672 (6,161,621)
CASH AND EQUIVALENTS, beginning of period 1,453,055 13,562,113
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CASH AND EQUIVALENTS, end of period $ 286,752,727 $ 7,400,492
--------------- ---------------
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash received for interest $ 13,663,965 $ 10,905,475
--------------- ---------------
--------------- ---------------
Cash paid for interest $ 11,882,076 $ 11,996,785
--------------- ---------------
--------------- ---------------
Cash paid for taxes $ 4,317,800 $ 8,459,139
--------------- ---------------
--------------- ---------------
</TABLE>
The accompanying notes are an integral part
of these financial statements
<PAGE>
FORM 10-Q
PanAmSat International Systems, Inc.
NOTES TO FINANCIAL STATEMENTS
(1) General.
The interim unaudited Financial Statements should be read in
conjunction with the audited Financial Statements and the notes
thereto for the year ended December 31, 1996 included in the
Company's Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission (Commission File Number 33-63284) (the
"Annual Form 10-K"). The balance sheet as of June 30, 1997, and
the related statements of operations and cash flows for the six
months ended June 30, 1997 and 1996 have been prepared by the
Company and are unaudited. In the opinion of management, all
adjustments which are of a normal recurring nature necessary to
present fairly the financial position, results of operations and
cash flows as of and for the three and six month periods ended
June 30, 1997 and 1996 have been made. The accounting policies
followed during the interim periods reported are in conformity
with generally accepted accounting principles and are consistent
with those applied for annual periods and described in the
Company's Annual Form 10-K. The results of operations for the six
month periods ended June 30, 1997 and 1996 are not necessarily
indicative of the operating results for the full year.
(2) Changes in Control of Registrant.
On May 16, 1997, HCI and the Company combined their commercial
satellite operations pursuant to an Agreement and Plan of
Reorganization, dated as of September 20, 1996, as amended as of
April 4, 1997 (the "Reorganization Agreement"), between HCI and
certain of its subsidiaries and the Company (the "Merger"). The
Merger was consummated through the merger of a wholly owned
subsidiary of a newly formed holding company (such holding
company, "New PanAmSat"), with and into the Company and a
contribution of the commercial satellite services business of HCI
(the "Galaxy Business") to New PanAmSat, with the result that the
Company became a wholly owned subsidiary of New PanAmSat and New
PanAmSat became the owner and operator of the Galaxy Business.
Following the Merger, the Company was renamed PanAmSat
International Systems, Inc. and New PanAmSat was renamed PanAmSat
Corporation.
<PAGE>
FORM 10-Q
PanAmSat International Systems, Inc.
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Satellite Capacity for DTH Services.
In November 1995, the Company announced that it would serve as a
satellite service provider for a Latin America DTH service ("Latin
America DTH") to be offered by the Globo Participacoes, Ltd.
("Globo"), Televisa, The News Corporation Limited ("News Corp.")
and Tele-Communications International, Inc. ("TCI"). On February
29, 1996, the Company signed a binding letter agreement with
Globo, Televisa and News Corp. (the "1996 Letter Agreement") to
provide service to a series of joint ventures (the "Latin America
JVs") to be formed. Under the 1996 Letter Agreement, Globo,
Televisa and News Corp. agreed to proportionally guaranty 100% of
PanAmSat's fees for transponder services provided to the Latin
America JVs. On June 26, 1996, a full-scale agreement was executed
for service in Brazil on twelve transponders (the "Brazil
Agreement"). The 1996 Letter Agreement remains in force. Globo and
News Corp have proportionately guaranteed the obligations under
the Brazil Agreement.
Concurrent with the Merger (see Note 2), the Company sold the
equity interest in certain joint ventures to be formed to offer
DTH services in Latin America and the Iberian Peninsula for $ 225
million. This resulted in a gain of $ 225 million which was
recorded as other income in the financial statements.
(4) Subsequent Events.
On August 8, 1997, the Company successfully launched its PAS-6
Atlantic Ocean Region satellite, the first communications
satellite ever dedicated for direct-to-home ("DTH") television
services in Latin America. The entire PAS-6 payload, 36 Ku-band
transponders, is fully sold to Sky Latin America, one of the Latin
America JVs, which will use the satellite to beam hundreds of
television channels to its DTH service subscribers in Latin
America. PAS-6 is expected to reach its final orbital location at
43 degrees West Longitude and commence service in October 1997
after successful completion of its in-orbit testing. Additionally,
the Company intends to launch another Atlantic Ocean Region
satellite, PAS-5, in late August 1997.
As a result of Old PanAmSat's financial performance as disclosed
herein and in its Quarterly Report on Form 10-Q for the period
ended June 30, 1997, taken together with all of Old PanAmSat's
prior filings with the Securities and Exchange Commission, Old
PanAmSat is required to exchange its 12 3/4% Senior Redeemable
Preferred Stock (the "Preferred Stock") to Exchange Debentures in
accordance with the procedures described in the Certificate of
Designation for the Preferred Stock.
<PAGE>
FORM 10-Q
PanAmSat International Systems, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview. The Company's first satellite, PAS-1, was launched in
1988 for service over the Atlantic Ocean Region and is the leading
satellite for television and cable programming distribution in
Latin America. The Company's second satellite, PAS-2, was launched
in July 1994 for service over the Pacific Ocean Region and is a
leading satellite for distribution in the Asia-Pacific region. The
Company's PAS-4 satellite was launched in August 1995 for service
over the Indian Ocean Region and commenced service on September 5,
1995. PAS-4 is the leading satellite for program distribution in
South Asia and Africa. The Company's PAS-3 satellite (a
replacement for a satellite lost as a result of a launch failure
in December 1994) was launched on January 12, 1996 and commenced
service on February 19, 1996 over the Atlantic Ocean Region.
During the construction period of each of its new satellites, and
thereafter, the Company may incur increased operating expenses,
including expenditures for sales and marketing in excess of the
levels historically incurred, increased engineering and technical
expenses, as well as increased general and administrative
expenses, which increased expenses may not be offset by additional
revenues until the new satellites are successfully launched and
commence service. Also, commencing at the in-service date of any
successfully launched satellite, all satellite construction costs,
launch, launch insurance, capitalized interest and development
costs for such satellite will be depreciated on a straight-line
basis over the estimated useful life of the satellite. Further,
after the in-service date of any successfully launched satellite
(or upon a launch failure), the Company will be required to
expense, and no longer will be able to capitalize, interest
allocable to such satellite's construction, launch and development
costs.
Revenues. Total revenues for the three months ended June 30, 1997
were $89.2 million, an increase of $28.9 million or 48% as
compared to the comparable period in 1996. Total revenues for the
six months ended June 30, 1997 were $164.5 million, an increase of
$53.8 million or 49% as compared to the comparable period in 1996.
Broadcasting services revenue for the three months ended June 30,
1997 was $77.9 million, an increase of $28.0 million, or 56% over
the same period in 1996. Broadcasting services revenue for the six
months ended June 30, 1997 was $142.6
<PAGE>
FORM 10-Q
PanAmSat International Systems, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
million, an increase of $53.0 million, or 59% over the same period
in 1996. The growth in broadcasting services revenue during the
three and six month periods was due primarily to the commencement
of new video service ad-hoc and special events traffic and revenue
during the first and second quarters of 1997.
Business communications services revenue was $10.7 million in the
three months ended June 30, 1997, increasing $0.7 million or 7%,
over the comparable period in 1996. Business communications
services revenue was $20.7 million in the six months ended June
30, 1997, increasing $0.4 million or 2%, over the comparable
period in 1996. The increase during the three and six month
periods was primarily due to the completion during 1997 of several
short-term business communications service agreements.
Long-distance telephony services revenue increased from $0.4
million for the three months ended June 30, 1996 to $0.6 million
for the three months ended June 30, 1997, an increase of $0.2
million or 50%. Long-distance telephony services revenue increased
from $0.8 million for the six months ended June 30, 1996 to $1.2
million for the six months ended June 30, 1997, an increase of
$0.4 million or 50%.
Direct Expenses. Direct expenses were $10.8 million, or 12% of
total revenues, in the three months ended June 30, 1997, an
increase of $8.5 million or 370%, from the same period in 1996
when direct expenses were 4% of total revenues. Direct expenses
were $14.6 million, or 9% of total revenues, in the six months
ended June 30, 1997, an increase of $10.9 million or 295%, from
the same period in 1996 when direct expenses were 3% of total
revenues. The increase in direct expenses over the three and six
month periods was primarily attributable to costs associated with
the increased ad-hoc and special events revenue recognized during
the quarters.
Sales and Marketing Expenses. Sales and marketing expenses were
$2.9 million, or 3% of total revenues, in the three months ended
June 30, 1997, compared to $4.2 million, or 7% of total revenues,
in the three months ended June 30, 1996. Sales and marketing
expenses were $5.9 million, or 4% of total revenues, in the six
months ended June 30, 1997, compared to $7.2 million, or 7% of
total revenues, in the six months ended June 30, 1996. The
decrease in sales and marketing expenses over the three and six
month periods was primarily attributable to the Company's reduced
marketing activity on the PAS Global System in anticipation of
future satellite launches.
<PAGE>
FORM 10-Q
PanAmSat International Systems, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Engineering and Technical Expenses. Engineering and technical
expenses were $4.6 million in the three month period ended June
30, 1997, or 5% of total revenues, compared to $4.3 million, or 7%
of total revenues, for the comparable period in 1996. Engineering
and technical expenses were $9.1 million in the six month period
ended June 30, 1997, or 6% of total revenues, compared to $7.8
million, or 7% of total revenues, for the comparable period in
1996. The dollar increase in engineering and technical expenses
during the three and six month periods was primarily due to
increased costs associated with its new teleport facilities, as
well as the additional telemetry, tracking and control costs
associated with PAS-3.
General and Administrative Expenses. General and administrative
expenses were $14.7 million, or 16% of total revenues, in the
three months ended June 30, 1997, an increase of $8.6 million or
141%, as compared to the same period in 1996, when general and
administrative expenses were $6.1 million, or 10% of total
revenues. General and administrative expenses were $22.4 million,
or 14% of total revenues, in the six months ended June 30, 1997,
an increase of $10.3 million or 85%, as compared to the same
period in 1996, when general and administrative expenses were
$12.1 million, or 11% of total revenues. The dollar increase in
general and administrative expenses during the three and six month
periods was primarily attributable to in-orbit insurance costs
associated with PAS-3 and additional personnel costs associated
with the Company's expansion.
Depreciation and Amortization. Depreciation and amortization was
$16.3 million in the three months ended June 30, 1997, as compared
to $15.8 million in the three months ended June 30, 1996, an
increase of $0.5 million or 3%. Depreciation and amortization was
$32.5 million in the six months ended June 30, 1997, as compared
to $29.1 million in the six months ended June 30, 1996, an
increase of $3.4 million or 12%. The dollar increase in the three
and six month periods was primarily due to increased depreciation
expense associated with PAS-3, and additional depreciation expense
related to communication equipment at the Company's new teleports.
Interest. Interest income, primarily earned from highly liquid
investment funds, was $6.4 million for the three months ended June
30, 1997 compared to $5.7 million for the comparable period in
1996, an increase of $0.7 million. Interest income was $11.7
million for the six months ended June 30, 1997 compared to $12.3
million for the comparable period in 1996, an decrease of $0.6
million. The increase
<PAGE>
FORM 10-Q
PanAmSat International Systems, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
in interest income during the three month period was primarily a
result of the maturity of marketable securities during 1996, the
proceeds of which were used to finance construction in progress.
Interest expense, net of capitalized interest, decreased from $7.8
million in the quarter ended June 30, 1996 to $1.5 million in the
same quarter in 1997. Interest expense, net of capitalized
interest, decreased from $14.9 million in the six months ended
June 30, 1996 to $4.4 million in the same period in 1997. The
decrease in interest expense during the three and six month
periods was primarily the result of an increase in the amount of
interest eligible for capitalization on construction in progress.
Other Income. The Company had Other Income of $225.0 million for
the three and six months ended June 30, 1997. The Other Income is
a result of the repurchase by Televisa of the Company's interest
in the Latin American DTH joint venture.
Income Taxes. The Company had an income tax provision of $108.6
million for the three months ended June 30, 1997 as compared to
$10.2 million for the comparable period in 1996. The Company had
an income tax provision of $125.8 million for the six months ended
June 30, 1997 compared to $19.4 million for the comparable period
in 1996. The increase in income taxes during the three and six
month periods was due to the increase in income before income
taxes.
Preferred Stock Dividend. The Company had Preferred Stock
dividends of $11.5 million for the three months ended June 30,
1997 as compared to $10.2 million for the comparable period in
1996. The Company had Preferred Stock dividends of $22.7 million
for the six months ended June 30, 1997 compared to $20.0 million
for the comparable period in 1996. The Preferred Stock dividends
in 1996 are a result of the issuance of the Company's Preferred
Stock on April 21, 1995.
EBITDA. EBITDA was $41.3 million in the three months ended June
30, 1997, a decrease of $2.1 million or 5%, as compared to $43.4
million for the comparable period in 1996. EBITDA was $96.9
million in the six months ended June 30, 1997, an increase of
$17.0 million or 21%, as compared to $79.9 million for the
comparable period in 1996. EBITDA was 59% of total revenues in the
first six months of 1997 as compared to 72% of total revenues for
the same period in the prior fiscal year. The dollar increase in
EBITDA for the six month period ended June 30, 1997 was due
primarily to the increase in total revenues.
<PAGE>
FORM 10-Q
PanAmSat International Systems, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Liquidity and Capital Resources. Since inception, the Company and
its predecessors have financed their operations through a
combination of debt and equity financing, vendor financing, bank
financing, equipment leases and cash flow from operations. On
August 5, 1993 the Company completed the sale of the $175 million
aggregate principal amount of the Senior Secured Notes and $460.2
million aggregate principal amount of the Discount Notes
(collectively, the "Notes") and received net proceeds of
approximately $425.5 million. The original PAS-3 satellite was
destroyed during a launch failure on December 1, 1994. The Company
collected in 1995 the insurance proceeds in the amount of $214.0
million for the original PAS-3 satellite. On April 21, 1995, the
Company completed the sale of 275,000 shares of the Preferred
Stock in a public offering and received net proceeds of
approximately $261.8 million. On September 27, 1995, the public
offering of 18,920,000 shares of the Common Stock was completed
and the Company received net proceeds of approximately $229
million.
The total cost for the construction and launch of PAS-5 and PAS-6,
including launch insurance, certain components for spare
satellites, ground facilities and related development expenses
(but excluding capitalized interest expense) is estimated to be
approximately $473 million. The Company expects to fund $296.3
million of such costs with the net proceeds of the offering of the
Preferred Stock and $70.0 million of vendor financing. The balance
of such costs and any additional costs due to cost overruns,
delays or other unanticipated expenses is anticipated to be funded
from vendor financing and future cash flow from operations.
The total cost for the construction and launch of PAS-7 and PAS-8,
including launch insurance, ground facilities and related
development expenses (but excluding capitalized interest expense)
is estimated to be approximately $420.0 million. The Company
expects to fund $224.6 million of such costs with the net proceeds
to it from the offering of the Common Stock. The balance of such
costs and any additional costs due to cost overruns, delays or
other unanticipated expenses is expected to be funded from vendor
financing and future cash flow from operations.
The Company believes that the net proceeds to it from the
offerings of Preferred Stock and Common Stock, vendor financing,
future cash flow from operations (assuming PAS-5 and PAS-6 are
successfully launched and commence service on the schedule
currently contemplated) and cash on hand will be sufficient to
fund the Company's operations, its remaining costs for the
construction and launch of PAS-5, PAS-6, PAS-7
<PAGE>
FORM 10-Q
PanAmSat International Systems, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
and PAS-8, as well as to pursue international opportunities for
DTH services which may be identified by the Company in the future.
Any additional costs due to cost overruns, delays or other
unanticipated expenses are expected to be funded from additional
vendor financing and future cash flow from operations.
Cash flows provided by operating activities increased to $324.4
million in the six months ended June 30, 1997, from $82.3 million
in the six months ended June 30, 1996. The 1997 increase is due
primarily to the significant growth in revenues for the six months
ended June 30, 1997 and the effect of non-cash charges. The
Company has and will continue to have significant non-cash charges
including depreciation of satellites and other equipment and
amortization of original issue discount on its Senior Subordinated
Discount Notes, as well as significant cash payments that are
capitalized rather than being currently expensed, including
capitalized interest.
Net cash used in investing activities decreased to $32.8 million
in the six months ended June 30, 1997 from $86.7 million in the
six months ended June 30, 1996. This decrease primarily reflects
$74.5 million of expenditures for satellite systems under
development partially funded by $50.0 million of proceeds from
maturity of marketable securities. This compares to $161.2 million
in expenditures for satellite systems under development during the
first six months of 1996 partially funded by $83.0 million of
proceeds from maturity of marketable securities.
Net cash used in financing activities increased to $6.3 million in
the six months ended June 30, 1997 from $1.7 million in the six
months ended June 30, 1996.
<PAGE>
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
During the quarter ended June 30, 1997, PanAmSat International
Systems, Inc. filed a Form 8-K on May 30, 1997 and a Form
8-K/A on June 25, 1997.
<PAGE>
FORM 10-Q
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PanAmSat International Systems, Inc.
Date: August 14, 1997 /s/ Kenneth N. Heintz
---------------------
Kenneth N. Heintz
Chief Financial Officer
and a Duly Authorized
Officer of the Company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Old
PanAmSat Form 10-Q for the quarterly period ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 286,752,727
<SECURITIES> 330,000,000
<RECEIVABLES> 11,162,565
<ALLOWANCES> (200,000)
<INVENTORY> 0
<CURRENT-ASSETS> 313,370,127
<PP&E> 872,673,532
<DEPRECIATION> (169,748,366)
<TOTAL-ASSETS> 1,939,387,163
<CURRENT-LIABILITIES> 127,673,916
<BONDS> 645,808,409
351,732,130
0
<COMMON> 1,000,000
<OTHER-SE> 658,645,319
<TOTAL-LIABILITY-AND-EQUITY> 1,939,387,163
<SALES> 89,247,374
<TOTAL-REVENUES> 89,247,374
<CGS> 0
<TOTAL-COSTS> 64,255,286
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,878,912)
<INCOME-PRETAX> 254,871,000
<INCOME-TAX> 108,611,347
<INCOME-CONTINUING> 146,259,653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,259,653
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
