10 May 2011

Intelsat S.A., the world’s leading provider of fixed satellite services, today reported results for the three months ended March 31, 2011.

Intelsat S.A. reported revenue of $640.2 million and a net loss of $215.6 million for the three months ended March 31, 2011.  Included in the quarterly results was a $168.2 million non-cash charge for loss on early extinguishment of debt resulting from refinancing activity.  The company also reported Intelsat S.A. EBITDAi, or earnings before net interest, loss on early extinguishment of debt, taxes and depreciation and amortization, of $489.3 million, and Intelsat S.A. Adjusted EBITDAi of $499.7 million, or 78 percent of revenue, for the three months ended March 31, 2011.

“Intelsat delivered solid 3 percent revenue growth in the first quarter of 2011 and also progressed on initiatives that position the company for long-term profitable growth,” said Intelsat CEO David McGlade.  “The quarter featured the addition of leading programmers to our regional video neighborhoods, new strategic agreements with large African and Latin American communications providers, and increased orders under large government programs at our Intelsat General Corporation business.  We ended the quarter with $9.9 billion in contracted services backlog, underscoring the stability and visibility inherent in our business.”
 
McGlade continued, “We have launched two satellites over the past six months and plan to launch another seven through the end of 2012.  The new and refreshed capacity these launches offer at key orbital locations is supporting our future growth by attracting strong contract activity from blue-chip customers who rely on the geographic coverage, flexibility, stability and resilience of our global fleet, all of which differentiate us from other operators in the sector.”

• Transponder services - an aggregate increase of $16.6 million, due primarily to a $6.4 million increase resulting from growth in capacity sold by our Intelsat General business, a $5.9 million increase in revenue resulting from favorable terms, new business and renewals from network services customers primarily in the Latin America and Caribbean and the Africa and Middle East regions, and a $4.3 million increase from media customers primarily in the Europe and the Latin America and Caribbean regions.
  
• Managed services - an aggregate decrease of $2.6 million, primarily due to a decrease in revenue from network services customers for trunking and private line solutions largely in the Africa and Middle East and the Asia-Pacific regions, partially offset by an increase in services sold by our Intelsat General subsidiary and an increase in occasional use video services sold to media customers in the Latin America and Caribbean region.
  
• Channel - an aggregate decrease of $4.0 million related to a continued decline from the migration of point-to-point satellite traffic to fiber optic cables, a trend which we expect will continue.

• Transponder, MSS and other Off-Network services - an aggregate increase of $4.1 million, primarily due to an $11.0 million increase in transponder services largely related to customers of our Intelsat General business, partially offset by a $6.9 million decline in usage-based MSS revenue.
  
• Satellite-related services- an aggregate increase of $4.9 million, due primarily to an increase in professional fees earned for providing flight operations for third-party satellites and government professional services.

• Selling, general and administrative expenses increased by $6.5 million, or 14 percent, to $51.6 million for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. The increase primarily was due to $7.8 million in higher non-cash compensation costs associated with the Intelsat Global, Ltd. 2008 Share Incentive Plan, partially offset by a decrease of $2.6 million in bad debt expense due to favorable cash collections in the first quarter of 2011 as compared to the prior year period.
  
• Depreciation and amortization expense decreased by $1.8 million, or 1 percent, to $195.0 million for the three months ended March 31, 2011 as compared to the three months ended March 31, 2010. This decrease was primarily due to the net effect of certain assets becoming fully depreciated and the 2010 impairments of the IS-4 and Galaxy 15 satellites due to anomalies, offset by increases due to satellites placed into service in 2010 and 2011.
  
• Our income from operations increased by $44.8 million to $290.3 million for the three months ended March 31, 2011 as compared to $245.5 million for the three months ended March 31, 2010. In addition to the impacts described above, our financial results were affected by certain material pre-tax charges incurred during the three months ended March 31, 2010 and March 31, 2011, as discussed below:
  
  • a $6.5 million non-cash impairment charge recorded in the first quarter of 2010 to write off our IS-4 satellite, which was deemed unrecoverable after an anomaly occurred in February 2010; and
    
  • a $29.9 million loss recognized on our derivative financial instruments for the three months ended March 31, 2010 due to cash settlements for interest, representing the difference between the amount of floating rate interest we receive and the amount of fixed rate interest we pay, together with the impact of marking the instruments to fair value, as compared to a gain on derivative financial instruments of $1.7 million for the three months ended March 31, 2011.
    
• Interest expense, net consists of the gross interest expense we incur less the amount of interest we capitalize related to capital assets under construction and less interest income earned. Interest expense, net increased by $9.0 million, or 3 percent, to $348.8 million for the three months ended March 31, 2011 as compared to $339.8 million for the three months ended March 31, 2010. The increase in interest expense was principally due to the following:
  
  • a net increase of $11.7 million in interest expense associated with our entry into the Intelsat Jackson Senior Secured Credit Agreement, a portion of the proceeds of which was used to repay indebtedness at Intelsat Corp and Intelsat Sub Holdco; and
    
  • an increase of $3.1 million in interest expense associated with interest paid-in-kind that was accreted into the principal of Intelsat Luxembourg S.A. 11 1/2%/12 1/2% Senior PIK Election Notes due 2017; partially offset by
    
  • a decrease of $7.2 million resulting from higher capitalized interest due to an increase in capitalized satellite related costs.

Non-cash items in interest expense, net included $20.7 million of payment-in-kind (“PIK”) interest expense and $23.4 million primarily associated with the amortization of deferred financing fees incurred as a result of new or refinanced debt and the amortization and accretion of discounts and premiums.

• Loss on early extinguishment of debt was $168.2 million for the three months ended March 31, 2011 with no similar charge during the three months ended March 31, 2010. The 2011 loss was recognized in connection with the first quarter refinancing activity described earlier in this news release.  The loss was primarily driven by the difference between the carrying value of the debt repurchased or redeemed and the total cash amount paid for the purchase, including related fees and a write-off of unamortized debt discounts and debt issuance costs.

• Other income, net was $4.0 million for the three months ended March 31, 2011 as compared to $2.8 million for the three months ended March 31, 2010. The increase of $1.2 million was primarily due to a $2.1 million increase in exchange rate gains, related to our business conducted in Brazilian reais and euros in 2010, offset by a $1.3 million gain recorded related to our sale of Viasat, Inc. common stock during the first quarter of 2010 with no similar gain recorded in the first quarter of 2011.