Telesat Reports Results for the Quarter and Year Ended

February 24, 2014

Telesat Holdings Inc. announced its financial results for the three month and one year periods ended December 31, 2013. All amounts are in Canadian dollars and are reported under International Financial Reporting Standards (“IFRS”) unless otherwise noted.

For the year ended December 31, 2013, Telesat reported consolidated revenues of $897 million, an increase of approximately 6% ($51 million) compared to 2012. When adjusted for foreign exchange rate changes, revenue increased by 5% ($43 million) compared to 2012. The increase was mainly due to revenue earned on the Nimiq 6 and Anik G1 satellites which entered into commercial service in June 2012 and May 2013, respectively. The increase was partially offset by a decrease in revenue earned on Nimiq 1 and Nimiq 2.  

Operating expenses of $201 million were 18% ($45 million) lower than in 2012 or 19% ($47 million) lower when taking into account changes in foreign exchange rates. This reduction was primarily due to compensation expenses incurred in 2012 related to special payments to certain employees of the Company in connection with a cash distribution made to the Company’s shareholders, partially offset by an increase in share-based compensation expense in 2013 as a result of additional stock option awards made in the second quarter of 2013. Adjusted EBITDA¹ was $711 million, an increase of 9% ($56 million) over 2012. The Adjusted EBITDA margin¹ for 2013 was 79%, compared to 78% for 2012.

Telesat’s net income for 2013 was $68 million compared to net income of $24 million for 2012. The favorable variation was partly due to a gain on changes in the fair value of financial instruments and a lower loss on financing in 2013 compared to 2012 as losses were recognized in 2012 on the repurchase and redemption of the 11.0% Senior Notes. Telesat’s results were also positively impacted by increased revenue, lower operating expenses and lower interest expense due to refinancing activities. The favorable variation was partially offset by a non-cash loss on foreign exchange, which was principally driven by a stronger U.S. dollar to Canadian dollar spot rate at December 31, 2013, compared to December 31, 2012, and the resulting unfavorable impact on the translation of Telesat’s U.S. dollar denominated debt.

For the three month period ended December 31, 2013, consolidated revenues were $224 million, a decrease of approximately 2% ($4 million) compared to the same period in 2012. When adjusted for foreign exchange rate changes, revenue decreased by 4% ($9 million) compared to the same period in 2012, driven mainly by lower equipment sales revenues and lower revenues from Nimiq 1 and Nimiq 2. Operating expenses were $50 million, a decrease of 17% ($11 million) compared to 2012. The decrease was primarily due to lower cost of equipment sales in 2013 and additional revenue-related expenses associated with Nimiq 1 in 2012. Adjusted EBITDA¹ for the fourth quarter of 2013 was $178 million, an increase of 3% ($5 million) compared to the fourth quarter of 2012 and an increase of 1% ($1 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin¹ was 79% for the fourth quarter compared to 76% for the same period in 2012. 

“Telesat achieved record revenues and Adjusted EBITDA in 2013” commented Dan Goldberg, Telesat’s President and CEO. “I am pleased with our strong financial performance, the successful entry into service of our Anik G1 satellite, the procurement of the Telstar 12 VANTAGE satellite and our ability to reduce borrowing costs by re-pricing and amending our credit facilities.  Our substantial investment in satellite capacity combined with our industry-leading contractual backlog provides visibility into the stability of our future revenue and cash flow and positions us well for 2014 and beyond.”

Business Highlights 

·         In April 2013, Telesat Canada and Telesat LLC reduced their borrowing costs and increased their flexibility by re-pricing and amending their existing credit facilities. The changes included decreasing the interest rates and the interest rate floors on the Term Loan B and increasing the permitted leverage ratio to incur first lien debt. In May 2013, Telesat Canada and Telesat LLC completed the redemption of all of their 12.5% Senior Subordinated Note issued in June 2008.  

·         During the second quarter of 2013, Telesat announced the procurement of a powerful, multi-mission satellite from Airbus Defence and Space that will replace and expand on Telstar 12 at 15 degrees West Longitude. This new state-of-the-art satellite, called Telstar 12 VANTAGE, is expected to launch in late 2015 and will utilize high throughput capabilities that offer superior performance to meet the growing needs of broadcast, government and enterprise users, including demand for aeronautical and maritime services. The satellite will offer a high level of flexibility with coverage of Europe, the Americas, the Middle East and Africa, as well as the Caribbean, North Sea, Mediterranean and South Atlantic regions.  In September 2013, Telesat entered into a contract with Mitsubishi Heavy Industries Ltd. to launch the Telstar 12 VANTAGE satellite. 

·         On May 8, 2013, commercial service began on Telesat’s new Anik G1 satellite, which was launched on April 15, 2013. Anik G1 is located at the 107.3 degrees West Longitude orbital location providing a range of communications services, using Ku-band for direct-to-home video services in Canada, X-band for government services in the Americas and Pacific Ocean Region, and C-band and Ku-band for a range of services in South America.