NSE New Skies Satellite Hlds Ltd

New Skies Satellites Holdings Ltd. (NYSE:NSE), the global satellite communications company, today reported financial results for the year ended December 31, 2005. Revenues for the year were $240.5 million, up 14 percent over the prior year, net loss was $1.4 million and Adjusted EBITDA(A) was $157.7 million, up 31 percent over the same period in the prior year. Commenting on the results, Dan Goldberg, CEO of New Skies, said: "I am delighted to report that 2005 has been an extraordinary year for New Skies. From a financial and operational standpoint, the significant increase in the fill rate of our fleet (from 55 percent to 64 percent over the course of the year) combined with a stable pricing environment allowed us to achieve record revenues of more than $240 million, a 14 percent increase over the prior year. Revenue growth was driven by video and enterprise requirements in Central and South Asia, the Middle East and Africa, by restoration services provided to Intelsat following the failure of one of its satellites in the Pacific Ocean Region, and by continued growth in government services across the fleet. "Our strong top line performance coupled with our continuing efforts to improve our cost structure and enhance our operating efficiencies resulted in a 31 percent annual increase in Adjusted EBITDA and a year-on-year expansion of our Adjusted EBITDA margins from 57 percent to 66 percent. "I am also pleased that we were able last year to generate nearly $20 million from the resolution of certain longstanding frequency coordination matters in connection with orbital locations we were not using as well as $10 million from the sale of our Australian teleports, an activity that was not core to our business and was diluting our margins. These amounts are excluded from the $240.5 million in revenues as well as the calculation of Adjusted EBITDA. We also were able to create significant value for shareholders through the re-negotiation of our NSS-8 contract with Boeing. A substantial portion of the amounts that Boeing returned to the company were used to reduce our outstanding long term indebtedness. These amounts, combined with proceeds from our successful IPO in May of last year and internally generated cash flow, enabled us to reduce our long term indebtedness from 6.2x Adjusted EBITDA at the outset of the year to 2.8x Adjusted EBITDA at year end. "In addition to our strong operational and financial performance, we took important steps last year to return value to shareholders. As mentioned, in May we concluded our initial public offering, using a substantial portion of the proceeds to strengthen our balance sheet by delevering, and in December - seizing a unique opportunity to deliver significant value and liquidity to shareholders - we announced the sale of the company to SES Global, a transaction that received the overwhelming approval of our shareholders just three weeks ago. We strongly believe that the agreement with SES serves the best interests of our shareholders, customers, lenders, employees and suppliers. It is presently our expectation that the SES transaction will close early in the second quarter of this year, although it is possible that it could occur sooner or later than this. "In sum, 2005 was a strong and exciting year for New Skies. Heading into 2006 we remain focused on concluding our transaction with SES Global at the earliest opportunity and to building upon the performance we achieved last year." (A) See definition of Adjusted EBITDA and the related reconciliations in Note 2 of "Notes to the consolidated quarterly financial information". Financial highlights: For the year and three-month period ended December 31, 2005, New Skies achieved the following financial results: -- Revenues for 2005 were $240.5 million, an increase of $29.8 million, or 14 percent, from $210.7 million in 2004. These amounts exclude proceeds arising from the resolution of certain orbital slot coordination matters in 2005 and 2004. The revenue growth was primarily due to an increase in the overall satellite fleet fill rate to 64 percent as of December 31, 2005 compared to 55 percent as of the end of 2004. Revenues for the three-month period ended December 31, 2005 were $61.4 million, an increase of $7.6 million, or 14 percent, compared to $53.8 million for the same period in 2004. -- Cost of Operations and Selling, General and Administrative costs, decreased by $25.3 million, or 23 percent, in 2005 relative to last year. This resulted from several factors, including reductions in third party teleport costs and in-orbit insurance, the non-recurrence of certain one-time costs incurred in 2004 associated with the termination of a customer contract and the reduction in our staff levels, and savings arising from careful management of discretionary costs. For the three month period, our Cost of Operations and Selling, General and Administrative costs decreased by $17.3 million, or 47 percent, as compared to the same period in 2004, primarily due to the non-recurrence of the previously mentioned one-time costs as well as continuing reductions in discretionary costs. -- Stock-based compensation recorded in accordance with Statement of Financial Accounting Standards No. 123 was $20.5 million and $1.8 million for 2005 and 2004, respectively. -- The company received a one-time payment of $9.5 million in the third quarter 2005 arising from the successful resolution of certain frequency coordination matters. Coupled with the frequency coordination payment received in the first quarter 2005, total amounts received were $19.5 million for 2005. In 2004, we received a one-time payment of $32.0 million relating to frequency coordination matters. -- Interest expense, net was $61.9 million and $11.2 million for 2005 and 2004, respectively. The net increase was due to the full year effect of new debt issued in connection with the purchase of the assets of New Skies Satellites N.V. by affiliates of The Blackstone Group in November 2004. Also included are non-cash charges of $15.0 million in 2005, related to the accelerated amortization of debt issuance costs associated with the early repayments of a portion of the term loan facility. For the three month period, our Interest expense, net increased by $3.3 million, or 32 percent. -- In 2005, Adjusted EBITDA was $157.7 million, compared to $120.6 million in 2004, reflecting an increase of $37.1 million, or 31 percent. Adjusted EBITDA margin increased to 66 percent for the year ended December 31, 2005 from 57 percent in the previous year. Adjusted EBITDA for the three months ended December 31, 2005 increased $11.1 million, or 36 percent, to $41.9 million, as compared to $30.8 million for the same period in 2004. -- Net loss for 2005 was $1.4 million compared to $6.3 million in the prior year. -- Backlog at the end of 2005 was $502 million, approximately two times annual revenues, compared to $517 million at the beginning of 2005. -- Total long-term debt as of December 31, 2005 was $438.6 million, reflecting a total paydown of $306.4 million in 2005, thus reducing long-term third party debt(B) to Adjusted EBITDA(C) from 6.2x as of December 31, 2004 to 2.8x as of December 31, 2005. -- During the quarter ended December 31, 2005, New Skies also declared a quarterly cash dividend for the fourth quarter of 2005, in the amount of $0.463125 per share. -- On November 8, 2005, New Skies announced the completion of the sale of its Australian subsidiary, New Skies Networks PTY Limited, to Multiemedia Limited for $10.0 million. The company used the net proceeds of the sale transaction to further reduce outstanding borrowings under its term loan facility. -- On May 10, 2005, New Skies completed the sale of 11.9 million newly issued ordinary shares, equivalent to 37 percent of the total currently issued and outstanding ordinary shares in an initial public share offering that generated gross proceeds of $196.4 million. The sale of an additional 1.8 million shares was completed on May 27, 2005, thus bringing the total number of issued and outstanding shares to 32.3 million. (B) Long-term third party debt includes borrowings under the senior secured credit facilities and amounts outstanding under the senior floating rate notes and senior subordinated notes, amounting to $745.0 million and $438.6 million as of December 31, 2004 and 2005, respectively. (C) Adjusted EBITDA for the twelve month periods ended December 31, 2004 and 2005 was $120.5 million and $157.7 million, respectively. Recent developments: On December 14, 2005, New Skies signed a definitive agreement pursuant to which SES GLOBAL will acquire 100 percent of New Skies by way of a merger under Bermudian law (an amalgamation). SES GLOBAL will acquire New Skies for US$ 22.52 per share in cash. -- On February 3, 2006, New Skies and SES Global S.A. received early termination of the required waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 for the acquisition of New Skies. -- At a special general meeting of shareholders held on February 10, 2006, New Skies' shareholders overwhelmingly approved the sale of the company, with 99 percent of shares in attendance voting for the acquisition. New Skies anticipates that the transaction will be completed early in the second quarter 2006, subject to the receipt of the remaining approvals and satisfaction of other customary closing conditions, although it is possible that it could occur sooner or later than this. About New Skies Satellites (NYSE:NSE) New Skies is one of only four fixed satellite communications companies with global satellite coverage, offering data, video, Internet and voice communications services to a range of telecommunications carriers, broadcasters, large corporations, Internet service providers and government entities around the world. New Skies has five satellites in orbit, one spacecraft under construction (NSS-8) and ground facilities around the world. New Skies is headquartered in Hamilton, Bermuda, and has subsidiaries with offices in The Hague, Hong Kong, New Delhi, Sao Paulo, Singapore, Sydney and Washington, D.C. Conference call: CEO Dan Goldberg and CFO Andrew Browne will host a conference call today at 11:00 a.m. (EST). To listen in please dial +1 877 491 0064, passcode "New Skies." International dial-in number is +1 334 323 6201. The call will also be webcast live on the New Skies web site at: http://www.newskies.com/investors.htm. The conference call will be available for replay, 24 hours a day for the subsequent 5 working days and will also be archived on New Skies' website. The dial-in number for the replay is +1 888 365 0240 or +1 954 334 0342 for international callers. Passcode: 695542. Safe Harbor Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934 provide a "safe harbor" for forward-looking statements made by an issuer of publicly traded securities and persons acting on its behalf. New Skies Satellites Holdings Ltd. ("New Skies") has made certain forward-looking statements in this press release in reliance on those safe harbors. A forward-looking statement concerns the company's or management's intentions or expectations, or is a prediction of future performance. These statements are identified by words such as "intends", "expects", "anticipates", "believes", "estimates", "may", "will", "should" and similar expressions. By their nature, forward-looking statements are not a matter of historical fact and involve risks and uncertainties that could cause New Skies' actual results to differ materially from those expressed or implied by the forward-looking statements for a number of reasons. The parties may not be able to consummate the proposed transaction on the terms on which the parties have agreed, or at all, due to a number of factors, including, but not limited to, the failure to obtain the requisite governmental approvals or the failure to satisfy any of the other conditions to consummation of the transaction. Other risks affecting New Skies' business are described in the company's public filings with the U.S. Securities and Exchange Commission. Copies of these filings may be obtained by contacting the SEC. New Skies believes that all forward-looking statements are based upon reasonable assumptions when made; however, New Skies cautions that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, you should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made, and New Skies disclaims any obligation to update the forward-looking statements contained in this document. New Skies Satellites Holdings Ltd. and Subsidiaries Consolidated Balance Sheets December 31, 2005 and 2004 (In thousands of U.S. Dollars, except share data) -0- *T December December 31, 31, 2005 2004 --------- ----------- Assets Current Assets Cash and cash equivalents $ 16,156 $ 37,974 Trade receivables 29,053 36,371 Prepaid expenses and other assets 6,300 10,591 --------- ----------- Total Current Assets 51,509 84,936 Communications, plant and other property, net 608,370 895,906 Goodwill and other intangible asset, net 28,213 - Deferred tax assets 17,231 17,362 Debt issuance costs, net 17,473 32,109 Restricted cash 30,000 - --------- ----------- TOTAL $752,796 $1,030,313 ========= =========== Liabilities and Shareholders' Equity (Deficit) Current Liabilities Accounts payable and accrued liabilities $ 18,393 $ 28,381 Accrued interest 6,594 4,880 Dividends payable 15,048 - Income taxes payable 20,153 20,480 Deferred tax liabilities 5,964 10,848 Deferred revenues and other liabilities 24,618 21,031 Satellite performance incentives 5,625 6,332 --------- ----------- Total Current Liabilities 96,395 91,952 Deferred revenues and other liabilities 11,534 10,224 Satellite performance incentives 29,097 30,597 Preferred equity securities subject to mandatory redemption - 164,327 Long-term debt 438,560 745,000 --------- ----------- Total Liabilities 575,586 1,042,100 --------- ----------- Shareholders' Equity (Deficit) Ordinary Shares(1) (57,142 shares authorized, par value $35.00; 43,312 shares issued as of December 31, 2004) - 1,516 Preferred Shares (250,000,000 shares authorized, par value $0.01; none issued) - - Ordinary Shares(D) (500,000,000 shares authorized, par value $0.01; 32,491,235 shares issued as of December 31, 2005) 325 - Additional paid-in capital 301,309 - Accumulated deficit (124,306) (13,973) Accumulated other comprehensive income (loss) (118) 670 --------- ----------- Total Shareholders' Equity (Deficit) 177,210 (11,787) --------- ----------- TOTAL $752,796 $1,030,313 ========= =========== See notes to the consolidated quarterly financial information *T (D) At December 31, 2004, ordinary shares relate to New Skies Investment S.a.r.l. As part of the reorganization that occurred on May 10, 2005, New Skies Satellites Holdings Ltd. indirectly acquired the shares of New Skies Investments S.a.r.l. and became the Group's ultimate parent company. At December 31, 2005, 32,491,235 shares were issued and outstanding. New Skies Satellites Holdings Ltd. and Subsidiaries Consolidated Statements of Operations Years ended December 31, 2005 and 2004 (In thousands of U.S. Dollars, except per share data) -0- *T Successor(E) Successor(E) Predecessor(E) ------------ ------------ -------------- Pro forma total Year Ended Period December November 2 Period Year Ended 31, to December January 1 to December 2004(F) 31, November 1, 31, 2005 (Unaudited) 2004 2004 ------------ ----------- ------------ -------------- Revenues $240,488 $210,677 $35,295 $175,382 Operating expenses: Depreciation and amortization 95,128 102,448 16,022 86,426 Cost of operations 42,238 56,067 10,906 45,161 Selling, general and administrative 40,530 51,959 17,685 34,274 Stock-based compensation 20,485 1,828 - 1,828 Monitoring agreement fees 6,938 247 247 - Transaction related expenses 2,932 26,367 - 26,367 ------------ ----------- ------------ -------------- Total Operating Expenses 208,251 238,916 44,860 194,056 Gain on frequency coordination 19,500 32,000 - 32,000 Gain on sale of subsidiary 7,011 - - - ------------ ----------- ------------ -------------- Operating Income (Loss) 58,748 3,761 (9,565) 13,326 Interest expense, net 61,943 11,150 9,777 1,373 ------------ ----------- ------------ -------------- Income (Loss) Before Income Tax Expense (Benefit) (3,195) (7,389) (19,342) 11,953 Income tax expense (benefit) (1,778) (1,072) (5,369) 4,297 ------------ ----------- ------------ -------------- Net Income (Loss) $(1,417) (6,317) $(13,973) $7,656 ============ =========== ============ ============== Earnings (Loss) Per Share(3) ----------- Basic and diluted (0.05) (322.61) 0.06 ---------------------------------------------------------------------- Weighted Average Shares Outstanding(3) (in thousands of shares) Basic 27,349 n/a 43 118,099 Diluted 28,611 n/a 43 119,850 ---------------------------------------------------------------------- *T (E) New Skies Satellites Holdings Ltd. commenced operations on May 10, 2005, the date upon which the Company successfully completed its Initial Public Offering (the "IPO"). Immediately prior to the IPO, the Company performed an internal restructuring pursuant to which pre-existing shareholders indirectly contributed 100 percent of the equity, preferred equity certificates and convertible preferred equity certificates of New Skies Satellites S.a.r.l. to New Skies Satellites Holdings Ltd. As New Skies Satellites Holdings Ltd. did not commence operations until after the restructuring, the results for 2005 represent the combination of the results of New Skies Investments S.a.r.l for the period up to and including the date of the restructuring and those of New Skies Satellites Holdings Ltd. (the "successor") for the periods thereafter. On November 2, 2004, New Skies Investments S.a.r.l, through its wholly owned subsidiaries New Skies Holding B.V. and New Skies Satellites B.V., purchased substantially all of the assets and liabilities of New Skies Satellites N.V. Prior to this transaction, New Skies Investments S.a.r.l had not commenced operations. Accordingly, the results for the period prior to November 1, 2004 represent the results of New Skies Satellites N.V. (the "predecessor"). (F) The pro forma column reflects the summary total for the year ended December 31, 2004, including results of the predecessor from January 1, 2004 to November 1, 2004 and the successor from November 2, 2004 to December 31, 2004. New Skies Satellites Holdings Ltd. and Subsidiaries Consolidated Statements of Operations Three-month periods ended December 31, 2005 and 2004 (Unaudited) (In thousands of U.S. Dollars, except per share data) -0- *T Successor(E) Successor(E) Predecessor(E) ------------ ------------ -------------- Pro forma total three- Three month month Period period period November 2 ended ended to Period December December December October 1 to 31, 31, 31, November 1, 2005 2004(G) 2004 2004 ------------ --------- ------------ -------------- Revenues $61,352 53,788 $35,295 $18,493 Operating expenses: Depreciation and amortization 23,811 24,829 16,022 8,807 Cost of operations 9,170 15,308 10,906 4,402 Selling, general and administrative 10,325 21,507 17,685 3,822 Stock-based compensation 2,904 234 - 234 Monitoring agreement fees - 247 247 - Transaction related expenses 2,296 22,741 - 22,741 ------------ --------- ------------ -------------- Total Operating Expenses 48,506 84,866 44,860 40,006 Gain on sale of subsidiary 7,011 - - - ------------ --------- ------------ -------------- Operating Income (Loss) 19,857 (31,078) (9,565) (21,513) Interest expense, net 13,717 10,368 9,777 591 ------------ --------- ------------ -------------- Income (Loss) Before Income Tax Expense (Benefit) 6,140 (41,446) (19,342) (22,104) Income tax expense (benefit) 883 (13,333) (5,369) (7,964) ------------ --------- ------------ -------------- Net Income (Loss) $5,257 (28,113) $(13,973) $(14,140) ============ ========= ============ ============== Earnings (Loss) Per Share(3) --------- Basic and diluted 0.16 322.61 (0.12) ---------------------------------------------------------------------- Weighted Average Shares Outstanding(3) (in thousands of shares) Basic 32,381 n/a 43 118,463 Diluted 33,655 n/a 43 120,311 ---------------------------------------------------------------------- *T (G) The pro forma column reflects the summary total for the three-month period ended December 31, 2004, including results of the predecessor from October 1, 2004 to November 1, 2004 and the successor from November 2, 2004 to December 31, 2004. New Skies Satellites Holdings Ltd. and Subsidiaries Consolidated Statements of Cash Flows Years ended December 31, 2005 and 2004 (In thousands of U.S. Dollars) -0- *T Successor Successor Predecessor --------- --------- ----------- Period Year November Period Ended 2 to January 1 December December to 31, 31 November 1 2005 2004 2004 --------- --------- ----------- Cash flows from operating activities: Net income (loss) $(1,417) $(13,973) $7,656 Adjustments for non-cash items: Depreciation and amortization 95,128 16,022 86,426 Deferred taxes (3,515) (5,607) 1,698 Stock-based compensation expense 12,378 - 5,895 Non-cash interest on preferred equity securities 4,417 2,827 - Gain arising from sale of subsidiary (7,011) - - Amortization of debt issuance costs 15,010 851 321 Changes in operating assets and liabilities, net of effects of acquisitions and disposals: Trade receivables 6,840 8,036 (2,546) Prepaid expenses and other assets 4,045 (3,881) 3,810 Accounts payable and accrued liabilities (7,960) 5,838 6,480 Accrued interest 1,714 4,880 - Income taxes payable (937) 226 1,036 Other liabilities 5,494 14,803 395 --------- --------- ----------- Net Cash Provided By Operating Activities 124,186 30,022 111,171 --------- --------- ----------- Cash flows from investing activities: Payments for communication, plant and other property (6,671) (4,393) (7,690) Acquisition of business, net of cash acquired - (861,741) - Sale of subsidiary, net of cash 8,997 - - Reimbursement of NSS-8 construction costs 168,000 - - Increase in restricted cash (30,000) - - --------- --------- ----------- Net Cash Provided by (Used In) Investing Activities 140,326 (866,134) (7,690) --------- --------- ----------- Cash flows from financing activities: Repayment of long-term debt (306,440) - - Proceeds from long-term debt - 745,000 - Proceeds from Initial Public Offering, net of expenses 202,313 - - Issue of preferred equity certificates 4,683 161,500 - Repayment of preferred equity securities (88,000) - - Dividends paid (93,868) - (4,721) Stock options exercised - - 3,139 Debt issuance costs - (32,959) - Shareholder contribution - 1,500 - Satellite performance incentives and other (5,006) (1,384) (4,780) --------- --------- ----------- Net Cash Provided By (Used In) Financing Activities (286,318) 873,657 (6,362) --------- --------- ----------- Effect of exchange rate differences (12) 413 642 --------- --------- ----------- Net change in cash and cash equivalents (21,818) 37,958 97,761 Cash and cash equivalents, beginning of period 37,974 16 23,253 --------- --------- ----------- Cash and cash equivalents, end of period $16,156 $37,974 $121,014 ========= ========= =========== *T Cash payments for interest (net of amounts capitalized) were $nil, $3.0 million and $39.9 million for the period from January 1, 2004 to November 1, 2004, November 2, 2004 to December 31, 2004 and the year ended December 31, 2005, respectively. Income taxes paid amounted to $1.6 million, $0.2 million and $2.8 million for the period from January 1, 2004 to November 1, 2004, the period from November 2, 2004 to December 31, 2004, and the year ended December 31, 2005, respectively. See notes to the consolidated quarterly financial information. New Skies Satellites Holdings Ltd. and Subsidiaries Notes to the consolidated quarterly financial information (in thousands of U.S. dollars) Three-month periods and years ended December 31, 2005 and 2004 (1) Basis of presentation New Skies Satellites Holdings Ltd. commenced operations on May 10, 2005, the date upon which the Company successfully completed its Initial Public Offering (the "IPO"). Immediately prior to the IPO, the Company performed an internal restructuring pursuant to which pre-existing shareholders contributed 100 percent of the equity, preferred equity certificates and convertible preferred equity certificates of New Skies Satellites S.a.r.l. to New Skies Satellites Holdings Ltd. As New Skies Satellites Holdings Ltd. did not commence operations until after the restructuring, the results for the year ended December 31, 2005 represent the combination of the results of New Skies Investments S.a.r.l for the period up to and including the date of the restructuring and those of New Skies Satellites Holdings Ltd. for the periods thereafter (the "successor"). On November 2, 2004, New Skies Investments S.a.r.l, through its wholly owned subsidiaries New Skies Holding B.V. and New Skies Satellites B.V., purchased substantially all of the assets and liabilities of New Skies Satellites N.V. Prior to this transaction, New Skies Investments S.a.r.l had not commenced operations. Accordingly, the results for the quarter and the period ended November 1, 2004 represent the results of New Skies Satellites N.V. (the "predecessor"). (2) Adjusted EBITDA Adjusted EBITDA is defined as EBITDA (i.e. earnings before interest, taxes, depreciation and amortization), further adjusted to give effect to adjustments required in calculating covenant ratios and compliance under the indentures governing the notes and the senior secured credit facilities. We use Adjusted EBITDA to give effect to adjustments required in calculating covenant ratios and compliance under the indentures governing the notes and the senior secured credit facilities. For instance, both the indentures governing the notes and the senior secured credit facilities contain financial ratios that are calculated by reference to Adjusted EBITDA. Non-compliance with the financial ratio maintenance covenants contained in the senior secured credit facilities could result in the requirement to immediately repay all amounts outstanding under such facilities, while non-compliance with the debt incurrence ratio contained in the indentures governing the notes would prohibit us from being able to incur additional indebtedness other than pursuant to specified exceptions. Adjusted EBITDA is not presented as an alternative measure of operating results or cash flows provided by operating activities, as determined in accordance with accounting principles generally accepted in the United States. Adjusted EBITDA as presented in this release may not be comparable to similarly titled measures reported by other companies. The following table sets forth the reconciliation of net cash provided by operating activities and net income (loss) to EBITDA and Adjusted EBITDA for the periods indicated. Reconciliation of Net Income (Loss) to EBITDA -0- *T Three-month Year ended periods ended December 31, December 31, ---------------- ----------------- 2005 2004 2005 2004 ------- -------- -------- -------- Net income (loss) 5,257 (28,113) (1,417) (6,317) Income tax expense (benefit) 883 (13,333) (1,778) (1,072) Interest expense, net 13,717 10,368 61,943 11,150 Depreciation and amortization 23,811 24,829 95,128 102,448 ------- -------- -------- -------- EBITDA 43,668 (6,249) 153,876 106,209 ======= ======== ======== ======== *T Reconciliation of EBITDA to Adjusted EBITDA -0- *T Three-month Year ended periods ended December 31, December 31, --------------- ----------------- 2005 2004 2005 2004 ------- ------- -------- -------- EBITDA 43,668 (6,249) 153,876 106,209 Gain arising on frequency coordination(a) - - (19,500) (32,000) Transaction related expenses(b) 2,296 22,741 2,932 26,367 Unused satellite capacity leased from third party(c) - 711 - 4,830 One time customer settlements - 10,299 - 10,299 Expense incurred with respect to employee severance - 2,760 - 2,760 Costs related to stock-based compensation(d) 2,904 234 20,485 1,828 Monitoring fee paid to Blackstone Management Partners IV L.L.C.(e) - 247 6,938 247 Gain arising on sale of subsidiary(f) (7,011) - (7,011) - ------- ------- -------- -------- Adjusted EBITDA 41,857 30,743 157,720 120,540 ======= ======= ======== ======== *T (a) Reflects a one-time payment from Intelsat LLC of $32.0 million in 2004 and payments from SES Global affiliates of $10.0 million in the first quarter 2005 and $9.5 million in the third quarter 2005 following the successful resolution of certain frequency coordination matters. (b) Represents non-recurring costs incurred in connection with the purchase of assets and liabilities of New Skies Satellites N.V. and expenses associated with SES Global acquisition of New Skies Satellites Holdings Ltd. (c) Reflects costs related to unused capacity on leased transponders, with the underlying contract expiring in November 2004. (d) Stock-based compensation includes $8.1 million of cash payments made for bonuses and tax withholdings. (e) Reflects the monitoring fee paid to Blackstone Management Partners IV L.L.C., of which $6.1 million represents a payment for the termination of the monitoring agreement in connection with the company's Initial Public Offering. (f) Reflects the sale of New Skies Networks Pty Limited, a wholly-owned subsidiary, on November 8, 2005 to Multimedia for cash consideration of $10.0 million, resulting in a gain on sale of $7.0 million. Reconciliation of Net Cash Provided by Operating Activities to Net Income (Loss) -0- *T Three-month Years ended periods ended December 31, December 31, ----------------- ------------------ 2005 2004 2005 2004 -------- -------- -------- --------- Net cash provided by operating activities 20,549 19,337 124,186 141,193 Depreciation and amortization (23,811) (24,829) (95,128) (102,448) Deferred taxes (1,071) 4,966 3,515 3,909 Stock-based compensation expense (252) (4,301) (12,378) (5,895) Amortization of debt issuance costs (2,483) (851) (15,010) (1,172) Change in operating assets and liabilities 5,314 (19,608) (9,196) (39,077) Interest on preferred equity securities - (2,827) (4,417) (2,827) Gain arising from sale of subsidiary 7,011 - 7,011 - -------- -------- -------- --------- Net Income (loss) 5,257 (28,113) (1,417) (6,317) ======== ======== ======== ========= *T (3) Earnings (Loss) per share Basic net earnings (loss) per share is computed by dividing net income (loss) by the weighted average ordinary shares outstanding. For the purpose of calculating the weighted average shares outstanding for the year ended December 31, 2005, the effects of the internal restructuring immediately prior to the Initial Public Offering are deemed to have occurred at the beginning of the period, and reflect 18.5 million shares. Diluted earnings (loss) per share reflects the potential dilution that could occur if potential dilutive securities, such as stock options, convertible securities and contracts that may be settled in cash or stock, were converted to shares as of the beginning of the period, if dilutive. For the purpose of calculating diluted loss per share for the year ended December 31, 2005, approximately 1.5 million potentially dilutive common shares relating to outstanding stock options have been excluded from the calculation of adjusted weighted average shares outstanding as their inclusion would have had an anti-dilutive effect due to the net loss in that period.