UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
Commission File No. 0-22531
PanAmSat Corporation
(Exact Name of Registrant as Specified in its Charter)
Delaware 95-4607698
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Pickwick Plaza, Greenwich, CT 06830
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: 203-622-6664
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
As of May 7, 2001, an aggregate of 149,752,886 shares of the Company's Common
Stock were outstanding.
Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995
This Quarterly Report on Form 10-Q contains certain forward-looking statements.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. When used in this Quarterly Report on
Form 10-Q, the words "estimate," "plan," "project," "anticipate," "expect,"
"intend," "outlook," "believe," and other similar expressions are intended to
identify forward-looking statements and information. Actual results may differ
materially from any results which might be projected, forecasted, estimated or
budgeted by PanAmSat Corporation ("PanAmSat" or the "Company") due to certain
risks and uncertainties, including without limitation: (i) risks of launch
failures, launch and construction delays and in-orbit failures or reduced
performance, (ii) risks of government regulation, (iii) risks of doing business
internationally, (iv) risks of uninsured loss, (v) risks associated with the
business of NET/36, Inc., a wholly-owned subsidiary of the Company ("NET-36")
and (vi) risks of inadequate access to capital for growth. Such risks are more
fully described in "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations" of this Quarterly Report on Form 10-Q and
under the caption "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000 (the "Form 10-K"). Reference is also
made to such other risks and uncertainties detailed from time to time in the
Company's filings with the Securities and Exchange Commission. The Company
cautions that the foregoing list of important factors is not exclusive.
Furthermore, 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.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended March 31, 2001 and 2000
(In Thousands, Except Share Data)
March 31, March 31,
2001 2000
----------- ------------
REVENUES:
Operating leases, satellite services and other $ 199,503 $ 200,027
Outright sales and sales-type leases 5,724 99,077
----------- ------------
Total revenues 205,227 299,104
----------- ------------
OPERATING COSTS AND EXPENSES:
Cost of outright sales and sales-type leases - 45,252
Depreciation and amortization 98,896 73,667
Direct operating costs 37,460 31,894
Selling, general and administrative expenses 27,718 21,011
----------- ------------
Total operating costs and expenses 164,074 171,824
----------- ------------
INCOME FROM OPERATIONS 41,153 127,280
INTEREST EXPENSE, net 32,308 24,453
----------- ------------
INCOME BEFORE INCOME TAXES 8,845 102,827
INCOME TAXES 3,848 46,272
----------- ------------
NET INCOME $ 4,997 $ 56,555
----------- ------------
NET INCOME PER COMMON SHARE - basic and diluted $ 0.03 $ 0.38
----------- ------------
Weighted average common shares outstanding 149,705,289 150,098,942
----------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
3
PANAMSAT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
March 31, December 31,
2001 2000
----------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 290,072 $ 129,345
Accounts receivable-net 61,302 52,912
Net investment in sales-type leases 20,622 24,959
Prepaid expenses and other (principally prepaid insurance) 37,944 30,360
Deferred income taxes 4,605 3,220
Insurance claim receivable - 132,435
----------- -----------
Total current assets 414,545 373,231
SATELLITES AND OTHER PROPERTY AND
EQUIPMENT-Net 3,158,534 3,156,944
NET INVESTMENT IN SALES-TYPE LEASES 202,301 221,039
GOODWILL-Net of amortization 2,287,379 2,303,619
DEFERRED CHARGES 135,131 123,518
----------- ------------
TOTAL ASSETS $ 6,197,890 $ 6,178,351
----------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
4
PANAMSAT CORPORATION
CONSOLIDATED BALANCE SHEETS - (continued)
(In Thousands, Except Share Data)
March 31, December 31,
2001 2000
----------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 112,424 $ 79,518
Deferred revenues 12,106 14,052
----------- ------------
Total Current Liabilities 124,530 93,570
DUE TO AFFILIATES (principally merger-related indebtedness) 1,725,000 1,725,000
LONG-TERM DEBT 750,000 796,542
DEFERRED INCOME TAXES 378,986 365,982
DEFERRED CREDITS AND OTHER (principally customer deposits and deferred
revenue) 258,086 242,562
----------- ------------
TOTAL LIABILITIES 3,236,602 3,223,656
----------- ------------
COMMITMENTS AND CONTINGENCIES
The accompanying notes are an integral part of these consolidated financial
statements.
5
PANAMSAT CORPORATION
CONSOLIDATED BALANCE SHEETS - (continued)
(In Thousands, Except Share Data)
March 31, December 31,
2001 2000
----------- ------------
(Unaudited)
STOCKHOLDERS' EQUITY:
Common Stock, $0.01 par value -- 400,000,000 shares authorized;
149,737,994 and 149,675,117 outstanding at March 31, 2001 and
December 31, 2000, respectively 1,497 1,497
Additional paid-in-capital 2,524,353 2,522,757
Retained earnings 435,438 430,441
----------- ------------
Total stockholders' equity 2,961,288 2,954,695
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,197,890 $ 6,178,351
----------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
6
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31, 2001 and 2000
(In Thousands)
March 31, March 31,
2001 2000
----------- ------------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income $ 4,997 $ 56,555
Adjustments to reconcile net income to
net cash provided by operating activities:
Gross profit on sales and sales-type leases - (48,538)
Depreciation and amortization 98,896 73,667
Deferred income taxes 11,617 40,812
Amortization of debt issuance costs 1,527 1,527
Provision for uncollectible receivables 5,876 (989)
Changes in assets and liabilities:
Collections on investments in sales-type leases 5,385 5,647
Operating leases and other receivables (14,266) (5,940)
Prepaid expenses and other assets (20,724) (13,774)
Accounts payable and accrued liabilities 7,568 (23,879)
Deferred gains and revenues 16,271 (7,703)
----------- ------------
Net cash provided by operating activities 117,147 77,385
----------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
7
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - (continued)
For the Three Months Ended March 31, 2001 and 2000
(In Thousands)
March 31, March 31,
2001 2000
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (including capitalized interest) (67,218) (158,004)
Insurance proceeds from satellite recoveries 132,435 33,836
----------- ------------
Net cash provided by (used in) investing activities 65,217 (124,168)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
New borrowings - 13,050
Repayments of long-term debt (21,216) (44,300)
Repayments of incentive obligations (2,017) (1,488)
Stock issued in connection with employee benefit plans 1,596 3,682
----------- ------------
Net cash used in financing activities (21,637) (29,056)
----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 160,727 (75,839)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 129,345 117,259
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 290,072 $ 41,420
----------- ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash received for interest $ 3,118 $ 1,251
----------- ------------
Cash paid for interest $ 56,069 $ 55,783
----------- ------------
Cash paid for taxes $ 92 $ 21,278
----------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
8
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)General
These unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. 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 month periods
ended March 31, 2001 and 2000 have been made. Certain prior period amounts
have been reclassified to conform with the current year's presentation.
Operating results for the three months ended March 31, 2001 and 2000 are not
necessarily indicative of the operating results for the full year. For
further information, refer to the financial statements and footnotes thereto
included in the Form 10-K.
(2)New Accounting Pronouncement
PanAmSat adopted Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133") on January 1, 2001. SFAS No. 133, as amended, establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging
activities. Under SFAS No. 133, all derivatives are required to be recorded
as either assets or liabilities and the instruments are required to be
measured at fair value. Gains or losses resulting from changes in the values
of those derivatives are to be recognized immediately or deferred depending
on the use of the derivative and whether or not it qualifies as a hedge. The
adoption of SFAS No. 133 did not have a significant impact on the
consolidated financial position, results of operations, or cash flows of the
Company.
(3)Satellite Developments
Reference is made to "Item 1. - Business - Strategy - Expanding the Network
and -The Satellite Network" and "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Satellite Deployment Plan
and Planed Satellites" in the Form 10-K for a detailed description of the
Company's satellite network and its satellite deployment plan.
During the first quarter of 2001, the Company commenced service on its PAS-1R
satellite, which was launched in November 2000. PAS-1R offers expanded and
enhanced video and data broadcasting, as well as broadband Internet services
throughout the Americas, the Caribbean, Europe and Africa. The Company
expects to launch four additional satellites by early 2003. PAS-10 is
scheduled to be
9
launched in May of 2001 and Galaxy IIIC is scheduled to be launched in the
third quarter of 2001. Subsequent to 2001, Galaxy VIIIi-R is scheduled to be
launched in 2002 and one unnamed satellite is scheduled to be launched in
late 2002 or early 2003.
In April 2001, the Company's Galaxy IIIR domestic satellite
experienced the failure of its primary spacecraft control processor ("SCP"),
causing a temporary outage of some of its transponders and some of its
customers to experience brief interruption of their service. Normal satellite
operations were restored through the use of the satellite's back-up SCP
within two hours.
In late 1998, PanAmSat implemented a comprehensive satellite expansion
and restoration plan that included the launch of certain spacecraft as
replacements for satellites that had or could suffer SCP failures. As part of
this plan, the Galaxy IIIC satellite is expected to be launched during the
third quarter of this year to serve as the replacement for Galaxy IIIR at 95
degrees west longitude.
Galaxy IIIR is a Boeing 601 spacecraft which was launched in 1995.
Boeing has previously concluded that SCPs on Boeing 601 spacecraft launched
prior to August 1997 contain tin-plated relay switches that can experience
electrical shorts when several factors are concurrently present. The PAS-4
Indian Ocean Region satellite experienced the failure of its primary SCP in
November 1998 and continues to provide normal service on its backup SCP. The
Company plans to launch PAS-10 in May of 2001 to serve as the replacement for
PAS-4 at 68.5 degrees east longitude.
10
PANAMSAT CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's selected operating data shown below are not necessarily indicative
of future results.
SELECTED OPERATING DATA
Three Months Ended
March 31
-------------------------
(unaudited; in thousands)
2001 2000
---- ----
Operating leases, satellite services and other $199,503 $200,027
Outright sales and sales-type leases 5,724 99,077
Total revenues 205,227 299,104
Cost of outright sales and sales-type leases - 45,252
Depreciation and amortization 98,896 73,667
Direct operating costs 37,460 31,894
Selling, general and administrative expenses 27,718 21,011
Income from operations 41,153 127,280
Interest expense, net 32,308 24,453
Income taxes 3,848 46,272
11
PANAMSAT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Revenues - Revenues were $205.2 million for the three months ended March
31, 2001, compared to revenues of $299.1 million for the same period in 2000.
This decrease was primarily due to $93.8 million of new outright sales and
sales-type lease transactions completed in the first quarter of 2000 for which
there were no comparable transactions in the first quarter of 2001. Total sales
and sales-type lease revenues were $5.7 million for the quarter ended March 31,
2001, compared to $99.1 million for the same period in 2000. Operating lease
revenues, which were 97 percent of total revenues for the first quarter of 2001,
decreased by 0.3 percent to $199.5 million from $200.0 million for the same
period in 2000. Outright sales and sales-type leases represent substantial
long-term commitments for services. However, the net present value of the
payments due to the Company over the life of these agreements are recorded as
revenues in the period such agreements are executed. Therefore, revenues from
these transactions are subject to greater variation from period to period than
are operating lease revenues.
The Company provides video services which are primarily full-time,
part-time and occasional satellite services for the transmission of news,
sports, entertainment and educational programming worldwide. The Company also
provides network services which support satellite-based networks that relay
voice, video and data communications within individual countries, throughout
regions and on a global basis. Video services revenues, excluding the revenue
from new sales-type lease activity were $136.8 million for the three months
ended March 31, 2001, a decrease of 3 percent from the same period in 2000. The
decrease in video services revenues for the three months ended March 31, 2001
was due primarily to customer conversions from operating lease agreements into
new sales-type lease agreements during the first half of 2000. Operating lease
revenues from network services were $54.3 million for the three months ended
March 31, 2001, an increase of 6 percent from the same period in 2000. The
increase in network services revenues was due primarily to the growth in data
and Internet-related service agreements.
Cost of Outright Sales and Sales-Type Leases - Cost of outright sales and
sales-type leases were $45.3 million for the three months ended March 31, 2000
due to the execution of new sales and sales-type lease agreements during the
first quarter of 2000. There were no comparable costs for the same period in
2001.
Depreciation and Amortization - Depreciation and amortization increased
$25.2 million, or 34%, to $98.9 million for the three months ended March 31,
2001 from $73.7 million for the same period in 2000. The increase in
depreciation and amortization for the three month period ended March 31, 2001 is
due primarily to depreciation expense associated with the addition of four new
satellites placed in service during 2000, the commencement of service on PAS-1R
during the first quarter of 2001 and the reduction in the remaining useful life
of Galaxy VIII-i, resulting in approximately $15.0 million of additional
incremental quarterly depreciation.
12
Direct Operating and Selling, General and Administrative Costs - Direct
operating costs increased $5.6 million or 17%, to $37.5 million for the three
months ended March 31, 2001 from $31.9 million for the same period in 2000.
Selling, general and administrative costs increased $6.7 million, or 32%, to
$27.7 million for the three months ended March 31, 2001 from $21.0 million for
the same period in 2000. These increases are due primarily to the Company's
continued fleet expansion and the Company's increased investment in the NET-36
initiative.
Income from Operations - Income from operations was $41.2 million for the
three months ended March 31, 2001 a decrease of $86.1 million or 68%, from
$127.3 million for the same period in 2000. The decrease in income from
operations for the three month period ended March 31, 2001 is due primarily to
the gross profit associated with the new outright sales and sales-type lease
agreements that were executed in the first quarter of 2000 for which there were
no comparable transactions in 2001 and the increases in depreciation expense and
direct operating and selling, general and administrative costs noted above.
Interest Expense, Net - Interest expense, net was $32.3 million for the
three months ended March 31, 2001, as compared to $24.5 million for the same
period in 2000. The increase in interest expense, net was due primarily to a
reduction in capitalized interest in the three months ended March 31, 2001 due
to fewer satellites under construction as compared to the three months ended
March 31, 2000.
Income Taxes - Income taxes decreased $42.5 million, or 92%, to $3.8
million for the three months ended March 31, 2001, from $46.3 million for the
same period in 2000. The decrease in income taxes for the three month period
ended March 31, 2001 is due to the items noted above, which resulted in a
decrease in taxable income of $94.0 million, as well as a decrease in the
Company's effective tax rate to 43.5% as a result of the greater beneficial
effects of the Foreign Sales Corporation ("FSC") replacement legislation known
as the Exclusion for Extraterritorial Income.
Satellite Developments - Reference is made to "Item 1. - Business -
Strategy - Expanding the Network and - The Satellite Network" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Satellite Deployment Plan and Planned Satellites " in the Form 10-K
for a detailed description of the Company's satellite network and its satellite
deployment plan.
During the first quarter of 2001, the Company commenced service on its
PAS-1R satellite, which was launched in November 2000. PAS-1R offers expanded
and enhanced video and data broadcasting, as well as broadband Internet services
throughout the Americas, the Caribbean, Europe and Africa. The Company expects
to launch four additional satellites by early 2003. PAS-10 is scheduled to be
launched in May of 2001 and Galaxy IIIC is scheduled to be launched in the third
quarter of 2001. Subsequent to 2001, Galaxy VIIIi-R is scheduled to be launched
in 2002 and one unnamed satellite is scheduled to be launched in late 2002 or
early 2003.
In April 2001, the Company's Galaxy IIIR domestic satellite experienced
the failure of its primary spacecraft control processor ("SCP"), causing a
temporary outage of some
13
of its transponders and some of its customers to experience brief interruption
of their service. Normal satellite operations were restored through the use of
the satellite's back-up SCP within two hours.
In late 1998, PanAmSat implemented a comprehensive satellite expansion and
restoration plan that included the launch of certain spacecraft as replacements
for satellites that had or could suffer SCP failures. As part of this plan, the
Galaxy IIIC satellite is expected to be launched during the third quarter of
this year to serve as the replacement for Galaxy IIIR at 95 degrees west
longitude.
Galaxy IIIR is a Boeing 601 spacecraft which was launched in 1995. Boeing
has previously concluded that SCPs on Boeing 601 spacecraft launched prior to
August 1997 contain tin-plated relay switches that can experience electrical
shorts when several factors are concurrently present. The PAS-4 Indian Ocean
Region satellite experienced the failure of its primary SCP in November 1998 and
continues to provide normal service on its backup SCP. The Company plans to
launch PAS-10 in May of 2001 to serve as the replacement for PAS-4 at 68.5
degrees east longitude.
Financial Condition - The Company has an outstanding term loan in the
amount of $1.725 billion from Hughes Electronics Corporation, an affiliate of
the Company ("Hughes Electronics"). The term loan matures in June 2003 and bears
interest at a rate equal to that of the Company's revolving credit facility
discussed below. Hughes Electronics has the right to request that the Company
use its best efforts to replace the term loan with another credit facility on
terms that may then be available to the Company. As of March 31, 2001, Hughes
Electronics had not requested the Company to replace the borrowings. The term
loan is subordinate to the $750 million of notes, the revolving credit facility
and the commercial paper program discussed below.
The Company issued five, seven, ten and thirty-year fixed rate notes
totaling $750 million in January 1998. The outstanding principal balances and
interest rates for these notes as of March 31, 2001 were $200 million at 6.0%,
$275 million at 6.125%, $150 million at 6.375% and $125 million at $6.875%,
respectively. Principal on the notes is payable at maturity, while interest is
payable semi-annually. At March 31, 2001, $750 million was outstanding in
relation to these notes.
In July 1999, in connection with the early buy-out of satellite
sale-leasebacks, the Company assumed $124.1 million of variable rate notes of
which $46.5 million was outstanding at March 31, 2001. The weighted average
interest rate on the notes was 5.55% at March 31, 2001. These notes mature in
January 2002.
The Company maintains a $500.0 million multi-year revolving credit
facility that provides for short-term and long-term borrowings and a $500.0
million commercial paper program. Borrowings under the credit facility bear
interest at a rate equal to LIBOR plus a spread based on PanAmSat's credit
rating. The multi-year revolving credit facility provides for a commitment
through December 24, 2002. Borrowings under the credit facility and commercial
paper program are limited to $500.0 million in the aggregate. No
14
amounts were outstanding under either the multi-year revolving credit facility
or the commercial paper program at March 31, 2001.
The significant cash outlays for the Company will continue to be primarily
capital expenditures related to the construction and launch of satellites and
debt service costs. The Company has satellites under various stages of
development, for which the Company has budgeted capital expenditures. According
to the Company's capital plan, PanAmSat currently expects to spend approximately
$500 million to $550 million on capital expenditures during 2001, which will
primarily be comprised of costs to construct, insure and launch satellites. As a
result of changes in the market, the Company has lowered its expectations
related to its NET-36 initiative. Accordingly, the projected investment in
NET-36 for 2001 has been reduced and the Company is evaluating its expectations
for subsequent years. The Company forecasts that combined capital and operating
expenses for 2001 for NET-36 will be in the range of $50 million to $75 million.
Assuming satellites in development are successfully launched, services on
the satellites commence on the schedule currently contemplated and NET-36 is
deployed as and when expected, PanAmSat believes that amounts available under
its revolving credit facility, vendor financing, future cash flow from
operations and cash on hand will be sufficient to fund its operations and its
remaining costs for the construction and launch of satellites currently under
development and for the deployment of NET-36 for the next twelve months. There
can be no assurance, however, that PanAmSat's assumptions with respect to costs
for future construction and launch of its satellites and costs to deploy NET-36
will be correct, or that amounts available under its revolving credit facility,
vendor financing, future cash flow from operations and cash on hand will be
sufficient to cover any shortfalls in funding for (i) launches caused by launch
failures, (ii) cost overruns, (iii) delays, (iv) capacity shortages, (v) NET-36
technical integration problems, (vi) additional costs associated with NET-36
strategic relationships or (vii) other unanticipated expenses. In addition, if
the Company were to consummate any strategic transactions or undertake any other
projects requiring significant capital expenditures, or if Hughes Electronics
were to require the Company to use its best efforts to replace the Hughes term
loan, the Company may be required to seek additional financing. If circumstances
were to require PanAmSat to incur additional indebtedness, the ability of
PanAmSat to incur any such additional indebtedness would be subject to the terms
of PanAmSat's outstanding indebtedness. The failure to obtain such financing or
the failure to obtain such financing on terms considered reasonable by the
Company could have a material adverse effect on PanAmSat's operations and its
ability to accomplish its business plan.
Net cash provided by operating activities increased to $117.1 million for
the three months ended March 31, 2001, from $77.4 million for the three months
ended March 31, 2000. The increase in 2001 was primarily attributable to a
reduction in net cash used by operating activities as a result of net changes in
working capital items.
Net cash provided by investing activities was $65.2 million for the three
months ended March 31, 2001, compared to net cash used in investing activities
of $124.2 million for the three months ended March 31, 2000. The increase in
cash provided by
15
investing activities in 2001 was primarily due to the receipt of proceeds from
an insurance claim receivable during the three months ended March 31, 2001 and
lower capital expenditures for satellite systems under development compared to
2000.
Net cash used in financing activities decreased to $21.6 million for the
three months ended March 31, 2001, from $29.1 million for the three months ended
March 31, 2000. The decrease in net cash used in financing activities in 2001
was primarily attributable to lower scheduled repayments of long term debt
during 2001 partially offset by the lack of new borrowings in 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk - The potential fair value change resulting from a
hypothetical 10% adverse fluctuation in interest rates related to PanAmSat's
outstanding fixed-rate debt and fixed rate net investments in sales-type lease
receivable balances would be approximately $30.0 million and $7.1 million,
respectively, as of March 31, 2001. The potential effect of a hypothetical 10%
adverse fluctuation in interest rates for one year on PanAmSat's floating rate
debt outstanding at March 31, 2001 would be a reduction in cash flows of
approximately $9.7 million and a reduction in net income of approximately $5.3
million.
16
PANAMSAT CORPORATION
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
10.33.5 Amendment No. 2 to the Amended and Restated PanAmSat Corporation
Long-Term Stock Incentive Plan, effective as of December 7, 2000.
10.58.2 Employment Agreement between PanAmSat Corporation and R. Douglas Kahn,
dated as of April 1, 2001.
10.67 PanAmSat Corporation Executive Change in Control Severance Agreement
between PanAmSat Corporation and Robert A. Bednarek, dated
January 31, 2001.
10.68 PanAmSat Corporation Executive Change in Control Severance Agreement
between PanAmSat Corporation and James W. Cuminale, dated
January 31, 2001.
10.69 PanAmSat Corporation Executive Change in Control Severance Agreement
between PanAmSat Corporation and Thomas E. Eaton, dated
January 31, 2001.
10.70 PanAmSat Corporation Executive Change in Control Severance Agreement
between PanAmSat Corporation and Michael J. Inglese, dated
January 31, 2001.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the quarter for
which this report is filed.
17
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 Corporation
Date: May 11, 2001 /s/ Michael J. Inglese
----------------------------
Michael J. Inglese
Senior Vice President and
Chief Financial Officer
and a Duly Authorized
Officer of the Company
18