Telesat Holdings Inc. (“Telesat”) today announced its preliminary
consolidated financial results for the three and nine month periods
ended September 30, 2016. All amounts are in Canadian dollars and
are reported under International Financial Reporting Standards
(“IFRS”) unless otherwise noted.
Telesat’s preliminary results and financial
guidance are being released in connection with potential debt
refinancing transactions. Telesat does not intend to provide
financial guidance on an ongoing basis.
Although Telesat has not yet finalized the
accounting of its results for the three and nine month periods
ended September 30, 2016, Telesat expects to announce the results
outlined below. See “Cautionary Statements Relating To
Preliminary Estimates” for additional information relating to the
preliminary results discussed in this release. Telesat
intends to file full condensed consolidated financial statements on
November 2, 2016.
Three Months Ended September 30, 2016
For the quarter ended September 30, 2016,
Telesat expects to report revenues of $224 million, a decrease of
approximately 7% ($18 million) compared to the same period in
2015. During the quarter, the U.S. dollar was approximately
1% stronger than it was during the third quarter of 2015 and, as a
result, there was a favorable impact on the conversion of U.S.
dollar denominated revenues. When adjusted for foreign
exchange rate changes, revenue declined by 8% (a decrease of $19
million) compared to the same period in 2015. The largest
contributor to the anticipated reduction in revenue relative to the
same period last year was short-term services provided to another
satellite operator in the third quarter of 2015 that did not recur
in the third quarter of 2016.
Operating expenses are expected to be $40
million for the quarter were 10% ($4 million) lower than the same
period in 2015, with no impact from changes in foreign exchange
rates. The anticipated reduction in operating expenses is
principally attributable to lower costs of third party satellite
capacity, lower Canadian spectrum license fees and lower equipment
sales.
Adjusted EBITDA1 for the quarter is expected to
be $186 million, a decrease of 6% ($12 million) compared to the
same period in 2015 and a decrease of 7% ($13 million) when
adjusted for foreign exchange rate changes. The Adjusted EBITDA
margin1 is expected to improve to 83.0% in the third quarter of
2016 from 81.9% during the same period in 2015.
Telesat’s net income for the quarter is expected
to be $15 million compared to a net loss of $139 million for the
quarter ended September 30, 2015. The $154 million difference was
principally the result of a reduction in the loss on foreign
exchange partially offset by higher depreciation expense.
Nine Months Ended September 30, 2016
For the nine month period ended September 30,
2016, revenue is expected to be $691 million, a decrease of 1% ($7
million) compared to the same period in 2015. During the first
three quarters of 2016, the U.S. dollar was 6% stronger than it was
during the first three quarters of 2015. When adjusted for changes
in foreign exchange rates, revenues are expected to decline 3% ($22
million) compared to the same period in 2015. The largest
contributor to the anticipated reduction in revenue relative to the
same period last year was lower revenue from the energy and
resource sector.
Operating expenses are expected to be $129
million, or 3% ($4 million) lower than the first nine months of
2015 or 5% ($7 million) lower when adjusted for foreign exchange
rate changes. The anticipated reduction in operating expenses is
principally attributable to lower costs of third party satellite
capacity and lower Canadian spectrum license fees.
Adjusted EBITDA1 for the nine months ended
September 30, 2016 is expected to be $568 million, virtually
unchanged compared to the same period in 2015 and 2% ($13 million)
lower when adjusted for foreign exchange rate changes. The Adjusted
EBITDA margin1 for the nine months ended September 30, 2016 is
expected to be 82.3%, compared to 81.6% in the same period in
2015.
For the nine month period ended September 30,
2016, net income is expected to be $314 million, compared to a net
loss of $237 million for the same period in 2015. The variation for
the nine month period ended September 30, 2016 was principally the
result of a gain on foreign exchange in 2016 compared to a loss on
foreign exchange in 2015 arising from the translation of Telesat’s
U.S. dollar denominated debt into Canadian dollars.
Business Highlights
- At September 30, 2016:
- Telesat had contracted backlog for future services of
approximately $4.4 billion.
- Fleet utilization was 94% for Telesat’s North American fleet
and 66% for Telesat’s international fleet.
Telesat is today providing financial guidance in connection with
the release of its preliminary results.
- For the 2016 financial year ending on December 31, 2016:
- Telesat expects revenues and Adjusted EBITDA1 for the quarter
ending December 31, 2016 to be approximately $235 million and $195
million, respectively;
- Telesat expects revenues and Adjusted EBITDA1 for the full 2016
year to be approximately $926 million and $763 million,
respectively;
- Telesat expects capital expenditures for satellites and other
property additions for the full 2016 year to be in the range of
$255 - $265 million including additions to intangible
assets.
- For the 2017 financial year ending on December 31, 2017:
- Telesat expects that its revenues and Adjusted EBITDA1 will be
at approximately the same levels as 2016 at constant foreign
exchange rates.
Telesat today also announced that it intends to
complete a cash distribution of up to US$400 million to its
shareholders. If completed, the cash distribution is expected to
take place in the first quarter of 2017. The completion of any such
cash distribution is subject to a number of conditions, including,
among others, the successful implementation of certain
restructuring transactions which will require regulatory approval.
There can be no assurance that any cash distribution will be paid
or, if paid, as to the amount and timing of any such payment.
Conference Call
Telesat has scheduled a conference call on Wednesday, November
2, 2016, at 10:30 a.m. ET to discuss its financial results for the
three and nine month periods ended September 30, 2016, and other
recent developments. The call will be hosted by Daniel S.
Goldberg, President and Chief Executive Officer, and Michel
Cayouette, Chief Financial Officer, of Telesat.
Prior to the commencement of the call, Telesat will post a news
release containing its financial results on its website
(www.telesat.com) under the tab “News & Events” and the heading
“News”.
Dial-in Instructions:The toll-free dial-in number for the
teleconference is +1 (866) 225-0198. Callers outside of North
America should dial +1 (416) 340-2216. The conference reference
number is 4227927. Please allow at least 15 minutes prior to
the scheduled start time to connect to the teleconference.
Dial-in Audio Replay:A replay of the teleconference will be
available one hour after the end of the call on November 2, 2016,
until 11:59 p.m. ET on November 17, 2016. To access the
replay, please call +1 (800) 408-3053. Callers outside of
North America should dial +1 (905) 694-9451. The access code
is 2632487 followed by the number sign (#).
All Adjusted EBITDA1 and Adjusted EBITDA1
margins included in this release are non-IFRS financial measures,
as described in the End Notes section of this release. For
information reconciling non-IFRS financial measures to the most
comparable IFRS financial measures, please see the consolidated
financial information below.
Cautionary Statements Relating to
Preliminary Estimates
These figures reflect Telesat’s preliminary
estimate of its unaudited quarterly results as of and for the three
and nine month periods ended September 30, 2016. They are made only
as of the date of this news release, are not final results and are
subject to change. Telesat has not completed its normal quarterly
review procedures for the three and nine month periods ended
September 30, 2016. In addition, Deloitte LLP, Telesat’s
independent public accounting firm, has not completed its
procedures with respect to the financial information for the three
and nine month periods ended September 30, 2016, nor have they
expressed any opinion or other form of assurance with respect to
the estimates presented above or their achievability. There can be
no assurance that the final results for these periods will not
differ from these estimates. Any such differences could be
material. These estimates should not be viewed as a substitute for
full interim financial statements prepared in accordance with IFRS.
Full interim financial statements for this period will be filed on
November 2, 2016. In addition, these preliminary results of
operations are not necessarily indicative of the results to be
achieved for the remainder of 2016 or for any future period.
Forward-Looking Statements Safe
Harbor
This news release contains statements that are
not based on historical fact and are ‘‘forward-looking statements’’
within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this news release, the words “expects”,
“intends”, “looking ahead”, and “further development”, or other
variations of these words or other similar expressions, as well as
the financial guidance provided with respect to the 2016 and 2017
financial years and information concerning payment of a potential
cash distribution, are intended to identify forward-looking
statements and information. Actual results may differ materially
from the expectations expressed or implied in the forward-looking
statements as a result of known and unknown risks and
uncertainties. Detailed information about some of the known risks
and uncertainties is included in the “Risk Factors” section of
Telesat Holdings Inc.’s Annual Report on Form 20-F for the fiscal
year ended December 31, 2015 which can be obtained on the SEC
website at http://www.sec.gov. Known risks and uncertainties
include but are not limited to: risks associated with operating
satellites and providing satellite services, including satellite
construction or launch delays, launch failures, in-orbit failures
or impaired satellite performance, volatility in exchange rates and
risks associated with domestic and foreign government regulation.
The foregoing list of important factors is not exhaustive. The
information contained in this news release reflects Telesat’s
beliefs, assumptions, intentions, plans and expectations as of the
date of this news release. Except as required by law, Telesat
disclaims any obligation or undertaking to update or revise the
information herein.
About Telesat (www.telesat.com)
Telesat is a leading global satellite operator, providing
reliable and secure satellite-delivered communications solutions
worldwide to broadcast, telecom, corporate and government
customers. Headquartered in Ottawa, Canada, with offices and
facilities around the world, the company’s state-of-the-art fleet
consists of 15 satellites plus the Canadian payload on ViaSat-1
with two new satellites under construction. An additional two
prototype satellites are under construction and will be deployed in
low earth orbit. Telesat also manages the operations of additional
satellites for third parties. Privately held, Telesat’s principal
shareholders are Canada’s Public Sector Pension Investment Board
and Loral Space & Communications Inc. (NASDAQ:LORL).
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Telesat Holdings
Inc. |
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|
|
Consolidated Statements of Income (Loss) |
For
the periods ended September 30 |
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|
Three months |
|
Nine months |
(in
thousands of Canadian dollars) (unaudited) |
|
|
|
2016 |
|
|
|
|
2015 |
|
|
|
|
2016 |
|
|
|
|
2015 |
|
Revenue |
|
$ |
|
224,172 |
|
|
$ |
|
242,220 |
|
|
$ |
|
690,791 |
|
|
$ |
|
698,219 |
|
Operating expenses |
|
|
|
(39,599 |
) |
|
|
|
(44,189 |
) |
|
|
|
(128,748 |
) |
|
|
|
(132,936 |
) |
|
|
|
|
184,573 |
|
|
|
|
198,031 |
|
|
|
|
562,043 |
|
|
|
|
565,283 |
|
Depreciation |
|
|
|
(56,193 |
) |
|
|
|
(51,585 |
) |
|
|
|
(168,671 |
) |
|
|
|
(155,630 |
) |
Amortization |
|
|
|
(6,963 |
) |
|
|
|
(6,908 |
) |
|
|
|
(20,723 |
) |
|
|
|
(21,002 |
) |
Other operating losses, net |
|
|
|
(6 |
) |
|
|
|
(9 |
) |
|
|
|
(2,553 |
) |
|
|
|
(35 |
) |
Operating income |
|
|
|
121,411 |
|
|
|
|
139,529 |
|
|
|
|
370,096 |
|
|
|
|
388,616 |
|
Interest expense |
|
|
|
(46,289 |
) |
|
|
|
(46,317 |
) |
|
|
|
(143,354 |
) |
|
|
|
(136,519 |
) |
Interest and other income |
|
|
|
1,988 |
|
|
|
|
1,097 |
|
|
|
|
4,362 |
|
|
|
|
2,794 |
|
Gain (loss) on changes in fair value
of financial instruments |
|
4,222 |
|
|
|
|
(6,174 |
) |
|
|
|
(20,075 |
) |
|
|
|
(13,986 |
) |
(Loss) gain on foreign exchange |
|
|
|
(47,063 |
) |
|
|
|
(207,373 |
) |
|
|
|
161,436 |
|
|
|
|
(414,651 |
) |
Income (loss) before tax |
|
|
|
34,269 |
|
|
|
|
(119,238 |
) |
|
|
|
372,465 |
|
|
|
|
(173,746 |
) |
Tax expense |
|
|
|
(19,483 |
) |
|
|
|
(20,160 |
) |
|
|
|
(58,584 |
) |
|
|
|
(63,710 |
) |
Net income (loss) |
|
$ |
|
14,786 |
|
|
$ |
|
(139,398 |
) |
|
$ |
|
313,881 |
|
|
$ |
|
(237,456 |
) |
|
|
|
|
|
|
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|
|
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|
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|
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|
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|
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|
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|
Telesat Holdings
Inc. |
|
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|
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|
|
Consolidated Balance Sheets |
|
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|
|
|
|
(in
thousands of Canadian dollars) (unaudited) |
September
30,2016 |
December
31, 2015 |
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
790,326 |
|
$ |
690,726 |
Trade and other receivables |
|
|
46,838 |
|
|
50,781 |
Other current financial assets |
|
|
2,546 |
|
|
1,186 |
Prepaid expenses and other current
assets |
|
|
13,604 |
|
|
17,100 |
Total current
assets |
|
|
853,314 |
|
|
759,793 |
Satellites, property and other
equipment |
|
|
1,887,978 |
|
|
1,925,265 |
Deferred tax assets |
|
|
9,186 |
|
|
7,791 |
Other long-term financial assets |
|
|
20,911 |
|
|
40,362 |
Other long-term assets |
|
|
13,036 |
|
|
13,438 |
Intangible assets |
|
|
835,331 |
|
|
811,397 |
Goodwill |
|
|
2,446,603 |
|
|
2,446,603 |
Total assets |
|
$ |
6,066,359 |
|
$ |
6,004,649 |
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|
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|
|
|
|
Liabilities |
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|
|
|
|
|
Trade and other payables |
|
$ |
31,148 |
|
$ |
44,166 |
Other current financial
liabilities |
|
|
50,000 |
|
|
36,425 |
Other current liabilities |
|
|
87,800 |
|
|
80,637 |
Current indebtedness |
|
|
1,511,566 |
|
|
87,386 |
Total current
liabilities |
|
|
1,680,514 |
|
|
248,614 |
Long-term indebtedness |
|
|
2,302,171 |
|
|
3,975,835 |
Deferred tax liabilities |
|
|
442,113 |
|
|
467,971 |
Other long-term financial
liabilities |
|
|
87,120 |
|
|
94,190 |
Other long-term liabilities |
|
|
354,490 |
|
|
299,911 |
Total
liabilities |
|
|
4,866,408 |
|
|
5,086,521 |
|
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|
Shareholders'
Equity |
|
|
|
|
|
|
Share capital |
|
|
658,735 |
|
|
656,874 |
Accumulated earnings |
|
|
485,178 |
|
|
188,479 |
Reserves |
|
|
56,038 |
|
|
72,775 |
Total shareholders'
equity |
|
|
1,199,951 |
|
|
918,128 |
Total liabilities and
shareholders' equity |
|
$ |
6,066,359 |
|
$ |
6,004,649 |
|
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|
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|
Telesat Holdings Inc. |
|
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Consolidated Statements of Cash Flows |
|
|
|
For
the nine months ended September 30 |
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|
(in thousands of Canadian dollars) (unaudited) |
|
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|
2016 |
|
|
|
|
2015 |
|
Cash flows from operating
activities |
|
|
|
|
|
|
Net income (loss) |
|
$ |
|
313,881 |
|
|
$ |
|
(237,456 |
) |
Adjustments to reconcile net income
(loss) to cash flows from operating activities |
|
|
|
|
|
Depreciation |
|
|
|
168,671 |
|
|
|
|
155,630 |
|
|
Amortization |
|
|
|
20,723 |
|
|
|
|
21,002 |
|
|
Tax expense |
|
|
|
58,584 |
|
|
|
|
63,710 |
|
|
Interest expense |
|
|
|
143,354 |
|
|
|
|
136,519 |
|
|
Interest income |
|
|
|
(4,952 |
) |
|
|
|
(2,835 |
) |
|
(Gain) loss on foreign exchange |
|
|
|
(161,436 |
) |
|
|
|
414,651 |
|
|
Loss on changes in fair value of financial
instruments |
|
|
|
20,075 |
|
|
|
|
13,986 |
|
|
Share-based compensation |
|
|
|
4,881 |
|
|
|
|
3,877 |
|
|
Loss on disposal of assets |
|
|
|
2,553 |
|
|
|
|
35 |
|
|
Other |
|
|
|
(27,935 |
) |
|
|
|
(29,099 |
) |
Income taxes paid, net of income
taxes received |
|
|
|
(93,158 |
) |
|
|
|
(125,693 |
) |
Interest paid, net of capitalized
interest and interest received |
|
|
|
(101,166 |
) |
|
|
|
(103,516 |
) |
Repurchase of stock options |
|
|
|
(24,658 |
) |
|
|
— |
|
Operating assets and liabilities |
|
|
|
96,709 |
|
|
|
|
10,160 |
|
Net cash from operating
activities |
|
|
|
416,126 |
|
|
|
|
320,971 |
|
Cash flows used in investing
activities |
|
|
|
|
|
|
Satellite programs, including
capitalized interest |
|
|
|
(166,385 |
) |
|
|
|
(64,445 |
) |
Purchase of property and other
equipment |
|
|
|
(4,986 |
) |
|
|
|
(7,040 |
) |
Purchase of intangible assets |
|
|
|
(42,099 |
) |
|
|
|
(5 |
) |
Net cash used in investing
activities |
|
|
|
(213,470 |
) |
|
|
|
(71,490 |
) |
Cash flows used in financing
activities |
|
|
|
|
|
|
|
|
|
|
Repayment of indebtedness |
|
|
|
(74,643 |
) |
|
|
|
(55,182 |
) |
Capital lease payments |
|
|
|
(22 |
) |
|
|
— |
|
Satellite performance incentive
payments |
|
|
|
(7,424 |
) |
|
|
|
(4,916 |
) |
Settlement of derivatives |
|
|
|
(55 |
) |
|
|
— |
|
Net cash used in financing
activities |
|
|
|
(82,144 |
) |
|
|
|
(60,098 |
) |
|
|
|
|
|
|
|
|
Effect of changes in exchange rates
on cash and cash equivalents |
|
|
|
(20,912 |
) |
|
|
|
33,431 |
|
|
|
|
|
|
|
|
|
Increase in cash and cash
equivalents |
|
|
|
99,600 |
|
|
|
|
222,814 |
|
Cash and cash equivalents, beginning
of period |
|
|
|
690,726 |
|
|
|
|
497,356 |
|
Cash and cash equivalents,
end of period |
|
$ |
|
790,326 |
|
|
$ |
|
720,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telesat’s Adjusted EBITDA margin1
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
(in
thousands of Canadian dollars) (unaudited) |
|
2016 |
|
2015 |
|
2016 |
2015 |
|
Net income (loss) |
|
$ |
|
14,786 |
|
|
$ |
|
(139,398 |
) |
|
$ |
|
313,881 |
|
|
$ |
|
(237,456 |
) |
|
Tax expense |
|
|
|
19,483 |
|
|
|
|
20,160 |
|
|
|
|
58,584 |
|
|
|
|
63,710 |
|
|
(Gain) loss on changes in fair value of financial
instruments |
|
|
|
(4,222 |
) |
|
|
|
6,174 |
|
|
|
|
20,075 |
|
|
|
|
13,986 |
|
|
Loss (gain) on foreign exchange |
|
|
|
47,063 |
|
|
|
|
207,373 |
|
|
|
|
(161,436 |
) |
|
|
|
414,651 |
|
|
Interest and other income |
|
|
|
(1,988 |
) |
|
|
|
(1,097 |
) |
|
|
|
(4,362 |
) |
|
|
|
(2,794 |
) |
|
Interest expense |
|
|
|
46,289 |
|
|
|
|
46,317 |
|
|
|
|
143,354 |
|
|
|
|
136,519 |
|
|
Depreciation |
|
|
|
56,193 |
|
|
|
|
51,585 |
|
|
|
|
168,671 |
|
|
|
|
155,630 |
|
|
Amortization |
|
|
|
6,963 |
|
|
|
|
6,908 |
|
|
|
|
20,723 |
|
|
|
|
21,002 |
|
|
Other operating losses, net |
|
|
|
6 |
|
|
|
|
9 |
|
|
|
|
2,553 |
|
|
|
|
35 |
|
|
Non-recurring compensation expenses, including
severance payments |
|
|
|
18 |
|
|
|
|
94 |
|
|
|
|
1,320 |
|
|
|
|
485 |
|
|
Non-cash expense related to share-based
compensation |
|
|
|
1,557 |
|
|
|
|
247 |
|
|
|
|
4,881 |
|
|
|
|
3,877 |
|
|
Adjusted EBITDA |
|
$ |
|
186,148 |
|
|
$ |
|
198,372 |
|
|
$ |
|
568,244 |
|
|
$ |
|
569,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
|
224,172 |
|
|
$ |
|
242,220 |
|
|
$ |
|
690,791 |
|
|
$ |
|
698,219 |
|
|
Adjusted EBITDA Margin |
|
|
|
83.0 |
% |
|
|
|
81.9 |
% |
|
|
|
82.3 |
% |
|
|
|
81.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End Notes
1 The common definition of EBITDA
is “Earnings Before Interest, Taxes, Depreciation and
Amortization.” In evaluating financial performance, Telesat uses
revenue and deducts certain operating expenses (including
share-based compensation expense and unusual and non-recurring
items, including restructuring related expenses) to obtain
operating income before interest, taxes, depreciation and
amortization (“Adjusted EBITDA”) and the Adjusted EBITDA margin
(defined as the ratio of Adjusted EBITDA to revenue) as measures of
Telesat’s operating performance.
Adjusted EBITDA allows Telesat and investors to
compare Telesat’s operating results with that of competitors
exclusive of depreciation and amortization, interest and investment
income, interest expense, taxes and certain other expenses.
Financial results of competitors in the satellite services industry
have significant variations that can result from timing of capital
expenditures, the amount of intangible assets recorded, the
differences in assets’ lives, the timing and amount of investments,
the effects of other income (expense), and unusual and
non-recurring items. The use of Adjusted EBITDA assists Telesat and
investors to compare operating results exclusive of these items.
Competitors in the satellite services industry have significantly
different capital structures. Telesat believes the use of Adjusted
EBITDA improves comparability of performance by excluding interest
expense.
Telesat believes the use of Adjusted EBITDA and
the Adjusted EBITDA margin along with IFRS financial measures
enhances the understanding of Telesat’s operating results and is
useful to Telesat and investors in comparing performance with
competitors, estimating enterprise value and making investment
decisions. Adjusted EBITDA as used here may not be the same as
similarly titled measures reported by competitors. Adjusted EBITDA
should be used in conjunction with IFRS financial measures and
is not presented as a substitute for cash flows from operations as
a measure of Telesat’s liquidity or as a substitute for net income
as an indicator of Telesat’s operating performance.
For further information:
Michael Bolitho, Telesat, +1 (613) 748-8700 ext. 2336 (ir@telesat.com)
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