Telesat reports first quarter results


	Telesat reports first quarter results After a very successful 2000, BCE-owned satellite operator continues strong performance. OTTAWA,April 26 2001 --Telesat Canada, a wholly owned subsidiary of BCE Inc., today released its financial results for the three months ending March 31, 2001. The company reported higher net earnings and cash flow from operating activities due primarily to the sheltering of income taxes under a tax loss monetization plan with BCE. Consolidated operating revenue for the period was $70.9 million, compared with $71.6 million in the first quarter of last year. Revenue for the first quarter was lower due to one-time Y2K-related revenue in the first quarter of 2000. This variance was partially offset by higher revenue from the Nimiq direct broadcast satellite and higher international consulting and related equipment sales in 2001. Earnings from operations of $16.1 million were $2.2 million lower than in 2000 because of increased depreciation expense relating to the Anik F1 satellite, which entered commercial service on February 19, 2001. Unaudited consolidated net earnings applicable to common shareholders increased to $16.3 million from $7.0 million in the first quarter of 2000. The major reason for this increase was the sheltering of income taxes under the tax loss monetization plan. Cash flow from operating activities for the first three months was $15.9 million. This increase of $32.2 million from the comparable figure for 2000 was primarily due to the payment of income taxes during the first quarter of 2000, with a minimal corresponding outlay in 2001. The tax loss monetization plan, which has contributed significantly to earnings over the last three quarters, was unwound on March 30, 2001. Highlights of the quarter included: - Telesat's new Anik F1 satellite entered commercial service on February 19, becoming the first Telesat satellite to serve both North and South America. - Just a few weeks later, Telesat announced three separate contracts with iDirect Inc., Verestar Inc., and Teleglobe Inc., for the purchase of ten transponders on Anik F1, which will largely be used for internet traffic between North and South America. - Telesat acquired 100% common share ownership of Infosat Communications, Inc., consolidating key BCE-owned satellite services under Telesat. - Telesat and Satmex, Mexico's domestic satellite operator, concluded a $15 million, two-year contract for service to Mexican customers using Anik E1. - In response to Industry Canada's call for applications to develop the Canadian satellite orbital slot at 118.7 degrees WL, Telesat tabled two proposals with the Canadian government under which the company would design, build and launch two new satellites. One satellite would be used to provide innovative new capacity for broadcasting and telecommunications services, while the other would carry advanced multimedia services to individual Canadians and public institutions-- including those in remote and underserved areas. About Telesat Telesat (www.telesat.ca) is the world's most experienced commercial satellite operator. The company made history in 1972 with the launch of the first domestic commercial communications satellite in geostationary orbit. Today, Telesat provides telecommunications and broadcast distribution services in the Americas and is a leading consultant, operator and partner in satellite ventures around the globe. Telesat is a wholly owned subsidiary of BCE Inc., one of the world's leading telecommunications companies. << Telesat Canada Consolidated Statement of Earnings (unaudited) Three months to March 31 (in millions of dollars, except per share amounts) Notes 2001 2000 ------------------------------------------------------------------------ (2) (restated) Operating revenues (3) 70.9 71.6 ------------------------------------------------------------------------ Operating expenses Depreciation 21.0 18.5 Operations and administration 33.8 34.8 ---------------------------------------------------------------------- 54.8 53.3 ---------------------------------------------------------------------- Earnings from operations (3) 16.1 18.3 ------------------------------------------------------------------------ Other expense (income) Interest expense 9.5 8.6 Other income (6.2) (4.8) ---------------------------------------------------------------------- 3.3 3.8 ---------------------------------------------------------------------- Earnings before non-recurring item 12.8 14.5 Non-recurring item - (0.6) ------------------------------------------------------------------------ Earnings before income taxes 12.8 13.9 Income taxes (4.2) 6.2 ------------------------------------------------------------------------ Net earnings 17.0 7.7 Dividends on preferred shares 0.7 0.7 ------------------------------------------------------------------------ Net earnings applicable to common shares 16.3 7.0 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Net earnings per common share 2.38 1.02 -------------------- -------------------- Consolidated Statement of Retained Earnings (unaudited) Three months to March 31 (in millions of dollars) Notes 2001 2000 ------------------------------------------------------------------------ (2) (restated) Balance at beginning of year, as previously reported 168.3 120.7 Adjustment for change in accounting policies (1) - 2.9 Adjustment for Infosat (2) 0.3 1.6 ------------------------------------------------------------------------ Balance at beginning of year, as restated 168.6 125.2 Net earnings 17.0 7.7 Dividends on common shares (16.2) - Dividends on preferred shares (0.7) (0.7) ------------------------------------------------------------------------ Balance at end of year 168.7 132.2 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Telesat Canada Consolidated Balance Sheet (unaudited) March 31 December 31 (in millions of dollars) Notes 2001 2000 ------------------------------------------------------------------------ (2) (restated) Assets Property, plant and equipment, net 933.5 930.9 Investments 58.4 58.4 Receivables 59.8 48.9 Other assets 61.6 64.2 Cash and cash equivalents 3.7 12.3 ------------------------------------------------------------------------ 1,117.0 1,114.7 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Shareholders' Equity and Liabilities Shareholders' equity Capital stock - common shares 111.9 88.2 Contributed surplus - 23.7 Retained earnings 168.7 168.6 Cumulative translation adjustment (0.1) 0.4 ---------------------------------------------------------------------- Total common equity 280.5 280.9 Capital stock - preferred shares 50.0 50.0 ---------------------------------------------------------------------- 330.5 330.9 Bank loans 139.4 159.5 Debt financing 301.2 301.9 Future tax liabilities 85.5 85.3 Other liabilities 260.4 237.1 ------------------------------------------------------------------------ 1,117.0 1,114.7 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Telesat Canada Consolidated Cash Flow Statement (unaudited) Three months to March 31 (in millions of dollars) Notes 2001 2000 ------------------------------------------------------------------------ (2) (restated) Cash flows from operating activities Net earnings 17.0 7.7 Items not affecting cash: Depreciation 21.0 18.5 Capitalized interest (5.0) (5.2) Net change in customer prepayments . and deferred interest (0.9) (0.9) Future income taxes 0.3 2.5 Other (16.5) (38.9) ---------------------------------------------------------------------- 15.9 (16.3) ---------------------------------------------------------------------- Cash flows from financing activities Bank loans (20.1) 38.6 Customer prepayments 1.0 29.3 Satellite performance incentive payments (0.3) (0.1) Office buildings financing (0.7) (0.4) Dividends (16.3) (0.7) ---------------------------------------------------------------------- (36.4) 66.7 ---------------------------------------------------------------------- Cash flows from investing activities Proceeds on disposal of assets 1.3 3.5 Proceeds on F1 transponders 71.0 - Satellite programs (58.5) (9.0) Property additions (1.9) (15.3) Investment in TMI Communications and Co., Limited Partnership - (0.2) ---------------------------------------------------------------------- 11.9 (21.0) ---------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (8.6) 29.4 Cash and cash equivalents, beginning of period 12.3 (7.8) ------------------------------------------------------------------------ Cash and cash equivalents, end of period 3.7 21.6 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Telesat Canada Notes to Consolidated Financial Statements (unaudited) 1. Summary of Significant Accounting Policies For a full description of the accounting policies, please refer to the 2000 Telesat Annual Report. All amounts are in Canadian dollars unless otherwise indicated. 2. Acquisition of Infosat Communications, Inc. In January 2001, Telesat acquired 100% of Infosat Communications, Inc., a related party, from Alouette Telecommunications Inc. in exchange for Telesat common shares. Continuity-of-interest accounting was used to record the acquisition and the prior year comparatives have been restated to reflect the results of Infosat. 3. Segmented Information The Company's business segments have been segregated based on the way that management organizes the business for making operating decisions and assessing performance. The following summary briefly describes the operations included in each reportable segment: - Telecommunications - most activities are accounted for in this category which includes television transmit and receive services, occasional use, bundled Digital Video Compression, radio and carrier industry services, business networks (Anikom, VSAT, DirecPC) and the results from the Brazilian subsidiary and Infosat Communications, Inc. - Telecommunications - Equipment Sales - equipment sales associated with the various services outlined in the Telecommunications segment. - International and Consulting Programs - all consulting services related to space and earth segments, government studies, satellite control services, R&D projects as well as management services for TMI Communications and Company, Limited Partnership. - International Consulting- Equipment Sales - equipment sales related to the International and Consulting Programs segment. - IRIDIUM(R) - includes operations and maintenance for Iridium TTAC stations and the related space segment. - Other - includes Telesat's investment in the Téléport de Montréal Immeuble, a real estate building in Montreal. Three months to Business segments March 31 (in millions of dollars) 2001 2000 ------------------------------------------------------------------------- (restated) Total revenues Telecommunications 56.0 60.2 Telecommunications - equipment sales 5.8 6.5 International and Consulting Programs 6.0 3.3 International Consulting - equipment sales 1.6 0.2 IRIDIUM(R) 0.9 0.8 Other 0.6 0.6 ------------------------------------------------------------------------- 70.9 71.6 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings from operations Telecommunications 11.2 14.5 Telecommunications - equipment sales 1.3 2.1 International and Consulting Programs 2.4 0.8 International Consulting - equipment sales 0.4 0.1 IRIDIUM(R) 0.6 0.6 Other 0.2 0.2 ------------------------------------------------------------------------- 16.1 18.3 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months to March 31 (in millions of dollars) 2001 2000 ------------------------------------------------------------------------- (restated) Revenues by Products and Services Broadcast Services 38.8 35.6 Business Network Services 18.5 27.1 Carrier Services 4.5 3.9 International and Consulting Services 9.1 5.0 ------------------------------------------------------------------------- 70.9 71.6 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 4. Related Party Transactions On August 3, 2000, BCE Inc. (BCE) (the ultimate parent company) advanced $1.35 billion to Telesat in the form of a Demand Loan (the "BCE Demand Loan") to acquire 1,350,000 Preferred Shares of 1431137 Ontario Inc., a wholly-owned subsidiary of BCE (the "1431137 Ontario Preferred Shares"). On March 30, 2001, 1431137 Ontario Inc. redeemed the preferred shares and as by way of payment for the redemption, assigned its interest in a receivable from BCE to Telesat. Telesat then offset the receivable from BCE against the BCE Demand Loan. a) The demand loan carried interest at a rate of 7.5%, the prime lending rate of Telesat's leading bank. b) The fixed cumulative preferential dividend rate was set at a rate equal to the interest rate on the BCE Demand Loan. c) As the legal right of offset existed and it was the intention of the financing arrangement to do so, the BCE Demand Loan and the investment in the 1431137 Ontario Preferred Shares were offset on the Balance Sheet. The use of cash for the BCE Demand Loan repayment and the source of cash from the redemption of the preferred shares are presented on a net basis on the Company's Cash Flow Statement. To March 31, 2001 Telesat has recorded $24.4 million in dividend income from the 1431137 Ontario Preferred Shares and incurred $24.4 million in interest expense on the BCE Demand Loan. These elements have been treated in a manner consistent with the underlying financial instruments and have been offset on the Statement of Earnings. >> -30- For further information: Dan Tisch, Environics Communications (416) 920-9000, ext. 260, dtisch@pr.environics.ca; Ted Ignacy, Telesat (613) 748-0123

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