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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NO. 0-22531
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PANAMSAT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 95-4607698
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE PICKWICK PLAZA, GREENWICH, CONNECTICUT 06830
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 622-6664
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
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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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.[_]
As of March 24, 1998, the registrant had outstanding 149,149,008 shares of
Common Stock. As of such date, the aggregate market value of voting stock held
by non-affiliates of the registrant was approximately $2,352,000,000.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Proxy Statement for the Annual Meeting
of Stockholders of Registrant to be held on May 4, 1998 (to be filed not later
than 120 days after the end of the Company's fiscal year) is incorporated by
reference into Part III hereof.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report on Form 10-K contains certain forward-looking information
under the captions "Item 1. Business" and "Item 7. Management's Discussion and
Analysis of Financial Conditions and Results of Operations." The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain
forward-looking statements so long as such information is identified as
forward-looking and is accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those projected in the information. When used in this Annual
Report on Form 10-K, the words "estimate," "project," "anticipate," "expect,"
"intend," "believe," and other similar expressions are intended to identify
forward-looking statements and information. PanAmSat identifies the following
important factors which could cause PanAmSat's actual results to differ
materially from any results which might be projected, forecasted, estimated or
budgeted by PanAmSat in forward-looking information: (i) risks associated with
technology, (ii) regulatory risks, (iii) effect of loss of key personnel, and
(iv) litigation. Such factors are more fully described under the caption "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors," and such descriptions are incorporated herein by
reference. PanAmSat cautions that the foregoing list of important factors is
not exclusive. Further, PanAmSat 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.
PART I
ITEM 1. BUSINESS
OVERVIEW
PanAmSat Corporation, a Delaware corporation ("PanAmSat" or the "Company"),
is the world's largest commercial provider of global satellite-based
communications services. The Company commenced operations on May 16, 1997 upon
the merger (the "Merger") of PanAmSat International Systems, Inc. (then
operating under its previous name, PanAmSat Corporation) ("PanAmSat
International") and the Galaxy Satellite Services division ("Galaxy") of
Hughes Communications, Inc. ("HCI"). As a result of the Merger and the
consummation of a separate but related stock contribution, HCI became the
owner of approximately 71.5% of the outstanding shares of Common Stock, par
value $.01 per share, of PanAmSat (the "PanAmSat Common Stock"). For further
information on the Merger, see "--The Merger" below and Note 1 to the
Consolidated Financial Statements included in Item 8 hereof. Unless the
context otherwise requires, the term "Company" is used to refer collectively
to the parent company and the subsidiaries through which its various
businesses are actually conducted, including PanAmSat International.
The Company is a leading provider of satellite capacity for television
program distribution to network, cable and other redistribution sources in the
United States, Latin America, Africa, south Asia and the Asia-Pacific region.
PanAmSat's global network of 17 satellites (excluding Brasilsat A1, which is
in inclined orbit and does not provide the Company with a significant source
of revenues) provide state-of-the-art video distribution and
telecommunications services for customers worldwide. Currently, an aggregate
of more than 120 million households worldwide are capable of receiving
television programming carried by PanAmSat satellites. PanAmSat satellites
also serve as the transmission platforms for seven planned or operational
direct-to-home ("DTH") services worldwide. The Company also provides satellite
services and related technical support for live transmissions for news and
special events coverage.
In addition, PanAmSat provides satellite services to telecommunications
carriers, corporations and Internet service providers ("ISPs") for the
provision of satellite-based communications networks, including private
corporate networks employing very small aperture terminals ("VSATs") and
international access to the U.S. Internet backbone. Currently, more than
100,000 VSATs worldwide relay communications over PanAmSat satellites, and
ISPs in 29 countries access the U.S. Internet backbone via PanAmSat
satellites.
The Company, together with its subsidiaries, provides global satellite
services in three areas: Video Services, Telecommunications Services and Other
Services.
THE MERGER
The Merger was the result of an Agreement and Plan of Reorganization dated
September 20, 1996 (as amended April 4, 1997) (the "Reorganization Agreement")
entered into among HCI, Hughes Communications Galaxy, Inc., Hughes
Communications Satellite Services, Inc., Hughes Communications Services, Inc.,
Hughes Communications Carrier Services, Inc., Hughes Communications Japan,
Inc., PanAmSat International and the Company. In addition, an Agreement and
Plan of Merger dated April 4, 1997 (the "Merger Agreement") was entered into
among PanAmSat International, PanAmSat and PAS Merger Corp., a subsidiary of
PanAmSat ("PAS Merger Corp.").
As a result of the transactions contemplated by the Reorganization Agreement
and the Merger Agreement, on May 16, 1997, among other things, PAS Merger
Corp. merged with and into PanAmSat International and Galaxy was contributed
to PanAmSat, with the result that (a) PanAmSat International became a wholly-
owned subsidiary of PanAmSat; (b) each issued and outstanding share of
PanAmSat International's Class A Common Stock, par value $.01 per share, and
Common Stock, par value $.01 per share, was converted into, at the election of
each holder, either (i) an amount in cash equal to $15, plus one-half ( 1/2)
share of PanAmSat Common Stock,
1
(ii) one share of PanAmSat Common Stock or (iii) an amount equal to
approximately $16.38 in cash plus 0.45 shares of PanAmSat Common Stock, in
each case subject to proration; (c) PanAmSat became Galaxy's owner and
operator; and (d) HCI and certain of its subsidiaries received an aggregate of
106,622,807 shares of PanAmSat Common Stock. Following the Merger, the shares
of PanAmSat Common Stock owned by HCI constitute approximately 71.5% of the
outstanding shares of PanAmSat Common Stock.
Prior to the Merger, PanAmSat International operated the world's first
privately owned global (excluding domestic U.S.) satellite communications
system, consisting of four satellites serving Latin America, the Caribbean,
Europe, Asia, the Middle East and Africa. Galaxy was the leading provider of
commercial satellite services in the United States, with a fleet consisting of
10 satellites.
SERVICES
In the year ended December 31, 1997, PanAmSat's pro forma revenues of $756.0
million were derived from the following service areas:
SERVICES 1997 REVENUES
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Video Services............................................. 80%
Telecommunications Services................................ 16%
Other Services............................................. 4%
----
Total...................................................... 100%
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Results of Operations."
VIDEO SERVICES
PanAmSat's Video Services provide for the long-term, part-time and
occasional use of PanAmSat satellite services for the transmission of news,
sports, entertainment and education programming worldwide. PanAmSat's Video
Services are comprised of four categories: (i) video distribution services,
(ii) DTH services, (iii) special events services and (iv) contribution
services.
Video Distribution Services. PanAmSat's primary video distribution service
is the full-time transmission of television programming to cable systems,
network affiliates and other redistribution systems. Certain PanAmSat
satellites contain broad C-band beams that deliver dozens of television
channels to these redistribution systems. PanAmSat generally provides video
distribution services under long-term contracts for full or partial
transponder usage and digital channels. The Company also offers bundled,
valued-added services that include satellite capacity, digital encoding of
video channels and, if required, uplinking and downlinking services to
PanAmSat satellites from the Company's teleport facilities.
PanAmSat currently operates satellites for the distribution of television
programming to cable and other redistribution systems in the United States,
Latin America, Africa, south Asia and the Asia-Pacific region. The Company
creates "video neighborhoods" on these satellites with dozens of popular
television channels. Cable and other redistribution systems then install
antennas to access the popular channels for their subscribers. Several of the
Company's Galaxy satellites deliver television programming to virtually all of
the United States' 11,000 cable systems, approximately 70 million cable
television households, as well as nearly two million households using C-band
backyard dishes. The Ku-band beams on several of the Company's domestic U.S.
and international satellites are also used for video distribution to cable
systems and network affiliates.
DTH Services. PanAmSat creates high-power Ku-band transmission beams on
several satellites that serve as platforms for the delivery of multiple
television channels for household reception using 60-90 centimeter antennas.
PanAmSat believes there is significant demand for digital DTH services because
of limited available
2
terrestrial television channels or cable television service in many
international markets, and in the United States, limited ethnic or niche
programming.
PanAmSat has arrangements with customers to operate platforms on five
satellites for seven current or planned DTH services in Latin America, South
Africa, the Middle East, India and the United States. PanAmSat also designs
many of these platforms to facilitate DTH service expansion through the launch
of multiple satellites in the same orbital location.
Special Events Services. PanAmSat provides broadcasters with satellite
transmission services for the timely broadcast of news, sports and events
coverage on a short-term basis. This service is designed to enable
broadcasters to conduct on-the-scene transmissions using small, portable
antennas and to receive the transmissions at their broadcast centers or
affiliate stations. PanAmSat conducted approximately 58,000 hours of total
special events transmissions in 1997. In addition to short-term services for
special events coverage, PanAmSat has long-term transponder service agreements
with certain satellite brokers in the United States. These customers package
domestic U.S. transponder capacity for their broadcast, business, educational
and government users.
Contribution Services. PanAmSat provides broadcasters with satellite
transmission services for the full-time transmission of news, sports and
entertainment segments to their network affiliates or broadcast centers within
the United States or around the world.
TELECOMMUNICATIONS SERVICES
PanAmSat's Telecommunications Services support the creation of satellite-
based networks that relay voice, video and data communications within
individual countries, throughout regions and around the world. PanAmSat has
designed virtually all of its satellites for high-power, bandwidth-intensive
applications that relay large amounts of digital information among multiple
sites using small, cost-effective antennas. PanAmSat's Telecommunications
Services are comprised of four categories: (i) carrier services, (ii) private
business networks, (iii) Internet access and (iv) telephony.
Carrier Services. PanAmSat provides satellite services to telecommunications
carriers licensed by one or more countries to provide voice, video and data
communications networks for businesses, governments and other users. The
Company's high-power satellites, which facilitate high information throughput
and the ability to use VSATs on the ground, have enabled emerging carriers to
introduce competitive new telecommunications services in Latin America, Africa
and Asia. In addition, PanAmSat offers value-added satellite services for
telecommunications customers that include satellite capacity and teleport
services that can connect customers to U.S. terrestrial networks.
Private Business Networks. PanAmSat provides satellite services directly to
network suppliers and businesses for the development and operation of private
business networks in the United States, Latin America, Europe, Africa and
Asia. These rooftop-to-rooftop VSAT networks provide dedicated, proprietary
one-way and two-way communications links among multiple business sites. VSAT
network customers include retail chains for rapid credit card authorization
and inventory control, banks for the connection of automated teller machines
with processing computers and news agencies for the timely dissemination of
news and financial information. More than 100,000 VSAT antennas worldwide
currently relay communications over PanAmSat satellites. The Company's largest
single telecommunications customer is Hughes Network Systems, Inc., an
affiliate of the Company ("HNS"), which uses the equivalent of more than 20
U.S. domestic satellite transponders to create and operate VSAT networks for
its business customers.
In addition, PanAmSat provides satellite services directly to businesses.
These include value-added satellite communications services, such as the
purchase and installation of on-site antennas and the design, integration,
management, operation and maintenance of business networks. These services are
provided via PanAmSat's teleports in the United States or through
subcontractors.
3
Internet Access. PanAmSat provides satellite services for the full-time
delivery of Internet information from the United States and other countries to
various locations around the world. PanAmSat's customers consist of
educational organizations, ISPs and companies providing direct-to-consumer
Internet applications. PanAmSat believes that its high-power domestic U.S. and
international satellites are well-suited for Internet service because of the
tremendous demand for reliable, high-speed access to the U.S. Internet
backbone, where approximately 80 percent of all Internet data currently
resides. In many cases, PanAmSat's satellites are capable of delivering
Internet data internationally at nearly 20 times the speed of traditional
telephone links. PanAmSat currently provides Internet services in
approximately 30 countries.
PanAmSat also provides SPOTbytesSM, a value-added, bundled Internet service,
that offers an integrated package of services including international
satellite capacity, uplinking services from a PanAmSat teleport and dedicated
links from the teleport to the U.S. Internet backbone.
Telephony. The Company provides domestic and international satellite
services for public switched telephone network ("PSTN") transmissions. PSTN
services represented less than one percent of total combined pro forma
revenues in 1997.
PanAmSat's ability to provide domestic and international PSTN services are
restricted by various telecommunications regulations in most countries. See
"Item 1. Business--Government Regulation." The Company believes competition
for long-distance services and significant deregulation in several countries
could create new service opportunities for the Company. In addition, the
Company believes that its international satellites are particularly well-
suited for thin-route PSTN applications in developing countries or remote
areas where fiber-optic telephone systems are not feasible or cost-effective.
OTHER SERVICES
Telemetry, Tracking and Control. PanAmSat provides telemetry, tracking and
control ("TT&C") services for 21 satellites owned by PanAmSat and other
satellite operators. PanAmSat personnel maintain proper orbital location and
attitude, monitor on-board housekeeping systems, adjust transponder levels and
remotely "rewire" satellites, if necessary, to bring backup systems on-line in
the event of a subsystem failure. The necessary TT&C satellite commands are
initiated from PanAmSat's Operations Control Center in Long Beach, California
and are transmitted to the satellites from PanAmSat Teleport facilities
located in New York, Florida, Georgia, Colorado and California.
Galaxy Backup Capacity. As part of its video distribution service on certain
Galaxy satellites, PanAmSat offers customers a premium service that includes
backup C-band capacity on the Galaxy VI satellite. Generally, subject to the
specific terms of individual contracts, these customers are entitled to
replacement capacity on Galaxy VI if a transponder failure occurs and no spare
amplifier or reserved transponder is available on their current satellite.
Galaxy VI can meet a customer's immediate needs by providing transponder
capacity at Galaxy VI's current orbital location or, subject to Federal
Communications Commission ("FCC") approval, from a relocated orbital position.
Galaxy VI serves as the in-orbit spare satellite because current Galaxy VI
customers are subject to preemption if their capacity is required to serve as
a backup transponder. As of December 31, 1997, PanAmSat had not been required
to preempt an existing full-time customer on Galaxy VI.
4
BUSINESS STRATEGY
PanAmSat's business strategy is based on more than 15 years of experience
providing satellite-based communications services and the Company's ongoing
analysis of expected worldwide market demand for its services. PanAmSat's
strategy is based on five key elements:
. Global satellite network;
. One-stop-shopping;
. Value-added services;
. Satellite broadcasting and telecommunications franchises; and
. Long-term customer relationships.
GLOBAL SATELLITE NETWORK
PanAmSat has created a global satellite communications network that is
designed to provide broadcast and telecommunications services worldwide. The
network currently consists of 17 satellites, seven teleport or TT&C facilities
in the United States and more than 450 PanAmSat professionals on five
continents. In addition, teleports operated by third parties in Europe, Latin
America, the United States and Asia also provide access to PanAmSat
satellites. PanAmSat's global satellite network is focused on the point-to-
multipoint communications market, which includes the distribution of
television channels to cable and other redistribution systems, DTH and private
business networks.
PanAmSat's core resource is its growing fleet of satellites. The Company has
designed many of its satellites to provide high-power transmissions that
reflect specific market demographics and customer service requirements. The
Company intends to launch six additional satellites by late 1999 that employ
the most advanced satellite technology commercially available. These new
satellites are designed to provide additional transmission capacity, higher
power, expanded coverage and/or extended operational life. Satellites are
subject to significant risks related to delayed and failed launches and in-
orbit failures. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Risk Factors--Risks Associated With
Technology."
PanAmSat's geostationary C-band and/or Ku-band satellites each provide
coverage over specific geographic areas, such as in the United States or
across ocean regions. To facilitate continued network expansion, PanAmSat has
received authorization from the FCC to use additional orbital slots for C-band
and/or Ku-band satellites and nine slots for Ka-band satellites. The Company
also has requested authorization for 11 V-band slots and six additional Ka-
band slots. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Risk Factors--Regulatory Risks."
ONE-STOP-SHOPPING
While PanAmSat has designed each satellite to reflect specific market
requirements, its global satellite network also serves as a single resource
for a customer's worldwide transmission requirements. PanAmSat is the only
commercial company that offers global satellite services on a one-stop-
shopping basis.
VALUE-ADDED SERVICES
The Company employs its satellites, teleports and professional staff to
offer value-added services that are market driven and responsive to customer
needs. In addition to satellite transmission capacity, PanAmSat's service
offerings include:
. Network design and systems engineering;
. Transmission of video channels and management of private business
network traffic from PanAmSat teleports;
5
. The provision of broadcast studios for video preparation and
transmission to PanAmSat satellites during major sporting and special
events sites; and
. Development of new service applications.
PanAmSat's value-added services also include bundled packages of PanAmSat
resources. In an effort to provide cost-effective digital video services
particularly for smaller programmers, for instance, PanAmSat offers a multi-
channel per carrier service in which several television channels are digitally
encoded and transmitted from a PanAmSat teleport to a specific cable
television market. The Company's SPOTbytesSM bundled Internet service consists
of international satellite transmission capacity, and if required, uplinking
services from a PanAmSat teleport and dedicated links from the teleport to the
U.S. Internet backbone.
SATELLITE BROADCASTING AND TELECOMMUNICATIONS FRANCHISES
A key element of PanAmSat's strategy is the creation of "service franchises"
that help the Company to maintain and build its customer base. These
franchises are based on large numbers of users who aim their ground antennas
at PanAmSat satellites for the delivery of their television programming or
communications traffic. The resulting infrastructure of ground antennas
creates neighborhoods that bring added value to the Company's satellite
transmission capacity.
PanAmSat franchises include the distribution of premier television channels
to cable systems and network affiliates; DTH television services to subscriber
households; and private business networks to multiple corporate sites.
PanAmSat initially enters into service agreements with several key programmers
that serve as anchor tenants offering popular television channels on the
satellite's cable television "neighborhood." These anchor broadcasters seed
the ground infrastructure accessing the programming and also attract
additional programmers that want to join the programming neighborhood.
LONG-TERM CUSTOMER RELATIONSHIPS
PanAmSat's strategy is to build long-term relationships with its customers
by understanding their business objectives and offering long-term solutions to
their satellite transmission needs. Most of PanAmSat's revenues result from
long-term contracts with its customers. In many cases, programmers,
corporations and ISPs have incrementally increased usage of PanAmSat
satellites based on their service experience.
6
THE SATELLITES
The following tables describe the Company's operational and anticipated fleet
of satellites:
SUMMARY SATELLITE DATA
OPERATIONAL SATELLITES
PAS-1 PAS-2 PAS-3 PAS-4 PAS-5
-------------------- --------------------- ------------------- --------------------- -------------------
Region Covered.. Atlantic Ocean Pacific Ocean Atlantic Ocean Indian Ocean Atlantic Ocean
Satellite....... GE 3000 HS 601 HS 601 HS 601 HS 601
Expected End of
Useful Life(2). 2001 2009 2008 2011 2012(3)
Orbital Loca-
tion........... 45(degrees) W.L. 191(degrees) W.L. 43(degrees) W.L. 68.5(degrees) E.L.(4) 58(degrees) W.L.
Transponders(5)
Ku-band(6)..... 6 @ 72 MHz 12 @ 54 MHz 12 @ 54 MHz 16 @ 27 MHz 24 @ 36 MHz
4 @ 64 MHz 4 @ 64 MHz 6 @ 54 MHz
C-band(7)...... 6 @ 72 MHz 12 @ 54 MHz 12 @ 54 MHz 12 @ 54 MHz 24 @ 36 MHz
12 @ 36 MHz 4 @ 64 MHz 4 @ 64 MHz 4 @ 64 MHz
Usable Band-
width(8)....... 1,296 MHz 1,808 MHz 1,808 MHz 1,768 MHz 1,728 MHz
Output Power(9)
Ku-band......... 6 @ 16 Watts 16 @ 63 Watts 16 @ 63 Watts 24 @ 60 Watts 18 @110 Watts
6 @ 60 Watts
C-band.......... 6 @ 16 Watts 16 @ 30 Watts 16 @ 34 Watts 16 @ 30 Watts 24 @ 50 Watts
12 @ 8.5 Watts
Total Output
Power.......... 294 Watts 1,488 Watts 1,552 Watts 1,920 Watts 3,540 Watts
GALAXY I-R GALAXY III-R GALAXY IV GALAXY V GALAXY VI
-------------------- --------------------- ------------------- --------------------- -------------------
Latin America/
Region Covered.. United States United States United States United States United States
Satellite....... HS 376 HS 601 HS 601 HS 376 HS 376
Expected End of
Useful Life(10).. 2006 2004 2005 2004 2003
Orbital Loca-
tion........... 133(degrees) W.L.(4) 95(degrees) W.L. 99(degrees) W.L. 125(degrees) W.L. 74(degrees) W.L.(4)
Transponders(5)
Ku-band(6)..... -- 16 @ 27 MHz 16 @ 27 MHz -- --
8 @ 54 MHz 8 @ 54 MHz
C-band(7)...... 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz
Usable Band-
width(8)....... 864 MHz 1,728 MHz 1,728 MHz 864 MHz 864 MHz
Output Power(9)
Ku-band........ -- 24 @ 63 Watts 24 @ 50 Watts -- --
C-band......... 24 @ 16 Watts 24 @ 16 Watts 24 @ 16 Watts 24 @ 16 Watts 24 @ 10 Watts
Total Output
Power.......... 384 Watts 1,896 Watts 1,584 Watts 384 Watts 240 Watts
GALAXY VIII-I GALAXY IX SBS-4 SBS-5 SBS-6
-------------------- --------------------- ------------------- --------------------- -------------------
Region Covered.. Latin America United States United States United States United States
Satellite....... HS 601HP HS 376 HS 376 HS 376 HS 393
Expected End of
Useful Life(10) 2012(12) 2010 (inclined)(13) 1999 2007
Orbital Loca-
tion........... 95(degrees) W.L. 123(degrees) W.L.(14) 77(degrees) W.L.(4) 123(degrees) W.L.(14) 74(degrees) W.L.(4)
Transponders(5)
Ku-band(6)...... 32 @ 24 MHz -- 10 @ 43 MHz 10 @ 43 MHz 19 @ 43 MHz
4 @ 110 MHz
C-band(7)....... -- 24 @ 36 MHz -- -- --
Usable Band-
width(8)....... 768 MHz 864 MHz 430 MHz 870 MHz 817 MHz
Output Power(9).
Ku-band......... 32 @ 115 Watts -- 10 @ 20 Watts 14 @ 20 Watts 19 @ 41 Watts
C-band.......... -- 24 @ 16 Watts -- -- --
Total Output
Power.......... 3,680 Watts 384 Watts 200 Watts 280 Watts 779 Watts
PAS-6(1)
----------------
Region Covered.. Atlantic Ocean
Satellite....... SS/L FS-1300
Expected End of
Useful Life(2). 2012(3)
Orbital Loca-
tion........... 43(degrees) W.L.
Transponders(5)
Ku-band(6)..... 36 @ 36 MHz
2 @ 64 MHz
C-band(7)...... --
Usable Band-
width(8)....... 1,296 MHz
Output Power(9)
Ku-band......... 24 @ 100 Watts
12 @ 110 Watts
C-band..........
Total Output
Power.......... 3,720 Watts
GALAXY VII
----------------
Region Covered.. United States
Satellite....... HS 601
Expected End of
Useful Life(10).. 2006
Orbital Loca-
tion........... 91(degrees) W.L.
Transponders(5)
Ku-band(6)..... 16 @ 27 MHz
8 @ 54 MHz
C-band(7)...... 24 @ 36 MHz
Usable Band-
width(8)....... 1,728 MHz
Output Power(9)
Ku-band........ 24 @ 50 Watts
C-band......... 24 @ 16 Watts
Total Output
Power.......... 1,584 Watts
BRASILSAT A1(11)
----------------
Region Covered.. United States
Satellite....... HS 376
Expected End of
Useful Life(10) (inclined)(13)
Orbital Loca-
tion........... 79(degrees) W.L.
Transponders(5)
Ku-band(6)...... --
C-band(7)....... 24 @ 36 MHz
Usable Band-
width(8)....... 864 MHz
Output Power(9).
Ku-band......... --
C-band.......... 24 @ 10 Watts
Total Output
Power.......... 240 Watts
7
SATELLITES UNDER DEVELOPMENT
PAS-6B(1) PAS-7(1) PAS-8(1) GALAXY X GALAXY XI
---------------- --------------------- -------------------- --------------------- -------------------
Region Covered.. Atlantic Ocean Indian Ocean Pacific Ocean United States United States
Expected
Launch(15)..... 1998 1998 1998 1998 1998
Satellite....... HS 601HP SS/L FS-1300(1) SS/L FS-1300(1) HS 601HP HS 702
Expected End of
Useful Life(13).. 2013(3) 2011(1) 2013(3) 2010 2013
Orbital Loca-
tion........... 43(degrees) W.L. 68.5(degrees) E.L.(4) 166(degrees) E.L.(4) 123(degrees) W.L.(14) 74(degrees) W.L.(4)
Transponders(5)
Ku-band(6)..... 32 @ 36 MHz 30 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 16 @ 27 MHz
24 @ 36 MHz
C-band(7)...... -- 14 @ 36 MHz (4) 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz
Usable Band-
width(8)....... 1,152 MHz 1,584 MHz 1,728 MHz 1,728 MHz 2,160 MHz
Output Power(9)
Ku-band........ To be determined 30 @ 100 Watts 24 @ 100 Watts 24 @ 63 Watts 16 @ 140 Watts
24 @ 75 Watts
C-band......... -- 14 @ 50 Watts 24 @ 50 Watts 24 @ 20 Watts 24 @ 20 Watts
Total Output
Power.......... To be determined 3,700 Watts 3,600 Watts 1,992 Watts 4,520 Watts
PAS-9 PAS-1R
---------------- -------------------
Region Covered.. Indian Ocean United States
Expected
Launch(15)..... 1999 1999
Satellite....... HS 702 HS 702
Expected End of
Useful Life(13).. 2014(3) 2014(2)
Orbital Loca-
tion........... To be determined 45(degrees) W.L.(4)
Transponders(5)
Ku-band(6)..... 48 @ 36 MHz 36 @ 36 MHz
C-band(7)...... 12 @ 36 MHz 36 @ 36 MHz
Usable Band-
width(8)....... 2,160 MHz 2,592 MHz
Output Power(9)
Ku-band........ To be determined To be determined
C-band......... To be determined To be determined
Total Output
Power.......... To be determined To be determined
- --------
(1) See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations--Risk Factors."
(2) The information for PAS-1, PAS-2, PAS-3 and PAS-4 is based on fuel level
estimates at October 31, 1997. The information for PAS-5 and PAS-6 is
based on the terms of their satellite contracts and their launch
contracts. Anomalies have begun to occur on PAS-1, which is beyond its
construction design life. As a cautionary measure, PAS-1R, a replacement
satellite for PAS-1, is planned for launch in 1999.
(3) The use of certain launch vehicles may yield significantly longer fuel
life for these satellites. The chart shows the conservative design life
for such satellites. Actual life may be longer in such cases. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors" for a discussion of recent events affecting PAS-
6.
(4) PanAmSat has received conditional regulatory approval for the orbital slot
of 72(degrees) E.L. from the FCC, which approval is subject to a full
financial showing and demonstration of consultation with Intelsat, an
international treaty organization of 142 member nations ("Intelsat"). In
addition, PanAmSat has requested approval to co-locate a satellite with
PAS-4 at 68.5(degrees) E.L. PanAmSat intends to locate PAS-7 at the
68.5(degrees) E.L. orbital location if its application for such orbital
location is granted, in which case the 72(degrees) E.L. orbital slot could
be used for another satellite. If PAS-7 is to be co-located with PAS-4, it
is unlikely that PAS-7 will be permitted to operate its C-band
transponders for transmitting to or from Russia until certain coordination
issues are resolved with the Russian Federation. PanAmSat tentatively
plans to locate PAS-8 at 166(degrees) E.L. and has an application for that
orbital slot pending with the FCC. The Company has not yet filed an
application with the FCC for PAS-1R. The FCC gives a "replacement
expectancy" with respect to the use of the same orbital location at the
same frequencies for replacement satellites. This replacement expectancy
may increase the likelihood that PanAmSat will be able to expand the
frequencies or coverages employed by PAS-1 at 45(degrees) W.L.; however,
no assurance can be given that the Company will be successful at expanding
such frequencies and coverages. SBS-4's FCC license expired in 1994, and
the satellite is operated pursuant to grants of special temporary
authority that are renewed periodically. PanAmSat has filed an application
with the FCC for Galaxy II (H) (to be known as Galaxy XI), a hybrid
satellite that will replace Galaxy VI (a C-band satellite) and SBS-6 (a
Ku-band satellite) at 74(degrees) W.L. Currently, the Company has not
identified any future orbital locations for Galaxy VI and SBS-6. Once
slots have been identified, the Company plans to apply for temporary
authority to operate at such slots until other satellites are authorized
for, and commence operations at, such slots.
(5) Satellite transponders receive transmissions from Earth and relay them
back to Earth. Transponders are composed of receivers, preamplifiers,
power amplifiers, frequency shifters and a host of other electronics.
(6) Ku-band is a range of relatively high frequencies (between approximately
12 GHz and 14 GHz) used for commercial satellite communications. Ku-band
is widely used for distribution of broadcast television and DTH services,
as well as business communications, and allows the use of relatively small
receive antennas.
8
(7) C-band is a range of relatively low frequencies (between approximately 4
GHz and 6 GHz) used for commercial satellite communications. C-band is
used primarily for cable and broadcast distribution and requires the use
of relatively large receive antennas on the ground.
(8) Bandwidth is one measure of the information carrying capacity of a
transponder. A transponder's bandwidth and power together primarily
determine the amount of information that can be carried.
(9) Output power is the transmitter power of each transponder and is not a
measure of the signal power received on Earth. Total output power is the
aggregate power of all the transponders on the satellite. High output
power allows for the use of smaller and less expensive receiving antennas
to obtain a satellite signal. See footnote 1.
(10) The expected end of useful life for each of the Galaxy operational
satellites (other than SBS-4) is based on fuel level estimates at October
30, 1997.
(11) On September 28, 1995, PanAmSat's predecessor-in-interest, Hughes
Communications Galaxy, Inc. ("HCG"), filed an application for interim
authority to use C-band capacity on Brasilsat A1 for a two-year period to
help alleviate a shortage of C-band capacity in the United States. At
that time, Brasilsat A1 was located at 63(degrees) W.L., operating in
inclined orbit, and carrying no traffic. HCG also asked that the FCC
allow all U.S. earth station licensees to communicate with the Brasilsat
A1 satellite during the period of its interim authority pursuant to the
ALSAT designation in their licenses. On June 14, 1996, HCG filed an
amendment to its application for interim authority to use C-band capacity
on Brasilsat A1. As HCG explained at that time, many of its customers
were unable to communicate with Brasilsat A1 because the 63(degrees) W.L.
orbital location did not provide good elevation angles for earth stations
located on the west coast of the U.S. and because some earth stations
could not be steered to communicate with satellites as far east as
63(degrees) W.L. Consequently, HCG asked that the FCC grant it interim
authority to use C-band capacity on Brasilsat A1 from the 79(degrees)
W.L. orbital location rather than the 63(degrees) W.L. location
originally requested. To accommodate the future launch of GE Americom's
GE-5 satellite, which the FCC has authorized to use the 79(degrees) W.L.
orbital location, HCG agreed to cease operations on Brasilsat A1 at that
location upon the launch of GE-5. On December 24, 1996, the FCC granted
HCG interim authority to use C-band capacity on Brasilsat A1 at
79(degrees) W.L. as requested in HCG's amended application, until
December 31, 1997, or the launch of the GE-5 satellite, whichever comes
first. On December 11, 1997, PanAmSat requested an extension of the
interim authority for Brasilsat A1.
(12) The expected end of useful life for each of the indicated satellites is
based on the terms of the relevant satellite construction contract and
the terms (with respect to Galaxy VIII-i, Galaxy X and Galaxy XI) or
anticipated terms (with respect to PAS-1R or PAS-9) of the relevant
satellite launch arrangement.
(13) Satellite operators may opt to extend the life of a satellite beyond its
useful life by allowing it to move into a fuel-conserving mode called
"inclined orbit." When a satellite is put into inclined orbit, only east-
west station-keeping is continued. While in this mode, the satellite
moves in a figure-8 crossing the equator twice daily. The uncorrected
north-south inclination increases over time and customers must retrofit
their existing ground equipment or purchase new equipment to enable them
to track the movement of the satellite. After reaching a certain degree
of north-south inclination, tracking antennas can no longer reliably
follow the movement of the satellite and its useful life ends.
(14) Galaxy X (a C-band/Ku-band hybrid) will replace SBS-5 (a Ku-band
satellite) at 123(degrees) W.L. Galaxy IX (a C-band satellite) is an
expansion satellite that is authorized to operate at 127(degrees) W.L.
The FCC has authorized Galaxy IX to operate temporarily at 123(degrees)
W.L. until Galaxy X is launched and occupies that orbital location. The
decision granting the Galaxy IX application was conditioned on
relinquishing any right to the continued operation of SBS-5 once Galaxy X
begins commercial operations. The Company plans to request that the FCC
grant PanAmSat interim authority to move SBS-5 to 127(degrees) W.L. when
Galaxy IX relocates there, subject to coordination with satellites in
adjacent locations. The interim authority would permit SBS-5 to occupy
127(degrees) W.L. until the FCC licenses another satellite for
127(degrees) W.L. and the satellite commences operations at that orbital
location. There can be no assurance that the FCC will grant PanAmSat's
request to relocate SBS-5 to 127(degrees) W.L. on such basis.
(15) Future launch dates are based on PanAmSat estimates.
9
SATELLITE PROCUREMENT
The Company currently has seven satellites under construction and
development. The Company has agreements with Hughes Space and Communications
Company ("HSC"), an affiliate of the Company, for construction of Galaxy X,
Galaxy XI, PAS-1R, PAS-6B and PAS-9, and with Space Systems/Loral, Inc.
("SS/Loral") for the construction of PAS-7 and PAS-8. These agreements
generally require the Company to pay the majority of the total contract price
for each satellite during the period of the satellite's construction, with the
remainder of such contract price to be paid in the form of incentive payments
based on orbital performance over the design life of the satellite following
launch. The contracts also provide for price reductions or liquidated damage
payments in the event of late delivery due to the fault of the manufacturer.
Each contract provides for a limited pre-launch warranty that a satellite will
be free from any defects and conform to technical specifications. The
satellite construction contracts contain provisions that would enable the
Company to terminate such contracts both with and without cause. If terminated
without cause, the Company would forfeit its progress payments and be subject
to termination payments that escalate with the passage of time. If terminated
for cause, the Company would be entitled to recover any payments it made under
the contracts and certain liquidated damages as specified in such contracts.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Factors--Risks Associated with Technology."
LAUNCH ARRANGEMENTS
The Company has entered into launch contracts for the launch of both
specified and unspecified future satellites. Each of the Company's launch
contracts provide that the Company may terminate such contract at its option,
subject to payment by the Company of a specified termination liability that
increases in magnitude as the applicable launch date approaches. In addition,
in the event of the failure of any launch, the Company may exercise the right
to obtain a replacement launch within a specified period following the
Company's request for relaunch. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Risk Factors--Risks
Associated with Technology."
CONTROL OF SATELLITES AFTER LAUNCH
Once a satellite is placed at its orbital location, ground stations control
it until the end of its in-orbit lifetime. PanAmSat generally provides TT&C
services for its own satellites, as well as for certain satellites owned or
operated by others.
INSURANCE
Launch Insurance. Under PanAmSat's satellite construction contracts, the
contractor generally bears the risk of loss of a satellite during the
construction phase up to delivery, at which time risk of loss passes to
PanAmSat and launch insurance coverage begins. PanAmSat generally maintains
launch insurance with respect to its satellites in an amount approximately
equal to the construction, launch and insurance costs for each of such
satellites.
Coverage under PanAmSat's launch insurance includes claims arising from
occurrences up to three years after launch, except for PAS-6. Such coverage
includes not only catastrophic loss of a satellite during launch, but also the
failure of a satellite to obtain proper orbit, or to perform in accordance
with design specifications once in orbit. The terms of the policies generally
provide for payment of the full insured amount if 50% or more of a satellite's
communications capacity is lost within such three-year period, and, subject to
certain deductibles, partial payment for losses of less than 50% of the
satellite's communications capacity within such period. Such insurance
policies include standard commercial launch insurance provisions and customary
exclusions including (i) military or similar actions, (ii) laser, directed-
energy or nuclear anti-satellite devices, (iii) insurrection and similar acts
or governmental action to prevent such acts, (iv) governmental confiscation,
(v) nuclear reaction or radiation contamination, (vi) willful or intentional
acts of PanAmSat or its contractors, (vii) loss of market, loss of revenue,
extra expenses, incidental and consequential damages, and (viii) third-party
claims against
10
PanAmSat. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Risk Factors--Risks Associated with
Technology" for a description of certain insurance arrangements with respect
to PAS-6.
In-orbit Insurance. PanAmSat typically obtains in-orbit insurance in advance
of the expiration of the relevant launch insurance policy, and coverage
thereunder commences upon expiration of such launch insurance policy. PanAmSat
generally obtains in-orbit insurance with respect to its satellites in an
initial amount approximately equal to the construction, launch and insurance
costs for each of such satellites. The amount of in-orbit insurance in force
with respect to each of PanAmSat's satellites generally decreases over time,
usually on straight line basis over the estimated useful life of such
satellite.
PanAmSat generally does not insure against lost revenues in the event of a
total or partial loss of the communications capacity of a satellite. The
Company does, however, purchase insurance to cover revenues from a satellite
when revenues have been recognized in connection with an outright sale, sales-
type lease or other arrangement with performance warranty provisions with
respect to such satellite.
Coverage under PanAmSat's in-orbit insurance policies includes claims
arising from occurrences after the expiration of the relevant launch insurance
policy. The insurance coverage includes the failure of a satellite to continue
to perform in accordance with design specifications. Payments in respect of
losses of communications capacity are calculated in the same manner as under
the launch insurance policies.
PanAmSat's in-orbit policies typically include customary commercial
satellite insurance exclusions, including, among other things, damage or loss
caused by military actions or acts of war, anti-satellite devices, government
action, frequency interference or nuclear reaction.
SALE LEASEBACK ARRANGEMENTS
The Company entered into sale-leaseback arrangements with respect to certain
transponders on SBS-6, Galaxy VII and Galaxy IIIR in December 1991, September
1993 and February 1996, respectively. Pursuant to such arrangements, Galaxy
sold 19 Ku-band transponders on SBS-6, 16 Ku-band and 14 C-band transponders
on Galaxy VII and 24 Ku-band transponders on Galaxy IIIR. Concurrently with
such sales, Galaxy agreed to lease back such transponders on terms that
required it to make scheduled semi-annual lease payments and operate and
maintain such transponders and the applicable satellites for terms of 11.2
years, 11 years and 6.9 years, respectively. As a result of the Merger,
PanAmSat succeeded to these arrangements. At the end of each lease's initial
term, the Company has the option to renew such lease through the end of the
applicable satellite's useful life. The Company's obligations under each sale-
leaseback arrangement are guaranteed by General Motors Acceptance Corporation
(as successor in interest to Hughes Electronics Corporation) ("GMAC"). In
connection with the Merger, the Company agreed to pay and indemnify GMAC for
performing any of its obligations under such guarantees.
The Company has an option under such leases to repurchase such transponders
prior to the end of the respective lease terms as follows: $152 million in
1998 (for which an early buy-out option for $96.6 million relating to
transponders on SBS-6 was exercised by the Company in January 1998) and $366
million in 1999.
Each of the sale-leaseback leases imposes limits on the Company's ability to
move the applicable satellite to a different orbital location other than in
certain specified situations and imposes limitations on the Company's ability
to consolidate or merge with another entity unless certain circumstances are
satisfied. The Company is also required under the terms of each such lease to
maintain in-orbit insurance on the applicable satellite. In addition, upon the
loss of one or more transponders, the Company is required either to pay a
specified loss amount or provide replacement transponder capacity to the
relevant lessor.
11
SALES AND MARKETING
PanAmSat's sales and marketing activities are separated into three general
service areas: full-time program distribution; part-time and ad hoc broadcast;
and business communications and long-distance telephony.
PanAmSat's Greenwich headquarters has a sales and marketing department for
each service area. PanAmSat also has sales and marketing offices in Long
Beach, California, Coral Gables, Florida, Sydney, Australia, London, England,
Tokyo, Japan and Johannesburg, South Africa, which provide integrated sales
and marketing for all three service areas in their respective regions. The
senior executive officers of PanAmSat have been directly involved in marketing
to key broadcasting and business communications customers.
COMPETITION
PanAmSat primarily competes with companies and organizations that own or
utilize satellite or terrestrial transmission facilities.
OTHER SATELLITE OPERATORS
PanAmSat's satellite competitors are divided among three categories: (i)
global competitors; (ii) companies that intend to create global satellite
systems; and (iii) regional or domestic satellite operators.
PanAmSat's only global competitor is Intelsat, an international treaty
organization of 142 member nations based in Washington, D.C. that provides
global satellite capacity primarily through its members called signatories.
Comsat Corporation ("Comsat") is the U.S. signatory and is the only company
permitted to provide Intelsat satellite capacity in the United States.
Intelsat's mandate is to provide international satellite capacity on a non-
discriminatory basis to countries around the world. Since its formation in
1964, Intelsat's primary business has been the provision of satellite capacity
for long-distance telephony circuits. According to Intelsat's 1996 annual
report, video services comprised 26 percent of Intelsat's operating revenue.
Intelsat generally provides capacity directly to its signatories which then
market such capacity to their customers.
In recent years, Intelsat has launched higher-powered satellites that are
capable of providing video distribution, DTH and private business network
services. In addition, many countries now permit companies other than the
Intelsat signatory to market Intelsat satellite capacity in that country.
Intelsat and its signatories have announced an intention to create an
affiliate company that will own and operate high-power satellites designed for
DTH and other high-growth services and that will directly market those
services to end users. In February 1998, Intelsat announced a plan that would
spin off six satellites and related resources to a new commercial company that
would effectively be controlled by current Intelsat signatories. Comsat has
also requested approval from the FCC to be regulated as a non-dominant
carrier.
In addition to Intelsat, PanAmSat experiences competition from companies
that have announced plans to create global satellite systems, primarily
through acquisitions, partnerships or equity interests in domestic or regional
satellite systems. These companies include Loral Space and Communications Ltd.
("Loral"), GE American Communications, Inc. ("GE Americom") and Lockheed
Martin Corp. For instance, in 1997 Loral acquired AT&T Skynet (a domestic U.S.
satellite operator), announced plans to acquire Orion Network Systems (a
transatlantic satellite operator with plans to launch additional international
satellites in other regions) and entered into a strategic partnership to own
and operate Satelites Mexicanos, S.A. de C.V. (a Mexican satellite system that
provides satellite capacity in Latin America).
PanAmSat also experiences competition from numerous companies and/or
governments that operate domestic or regional satellite systems in the United
States, Latin America, Europe, the Middle East, Africa and Asia. Competition
from these satellite operators is limited to service within one country or
region, depending on
12
the operator's satellite coverage and market activities. In the United States,
GE Americom, Loral and Comsat all currently provide fixed satellite services
on a regional or domestic basis, and are the Company's primary competitors in
such market.
PROPOSED SATELLITE SYSTEMS
Other companies have announced plans to operate regional or transoceanic
satellite systems. Entry into the international satellite communication
industry can be expensive and difficult. The construction and launch of a
satellite comparable to PanAmSat's new satellites usually takes approximately
three or more years and costs approximately $200 million to $250 million. In
addition, there are a limited number of orbital slots. The operation of an
international satellite communications system also requires approvals from
national telecommunications authorities and Intelsat and, in certain cases,
from regional satellite authorities. See "--Government Regulation." While the
trend around the world is to liberalize these regulatory requirements, at
present obtaining the necessary licenses involves significant time, expense
and expertise.
The Company believes that low-earth-orbit satellite systems under
development, such as Celestri, Globalstar, Iridium, Skybridge and Teledesic,
are not competitors of PanAmSat. These low-earth-orbit systems are designed
primarily for mobile telephony and data services and are not expected to serve
the fixed point-to-multipoint video and telecommunications markets.
SERVICE PROVIDERS
In some cases, PanAmSat experiences competition for its value-added
satellite services from companies that also provide value-added services.
These companies typically lease large amounts of satellite capacity from
satellite operators and then use that capacity to provide value-added
communications networks for their customers. For instance, several carriers
operate VSAT networks for businesses that PanAmSat also could provide as a
value-added service. In addition, brokers in the United States provide value-
added special events services to broadcasters, businesses and educational
institutions that also could be provided by PanAmSat. Many of these value-
added service providers and brokers are PanAmSat customers for their satellite
capacity.
OPTICAL FIBER CABLES
Optical fiber cables generally do not compete with PanAmSat's services. The
primary use of optical fiber cables is to carry high-volume telephony
communications on a point-to-point basis. Transcontinental optical fiber
cables currently carry video traffic, but this service is largely for point-
to-point traffic (e.g., New York to London). Optical fiber cables are not
readily usable for point-to-multipoint broadcast applications or for the
transmission of ad hoc events which require transportable uplink earth
stations.
GOVERNMENT REGULATION
As an operator of a privately-owned global satellite system, PanAmSat is
subject to: (i) the regulatory authority of the U.S. government; (ii) the
regulatory authority of other countries in which PanAmSat operates; (iii) the
Intelsat consultation process; and (iv) the frequency coordination process of
the International Telecommunications Union (the "ITU").
U.S. REGULATION
The ownership and operation of PanAmSat's satellite system is regulated by
the FCC. PanAmSat is subject to the FCC's jurisdiction primarily for: (i) the
licensing of satellites and earth stations; (ii) avoidance of interference
with other radio stations; and (iii) compliance with FCC rules governing U.S.-
licensed satellite systems. Violations of the FCC's rules can result in
various sanctions including fines, loss of authorizations, or the denial of
applications for new authorizations or to renew existing authorizations.
PanAmSat is not regulated as a common carrier and, therefore, is not subject
to rate regulation or the obligation not to discriminate among
13
customers, and operates with minimal governmental scrutiny of its business
decisions. PanAmSat must pay FCC filing fees in connection with its space
station and earth station applications; must pay annual regulatory fees that
are intended to defray the FCC's regulatory expenses; and, to the extent
PanAmSat is deemed to be providing interstate telecommunications, must
contribute to funds used to support universal service.
Authorization to Construct, Launch, and Operate Satellites. The FCC grants
authorizations to satellite operators who meet its legal, technical and
financial qualification requirements. Under the FCC's financial qualification
rules, an applicant must demonstrate that it has sufficient funds to
construct, launch, and operate for one year each requested satellite. Licenses
are issued for an initial ten-year term, and may be extended by the FCC,
although it may not be possible for satellites operating beyond their initial
ten-year term to remain in the same orbital location or even, in all cases, to
be provided a new orbital location. The FCC's rules and policies limit the
number of expansion satellite authorizations that may be granted for the same
frequency band at one time.
PanAmSat has final FCC authorization for seventeen satellites operating in
the C-band, the Ku-band, or both bands. In addition, PanAmSat has a final
authorization to operate nine satellites in the Ka-band (one Atlantic Ocean
Region ("AOR"), to be located at 58(degrees) W.L.; two Pacific Ocean Region
("POR"), to be located at 149(degrees) E.L. and 173(degrees) E.L.; four Indian
Ocean Region ("IOR"), to be located at 36(degrees) E.L., 40(degrees) E.L.,
48(degrees) E.L., and 124.5(degrees) E.L.; and two U.S., to be located at
103(degrees) W.L. and 125(degrees) W.L.). PanAmSat has requested authority
also to operate five of these satellites in the BSS band, and to operate three
other satellites exclusively in the BSS band, but FCC processing of PanAmSat's
requests must await the resolution of issues concerning the ITU's BSS band
plan.
In addition to the above final authorizations, PanAmSat has a conditional
authorization for an IOR satellite, to be located at 72(degrees) E.L. In order
to finalize this authorization, PanAmSat must make a full financial showing
and complete its consultation with Intelsat for the satellite.
None of PanAmSat's final or conditional authorizations is subject to further
administrative or judicial reconsideration or review. The FCC reserves the
right to require a satellite to be relocated to a different orbital location
if it determines that such a change is in the public interest, but the FCC has
rarely used this authority.
PanAmSat operates two additional satellites under interim or special
temporary authority. The first of these satellites, Brasilsat A1, is providing
U.S. domestic service from 79(degrees) W.L. under an interim authorization
that expired on December 31, 1997. PanAmSat has requested, but has not yet
received, an extension of this authority. The second satellite, SBS-4,
exceeded its regular license term in 1994 and, since that time, has operated
at 77(degrees) W.L. under successive grants of special temporary authority.
Both Brasilsat A1 and SBS-4 must be relocated once the U.S. satellites
assigned to 79(degrees) W.L. and 77(degrees) W.L., respectively, are launched.
Although PanAmSat has requested authority to relocate SBS-4 to 79(degrees)
W.L., there can be no assurance that either of the satellites will be
authorized to operate at another orbital location.
PanAmSat has filed the following applications for additional or replacement
satellites in the C-band and/or the Ku-band: (1) applications for two hybrid
C/Ku-band satellites (one POR and one U.S.), and one Ku-band satellite (U.S.),
that are now ripe for FCC action; (2) applications for two hybrid C/Ku-band
satellites (one IOR and one U.S.); and (3) an application for a hybrid C/Ku-
band satellite to replace its separate C-band and Ku-band satellites at
74(degrees) W.L. In order to grant two of the U.S. additional satellite
applications, the FCC would have to assign different orbital locations than
those requested by PanAmSat (79(degrees) W.L. and 93(degrees) W.L.) because,
after PanAmSat's applications were filed, the FCC assigned these orbital
locations to other entities. PanAmSat has requested that the 79(degrees) W.L.
application be associated with the 81(degrees) W.L. orbital location.
In 1996, the FCC modified its rules for processing international satellite
system applications. Under the new rules, FCC action on one IOR application
and one U.S. application would be substantially delayed. PanAmSat has
requested a waiver of these rules.
14
PanAmSat has filed applications for six additional Ka-band satellites (two
AOR; two POR; and two IOR), which will be processed in the second Ka-band
satellite processing round. Finally, PanAmSat has applied for twelve V-band
satellites (two AOR, six IOR, and four U.S.), but the FCC has not yet accepted
these applications for filing.
Under the FCC's rules, unless an applicant has received an authorization to
launch and operate, it must notify the FCC in writing prior to commencing
satellite construction, and any construction engaged in is at the applicant's
own risk. While PanAmSat therefore may proceed with the construction of
planned satellites without prior FCC approval, it must accept the risk that
the FCC may not grant the application, may not assign the satellite to its
proposed orbital location, or otherwise may act in a manner that limits or
eliminates some or all of the value of the construction previously done on the
satellite.
Other FCC Authorizations. Under the FCC's rules, an entity that provides
international telecommunications services on a common carrier basis must first
receive authorization, pursuant to Section 214 of the Communications Act of
1934, as amended, to provide such services. The FCC has granted PanAmSat
Carrier Services, Inc. ("PCSI") and PanAmSat Communications Carrier Services,
Inc. ("PCCS"), wholly owned subsidiaries of the Company, Section 214 authority
to provide international private line and public switched services. As common
carriers, PCSI and PCCS are subject to rate regulation, tariffing and non-
discrimination requirements.
Other Authorizations. PanAmSat Asia Carrier Services, Inc. ("PACS"), a
wholly owned subsidiary of the Company, intends to apply for a common carrier
license in Australia. If such license is granted, PACS will be subject to rate
regulation, tariffing and other possible requirements.
Scope of Services Authorized. In 1996, the FCC eliminated the regulatory
distinction between U.S. domestic satellites and U.S.-licensed international
satellites. As a result, each of PanAmSat's satellites may be used, to the
extent technically feasible, to provide both U.S. domestic and international
services. Due to a restriction in the FCC's rules, however, the transponders
on PAS-5 that operate in the 10.7-11.7 GHz and 12.75-13.25 GHz frequency bands
may be used solely for international service. PanAmSat has requested a waiver
of this restriction.
Coordination Requirements. Orion Satellite Corporation ("Orion") has an FCC
authorization for the orbital location adjacent to PAS-1. Orion has taken the
position that PanAmSat must accept interference from Orion's satellite because
PAS-1 does not have "full frequency reuse," while PanAmSat has disputed this
position. The FCC has suggested that Orion's position is incorrect, but stated
that it will not rule definitively on the issue unless the parties are unable
to resolve their differences by frequency coordination. Orion announced in
1993 that it had cancelled its contract for construction of the satellite
which was intended for this orbital slot but reaffirmed its intention to build
such satellite at an unspecified later date.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Factors--Regulatory Risks" generally and for a
description of certain frequency coordination issues affecting PAS-6 and PAS-
7.
REGULATION BY NON-U.S. NATIONAL TELECOMMUNICATIONS AUTHORITIES
Foreign laws and regulatory practices governing the provision of satellite
services to licensed entities and directly to end users vary substantially.
Most countries in which PanAmSat operates are signatories of Intelsat and, as
a result, may require PanAmSat to confirm that it has successfully completed
technical consultation with Intelsat before providing services on a given
satellite. See "--Intelsat Consultation." In addition, PanAmSat may be subject
to national communications and/or broadcasting laws with respect to its
provision of international satellite service. While these vary from country to
country, national telecommunications authorities, with limited exceptions,
typically have not required satellite operators to obtain licenses or
regulatory authorizations in order to provide space segment capacity to
licensed entities.
15
Many countries--particularly in Latin America and, increasingly, in Europe,
Africa and Asia--have liberalized their regulations to permit multiple
entities to seek licenses to provide voice, data or video services for their
own use or for third-party use; to own and operate private earth station
equipment; and to choose a provider of satellite capacity. This trend should
accelerate with the commitments by many World Trade Organization ("WTO")
members, in the context of the WTO Agreement on Basic Telecommunications
Services, to open their satellite markets to competition. Many countries allow
licensed radio and television broadcasters and cable television providers to
own their own transmission broadcast facilities and purchase satellite
capacity without restriction. In such environments, customer access to
PanAmSat's services can be a relatively simple procedure. Other countries,
however, have maintained strict monopoly regimes. In such markets, a single
entity (often the government-owned Posts, Telephone and Telegraph authority)
may hold a monopoly on the ownership and operation of facilities or on the
provision of communications and/or broadcasting services to, from, and within
the country, including via satellite, rendering the provision of service from
PanAmSat and other U.S.-licensed satellites more complicated.
Many countries also permit satellite carriers to provide services directly
to end users. In others, however, a license is required. PanAmSat has obtained
licenses in Argentina, Columbia, Ecuador, France, Germany, Japan, Pakistan and
the United Kingdom to provide certain services directly to end users. Through
its wholly-owned subsidiary, PACS, the Company intends to apply for a carrier
license in Australia.
Notwithstanding the wide variety of regulatory regimes extant in the
countries in which PanAmSat provides service, PanAmSat believes that it and
its customers are in compliance in all material respects with all applicable
laws and regulations.
Intelsat Consultation. In connection with its international satellite
services, PanAmSat must complete a consultation process with Intelsat under
Article XIV of the Intelsat Agreement to assure that use of any new satellite
will not cause Intelsat technical harm. To provide domestic satellite services
in any country, PanAmSat must complete a technical consultation.
The FCC is responsible for ensuring that PanAmSat has undergone the
necessary consultations and that it operates in accordance with the technical
parameters forming the basis for each Article XIV consultation. If PanAmSat
changes the terms (either technical or service) of its operation in a
significant way, it may need to reconsult with Intelsat.
The ITU Frequency Coordination Process. Each ITU member nation is required
to register its proposed use of orbital slots with the ITU's Radio Regulations
Board. Other nations then may give notice of any use or intended use of the
radio spectrum that would conflict with the proposal. The nations then are
obligated to seek to coordinate the proposed uses and resolve interference
concerns. If all disputes are resolved, the ITU "notifies" the proposed use
which, at least theoretically, protects it from subsequent or nonconforming
interfering uses. The ITU Radio Regulations Board has no dispute resolution or
enforcement mechanisms, however, and international law provides no clear
remedies if this voluntary process fails.
While the right to use most frequencies is determined on a "first-come,
first-served" basis, the ITU has "planned" the use of certain frequency bands
in a manner that effectively reserves for various countries the right to use
those frequencies in accordance with certain technical parameters at a given
orbital location. PanAmSat's proposed use of BSS frequencies on eleven
satellites is subject to unresolved issues concerning the ITU's BSS band plan.
All of the registrations for PanAmSat's satellites are or will be subject to
the ITU coordination process. Certain entities have filed notices of intended
use with respect to certain orbital slots which conflict with PanAmSat's
registered orbital slots for PAS-2, PAS-4 and PAS-8. Such filings may delay
the receipt of final registration of such orbital slots with the ITU Radio
Regulations Board.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Factors--Regulatory Risks."
16
EMPLOYEES
At December 31, 1997, PanAmSat had approximately 450 full-time employees.
PanAmSat believes that its relations with its employees are good.
ITEM 2. PROPERTIES
PanAmSat's executive offices are located in Greenwich, Connecticut. PanAmSat
leases its executive offices pursuant to a lease that will expire on March 31,
2003. PanAmSat currently operates seven teleports and operations centers in
conjunction with its global satellite network. PanAmSat operates its primary
teleport in Ellenwood, Georgia and operates regional teleports in Castle Rock,
Colorado; Fillmore, California; Homestead, Florida; Long Beach, California;
Napa, California; and Spring Creek, New York. PanAmSat's operations centers
located in Ellenwood and Long Beach provide other services, such as customer
service support, in addition to teleport operations. PanAmSat owns its
Homestead, Florida; Spring Creek, New York; Napa, California; and Fillmore,
California teleports. PanAmSat leases its Castle Rock, Colorado and Ellenwood,
Georgia teleports, and its Long Beach, California teleport and operations
center.
PanAmSat also leases office space for its sales and marketing offices in
Washington, D.C.; Coral Gables, Florida; Sydney, Australia; Johannesburg,
South Africa; London, England; and Tokyo, Japan. PanAmSat's leases for its
foreign offices have been entered into upon terms that PanAmSat deems to be
reasonable and customary.
ITEM 3. LEGAL PROCEEDINGS
On or about October 25, 1996, an action was commenced by Comsat against the
Company, News Corporation, Ltd. ("News") and Grupo Televisa, S.A.,
("Televisa") in the United States District Court for the Central District of
California. The complaint alleges that News wrongfully terminated an agreement
with Comsat for the lease of transponders on an Intelsat satellite over the
term of a five year lease, breached certain alleged promises related to such
agreement, and breached its alleged obligations under a tariff filed by Comsat
with the FCC. As to the Company, the complaint alleges that the Company, alone
and in conspiracy with Televisa, intentionally interfered with the alleged
agreement and with Comsat's economic relationship with News. The complaint in
the present action seeks actual and consequential damages, and punitive or
exemplary damages, in an amount to be determined at trial. On December 11,
1996 the Company, News and Televisa filed motions to dismiss the action on
various grounds, including that the FCC has primary jurisdiction over the
dispute, that Federal law preempts the claims asserted against the Company and
Televisa, that the claims asserted against Televisa and the Company are not
recognized by Federal law, that the claims against the Company and Televisa
fail to state a cause of action and that because the claims against the
Company and Televisa depend upon the existence of enforceable rights under the
tariff Comsat filed with the FCC, the claims fail if the FCC determines that
Comsat has no such rights. In this regard, in April 1996, News filed a
complaint with the FCC challenging Comsat's tariff. By order adopted September
15, 1997, the FCC dismissed that complaint without prejudice. On January 27,
1997, the court denied defendants' motions to dismiss the action. The trial is
scheduled to begin on November 17, 1998. The Company believes this action is
without merit and intends to vigorously contest this matter, although there
can be no assurance that PanAmSat will prevail. If PanAmSat were not to
prevail, the amounts involved could be material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1997, no matters were submitted to a
vote of stockholders through the solicitation of proxies or otherwise.
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PanAmSat Common Stock was listed on the Nasdaq National Market in connection
with the Merger and commenced trading on May 19, 1997 under the symbol "SPOT".
The following table sets forth, for the calendar periods indicated, the high
and low closing sales price per share for PanAmSat Common Stock, as reported
by the Nasdaq National Market and the Dow Jones News Retrieval Service.
1997 HIGH LOW
---- -------- --------
Second Quarter (from May 19, 1997)........................... $30- 3/8 $27- 1/2
Third Quarter................................................ $44- 1/2 $29- 1/4
Fourth Quarter............................................... $46- 1/4 $36- 7/8
At March 24, 1998, there were approximately 85 holders of record of PanAmSat
Common Stock.
To date, the Company has not declared or paid cash dividends on PanAmSat
Common Stock. The Company presently intends to retain future earnings to
support the growth of its business and, therefore, does not anticipate paying
cash dividends in the near future. The payment of any future dividends on
PanAmSat Common Stock will be determined by the Company's Board of Directors
in light of conditions then existing, including the Company's earnings,
financial condition and capital requirements, restrictions in financing
agreements, business conditions and other factors.
18
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of Galaxy (as predecessor) as of
December 31, 1996, 1995 and 1994 and for each year of the three year period
ended December 31, 1996 have been derived from the audited financial
statements of Galaxy. The selected financial data set forth below as of
December 31, 1993 and for the year ended December 31, 1993 have been derived
from the unaudited financial statements of Galaxy which, in the opinion of
management, include all adjustments necessary (consisting only of normal
recurring adjustments) for a fair and consistent presentation of such
information. The selected financial data as of and for the year ended December
31, 1997 have been derived from the audited consolidated financial statements
of PanAmSat appearing elsewhere in this Annual Report, and should be read in
conjunction with such financial statements and notes related thereto and "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations."
PANAMSAT
HISTORICAL GALAXY HISTORICAL DATA
DATA(1) (AS PREDECESSOR)
------------ -------------------------------------------
YEAR ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
------------ ---------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DA-
TA:
Total revenues.......... $ 629,939 $ 482,770 $ 386,126 $ 328,243 $220,247
----------- ---------- ---------- --------- --------
Costs and expenses
Cost of outright sales
and sales-type leases.. 20,476 52,969 49,616 45,747 34,530
Leaseback expense, net
of deferred gain....... 61,907 59,927 36,597 36,617 36,576
Depreciation and amorti-
zation................. 149,592 58,523 76,522 54,126 52,025
Direct operating costs.. 61,199 34,794 29,931 33,627 35,034
Selling, general & ad-
ministrative........... 42,561 34,119 30,146 51,595 19,278
----------- ---------- ---------- --------- --------
Operating income........ 294,204 242,438 163,314 106,531 42,804
Interest expense,
net(2)................. (30,973) (4,903) (5,828) (6,826) (5,848)
Other income............ 385 2,184 7,892 3,885 44,876
----------- ---------- ---------- --------- --------
Income before taxes, mi-
nority interest
and extraordinary item. 263,616 239,719 165,378 103,590 81,832
Income tax expense...... 117,325 89,895 62,017 38,846 30,687
Minority interest....... 12,819 -- -- -- --
Extraordinary item(3)... 20,643 -- -- -- --
----------- ---------- ---------- --------- --------
Net income.............. $ 112,829 $ 149,824 $ 103,361 $ 64,744 $ 51,145
=========== ========== ========== ========= ========
OTHER FINANCIAL DATA:
EBITDA(4)............... $ 444,181 $ 303,145 $ 247,728 $ 164,542 $139,705
EBITDA margin........... 71% 63% 64% 50% 63%
Net cash provided by op-
erating activities..... 286,726 151,238 83,690 110,490 --
Net cash used in invest-
ing activities......... (1,414,972) (42,122) (270,396) (109,560) --
Net cash provided by
(used in) financing
activities............. 1,219,956 (109,122) 186,720 (1,126) --
Capital expenditures.... 541,879 308,735 280,543 114,660 111,104
Total assets............ 5,682,434 1,275,516 1,137,978 868,408 850,640
Total long-term obliga-
tions.................. 3,016,680 394,187 290,963 319,620 342,070
Total stockholders' eq-
uity................... 2,560,836 -- -- -- --
- --------
(1) Includes financial data for PanAmSat International from May 16, 1997 (the
effective date of the Merger). See "Item 1. Business--Overview--The
Merger" for a description of the Merger.
(2) Net of capitalized interest of $80.5 million, $14.6 million, $10.1
million, $5.1 million and $1.6 million for the years ended December 31,
1997, 1996, 1995, 1994 and 1993, respectively, and net of interest income
of $28.0 million in 1997.
(3) Represents loss on early extinguishment of debt, net of tax.
(4) Represents earnings before net interest expense, income tax expense,
depreciation and amortization. EBITDA is commonly used in the
communications industry to analyze companies on the basis of operating
performance, leverage and liquidity. EBITDA should not be considered as a
measure of profitability or liquidity as determined in accordance with
generally accepted accounting principles in the statements of income and
cash flows.
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations of PanAmSat should be read in conjunction with the financial
data and the Consolidated Financial Statements appearing elsewhere in this
Annual Report.
The Company commenced operations on May 16, 1997 upon the Merger. Prior to
the Merger, the Company was an inactive corporation formed solely for the
purpose of consummating the Merger, and each of PanAmSat International and
Galaxy was primarily engaged in the business of providing satellite-based
communication services.
RESULTS OF OPERATIONS
The Company's results of operations as reported incorporate PanAmSat
International's activity commencing May 16, 1997, the effective date of the
Merger. Since this represents only seven and one-half months of activity for
PanAmSat International in 1997, management has determined that for comparative
purposes, it would be more meaningful to present the information shown below
on a "pro forma" basis reflecting the Merger as though it had occurred at the
beginning of the respective periods presented (excluding the impact of
PanAmSat International's $225 million gain on the sale of its direct-to-home
television rights in certain foreign markets (the "DTH Options") to an
affiliate concurrent with the Merger, as well as certain professional and
advisory fees and other expenses incurred in connection with the Merger
totaling $31.6 million, both of which are non-recurring items that are not
indicative of the Company's ordinary course of business). The pro forma
results are not necessarily indicative of the combined results that would have
occurred had the Merger actually occurred at the beginning of 1996.
PRO FORMA
(UNAUDITED) AS REPORTED
------------------ ----------------------------
1997 1996 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
REVENUES
Operating leases, satellite
services and other......... $684,663 $566,027 $558,622 $319,084 $236,382
Outright sales and sales-
type leases................ 71,317 163,686 71,317 163,686 149,744
-------- -------- -------- -------- --------
Total revenue.............. 755,980 729,713 629,939 482,770 386,126
-------- -------- -------- -------- --------
COSTS AND EXPENSES
Cost of outright sales and
sales-type leases.......... 20,476 52,969 20,476 52,969 49,616
Leaseback expense, net of
deferred gain.............. 61,907 59,927 61,907 59,927 36,597
Direct operating and SG&A
costs...................... 130,076 136,116 103,760 68,913 60,077
Depreciation and amortiza-
tion....................... 197,116 181,100 149,592 58,523 76,522
-------- -------- -------- -------- --------
Total...................... 409,575 430,112 335,735 240,332 222,812
-------- -------- -------- -------- --------
Income from operations...... 346,405 299,601 294,204 242,438 163,314
Interest expense, net....... 68,981 125,308 30,973 4,903 5,828
Other income................ (385) (2,184) (385) (2,184) (7,892)
-------- -------- -------- -------- --------
Income before income taxes,
minority interest and
extraordinary item......... 277,809 176,477 263,616 239,719 165,378
Income tax expense.......... 134,343 92,549 117,325 89,895 62,017
-------- -------- -------- -------- --------
Income before minority
interest and extraordinary
item....................... 143,466 83,928 146,291 149,824 103,361
Minority interest,
subsidiary preferred stock
dividend................... 24,838 28,474 12,819 -- --
-------- -------- -------- -------- --------
Income before extraordinary
item....................... 118,628 55,454 133,472 149,824 103,361
Extraordinary item: loss on
extinguishment of debt, net
of tax..................... 20,643 -- 20,643 -- --
-------- -------- -------- -------- --------
Net income.................. $ 97,985 $ 55,454 $112,829 $149,824 $103,361
-------- -------- -------- -------- --------
Earnings per share--basic
and diluted................ $ 0.66 $ 0.37
20
CONSOLIDATED RESULTS
1997 COMPARED TO 1996 (PRO FORMA AND AS REPORTED)
The following discussion of 1997 versus 1996 performance is primarily based
on pro forma results. Pro forma results for 1997 and 1996 and as reported
results since the Merger date reflect the impact of the acquisition of
PanAmSat International, including the use of purchase accounting. Comparisons
of as reported results reflect significant increases in amortization of
intangible assets, interest expense, the effective income tax rate and shares
outstanding arising from the Merger.
Revenues. Pro forma revenues increased $26.3 million, or 4%, to $756.0
million in 1997 from $729.7 million in 1996. Pro forma video services revenues
increased $88.4 million, or 17%, to $607.6 million in 1997 from $519.2 million
in 1996, principally as a result of increased service agreements associated
with available transponder capacity, increased ad hoc revenue associated with
significant international news events and increased revenues associated with
DTH services. Pro forma telecommunications services revenues decreased $43.1
million, or 26%, to $123.2 million in 1997 from $166.3 million in 1996. The
decrease was primarily due to less outright sales and sales-type lease
activity during 1997. Pro forma satellite services and other revenues
decreased $19.0 million, or 43%, to $25.2 million in 1997 from $44.2 million
in 1996 principally due to a decrease in ground services sales.
The pro forma revenue increase can also be analyzed based on the type of
agreement. Pro forma revenues from sales and sales-type leases decreased to
$71.3 million in 1997 from $163.7 million in 1996. The decrease was
attributable to a lower volume in 1997 relative to 1996 of outright sales and
sales-type leases. Pro forma revenues from operating leases of transponders,
satellite services and other increased $118.7 million, or 21%, to $684.7
million in 1997 from $566.0 million in 1996, due primarily to additional
transponder capacity placed in service.
As reported revenues increased $147.1 million, or 30%, to $629.9 million in
1997 from $482.8 million in 1996, primarily due to the impact of the Merger,
and also due to increased service agreements associated with available
transponder capacity.
Cost of Outright Sales and Sales-Type Leases of Transponders. Pro forma cost
of outright sales and sales-type leases of transponders decreased $32.5
million, or 61%, to $20.5 million in 1997 from $53.0 million in 1996, due to
the decrease in outright sales and sales-type leases.
Leaseback Expense, Net of Deferred Gain. Pro forma leaseback expense, net of
deferred gain, increased $2.0 million, or 3%, to $61.9 million in 1997 from
$59.9 million in 1996.
Direct Operating and Selling, General and Administrative Costs. Pro forma
direct operating and selling, general and administrative costs decreased $6.0
million, or 4%, to $130.1 million in 1997 from $136.1 million in 1996.
Depreciation and Amortization. Pro forma depreciation and amortization
increased $16.0 million, or 9%, to $197.1 million in 1997, from $181.1 million
in 1996, due primarily to depreciation expense associated with additional
transponder capacity placed in service.
As reported depreciation and amortization increased $91.1 million, or 156%,
to $149.6 million in 1997, from $58.5 million in 1996. In addition to the
impact of the Merger, the increase was a result of depreciation expense
associated with additional transponder capacity placed in service.
Income from Operations. Pro forma income from operations increased $46.8
million, or 16%, to $346.4 million in 1997, from $299.6 million in 1996. The
increase was primarily due to the increase in revenues and the decrease in
cost of outright sales and sales-type leases.
Interest Expense, Net. Pro forma interest expense, net decreased $56.3
million, or 45%, to $69.0 million in 1997, from $125.3 million in 1996. The
decrease in pro forma interest expense, net was due to increased
21
interest income earned on marketable securities coupled with reduced interest
expense reflecting larger amounts of interest capitalized on satellites under
construction which are expected to be launched in 1998 and 1999.
Income Tax Expense. Pro forma income tax expense increased $41.8 million, or
45%, to $134.3 million in 1997, from $92.5 million in 1996. The increase in
pro forma income tax expense was principally due to the increase in taxable
income. The pro forma tax rates for 1997 and 1996 of 48% and 52%,
respectively, are higher than the statutory rate due to the fact that goodwill
amortization attributable to the Merger is not deductible for tax purposes.
Minority Interest. Pro forma minority interest, representing preferred stock
dividends of PanAmSat International, decreased $3.7 million to $24.8 million
in 1997 from $28.5 million in 1996. The decrease was due to the conversion of
PanAmSat International's 12 3/4% Mandatorily Exchangeable Senior Redeemable
Preferred Stock due 2005 into 12 3/4% Senior Subordinated Notes due 2005 in
the third quarter of 1997 and the related termination of dividend payment
obligations.
Extraordinary Item. The Company recorded an extraordinary charge of $20.6
million ($34.3 million before taxes) during 1997 related to the early
extinguishment of certain indebtedness of PanAmSat's subsidiaries. The charge
principally represented the excess of the price paid for the debt over its
carrying value, net of any deferred financing costs and fair value adjustments
recognized in connection with the Merger.
1996 COMPARED TO 1995 (AS REPORTED)
Revenues. Revenues increased $96.7 million, or 25%, to $482.8 million in
1996 from $386.1 million in 1995. Video services revenues increased $78.5
million, or 33%, to $314.4 million in 1996 from $235.9 million in 1995,
principally as a result of additional transponder capacity with the successful
launch of Galaxy III-R and Galaxy IX. Telecommunications services revenues
increased $28.0 million, or 28%, to $126.4 million in 1996 from $98.4 million
in 1995. The increase was primarily due to an increase in the full and
occasional use of SBS 6, Galaxy IV and Galaxy VII Ku-band transponders.
Satellite services and other revenues decreased $9.8 million, or 19%, to $42.0
million in 1996 from $51.8 million in 1995 principally due to a decrease in
ground service sales.
The revenue increase can also be analyzed based on the type of agreement.
Revenues from sales and sales-type leases increased to $163.7 million in 1996
from $149.7 million in 1995. The increase was attributable to higher interest
income on sales-type leases offset by a lower volume in 1996 relative to 1995
of outright sales and sales-type leases of transponders previously placed in
service. The lower volume of outright sales and sales-type leases in 1996
primarily reflected a decrease in available in-orbit C-band transponder
capacity, which is typically purchased outright or via sales-type leases by
cable video providers. Revenues from operating leases of transponders,
satellite services and other increased $82.7 million, or 35%, to $319.1
million in 1996 from $236.4 million in 1995, due primarily to additional
transponder capacity placed in service with the launch of Galaxy III-R and
Galaxy IX in 1996, including revenues received from a related party for
certain Galaxy III-R transponder leases.
Cost of Outright Sales and Sales-Type Leases of Transponders. Cost of
outright sales and sales-type leases of transponders increased $3.4 million,
or 7%, to $53.0 million in 1996 from $49.6 million in 1995, reflecting
relatively constant margins on transponder sales and sales-type leases.
Leaseback Expense, Net of Deferred Gain. Leaseback expense, net of deferred
gain, increased $23.3 million, or 64%, to $59.9 million in 1996 from $36.6
million in 1995. This increase in leaseback expense, net of deferred gain, was
due to the sale-leaseback of Galaxy III-R in 1996.
Direct Operating and Selling, General and Administrative Costs. Direct
operating and selling, general and administrative costs increased $8.8
million, or 15%, to $68.9 million in 1996 from $60.1 million in 1995
principally due to an increase in TT&C costs related to Galaxy III-R and
Galaxy IX which were launched in 1996 and an increase in the provision for
doubtful accounts.
22
Depreciation and Amortization. Depreciation decreased $18.0 million, or 24%,
to $58.5 million in 1996, from $76.5 million in 1995, due primarily to
accelerated depreciation in 1995 attributable to a reduction in the expected
useful lifetime of one noncommercial satellite resulting from a customer's
decision not to exercise a lease renewal option, partially offset by
additional depreciation associated with the launch and placement in service of
Galaxy III-R.
Income from Operations. Income from operations increased $79.1 million, or
48%, to $242.4 million in 1996, from $163.3 million in 1995. The increase is
primarily due to the increase in revenues offset by an increase in leaseback
expense, net of deferred gain.
Other Income. Other income decreased $5.7 million to $2.2 million in 1996
from $7.9 million in 1995, primarily due to non-recurring revenue earned in
1995 for providing services to General Motors Corporation.
Income Tax Expense. The effective tax rate for each of 1996 and 1995 was
38%, reflecting the U.S. federal, state and local income taxes reduced for
foreign sales corporation benefits.
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to the Merger, aggregate consideration paid to PanAmSat
International shareholders consisted of approximately $1.5 billion in cash and
approximately 42.5 million shares of PanAmSat Common Stock. In connection with
the Merger, the Company obtained a term loan in the amount of $1.725 billion
from Hughes Electronics Corporation, an affiliate of the Company ("HE"). In
addition to the $1.725 billion loan, at December 31, 1997 the Company also had
long-term indebtedness of $717 million (comprised primarily of $600 million of
loans under the Original Credit Agreement (as defined below) and $77.2 million
due to affiliates).
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. With the commencement of construction of PAS-6B, the
Company now has seven satellites under various stages of development for which
the Company has budgeted capital expenditures. See "--Risk Factors" below. The
Company will require approximately $900 million to complete the construction,
insurance and launch of PAS-6B, PAS-7, PAS-8, Galaxy X, Galaxy XI, PAS-9, and
PAS-1R, together with related equipment. This amount is expected to be funded
from cash flow from operations, vendor financing and borrowings under the
Credit Agreement (as defined below). In addition to funding the construction
and launch of new satellites, the Company also expects to exercise its
remaining early buy-out options under certain satellite sale-leaseback
transactions entered into in prior years which will require the Company to
fund outlays of approximately $152 million in 1998 (for which an early buy-out
option for $96.6 million relating to transponders on SBS-6 was exercised by
the Company in January 1998) and approximately $366 million in 1999. Such
additional outlays are expected to be funded from cash flow from operations
and borrowings under the Credit Agreement.
On January 16, 1998, PanAmSat completed a private placement pursuant to Rule
144A under the Securities Act of 1933 of $750 million aggregate principal
amount of new debt securities (the "Offering"). The net proceeds from the
Offering were used to repay bank loans incurred partially to finance the
recent tender offer for certain debt securities of PanAmSat's subsidiaries, as
well as for general corporate purposes.
In connection with the Offering, the Company executed a Credit Agreement
(the "Credit Agreement") with certain lenders and Citicorp USA, Inc. as
administrative agent. The Credit Agreement amends and restates the credit
agreement among the parties dated December 24, 1997 (the "Original Credit
Agreement"). The Original Credit Agreement provided the Company with up to
$500 million of revolving credit loans (the "Revolving Credit Loans") for five
years, and up to $300 million in short-term loans maturing on April 30, 1998
(the "Term Loans"). The Credit Agreement amends the Original Credit Agreement
to terminate the Term Loan facility. The Company currently has $500 million of
Revolving Credit Loans available to it under the Credit Agreement.
PanAmSat believes that the Credit Agreement, vendor financing, future cash
flow from operations (assuming satellites in development are successfully
launched and commence service on the schedule currently
23
contemplated) and cash on hand will be sufficient to fund PanAmSat's
operations, anticipated exercise of early buy-out options on certain satellite
sale-leaseback transactions and its remaining costs for the construction and
launch of the satellites currently in development for the next twelve months.
There can be no assurance, however, that PanAmSat's assumptions with respect
to future construction and launch costs will be correct, or that additional
vendor financing, PanAmSat's future cash flow from operations and borrowings
under the Credit Agreement will be sufficient to cover any shortfall in
funding for future launches caused by launch failures, cost overruns, delays
or other unanticipated expenses. If circumstances required 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 could have a material
adverse effect on PanAmSat's operations and its ability to accomplish its
business plan.
Net cash provided by operating activities decreased to $61.7 million in
1997, from $151.2 million in 1996, an increase from $83.7 million in 1995. The
decrease in 1997 was primarily attributable to payments of various liabilities
acquired in the Merger, offset by larger adjustments related to amounts of
depreciation and amortization as a result of the Merger. The increase in 1996
was primarily attributable to increased cash receipts from customers on
additional transponders committed under sales-type and operating leases.
Net cash used in investing activities increased to $1,640.0 million in 1997,
from $42.1 million in 1996, a decrease from $270.4 million in 1995. The
increase in 1997 was primarily attributable to the net cash paid in connection
with the Merger and additional capital expenditures for satellite systems
under development, offset by proceeds from the sale of marketable securities.
The decrease in 1996 was primarily due to proceeds from the sale and leaseback
of Galaxy III-R.
Net cash provided by (used in) financing activities increased to $1,670.0
million in 1997, from $(109.1) million in 1996, a decrease from $186.7 million
in 1995. The increase in 1997 was primarily due to new borrowings (including
$1.725 billion of Merger-related borrowings), offset by repayments of long-
term debt in connection with the tender offer for certain debt securities of
the Company's subsidiaries. The decrease in 1996 (representing distributions
by Galaxy to its parent company) was primarily a result of proceeds from the
sale and leaseback of Galaxy III-R and increased cash collections from
customers.
MARKET RISKS
From time to time the Company is exposed to market risks relating to
interest rate changes. The Company does not enter into derivatives or other
financial instruments for trading or speculative purposes. At December 31,
1997, in connection with its debt refinancing activities, the Company entered
into certain U.S. Treasury rate lock contracts to reduce its exposure to
fluctuations in interest rates. The aggregate nominal value of these contracts
was $375 million and these contracts were accounted for as hedges because they
were applied to a specific refinancing plan that was consummated shortly after
December 31, 1997. The counterparties are major financial institutions. The
fair value of these financial instruments at December 31, 1997 approximated
their contract value. The cost to unwind these instruments in 1998 will be
amortized to expense over the term of the newly placed debt securities to
which such hedges were applied.
YEAR 2000 MATTERS
Many of the world's computer systems currently record years in a two-digit
format. Such computer systems will be unable to properly interpret dates
beyond the year 1999, which could lead to disruption in the U.S. and
internationally. PanAmSat has begun an evaluation of its major business and
operations software systems for Year 2000 compliance and expects to complete
that evaluation in 1998. As a part of that process, the Company is identifying
any applications software which may require further analysis and updating. The
Company's most significant assets, the satellites themselves, do not utilize
year-specific code in their processing systems and hence are not subject to
spontaneous events at the change in year.
Nearly all of the PanAmSat satellites are less than 10 years old, and the
ground-based satellite control software systems were also largely developed in
the last 10 years with many new software systems and
24
enhancements added in the last 5 years. Instances where date corrections may
be necessary are anticipated to be far fewer than in the older Cobol-based
systems which have been highlighted in other industries as requiring
significant re-coding. Further, in all cases the satellite control activities
are subject to real-time confirmation by human operators, and any unforeseen
software problems can be potentially identified and bypassed before any
actions are taken which would adversely affect a satellite.
Based upon the facts and circumstances described above, PanAmSat does not
believe that the Year 2000 software issue presents any material risk to the
business or assets of PanAmSat or to the Company's ability to perform its
obligations under its agreements to provide satellite services. As indicated
above, PanAmSat will continue to conduct analysis and take appropriate
remedial action when required with respect to its critical systems. The total
cost to the Company of Year 2000 compliance activities has not been and is not
anticipated to have a material adverse effect on its financial position or
results of operations.
RISK FACTORS
Risks Associated with Technology. Satellites are subject to significant
risks related to delayed and failed launches and in-orbit failures. Of the 25
satellite launches by PanAmSat or its predecessors since 1983, the Company has
experienced three launch failures: on December 1, 1994, the original PAS-3 was
destroyed upon launch as a result of a malfunction of an Ariane IV launch
vehicle; on August 22, 1992, the Company's original Galaxy I-R satellite was
destroyed upon launch as a result of an Atlas launch vehicle malfunction; and
the Company's Leasat 4, which was launched on August 27, 1985, was not placed
in service after launch due to the failure of its communications payload. Each
of the foregoing satellites was insured in an amount sufficient to
substantially recover the Company's investment therein, and each was
subsequently replaced with a satellite that was successfully launched.
Certain launch vehicles present special risks to the Company. Certain launch
vehicles scheduled to be used by PanAmSat have unproven track records and are
susceptible to certain risks associated with new launch vehicles. For example,
Sea Launch and Delta III are two launchers that are scheduled to be used by
PanAmSat to launch satellites within the next two years. These launchers have
no commercial launch history, which poses special risks including potential
launch delays and failures.
The Company expects to launch Galaxy X on a Delta III launch vehicle, Galaxy
XI on a Sea Launch launch vehicle, PAS-7, PAS-6B and PAS-1R on Ariane launch
vehicles, and PAS-8 and PAS-9 on Proton launch vehicles. The Company has
contracts directly with Arianespace S.A. ("Arianespace") and with
International Launch Services (formerly known as Lockheed-Khrunichev-Energia
International, Inc.) ("ILS") for the Ariane and Proton launches, respectively.
The Company has a contract with Hughes Space and Communications International,
Inc. ("HSCI") for one Delta III launch and one Sea Launch launch, such launch
services to be provided by Boeing and Sea Launch LP, respectively, under
contracts between HSCI and such providers.
The Company's contract with ILS provides for launch services on the Proton
launch vehicle. The Proton is built in Russia and launched in Kazakhstan. ILS
suffered a launch failure of a Proton launch vehicle in December 1997; an
investigation into the failure has commenced, but a final report has not been
issued. In addition, there were two Proton launch failures in 1996. Under the
Company's contract with ILS, if the Proton is unavailable due to technical,
regulatory or other factors, ILS would provide launch services for at least
one launch using an alternative launch vehicle. The contract provides for the
launch of three PanAmSat satellites using Proton launch vehicles. PAS 5 was
launched on a Proton in August 1997 and it is anticipated that PAS-8 will be
launched on a Proton in the third quarter of 1998.
The Company plans to launch Galaxy X in June 1998 from Cape Canaveral,
Florida, aboard a Delta III launch vehicle manufactured by Boeing (formerly
McDonnell Douglas). This launch will be the first commercial launch of the
Delta III, the latest generation based in part on the Delta II launch vehicle.
A Delta II launch vehicle carrying an Air Force satellite suffered a launch
failure in January 1997.
The Company plans to launch Galaxy XI in the fourth quarter of 1998 using a
Sea Launch launch vehicle. Sea Launch is a joint venture among Boeing
Commercial Space Co., Kvaerner A.S., RSC-Energia and the NPO-
25
Yuzhnoye space concern. This launch will be the first commercial launch of the
Sea Launch service, which will utilize a three-stage launch vehicle launched
from a novel semi-submersible launch platform in the Pacific Ocean near the
equator.
There can be no assurance that PanAmSat's planned launches on Delta III or
using the Sea Launch platform will be successful.
Galaxy XI is scheduled to be a Hughes-manufactured HS-702 model spacecraft.
The HS-702 model has an unproven track record and may be susceptible to
certain risks related to its new technology. There can be no assurance that
PanAmSat's planned use of an HS-702 model spacecraft will be successful.
A significant delay in the delivery or launch of any future satellite would
adversely affect the Company's marketing plan for such satellite. Delays can
result from the construction of satellites and launch vehicles, launch
failures, the periodic unavailability of reliable launch opportunities and
possible delays in obtaining regulatory approvals. If satellite construction
schedules are not met, there can be no assurance that a launch opportunity
will be available at the time a satellite is ready to be launched. The
occurrence of a launch failure results in a significant delay in the
deployment of a particular satellite because of the need both to construct a
replacement satellite and obtain another launch opportunity. A significant
delay in the launch of any of PanAmSat's satellites could enable customers who
pre-purchased or agreed to lease capacity of such satellite to terminate their
contracts.
Satellites are also subject to risks after they have been properly deployed
and operational. The likelihood of in-orbit failure may be heightened by
PanAmSat's use on certain of their satellites of new technology, including a
new xenon ion propulsion system on PAS-5, Galaxy VIII-i and Galaxy XI. In
addition, the Company's planned deployment of new HS-702 model satellites may
increase the risk of in-orbit failure.
Following the launch of PAS-6, an anomaly was detected in its solar arrays.
The satellite has experienced several circuit failures in its solar arrays and
may experience additional failures in the future. The circuit failures will
require the Company to forego the use of some transponders initially and to
turn off additional transponders in later years. However, the ability of
transponders to provide transmission power for DTH signal reception using 60-
centimeter dishes is not affected. In November 1997, the Company negotiated an
extension of the launch insurance policy for PAS-6 to extend the period of
coverage from 181 days from the launch date to one year plus 181 days from the
launch date. In February 1998, the Company filed a proof of loss totaling
approximately $29 million with its launch insurance underwriters based on
certain anomalies discovered in the solar panels on PAS-6 prior to February 5,
1998. The Company expects to receive payment from the insurers pursuant to the
proof of loss in the second quarter of 1998. In connection with the extension
of the launch insurance policy for PAS-6, the Company has agreed to forego any
further claims for partial loss due to subsequent anomalies involving the
spacecraft's solar panels but the endorsement to PAS-6's launch insurance
policy does not otherwise affect the Company's ability to claim a total
constructive launch failure of the spacecraft for any reason (other than
normal policy exclusions).
On March 9, 1998, the Company entered into arrangements with its customers
to build a new satellite to be designated as PAS-6B. In connection with these
arrangements, the Company entered into an amendment to its agreements with its
customers on PAS-6. Under these amendments, PanAmSat will acquire a new Hughes
HS-601HP satellite that is scheduled to be launched on an Ariane IV launch
vehicle in the fourth quarter of 1998. The Company is exploring its options
for the deployment and use of the original PAS-6 satellite and anticipates
either using that satellite as either a backup for PAS-6B, or moving it to
another orbital location for other purposes. Management believes that it will
be able to generate sufficient future revenues on PAS-6 to enable it to
recover the carrying value of its investment in the satellite.
Due to contract performance issues relating to the PAS-7 and PAS-8
construction programs, the Company has informed SS/Loral that SS/Loral is in
default under the construction contracts for such satellites. Such notice
gives the Company the right to terminate in whole or in part its contract for
the construction and delivery of
26
PAS-7, PAS-8 and a replacement satellite for either of such satellites or for
PAS-6. The Company believes it has adequate sources to procure satellites in
the event such performance issues are not satisfactorily resolved. SS/Loral
has responded to the Company's notice by asserting that the Company is not
entitled to claim a default termination under such circumstances.
Regulatory Risks. The satellite industry is highly regulated both in the
United States and internationally. PanAmSat is subject to the regulatory
authority of the U.S. government (primarily the FCC) and the national
communications authorities of the countries in which it operates. The business
prospects of PanAmSat could be adversely affected by the adoption of new laws,
policies, regulations, or changes in the interpretation or application of
existing laws, policies or regulations, that modify the present regulatory
environment. While PanAmSat has generally been successful in obtaining
necessary licenses, there can be no assurance that PanAmSat will obtain all
requisite regulatory approvals for the construction, launch and operation of
any of PanAmSat's future satellites and for the orbital slots planned for
these satellites or, if obtained, that such licenses will not impose
operational restrictions on PanAmSat. Nor can there be any assurance that
PanAmSat will succeed in coordinating any or all of its future satellites
internationally.
Regulatory schemes in countries in which PanAmSat operates may impose
impediments to the Company's operations. PanAmSat, its customers or companies
with which PanAmSat does business must have authority from each country in
which PanAmSat provides services. Although PanAmSat believes that it, its
customers and/or companies with which it does business presently hold the
requisite licenses and approvals for the countries in which it currently
provides services, the regulatory schemes in each country are different and
thus there may be instances of noncompliance of which PanAmSat is not aware.
In addition, portions of PanAmSat's future satellites are being designed to
provide service to countries in which regulatory impediments continue to
exist. Although PanAmSat believes these regulatory schemes will not prevent it
from pursuing its business plan, there can be no assurance that any current
regulatory approvals held by PanAmSat are, or will remain, sufficient in the
view of foreign regulatory authorities, or that any additional necessary
approvals will be granted on a timely basis, or at all, in all jurisdictions
in which the Company wishes to operate its new satellites or that restrictions
applicable thereto will not be unduly burdensome.
Certain of the frequencies that are intended to be used to uplink to PAS-7
and PAS-6 must be coordinated with the U.S. government on an earth-station-by-
earth-station basis to ensure that harmful interference to government
operations is minimized. PanAmSat has undertaken such coordination and
believes that it will be able to coordinate successfully with federal
government users or will institute operational solutions that will mitigate
the problem, but there can be no assurance that PanAmSat's efforts will be
successful.
Effect of Loss of Key Personnel. The success of PanAmSat's business depends
in part upon the continued employment of Frederick A. Landman, President and
Chief Executive Officer and Lourdes Saralegui, Executive Vice President. The
loss of either of these executives could have an adverse effect on PanAmSat's
business. PanAmSat is not the beneficiary of key man life insurance policies
for either Mr. Landman or Ms. Saralegui. To minimize the potential adverse
effect that the loss of either of these executives would have on PanAmSat's
business, Mr. Landman has established a senior advisory committee known as the
Office of the President. The Office of the President consists of several
executive officers of PanAmSat, selected by Mr. Landman, including Ms.
Saralegui. The committee meets regularly with Mr. Landman to discuss key
issues affecting the Company's business and operations. The Company believes
that in the event of a loss of either Mr. Landman or Ms. Saralegui, the Office
of the President or certain of its members would be capable of overseeing the
Company's operations and business, mitigating the adverse impact caused by any
loss.
Litigation. See "Item 3. Legal Proceedings."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Market Risks."
27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report.............................................. 29
Consolidated Statements of Income for Each of the Three Years Ended Decem-
ber 31, 1997............................................................. 30
Consolidated Balance Sheets--December 31, 1997 and 1996................... 31
Consolidated Statements of Changes in Stockholders' Equity for Each of the
Three Years Ended December 31, 1997...................................... 33
Consolidated Statements of Cash Flows for Each of the Three Years Ended
December 31, 1997........................................................ 34
Notes to Consolidated Financial Statements................................ 35
28
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
PanAmSat Corporation
We have audited the accompanying consolidated balance sheets of PanAmSat
Corporation and subsidiaries and predecessor entity as of December 31, 1997
and 1996, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PanAmSat
Corporation and subsidiaries and predecessor entity as of December 31, 1997
and 1996 and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Stamford, Connecticut
January 23, 1998 (except for Note 4,
which is March 9, 1998)
29
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
1997 1996 1995
-------- -------- --------
REVENUES:
Operating leases, satellite services and other.. $558,622 $319,084 $236,382
Outright sales and sales-type leases............ 71,317 163,686 149,744
-------- -------- --------
Total revenues................................ 629,939 482,770 386,126
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Cost of outright sales and sales-type leases.... 20,476 52,969 49,616
Leaseback expense, net of deferred gains........ 61,907 59,927 36,597
Depreciation and amortization................... 149,592 58,523 76,522
Direct operating costs.......................... 61,199 34,794 29,931
Selling, general and administrative expenses.... 42,561 34,119 30,146
-------- -------- --------
Total operating costs and expenses............ 335,735 240,332 222,812
-------- -------- --------
INCOME FROM OPERATIONS........................... 294,204 242,438 163,314
INTEREST EXPENSE--Net............................ (30,973) (4,903) (5,828)
OTHER INCOME..................................... 385 2,184 7,892
-------- -------- --------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND
EXTRAORDINARY ITEM.............................. 263,616 239,719 165,378
INCOME TAXES..................................... 117,325 89,895 62,017
-------- -------- --------
INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY
ITEM............................................ 146,291 149,824 103,361
MINORITY INTEREST--Subsidiary preferred stock
dividend........................................ 12,819 -- --
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM................. 133,472 149,824 103,361
EXTRAORDINARY ITEM, LOSS ON EXTINGUISHMENT OF
DEBT, NET OF TAX................................ 20,643 -- --
-------- -------- --------
NET INCOME....................................... $112,829 $149,824 $103,361
======== ======== ========
See notes to consolidated financial statements.
30
PANAMSAT CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
1997 1996
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................... $ 91,739 $ 29
Accounts receivable--net................................ 41,030 21,742
Net investment in sales-type leases..................... 27,757 20,634
Prepaid expenses and other.............................. 77,891 23,313
Deferred income taxes................................... 46,940 46,989
---------- ----------
Total current assets.................................. 285,357 112,707
---------- ----------
SATELLITES AND OTHER PROPERTY AND EQUIPMENT--Net......... 2,506,082 720,225
NET INVESTMENT IN SALES-TYPE LEASES...................... 324,689 320,610
GOODWILL--Net of amortization............................ 2,498,498 72,896
DEFERRED CHARGES--Including deferred income taxes of
$28,073 in 1996......................................... 67,808 49,078
---------- ----------
TOTAL ASSETS............................................. $5,682,434 $1,275,516
========== ==========
See notes to consolidated financial statements.
31
PANAMSAT CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
1997 1996
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.......................... $ 16,398 $ --
Accounts payable and accrued liabilities................... 26,828 30,941
Deferred gains on sale-leasebacks.......................... 42,870 42,871
Deferred revenues.......................................... 18,822 5,424
---------- ----------
Total current liabilities................................ 104,918 79,236
DUE TO AFFILIATES (PRINCIPALLY MERGER-RELATED INDEBTEDNESS).. 1,802,195 --
LONG-TERM DEBT............................................... 640,123 --
DEFERRED GAINS ON SALE-LEASEBACKS............................ 191,882 234,751
DEFERRED INCOME TAXES........................................ 179,267 --
OTHER LIABILITIES AND DEFERRED CREDITS....................... 103,029 51,595
ACCRUED OPERATING LEASEBACK EXPENSE.......................... 100,184 107,841
---------- ----------
TOTAL LIABILITIES............................................ 3,121,598 473,423
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Parent company's net investment............................ -- 802,093
Common stock, $0.01 par value--400,000,000 shares autho-
rized;
149,135,654 shares issued and outstanding................. 1,491 --
Additional paid-in capital................................. 2,501,344 --
Retained earnings.......................................... 58,001 --
---------- ----------
Total stockholders' equity............................... 2,560,836 802,093
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................... $5,682,434 $1,275,516
========== ==========
See notes to consolidated financial statements.
32
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK
PAR VALUE
------------------
PARENT ADDITIONAL
COMPANY'S PAID-IN RETAINED
NET INVESTMENT SHARES AMOUNT CAPITAL EARNINGS
-------------- ----------- ------ ---------- --------
BALANCE, JANUARY 1,
1995................... $ 471,310 -- $ -- $ -- $ --
Net contributions from
Parent............... 186,720 -- -- -- --
Net income............ 103,361 -- -- -- --
---------- ----------- ------ ---------- --------
BALANCE, DECEMBER 31,
1995................... 761,391 -- -- -- --
Net distributions to
Parent............... (109,122) -- -- -- --
Net income............ 149,824 -- -- -- --
---------- ----------- ------ ---------- --------
BALANCE, DECEMBER 31,
1996................... 802,093 -- -- -- --
Net income prior to
Merger............... 54,828 -- -- -- (54,828)
Net contributions from
Parent............... 370,424 -- -- -- --
Capitalization in con-
nection with Merger.. (1,227,345) 149,122,807 1,491 2,500,854
Additional issuance of
stock................ -- 12,847 -- 490 --
Net income............ -- -- -- -- 112,829
---------- ----------- ------ ---------- --------
BALANCE, DECEMBER 31,
1997................... $ -- 149,135,654 $1,491 $2,501,344 $ 58,001
========== =========== ====== ========== ========
See notes to consolidated financial statements.
33
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
1997 1996 1995
---------- -------- --------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income.................................... $ 112,829 $149,824 $103,361
Adjustments to reconcile net income to net
cash provided by operating activities:
Cost of outright sales....................... -- 14,523 5,990
Gross profit on sales--type leases........... (33,180) (51,802) (62,855)
Depreciation and amortization................ 149,592 58,523 76,522
Deferred income taxes........................ 129,065 (21,399) (18,235)
Amortization of gains on sale-leasebacks..... (42,870) (41,559) (27,133)
Provision for uncollectible receivables...... -- 1,315 (6,666)
Interest expense capitalized................. (80,468) (14,613) (10,147)
Minority interest............................ 12,819 -- --
Extraordinary item........................... 20,643 -- --
Changes in assets and liabilities, net of ac-
quired assets and liabilities:
Collections on investments in sales-type
leases...................................... 21,978 31,204 19,554
Operating lease and other receivables........ (8,086) (6,053) (6,543)
Prepaid expenses and other current assets.... (37,333) 1,725 (1,604)
Accounts payable and accrued liabilities..... (130,921) (935) 8,486
Accrued operating leaseback expense.......... (7,657) 38,738 3,441
Deferred revenues and other.................. (44,685) (8,253) (481)
---------- -------- --------
Net cash provided by operating activities... 61,726 151,238 83,690
---------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of PanAmSat International, net of
cash acquired............................... (1,486,266) -- --
Capital expenditures......................... (541,879) (294,122) (270,396)
Proceeds from sale-leaseback of satellite
transponders................................ -- 252,000 --
Proceeds from sale of marketable securities.. 388,173 -- --
---------- -------- --------
Net cash used in investing activities....... (1,639,972) (42,122) (270,396)
---------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
New borrowings (including acquisition
borrowings of $1.725 billion)............... 2,391,836 -- --
Net contributions from (distributions to)
parent company.............................. -- (109,122) 186,720
Parent company contributions prior to the
Merger...................................... 370,424 -- --
Repayments of long-term debt................. (1,092,794) -- --
Stock issued to 401(k) plan.................. 490 -- --
---------- -------- --------
Net cash provided by (used in) financing ac-
tivities................................... 1,669,956 (109,122) 186,720
---------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. 91,710 (6) 14
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.. 29 35 21
---------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR........ $ 91,739 $ 29 $ 35
========== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMA-
TION:
Cash received for interest................... $ 22,229 $ -- $ --
========== ======== ========
Cash paid for interest....................... $ 109,858 $ -- $ --
========== ======== ========
Cash paid for taxes.......................... $ 105,218 $ -- $ --
========== ======== ========
See notes to consolidated financial statements.
34
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1.BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
BASIS OF PRESENTATION--Effective May 16, 1997, PanAmSat Corporation (the
"Company") acquired the business of PanAmSat International Systems, Inc. (then
operating under its previous name, PanAmSat Corporation) ("PanAmSat
International"). In connection with the acquisition, the net assets of the
Galaxy Business of Hughes Communications, Inc. (the "Galaxy Business") were
contributed to the Company. (As used herein, the Company refers to the
business and operations of PanAmSat Corporation and the Galaxy Business, its
predecessor entity.) The consideration paid to PanAmSat International's common
stockholders consisted of $1.5 billion in cash and 42.5 million shares of
common stock of the Company having an estimated value of $1.3 billion. The
acquisition of PanAmSat International was accounted for as a purchase and its
operating results have been consolidated from the date of acquisition. The
purchase price exceeded the estimated fair value of PanAmSat International's
net assets (principally satellites) by approximately $2.5 billion, which has
been allocated to goodwill and is being amortized on a straight-line basis
over forty years.
In a separate but related transaction, as a condition precedent to the
merger, the Company redeemed 7.5 million shares of its common stock that was
received by a PanAmSat International stockholder for $225 million in cash, and
these proceeds were used by the former PanAmSat International stockholder to
acquire the Company's rights to equity interests in certain direct-to-home
businesses in Latin America and the Iberian Peninsula (the "DTH Rights").
In connection with the transactions described above, the Company borrowed
$1.725 billion from Hughes Electronics Corporation ("Hughes"), a wholly owned
subsidiary of General Motors Corporation ("GM") and owner of 71 1/2% of the
Company's common stock. The Hughes borrowings initially had a term of three
years, a floating interest rate of London Interbank Offered Rate ("LIBOR")
plus 2% and quarterly principal payments of $50 million commencing in August
1998. (See Note 7 for a description of certain modifications made to the terms
of these borrowings.)
As a result of the merger transactions described above (the "Merger"), the
Company acquired the indebtedness of PanAmSat International consisting
primarily of 9 3/4% Senior Secured Notes due 2000 and 11 3/8% Senior
Subordinated Discount Notes due 2003, as well as its 12 3/4% Mandatorily
Exchangeable Senior Redeemable Preferred Stock due 2005 (the "Preferred
Stock"). During the third quarter of 1997, PanAmSat International exchanged
the Preferred Stock into 12 3/4% Senior Subordinated Notes due 2005. These
debt instruments are collectively referred to as the "Old Notes."
The principal components of the Merger were as follows:
Fair value of assets acquired (excluding goodwill)............... $1,954,902
Goodwill......................................................... 2,470,000
Fair value of liabilities assumed (including Old Notes).......... (1,424,902)
Fair value of common stock issued................................ (1,275,000)
----------
Debt issued in connection with the Merger........................ 1,725,000
Less: Cash acquired.............................................. (238,734)
----------
Net cash paid in connection with the Merger...................... $1,486,266
==========
35
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited pro forma summary results of operations as if PanAmSat
International had been acquired at the beginning of 1997 and 1996 are
presented below (in thousands, except per share data):
1997 1996
-------- --------
Revenues.................................................. $755,980 $729,713
Income before extraordinary items......................... $118,628 $ 55,454
Net income................................................ $ 97,985 $ 55,454
Income before extraordinary item per share--basic and di-
luted.................................................... $ 0.80 $ 0.37
Net income per share--basic and diluted................... $ 0.66 $ 0.37
The unaudited pro forma results of operations include adjustments to reflect
the issuance of certain indebtedness related to the Merger, fair value
adjustments and the recognition of goodwill associated with the transaction.
The unaudited pro forma results exclude the impact of PanAmSat International's
$225 million pre-tax gain on the sale of the DTH Rights, as well as certain
professional and advisory fees and other expenses incurred by PanAmSat
International in connection with the Merger totaling $31.6 million, both of
which are nonrecurring items which are not indicative of the Company's
ordinary course of business. The pro forma earnings per share for the years
ended December 31, 1997 and 1996 is calculated on a basic and diluted basis
using the pro forma average number of common shares assumed to be outstanding
during the period.
DESCRIPTION OF THE BUSINESS--PanAmSat is the world's largest commercial
provider of satellite-based communications services through its global network
of 17 satellites (excluding Brasilsat A1, which is in inclined orbit and does
not provide the Company with a significant source of revenues) that provide
state-of-the-art telecommunications services for customers worldwide. The
Company is a leading provider of satellite capacity for television program
distribution to network, cable and other redistribution sources in the United
States, Latin America, Africa, south Asia and the Asia-Pacific region. The
Company also provides satellite services and related technical support for
live transmissions for news and special events coverage. In addition, PanAmSat
provides satellite services to telecommunications carriers, corporations and
Internet service providers for the provision of satellite-based communications
networks, including private corporate networks employing very small aperture
antennas and international access to the U.S. Internet backbone.
Prior to the Merger, the Galaxy Business was an operating division of a
wholly owned subsidiary of Hughes and its financial information for these
periods was derived from the historical financial statements of the subsidiary
based upon assumptions that the Company's management believes represent a
reasonable basis for presenting results of operations and financial position.
Financial data for these periods also included the allocation of certain
corporate expenses of Hughes and its wholly owned subsidiary based upon a
systematic allocation process that was uniformly applied to similar operating
business units of Hughes.
2.SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of the Company and its domestic and foreign subsidiaries. All
significant intercompany balances and transactions have been eliminated.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may be based upon amounts that differ from those estimates.
REVENUE RECOGNITION--The Company enters into contracts to provide satellite
capacity and related services. Revenues are generated from outright sale,
sales-type lease and operating lease contracts with customers to provide
satellite transponders and transponder capacity and, in certain cases, earth
station and teleport facilities,
36
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
for periods ranging from one year to the life of the satellite. Virtually all
contracts stipulate payment terms in U.S. dollars.
Pursuant to an outright sale contract, all rights and title to a transponder
may be purchased. In connection with an outright sale, the Company recognizes
the sale amount as revenue and the cost basis of the transponder is removed
and charged to cost of sales. Contracts for the sale of transponders include a
telemetry, tracking and control ("TT&C") service agreement with the customer.
Lease contracts qualifying for capital lease treatment (typically based on
the term of the lease) are accounted for as sales-type leases. For sales-type
lease transactions, the Company recognizes as revenue the net present value of
the future minimum lease payments. The cost basis of the transponder is
removed and charged to cost of sales. During the life of the lease, the
Company recognizes as revenue in each respective period, that portion of each
periodic lease payment deemed to be attributable to interest income. The
balance of each periodic lease payment, representing principal repayment, is
recognized as a reduction of the net investment in sales-type leases. Interest
income from sales-type leases of approximately $38 million, $41 million and
$27 million is included in sales-type lease revenues for the years ended
December 31, 1997, 1996 and 1995, respectively.
Lease contracts that do not qualify as sales-type leases are accounted for
as operating leases. Operating lease revenues are recognized on a straight-
line basis over the lease term. Differences between operating lease payments
received and revenues recognized are deferred and included in operating lease
receivables. Revenues for occasional services are recognized as services are
performed and billed. The Company has certain obligations, including providing
spare or substitute capacity if available, in the event of satellite service
failure under certain long-term agreements. If no spare or substitute capacity
is available, the agreements may be terminated. Except for certain deposits,
the Company is not obligated to refund payments previously made.
The Company has entered into sale-leaseback agreements for the sale of
certain of its satellite transponders that are subject to operating leases.
Gains resulting from such transactions are deferred and amortized over the
leaseback period. Leaseback expense is recorded using the straight-line method
over the term of the lease, net of the amortization of the deferred gains.
Differences between operating leaseback payments made and expense recognized
are deferred and included in accrued operating leaseback expense.
Future cash payments expected from customers under all long-term
arrangements described above aggregate approximately $7.0 billion as of
December 31, 1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts of cash, accounts
receivables, accounts payable and accrued liabilities approximate their fair
values generally due to the short maturity of these items. The carrying amount
of the net investment in sales-type leases approximates fair value based on
the interest rates implicit in the leases.
At December 31, 1997, in connection with its debt refinancing activities,
the Company entered into certain U. S. Treasury rate lock contracts to reduce
its exposure to fluctuations in interest rates. The aggregate nominal value of
these contracts was $375 million and these contracts were accounted for as
hedges because they were applied to a specific refinancing plan that was
consummated shortly after December 31, 1997. The fair value of these financial
instruments at December 31, 1997 approximated their contract value. The cost
to unwind these instruments in 1998 will be amortized to expense over the term
of the newly placed debt securities to which such hedges were applied.
CONCENTRATION OF CREDIT RISK--The Company provides satellite transponders
and related services and extends credit to a large number of customers in the
commercial satellite communications market. Management monitors its exposure
to credit losses and maintains allowances for anticipated losses which are
charged to selling, general and administrative expenses. The currency in which
the majority of the contracts are denominated is the U.S. dollar.
37
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CASH AND CASH EQUIVALENTS--Cash and cash equivalents consists of cash on
hand and highly liquid investments with maturities at date of acquisition of
three months or less.
ACCOUNTS RECEIVABLE--Accounts receivable include amounts earned under
service agreements and occasional services which are billable as performed. An
allowance for doubtful accounts was provided for in the amount of
approximately $1.0 million and $0.8 million at December 31, 1997 and 1996,
respectively.
SATELLITES AND OTHER PROPERTY AND EQUIPMENT--Satellites and other property
and equipment are stated at historical cost, or in the case of satellites
acquired from PanAmSat International, the fair value at the date of
acquisition. The capitalized cost of satellites includes all construction
costs, incentive obligations, launch costs, launch insurance, direct
development costs, and capitalized interest. Substantially all other property
and equipment consists of the Company's teleport facilities.
Depreciation and amortization are provided using the straight-line method
over the estimated useful lives of the respective assets as follows:
ESTIMATED LIVES
(YEARS)
---------------
Satellite systems under development.......................... --
Satellites in service........................................ 13-15
Communications equipment..................................... 7
General support equipment.................................... 5-10
Buildings.................................................... 25
The estimated useful lives of the satellites are determined by an
engineering analysis performed at the initial in-service dates. Estimated
useful lives are periodically reviewed using current TT&C data provided by
various service providers. To date, no significant change in the original
estimated useful lives has resulted. The telecommunications industry is
subject to rapid technological change which may require the Company to revise
the estimated useful lives of its satellites and communications equipment or
to adjust their carrying amounts.
EVALUATION OF LONG-LIVED ASSETS--The Company periodically evaluates
potential impairment loss relating to long-lived assets, including goodwill,
by assessing whether the unamortized carrying amount can be recovered over the
remaining life through undiscounted future expected cash flows generated by
the underlying assets.
DEBT ISSUANCE COSTS--Included in Deferred Charges in the accompanying
balance sheet are debt issuance costs incurred in connection with the $1.725
billion loan from Hughes of $17.3 million at December 31, 1997, which are
being amortized on a straight line basis over the life of the loan. The
accumulated amortization at December 31, 1997 is approximately $3.6 million.
GOODWILL--Goodwill is primarily related to the acquisition of PanAmSat
International and is being amortized over 40 years. Accumulated amortization
was $77.8 million at December 31, 1997.
DEFERRED REVENUES--The Company enters into agreements with its customers
under which they make prepayments for services to be rendered over a specific
period. Payments received are deferred and amortized over the periods of
performance.
TRANSPONDER INSURANCE--The Company accrues an obligation for the present
value of estimated in-orbit performance insurance costs on transponder sale,
sales-type lease and other agreements with performance warranty provisions,
concurrently with the recognition of the related revenue. The Company also
purchases insurance for the replacement value of its owned satellite
transponders. Premiums paid relative to such insurance are amortized to
expense over the insurance policy terms, which are typically one to three
years.
38
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INCOME TAXES--The provision for income taxes is based upon reported income
before income taxes. Deferred income tax assets and liabilities reflect the
impact of temporary differences between the amounts of assets and liabilities
recognized for financial reporting purposes and such amounts recognized for
tax purposes, as measured by applying currently enacted tax laws. The Company
and its domestic subsidiaries file a consolidated U. S. Federal income tax
return.
Prior to the Merger, Hughes Communications, Inc. (which owned the Galaxy
Business), along with other Hughes subsidiaries, joined with GM in filing a
consolidated U.S. Federal tax return. Current and deferred income taxes were
computed by Hughes and allocated to the Company in accordance with principles
established by Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Hughes paid the Company's share of the
consolidated income tax liability. The income taxes that would have been paid
by Galaxy if it were a separate taxpayer but were not paid under the Hughes
policy resulted in an increase in the parent company's net investment.
EARNINGS PER SHARE--The Company has adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share, which supercedes Accounting
Principles Board No. 15, Earnings Per Share, and modifies the presentation of
primary earnings per share ("EPS") on the face of the income statement. As the
Company was an operating division of Hughes for all periods prior to the
merger, presentation of EPS data for the years ended December 31, 1997, 1996
and 1995 have not been presented on the face of the income statement.
STOCK-BASED COMPENSATION--As permitted by Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the Company
accounts for stock-based awards to employees using the intrinsic value method
in accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
RECLASSIFICATION--Certain prior period amounts have been reclassified to
conform with the current year's presentation.
NEW ACCOUNTING PRONOUNCEMENTS--The financial accounting Standards Board
issued Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure," Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," and Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in 1997. The Company will adopt the
disclosure requirements of these statements in 1998.
3.NET INVESTMENT IN SALES-TYPE LEASES
The components of net investment in sales-type leases are as follows:
DECEMBER 31,
--------------------
1997 1996
--------- ---------
Total minimum lease payments........................... $ 662,453 $ 696,723
Allowance for doubtful accounts........................ (12,897) (17,968)
Less unearned interest income.......................... (297,110) (337,511)
--------- ---------
Total net investment in sales-type leases.............. 352,446 341,244
Less current portion................................... (27,757) (20,634)
--------- ---------
$ 324,689 $ 320,610
========= =========
39
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum payments due from customers under sales-type leases and
related service agreements (primarily TT&C and in-orbit performance
protection) as of December 31, 1997 are as follows:
MINIMUM SERVICE
LEASE AGREEMENT
PAYMENTS PAYMENTS
-------- ---------
1998...................................................... $ 70,256 $ 7,860
1999...................................................... 77,440 9,800
2000...................................................... 76,093 9,720
2001...................................................... 77,391 9,720
2002...................................................... 77,926 9,720
2003 and thereafter....................................... 283,347 22,020
-------- -------
$662,453 $68,840
======== =======
4.SATELLITES AND OTHER PROPERTY AND EQUIPMENT--NET
The Company's principal operating assets consists of satellites in service,
summarized as follows:
DECEMBER 31,
---------------------
1997 1996
---------- ---------
Satellite transponders under lease.................... $1,713,409 $ 602,059
Satellite systems under development................... 1,038,886 316,332
Buildings and leasehold improvements.................. 42,078 41,632
Machinery and equipment............................... 136,989 92,573
Other................................................. 11,406 8,346
---------- ---------
2,942,768 1,060,942
Less accumulated depreciation......................... (436,686) (340,717)
---------- ---------
$2,506,082 $ 720,225
========== =========
At December 31, 1997, the Company had contracts for the construction and
development of six satellites with two satellite vendors. Satellite contracts
typically require the Company to make progress payments during the period of
the satellite's construction and orbital incentive payments (plus interest)
over the orbital life of the satellite. The incentive obligations are subject
to reduction or refund if the satellite fails to meet specific technical
operating standards. The satellite construction contracts contain provisions
that would enable the Company to terminate the contracts both with and without
cause. If terminated without cause, the Company would forfeit its progress
payments and be subject to termination payments that escalate with the passage
of time. If terminated for cause, the Company would be entitled to recover any
payments it made under the contracts and certain liquidated damages as
specified in the contracts.
The Company has entered into launch contracts for the launch of both
specified and unspecified future satellites. Each of the Company's launch
contracts provide that the Company may terminate such contract at its option,
subject to payment by the Company of a specified termination liability that
increases in magnitude as the applicable launch date approaches. In addition,
in the event of a failure of any launch, the Company may exercise the right to
obtain a replacement launch within a specified period following the Company's
request for relaunch.
On August 8, 1997, the Company launched its PAS-6 satellite which commenced
service on September 19, 1997 after successfully completing its in-orbit
testing. After launch, an anomaly was detected in PAS-6's solar arrays
affecting several of the onboard electrical circuits that provide power to the
satellite's transponders. The
40
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
circuit failures will require the Company to forego the use of some
transponders initially, and turn off additional transponders in later years.
However, the ability of transponders to provide transmission power for DTH
signal reception to meet the customer's requirements is not affected. The
Company is working with its customers on PAS-6 to ensure that the Company's
services continue to meet their needs. Management has evaluated the effects of
this anomaly and has determined that no impairment loss has occurred.
On March 9, 1998, the Company announced that it had entered into
arrangements with its customers to build a new satellite to be designated as
PAS-6B. In connection with these arrangements, the Company entered into an
amendment to its agreements with its customers on PAS-6 (the "PAS-6B DTH
Amendments"). Under these amendments, the Company will acquire a new Hughes HS
601 HP satellite that is scheduled to be launched on an Ariane IV launch
vehicle in the fourth quarter of 1998. The Company is exploring its options
for the deployment and use of the original PAS-6 satellite and anticipates
using this satellite as either a back-up for PAS-6B or moving it to another
orbital location for other purposes. Management believes that it will be able
to generate sufficient future cash flows on PAS-6 to enable it to recover the
carrying value of its investment in the satellite. In addition, the Company
has filed an insurance claim relating to PAS-6 and expects to receive a
payment of approximately $29 million from the insurance carrier.
Future minimum lease payments due from customers under non-cancelable
operating leases on completed satellites, exclusive of sublease payments
reported below are as follows:
DECEMBER 31, 1997
MINIMUM LEASE
PAYMENTS
-----------------
1998....................................................... $ 695,864
1999....................................................... 666,102
2000....................................................... 612,164
2001....................................................... 571,626
2002....................................................... 505,210
2003 and thereafter........................................ 2,721,459
----------
$5,772,425
==========
In February 1996, the Company entered into a sale-leaseback agreement for
certain transponders on Galaxy III-R with General Motors Acceptance
Corporation ("GMAC"), a subsidiary of GM. Proceeds from the sale were $252
million and the sale resulted in a gain of $109 million, which was deferred
and is being amortized over the seven-year leaseback period. The transponders
on Galaxy III-R are currently under month-to-month subleases pending the
planned conversion of the satellite from international to domestic service in
early 1998. Accordingly, there are no sublease payments on these transponders
in the table below. In prior years, the Company entered into sale-leaseback
agreements for the sale of certain transponders on SBS-6 and Galaxy VII,
resulting in deferred gains which are being amortized over the leaseback
periods. The transponder leaseback terms include early buy-out options as
follows: $152 million in 1998 (for which an early buy-out option for $96.6
million relating to transponders on SBS-6 was exercised by the Company in
January 1998) and $366 million in 1999.
41
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1997, the future minimum lease amounts payable to lessors
under the sale-leaseback agreements and the future minimum payments due from
subleases under noncancelable subleases are as follows:
DECEMBER 31, 1997
------------------
LEASEBACK SUBLEASE
AMOUNTS PAYMENTS
--------- --------
1998...................................................... $102,469 $ 76,555
1999...................................................... 133,269 74,946
2000...................................................... 164,657 69,693
2001...................................................... 90,930 67,031
2002...................................................... 138,278 56,477
2003 and thereafter....................................... 228,471 159,512
-------- --------
$858,074 $504,214
======== ========
5.LONG-TERM DEBT
As of December 31, 1997 and 1996, long-term debt consisted of the following:
DECEMBER 31,
------------------
1997 1996
-------- --------
Borrowings under bank agreements......................... $600,000 $ --
Incentive obligations.................................... 42,500 --
Other.................................................... 10,193 --
-------- --------
652,693 --
Less current maturities.................................. (12,570) --
-------- --------
$640,123 $ --
======== ========
In December 1997, the Company commenced a debt tender offer and
restructuring program (the "Program") for the Old Notes. In connection with
the Program, the Company purchased approximately 99% of the principal amount
of each class of the Old Notes then outstanding. The Company also entered into
a bank borrowing agreement (the "Bank Agreement") that provided for bridge
loans of up to $300 million (terminating in April 1998) and loans of up to
$500 million under a five-year revolving credit facility. Using $600 million
in borrowings under the Bank Agreement (including $100 million under the
bridge loans) and available cash (including cash from the liquidation of
certain marketable securities), the Company retired Old Notes having a
principal value of approximately $1.1 billion. The debt refinancing Program
resulted in the recognition of an extraordinary charge of $20.6 million ($34.3
million before taxes) related principally to the excess of the price paid for
the debt over its carrying value, net of any deferred financing costs and fair
value adjustments recognized in connection with the Merger.
In January 1998, the Company borrowed an additional amount of $125 million
under the Bank Agreement principally for the purpose of exercising an early
buy-out option on a sale-leaseback agreement. Also in January 1998, the
Company completed a private placement debt offering for five, seven, ten and
thirty year notes aggregating $750 million (the "Notes Offering"), the
proceeds of which were used to retire all of the outstanding borrowings under
the Bank Agreement. As a result of the Notes Offering, the bridge loan under
the Bank Agreement terminated, and the five year revolving credit facility
remains in effect. Because all of the bank borrowings were refinanced on a
long term basis shortly after year end, these amounts have been classified as
long term as of December 31, 1997.
42
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Annual maturities of long-term debt are as follows:
YEAR ENDING
DECEMBER 31,
1998.............................................................. $ 12,570
1999.............................................................. 12,180
2000.............................................................. 7,819
2001.............................................................. 148
2002.............................................................. --
2003 and thereafter............................................... 619,976
--------
$652,693
========
Interest expense for 1997 is presented net of $19.6 million of interest
income.
6.INCOME TAXES
The income tax provision consisted of the following:
1997 1996 1995
-------- -------- -------
Taxes currently payable (receivable) U.S. Fed-
eral and state................................ $(11,740) $111,294 $80,252
Deferred tax (assets) liabilities--net U.S.
Federal and state............................. 129,065 (21,399) (18,235)
-------- -------- -------
Total income tax provision..................... $117,325 $ 89,895 $62,017
======== ======== =======
The income tax provision was different than the amount computed using the
U.S. statutory income tax rate for the reasons set forth in the following
table:
1997 1996 1995
-------- ------- -------
Expected tax at U.S. statutory income tax rate.. $ 92,266 $83,902 $57,882
U.S. state and local income taxes--net of fed-
eral income tax effect......................... 12,900 14,479 9,989
Foreign sales corporation tax benefit........... (9,485) (9,589) (6,615)
Non-deductible goodwill amortization............ 14,527 -- --
Other........................................... 7,117 1,103 761
-------- ------- -------
Total income tax provision...................... $117,325 $89,895 $62,017
======== ======= =======
Temporary differences which gave rise to deferred tax assets and liabilities
are as follows:
1997 1996
------------------------ ------------------------
DEFERRED DEFERRED
TAX DEFERRED TAX DEFERRED
ASSETS TAX LIABILITIES ASSETS TAX LIABILITIES
-------- --------------- -------- ---------------
Sales and leasebacks....... $ 85,780 $ -- $111,049 $ --
Depreciation............... -- 238,476 -- 71,616
Launch insurance costs..... -- 41,175 -- --
Customer deposits.......... 23,854 -- -- --
Accruals and advances...... 29,969 -- 29,841 --
Other...................... 14,275 6,554 5,788 --
-------- -------- -------- -------
Total deferred taxes....... $153,878 $286,205 $146,678 $71,616
======== ======== ======== =======
At December 31, 1997, the Company had non-current deferred tax liabilities
of $286,205 and deferred tax assets of $153,878, of which $46,940 are current
in nature. At December 31, 1996, the Company had deferred tax assets of
$75,062, of which $46,989 was current in nature.
43
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7.RELATED PARTY TRANSACTIONS AND BORROWINGS
The Company purchases certain of its satellites and launch services from a
subsidiary of Hughes and has provided services to several subsidiaries of
Hughes. The Company also reimburses Hughes for the allocated costs of certain
expense items it jointly incurs with Hughes, principally relating to
administrative and other expenses. The aggregate amounts of related party
transactions in 1997 are summarized below:
1997 1996 1995
-------- -------- --------
Satellite Purchases............................... $345,546 $196,400 $115,337
Satellite Services Revenues:
Operating lease revenues........................ 87,235 72,043 26,261
Other satellite services........................ 5,363 11,397 18,513
Allocations of Expenses:
Administrative and other expenses............... 9,005 11,016 12,242
Interest expense................................ 91,020 19,475 15,924
Interest expense for 1997 is presented net of $8.4 million of interest
income.
The following table provides summary information relative to the Company's
related party borrowings from Hughes and its affiliates:
DECEMBER 31,
---------------------
1997 1996
---------- ---------
Merger related borrowings (see Note 1)................ $1,725,000 $ --
Incentive obligations................................. 80,819 --
Other................................................. 204 --
---------- ---------
1,806,023 --
Less current maturities............................... (3,828) --
---------- ---------
Total due to Affiliates............................... $1,802,195 $ --
========== =========
In connection with the Notes Offering described in Note 5, the Company also
modified the terms of its indebtedness with Hughes so that the maturity of the
borrowings was extended to June 24, 2003, the mandatory principal payments
were eliminated (however, prepayments of principal are permitted under certain
circumstances depending upon the level of cash flow from operations), the
interest rate on the debt was adjusted to be a floating rate equal to that of
the Bank Agreement, and the debt became subordinated to the Bank Agreement and
the Notes Offering. In addition, subsequent to May 16, 2000 (the original
maturity of the indebtedness), Hughes has the right to request that the
Company use its best efforts to replace the credit facility with another
Hughes credit facility on terms that may then be available to the Company.
Annual maturities of long-term debt are as follows:
YEAR ENDING
DECEMBER 31,
1998............................................................ $ 3,828
1999............................................................ 4,015
2000............................................................ 4,435
2001............................................................ 4,900
2002............................................................ 5,413
2003 and thereafter............................................. 1,783,432
----------
$1,806,023
==========
44
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8.RETIREMENT AND INCENTIVE PLANS
EMPLOYEE BENEFIT PLANS:
DEFINED CONTRIBUTION PLANS 401(K) PLAN--The Company has a 401(k) plan for
qualifying employees. A portion of employee contributions is matched by the
Company with shares of its common stock. The number of shares contributed to
the plan and the respective market values for 1997 were 12,847 shares and $0.5
million, respectively.
DEFERRED COMPENSATION PLAN--The Company has a Restoration and Deferred
Compensation Plan (the "Deferred Compensation Plan") for eligible employees.
Under the Deferred Compensation Plan, executives and other highly compensated
employees of the Company are entitled to defer a portion of their compensation
to future years. The annual amount that can be deferred is subject to certain
limitations, and a portion of the employee's contribution may be matched by
the Company if the employee elected to defer in the 401(k) Plan the maximum
amount permissible under the Deferred Compensation Plan and the Internal
Revenue Code of 1986, as amended. The maximum annual Company match under both
the 401(k) Plan and the Deferred Compensation Plan is limited to an aggregate
level of 4% of annual compensation. The Company matched portion of the
Deferred Compensation Plan consists of "credits" which vest when awarded.
Contributions that receive employer matching are required to be deferred until
termination of employment, and any nonmatched contributions may be deferred
over a period selected by the employee. In addition, the Company, at its
discretion, may make contributions to the Plan for the benefit of any
participant as supplemental compensation. The Deferred Compensation Plan is an
unfunded plan, and the deferrals and matching credits will receive earnings
based upon rates set by the Compensation Committee of the Board of Directors
(the "Compensation Committee"), but in no event will these amounts earn less
than 100% of the Moody's Corporate Bond Index Rate.
1997 STOCK INCENTIVE PLAN--On May 5, 1997, the Company's Board of Directors
adopted the PanAmSat Corporation Long-Term Stock Incentive Plan established in
1997 (the "Stock Plan"), which provides for the granting of nonqualified stock
options, incentive stock options, alternate appreciation rights, restricted
stock, performance units and performance shares to executive officers, other
employees, directors and independent contractors of the Company. Restricted
stock, performance units and performance shares may be granted at the
discretion of the Compensation Committee on such terms as such committee may
decide. The maximum number of shares of common stock which may be issued under
the Stock Plan is 7,456,140 and the maximum number of shares of common stock
which may be issued to any grantee pursuant to the Stock Plan is 2,000,000.
The Stock Plan is administered by the Compensation Committee. As of December
31, 1997, nonqualified options for 584,890 shares of common stock have been
granted under the Stock Plan. Such options are exercisable at a price equal to
100% of the fair market value at the date of grant and vest ratably over three
years.
As permitted by Statement of Financial Accounting Standards No. 123
"Accounting for Stock Based Compensation" ("SFAS 123"), the Company has
applied the recognition and measurement principles of Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued To Employees" to its stock
options and other stock-based compensation awards and, accordingly, no
compensation expense has been recognized on options granted to date. Options
outstanding at December 31, 1997 have exercise prices ranging from $29.00--
$38.25 per share (weighted average of $29.09 per share), a remaining life of
approximately nine and one-half years, and none of the options are
exercisable. Had compensation expense for stock options granted been
determined based on the fair value of the options at the grant dates
(consistent with the provisions of SFAS 123), the Company's net income for
1997 would have been reduced by approximately $2.0 million.
The Company uses the Black-Scholes model for estimating the fair value of
its compensation instruments. The estimated fair value of options granted in
1997 was $16.80 and the weighted average assumptions used for
45
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
calculation of the value were as follows; risk-free interest rate of 6.7%;
dividend yield 0%; expected life of ten years; and stock volatility of 30%.
COMPENSATION PLANS--On May 16, 1997, the Company assumed the certain
obligations of PanAmSat International with respect to its General Severance
Policy, Employee Separation Plan and an Executive Severance Pay Program. These
plans allow for benefits to be paid to the former employees of PanAmSat
International who became employees of the Company as a result of the Merger
under certain circumstances relating to a termination of employment. The
benefits provided under these programs expire at various dates through May
1999. During 1997, there were no material payments made under these programs.
9.COMMITMENTS AND CONTINGENCIES
The Company has commitments for operating leases primarily relating to
equipment and its executive office facilities in Greenwich, Connecticut and
various other locations. These leases contain escalation provisions for
increases as a result of increases in real estate taxes and operating
expenses. Minimum annual rentals of all leases, exclusive of potential
increases in real estate taxes and operating assessments, are as follows:
1998................................................................. $ 2,335
1999................................................................. 2,315
2000................................................................. 2,088
2001................................................................. 1,894
2002................................................................. 1,653
2003 and thereafter.................................................. 4,117
-------
$14,402
=======
In October 1996, Comsat Corporation ("Comsat") initiated an action seeking
unspecified actual, consequential and punitive or exemplary damages against
PanAmSat International, Televisa and News Corporation ("News"). The complaint
alleges that the Company interfered with the alleged termination by News of an
alleged contract between Comsat and News. Although the Company believes this
action is without merit and intends to vigorously contest this matter, it is
unable to predict the final outcome of this action at this time.
The Company is involved in other litigation in the normal course of its
operations. Management does not believe the outcome of such matters will have
a material effect on the consolidated financial statements.
10.QUARTERLY FINANCIAL INFORMATION--UNAUDITED
THREE MONTHS ENDED
---------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
Revenues...................... $127,553 $134,192 $170,315 $197,879
Operating income.............. 67,511 62,098 70,766 93,829
Income before extraordinary
item......................... 41,853 19,902 27,416 44,301
Net income.................... 41,853 19,902 27,416 23,658
Income before extraordinary
item per common share--basic
and diluted.................. 0.18 0.30
Net income per common share--
basic and diluted............ 0.18 0.16
46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the information set forth under the captions "Election of Directors" and
"Executive Officers of the Company" contained in the Company's Proxy Statement
(to be filed not later than 120 days after the end of the Company's fiscal
year) for the 1998 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the information set forth under the caption "Executive Compensation" (up
to but not including the subcaption "Report of the Compensation Committee on
Executive Compensation") contained in the Company's Proxy Statement (to be
filed not later than 120 days after the end of the Company's fiscal year) for
the 1998 Annual Meeting of Stockholders, which information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" contained in the Company's Proxy
Statement (to be filed not later than 120 days after the end of the Company's
fiscal year) for the 1998 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the information set forth under the subcaptions "Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions" under the
caption "Executive Compensation" contained in the Company's Proxy Statement
(to be filed not later than 120 days after the end of the Company's fiscal
year) for the 1998 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)1.FINANCIAL STATEMENTS
See Index to Financial Statements on page 28.
2.FINANCIAL STATEMENT SCHEDULES
Financial statement schedules are omitted because of the absence of
the conditions under which they are required, or because the
information is set forth in the financial statements or notes
thereto.
(B)REPORTS ON FORM 8-K
During the last quarter of 1997, the Company did not file any
Current Reports on Form 8-K with the Securities and Exchange
Commission.
(C)EXHIBITS
2.1 Agreement and Plan of Reorganization, dated September 20, 1996, among
Hughes Communications, Inc., Hughes Communications Galaxy, Inc.,
Hughes Communications Satellite Services, Inc., Hughes Communications
Services, Inc., Hughes Communications Carrier Services, Inc., Hughes
Communications Japan, Inc., PanAmSat Corporation (formerly known as
Magellan International, Inc. ("PanAmSat")) and PanAmSat International
Systems, Inc. (formerly known as PanAmSat Corporation and successor
corporation to PanAmSat, L.P. ("PanAmSat International")) is
incorporated herein by reference to Exhibit 2.3 to PanAmSat
International's Quarterly Report on Form 10-Q for the period ended
June 30, 1996.
2.2 Amendment to Agreement and Plan of Reorganization dated as of April 4,
1997 constituting Exhibit 2.1 hereto is incorporated herein by
reference to Appendix AA to the Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") contained in PanAmSat's Registration Statement
on Form S-4 (Reg. No. 333-25293) filed on April 16, 1997 (the
"Registration Statement").
2.3 Agreement and Plan of Merger, dated as of April 4, 1997, among
PanAmSat International, PAS Merger Corp. and PanAmSat is incorporated
herein by reference to Appendix B to the Proxy Statement/Prospectus.
2.4 Assurance Agreement, dated September 20, 1996, between Hughes
Electronics Corporation, PanAmSat International, Satellite Company,
L.L.C. and PanAmSat is incorporated herein by reference to Appendix K
to the Proxy Statement/Prospectus.
2.5 Principal Stockholders Agreement, dated September 20, 1996, among
Hughes Communications, Inc., Hughes Communications Galaxy, Inc.,
Satellite Company, L.L.C., Univisa Satellite Holdings, Inc., the
holders of Class A Common Stock of PanAmSat International and the
Trustees of that certain Voting Trust of certain holders of Class A
Common Stock of PanAmSat International is incorporated herein by
reference to Appendix L to the Proxy Statement/Prospectus.
2.6 Stock Contribution and Exchange Agreement, dated September 20, 1996,
among Grupo Televisa, S.A., Satellite Company, L.L.C., PanAmSat and
Hughes Communications, Inc. is incorporated herein by reference to
Exhibit 2.4 to the Registration Statement.
3.1 Restated Certificate of Incorporation of PanAmSat.
3.2 Restated Bylaws of PanAmSat.
48
4.1 Amended and Restated Stockholder Agreement, dated as of May 16,
1997, by and among PanAmSat, Hughes Communications, Inc., Satellite
Company, LLC and the former holders of Class A Common Stock of
PanAmSat International is incorporated herein by reference to
Appendix M to the Proxy Statement/Prospectus.
4.2 Amended and Restated Registration Rights Agreement, dated as of May
16, 1997, by and among PanAmSat, Hughes Communications, Inc.,
Hughes Communications Galaxy, Inc., Hughes Communications Satellite
Services, Inc., Satellite Company, LLC and the former holders of
Class A Common Stock of PanAmSat International is incorporated
herein by reference to Appendix N to the Proxy
Statement/Prospectus.
4.3.1 Loan Agreement, dated May 15, 1997, between Hughes Network Systems,
Inc. and PanAmSat is incorporated by reference to Exhibit 4.3 to
PanAmSat's Current Report on Form 8-K dated June 5, 1997.
4.3.2 First Amendment to Loan Agreement, constituting Exhibit 4.3.1
hereto, dated as of December 23, 1997, between Hughes Electronics
Corporation and PanAmSat.
4.3.3 Subordination and Amendment Agreement, dated as of February 20,
1998, among Hughes Electronics Corporation, PanAmSat and Citicorp
USA, Inc., as administrative agent.
4.4 Indenture, dated as of January 16, 1998, between PanAmSat and The
Chase Manhattan Bank, as Trustee.
10.1 Participation Agreement, dated as of December 27, 1991, among
Satellite Transponder Leasing Corporation, GM Hughes Electronics
Corporation, Security Pacific Equipment Leasing, Inc., Wilmington
Trust Company, State Street Bank and Trust Company of Connecticut,
National Association ("State Street") and Goldman, Sachs & Co. is
incorporated herein by reference to Exhibit 10.1 to the
Registration Statement.
10.2 Lease Agreement, dated as of December 27, 1991, among GM Hughes
Electronics Corporation, Satellite Transponder Leasing Corporation
and Wilmington Trust Company is incorporated herein by reference to
Exhibit 10.2 to the Registration Statement.
10.3 Participation Agreement, dated as of December 27, 1991, among
Satellite Transponder Leasing Corporation, GM Hughes Electronics
Corporation, Student Loan Marketing Association, Wilmington Trust
Company, State Street and Goldman Sachs & Co. is incorporated
herein by reference to Exhibit 10.3 to the Registration Statement.
10.4 Lease Agreement, dated as of December 27, 1991, among GM Hughes
Electronics Corporation, Satellite Transponder Leasing Corporation
and Wilmington Trust Company is incorporated herein by reference to
Exhibit 10.4 to the Registration Statement.
10.5.1 Participation Agreement and Purchase Agreement, dated as of August
21, 1992, among Hughes Communications Galaxy, Inc., Orion One,
Inc., State Street, Wilmington Trust Company, Hughes
Communications, Inc. and BT Securities Corporation, as agent is
incorporated herein by reference to Exhibit 10.5.1 to the
Registration Statement.
10.5.2 First Amendment to Participation Agreement and Purchase Agreement,
constituting Exhibit 10.5.1 hereto, dated as of December 24, 1992,
among Hughes Communications Galaxy, Inc., Orion One, Inc., State
Street, Hughes Communications, Inc., Wilmington Trust Company, BT
Securities Corporation, as agent, and the other participants to the
Transponder Purchase Agreement is incorporated herein by reference
to Exhibit 10.5.2 to the Registration Statement.
10.5.3 Second Amendment to Participation Agreement and Purchase Agreement,
constituting Exhibit 10.5.1 hereto, dated as of June 18, 1993,
among Hughes Communications Galaxy, Inc., Orion One, Inc., State
Street, CIBC Inc., Internationale Nederlanden Lease Structured
Finance B.V., Wilmington Trust Company and BT Securities
Corporation, as agent is incorporated herein by reference to
Exhibit 10.5.3 to the Registration Statement.
49
10.6.1 Lease Agreement, dated as of December 31, 1992, by and between
Hughes Communications Galaxy, Inc. and State Street is incorporated
herein by reference to Exhibit 10.6.1 to the Registration
Statement.
10.6.2 First Amendment to Lease Agreement constituting Exhibit 10.6.1,
dated as of June 18, 1993, by and between Hughes Communications
Galaxy, Inc. and State Street is incorporated herein by reference
to Exhibit 10.6.2 to the Registration Statement.
10.7 Schedule identifying certain agreements that have been omitted on
the basis that such agreements are substantially identical to the
agreements filed as Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and
10.6.2 hereto is incorporated herein by reference to Exhibit 10.7
to the Registration Statement.
10.8.1 Launch Services Agreement No. 9411-002, dated November 14, 1994,
between Lockheed-Khrunichev-Energia International, Inc. and
PanAmSat International is incorporated herein by reference to
Exhibit 10.10 to Amendment No. 3 to PanAmSat International's
Registration Statement on Form S-1 (Reg. No. 33-84836), dated March
9, 1995. (1)
10.8.2 First Amendment to Launch Services Agreement No. 9411-002
constituting Exhibit 10.8.1 hereto, dated March 30, 1995, between
Lockheed-Khrunichev-Energia International, Inc. and PanAmSat
International is incorporated herein by reference to Exhibit
10.10.2 to Amendment No. 1 to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995.
(1)
10.8.3 Second Amendment to Launch Services Agreement No. 9411-002
constituting Exhibit 10.8.1 hereto, dated June 9, 1995, between
Lockheed-Khrunichev-Energia International, Inc. and PanAmSat
International is incorporated herein by reference to Exhibit
10.10.3 to Amendment No. 1 to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995.
(1)
10.8.4 Amendment Number 3 to Launch Services Agreement No. 9411-002
constituting Exhibit 10.8.1 hereto, dated August 23, 1996, between
Lockheed-Khrunichev-Energia International, Inc. and PanAmSat
International is incorporated herein by reference to Exhibit
10.10.4 to PanAmSat International's Quarterly Report on Form 10-Q
for the period ended September 30, 1996. (1)
10.9.1 Agreement for the Launching into Geostationary Transfer Orbit of
the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918,
dated November 21, 1994, between PanAmSat International and
Arianespace S.A. is incorporated herein by reference to Exhibit
10.12 to Amendment No. 4 to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-84836), dated March 29, 1995.
(1)
10.9.2 Amendment No. 1 to Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch
Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated May
1995, between PanAmSat International and Arianespace S.A. is
incorporated herein by reference to Exhibit 10.12.2 to Amendment
No. 1 to PanAmSat International's Registration Statement on Form S-
1 (Reg. No. 33-95396), dated August 17, 1995. (1)
10.9.3 Amendment No. 2 to Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch
Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated as
of April 29, 1996, between PanAmSat International and Arianespace
S.A. is incorporated herein by reference to Exhibit S-1 to PanAmSat
International's Quarterly Report on Form 10-Q for the period ended
March 31, 1996.
50
10.9.4 Amendment No. 3 to Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch
Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated
December 31, 1996, between PanAmSat International and Arianespace
S.A. is incorporated herein by reference to Exhibit 10.12.8 to
PanAmSat International's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996. (1)
10.10.1 Memorandum of Understanding, dated as of March 27, 1995, between
Grupo Televisa, S.A. and PanAmSat International is incorporated
herein by reference to Exhibit 10.13 to Amendment No. 4 to
PanAmSat International's Registration Statement on Form S-1
(Reg. No. 33-84836), dated March 29, 1995. (1)
10.10.2 Revised DTH System in Latin America Memorandum of Understanding,
dated as of September 20, 1996, between PanAmSat International and
Grupo Televisa, S.A. is incorporated herein by reference to
Exhibit 10.13.2 to PanAmSat International's Quarterly Report on
Form 10-Q for the period ended September 30, 1996.
10.11.1 Satellite Purchase Contract, dated as of March 31, 1995, between
Hughes Aircraft Company and PanAmSat International is incorporated
by reference to Exhibit 10.14 to Amendment No. 5 to PanAmSat
International's Registration Statement on Form S-1 (Reg. No. 33-
84836), dated April 13, 1995. (1)
10.11.2 Amendment No. 1 to Satellite Purchase Contract constituting
Exhibit 10.11.1 dated as of September 3, 1996, between Hughes
Aircraft Company and PanAmSat International is incorporated herein
by reference to Exhibit 10.14.1 to PanAmSat's Quarterly Report on
Form 10-Q for the period ended September 30, 1996. (1)
10.12 Galaxy IX Satellite and Services Contract, No. 95-HCG-001, dated
August 7, 1995, between Hughes Communications Galaxy, Inc. and
Hughes Space and Communications Company is incorporated herein by
reference to Exhibit 10.12 to the Registration Statement. (1)
10.13 Letter Agreement, dated November 29, 1995, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy X and Galaxy XI is
incorporated herein by reference to Exhibit 10.13 to the
Registration Statement. (1)
10.14 Galaxy VIII-I Satellite and Services Contract (95-HCG-002), dated
October 31, 1995, between Hughes Communications Galaxy, Inc. and
Hughes Space and Communications Company is incorporated herein by
reference to Exhibit 10.14 to the Registration Statement. (1)
10.15.1 Agreement for the Launching into Geostationary Transfer Orbit of
PanAmSat Satellites by an Ariane Launch Vehicle, No. 95.5.933,
dated as of December 20, 1995, between PanAmSat International and
Arianespace S.A. is incorporated herein by reference to Exhibit
10.12.3 to PanAmSat International's Quarterly Report on Form 10-Q
of the Registrant for the period ended March 31, 1996. (1)
10.15.2 Side Letter to Agreement for Launching into Geostationary Transfer
Orbit of PanAmSat Satellites by an Ariane Launch Vehicle, No.
95.5.933, dated as of December 20, 1995, between PanAmSat
International and Arianespace S.A., constituting Exhibit 10.15.1
hereto, is incorporated herein by reference to Exhibit 10.12.4 to
PanAmSat International's Quarterly Report on Form 10-Q for the
period ended March 31, 1996. (1)
10.15.3 Amendment No. 1 to Agreement for Launching into Geostationary
Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle,
No. 95.5.933, dated as of April 29, 1996, between PanAmSat
International and Arianespace S.A., constituting Exhibit 10.15.1
hereto, is incorporated herein by reference to Exhibit 10.12.5 to
PanAmSat International's Quarterly Report on Form 10-Q for the
period ended March 31, 1996.
51
10.15.4 Amendment No. 2 to Agreement for Launching into Geostationary
Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle,
No. 95.5.933, dated December 31, 1996, between PanAmSat
International and Arianespace S.A., constituting Exhibit 10.15.1
hereto, is incorporated herein by reference to Exhibit 10.12.6 to
PanAmSat International's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996. (1)
10.16 Participation Agreement, dated as of February 7, 1996, among
Hughes Communications Galaxy, Inc., General Motors Acceptance
Corporation, Wilmington Trust Company, Chemical Bank and the
lending institutions listed as loan participants in Schedule I to
the Agreement is incorporated herein by reference to Exhibit 10.16
to the Registration Statement.
10.17 Lease Agreement, dated as of February 7, 1996, by and between
Wilmington Trust Company and Hughes Communications Galaxy, Inc. is
incorporated herein by reference to Exhibit 10.17 to the
Registration Statement.
10.18.1 Letter Agreement, dated February 29, 1996, among The News
Corporation Limited, Globo Participacoes, Ltd., Grupo Televisa,
S.A., and PanAmSat International is incorporated herein by
reference to Exhibit 10.17.1 to PanAmSat International's Quarterly
Report on Form 10-Q/A for the period ended March 31, 1996. (1)
10.18.2 Amendment to Letter Agreement, dated November 4, 1996,
constituting Exhibit 10.18.1 hereto, among The News Corporation
Limited, Globo Participacoes, Ltd., Grupo Televisa, S.A., and
PanAmSat International is incorporated herein by reference to
Exhibit 10.17.2 to PanAmSat International's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
10.19 Amended and Restated Contract for PanAmSat Program, dated May 2,
1996, between PanAmSat International and Space Systems/Loral, Inc.
is incorporated herein by reference to Exhibit 10.7.3 to PanAmSat
International's Quarterly Report on Form 10-Q for the period ended
March 31, 1996. (1)
10.20 Letter Agreement, dated June 10, 1996, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy XI is incorporated
herein by reference to Exhibit 10.20 to the Registration
Statement. (1)
10.21 Letter Agreement, dated August 12, 1996, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy XII is incorporated
herein by reference to Exhibit 10.21 to the Registration
Statement. (1)
10.22 Letter Agreement, dated August 12, 1996, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy XIII, XIV, XV and XVI
is incorporated herein by reference to Exhibit 10.22 to the
Registration Statement. (1)
10.23 Letter Agreement, dated August 21, 1996, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy XI is incorporated
herein by reference to Exhibit 10.23 to the Registration
Statement. (1)
10.24 DTH Option Purchase Agreement, dated September 20, 1996, between
PanAmSat International, Grupo Televisa, S.A. and Satellite
Company, L.L.C. is incorporated herein by reference to Exhibit
10.13.1 to PanAmSat International's Quarterly Report on Form 10-Q
for the period ended September 30, 1996.
10.25 Full-Time Transponder Service Agreement From PAS-3 (European
Beam), dated as of September 20, 1996, between PanAmSat
International and Televisa, S.A. is incorporated herein by
reference to Exhibit 10.16 to PanAmSat International's Quarterly
Report on Form 10-Q for the period ended September 30, 1996. (1)
52
10.26 Transponder Purchase and Sale Agreement, dated as of June 26, 1996,
between PanAmSat International and Net Sat Servicos Ltda. is
incorporated herein by reference to Exhibit 10.2 to Net Sat
Servicios Ltda.'s Registration Statement on Form F-4 (Reg. No. 333-
6318), dated January 21, 1997. (1)
10.27 Amended and Restated Transponder Purchase and Sale Agreement, dated
as of June 26, 1996, between PanAmSat International and Net Sat
Servicos Ltda. is incorporated herein by reference to Exhibit 10.2.1
to Net Sat Servicios Ltda.'s Registration Statement on Form F-4
(Reg. No. 333-6318), dated January 21, 1997. (1)
10.28 Amended and Restated Launch Services Agreement, dated as of January
17, 1997, between Hughes Communications Galaxy, Inc. and Hughes
Space and Communications International, Inc. is incorporated herein
by reference to Exhibit 10.28 to the Registration Statement. (1)
10.29 Galaxy X Spacecraft, Related Services and Documentation Contract
(96-HCG-001), dated March 20, 1997, between Hughes Communications
Galaxy, Inc. and Hughes Space and Communications Company is
incorporated herein by reference to Exhibit 10.29 to the
Registration Statement. (1)
10.30 Employment Agreement between PanAmSat and Frederick A. Landman,
dated as of May 15, 1997, is incorporated herein by reference to
Exhibit 10.30 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.*
10.31 Amended and Restated Collateral Trust Agreement, dated as of May 16,
1997 by and among PanAmSat, Hughes Communications, Inc., Satellite
Company, LLC, Grupo Televisa, S.A. and IBJ Schroder Bank & Trust
Company is incorporated herein by reference to Exhibit 10.31 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended June
30, 1997.
10.32 Pledge and Security Agreement, dated as of May 16, 1997, by and
among Satellite Company, LLC, Grupo Televisa, S.A., in favor of IBJ
Schroder Bank & Trust Company is incorporated herein by reference to
Exhibit 10.30 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.
10.33 PanAmSat Corporation Long Term Incentive Plan established in 1997 is
incorporated herein by reference to Exhibit 10.33 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.*
10.34 PanAmSat Corporation Annual Incentive Plan, effective January l,
1997, is incorporated herein by reference to Exhibit 10.34 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended June
30, 1997.*
10.35 Intellectual Property Cross License Agreement, dated as of May 16,
1997, by and between PanAmSat and Hughes Electronics Corporation is
incorporated herein by reference to Exhibit 10.35 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
10.36 Leveraged Lease Guaranty Indemnification Agreement, dated as of May
16, 1997 by and between PanAmSat and Hughes Electronics Corporation
incorporated herein by reference to Exhibit 10.36 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
10.37 Fixed Price Contract between Hughes Communications Galaxy, Inc. and
Hughes Space & Communications Company for Galaxy XI HS702,
Spacecraft, Related Services and Documentation, Contract No. 96-HCG-
002, executed May 1997 is incorporated herein by reference to
Exhibit 10.37 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.38 Fixed Price Contract for PAS 1R and PAS 9 HS-702 Spacecraft, Related
Services and Documentation--Contract No. 97-HCG-001, dated as of
August 15, 1997, between Hughes Space and Communications Company,
Inc. and PanAmSat. (2)
53
10.39 Transponder Sublease Agreement for Galaxy III-R between Hughes
Communications Galaxy, Inc. and California Broadcast Center, LLC,
dated April 21, 1997 is incorporated herein by reference to
Exhibit 10.39 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.40 Transponder Lease Agreement for Galaxy VIII(i) between Hughes
Communications Galaxy, Inc. and California Broadcast Center, LLC,
dated April 21, 1997 is incorporated herein by reference to
Exhibit 10.40 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.41.1 Form of Indemnity Agreement between PanAmSat and each of its
directors and executive officers is incorporated herein by
reference to Exhibit 10.41 to PanAmSat's Quarterly Report on Form
10-Q for the period ended June 30, 1997.*
10.41.2 Schedule identifying substantially identical agreements to the
Indemnity Agreement constituting Exhibit 10.41.1 hereto in favor
of Charles H. Noski, Frederick A. Landman, Patrick J. Costello,
Steven D. Dorfman, John J. Higgins, Ted G. Westerman, Dennis F.
Hightower, James M. Hoak, Joseph R. Wright, Jr., Michael T. Smith,
Lourdes Saralegui, Carl A. Brown, Kenneth N. Heintz, Robert A.
Bednarek, James W. Cuminale and David P. Berman.*
10.42 Credit Agreement, dated February 20, 1998, among PanAmSat, certain
lenders and Citicorp USA, Inc., as administrative agent.
10.43 Agreement, dated as of May 15, 1996, between PanAmSat
International and Patrick J. Costello is incorporated herein by
reference to Exhibit 10.11.19 to PanAmSat's Quarterly Report on
Form 10-Q for the period ended June 30, 1996.*
10.44 Agreement, dated as of March 21, 1997, between PanAmSat and
Patrick J. Costello.*
10.45 Agreement, dated as of May 15, 1996, between PanAmSat
International and Frederick A. Landman is incorporated herein by
reference to Exhibit 10.11.16 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.46 Agreement, dated as of May 15, 1996, between PanAmSat
International and Lourdes Saralegui is incorporated herein by
reference to Exhibit 10.11.17 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.47 Agreement, dated as of May 15, 1996, between PanAmSat
International and Robert A. Bednarek is incorporated herein by
reference to Exhibit 10.11.18 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.48 Agreement, dated as of May 15, 1996, between PanAmSat
International and James W. Cuminale is incorporated herein by
reference to Exhibit 10.11.20 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.49 Agreement, dated as of May 15, 1996, between PanAmSat
International and David P. Berman incorporated herein by reference
to Exhibit 10.11.21 to PanAmSat International's Quarterly Report
on Form 10-Q for the period ended June 30, 1996.*
10.50 Agreement, dated April 7, 1997, between PanAmSat and Hughes
Electronics Corporation, regarding the terms of assignment of
Kenneth N. Heintz to PanAmSat.*
21.1 Subsidiaries of PanAmSat.
24. l Powers of Attorney.
27.1 Financial Data Schedule.
- --------
(1) Portions of this Exhibit have been omitted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment with
respect thereto.
(2) Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
54
Exhibits indicated with a * symbol are an executive contract or compensatory
plan or arrangement filed pursuant to Item 14 of Form 10-K.
In lieu of filing certain instruments with respect to long-term debt of the
kind described in Item 601(b)(4) of Regulation S-K, Registrant agrees to
furnish a copy of such instruments to the Securities and Exchange Commission
upon request.
A copy of any of the exhibits included in this Annual Report on Form 10-K,
other than those as to which confidential treatment is pending or has been
granted by the Securities and Exchange Commission, upon payment of a fee to
cover the reasonable expenses of furnishing such exhibits, may be obtained by
written request to the Company, at the address set forth on the front cover,
attention General Counsel.
55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the Town of Greenwich, State of Connecticut.
PanAmSat Corporation
By: /s/ Kenneth N. Heintz
__________________________________
Kenneth N. Heintz
Executive Vice President and
Chief Financial Officer
March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
* Chairman of the Board of March 27, 1998
_____________________________________ Directors
MICHAEL T. SMITH
* President and Chief Executive
Officer (principal executive
officer) and Director
March 27, 1998
_____________________________________
FREDERICK A. LANDMAN
* Director March 27, 1998
_____________________________________
PATRICK J. COSTELLO
* Director March 27, 1998
_____________________________________
STEVEN D. DORFMAN
* Director March 27, 1998
_____________________________________
JOHN J. HIGGINS
* Director March 27, 1998
_____________________________________
DENNIS F. HIGHTOWER
* Director March 27, 1998
_____________________________________
JAMES M. HOAK
* Director March 27, 1998
_____________________________________
CHARLES H. NOSKI
* Director March 27, 1998
_____________________________________
TED G. WESTERMAN
* Director March 27, 1998
_____________________________________
JOSEPH R. WRIGHT
56
NAME TITLE DATE
/s/ Kenneth N. Heintz Executive Vice President and
Chief Financial Officer
(principal financial officer
and principal accounting
officer)
March 27, 1998
_____________________________________
KENNETH N. HEINTZ
*By: /s/ James W. Cuminale
_____________________________________
(JAMES W. CUMINALE, ATTORNEY-IN-
FACT)
57
EXHIBIT INDEX
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2.1 Agreement and Plan of Reorganization, dated September 20, 1996,
amon gHughes Communications, Inc., Hughes Communications Galaxy,
Inc., Hughes Communications Satellite Services, Inc., Hughes
Communications Services, Inc., Hughes Communications Carrier
Services, Inc., Hughes Communications Japan, Inc., PanAmSat
Corporation (formerly known as Magellan International, Inc.
("PanAmSat")) and PanAmSat International Systems, Inc. (formerly
known as PanAmSat Corporation and successor corporation to PanAmSat,
L.P. ("PanAmSat International")) is incorporated herein by reference
to Exhibit 2.3 to PanAmSat International's Quarterly Report on Form
10-Q for the period ended June 30, 1996.
2.2 Amendment to Agreement and Plan of Reorganization dated as of April
4, 1997 constituting Exhibit 2.1 hereto is incorporated herein by
reference to Appendix AA to the Proxy Statement/Prospectus (the
"Proxy Statement/Prospectus") contained in PanAmSat's Registration
Statement on Form S-4 (Reg. No. 333-25293) filed on April 16, 1997
(the "Registration Statement").
2.3 Agreement and Plan of Merger, dated as of April 4, 1997, among
PanAmSat International, PAS Merger Corp. and PanAmSat is
incorporated herein by reference to Appendix B to the Proxy
Statement/Prospectus.
2.4 Assurance Agreement, dated September 20, 1996, between Hughes
Electronics Corporation, PanAmSat International, Satellite Company,
L.L.C. and PanAmSat is incorporated herein by reference to Appendix
K to the Proxy Statement/Prospectus.
2.5 Principal Stockholders Agreement, dated September 20, 1996, among
Hughes Communications, Inc., Hughes Communications Galaxy, Inc.,
Satellite Company, L.L.C., Univisa Satellite Holdings, Inc., the
holders of Class A Common Stock of PanAmSat International and the
Trustees of that certain Voting Trust of certain holders of Class A
Common Stock of PanAmSat International is incorporated herein by
reference to Appendix L to the Proxy Statement/Prospectus.
2.6 Stock Contribution and Exchange Agreement, dated September 20, 1996,
among Grupo Televisa, S.A., Satellite Company, L.L.C., PanAmSat and
Hughes Communications, Inc. is incorporated herein by reference to
Exhibit 2.4 to the Registration Statement.
3.1 Restated Certificate of Incorporation of PanAmSat.
3.2 Restated Bylaws of PanAmSat.
EXHIBIT INDEX
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4.1 Amended and Restated Stockholder Agreement, dated
as of May 16, 1997, by and among PanAmSat, Hughes
Communications, Inc., Satellite Company, LLC and
the former holders of Class A Common Stock of
PanAmSat International is incorporated herein by
reference to Appendix M to the Proxy Statement/
Prospectus.
4.2 Amended and Restated Registration Rights Agreement,
dated as of May 16, 1997, by and among PanAmSat,
Hughes Communications, Inc., Hughes Communications
Galaxy, Inc., Hughes Communications Satellite
Services, Inc., Satellite Company, LLC and the former
holders of Class A Common Stock of PanAmSat
International is incorporated herein by reference
to Appendix N to the Proxy Statement/Prospectus.
4.3.1 Loan Agreement, dated May 15, 1997, between Hughes
Network Systems, Inc. and PanAmSat is incorporated
by reference to Exhibit 4.3 to PanAmSat's Current
Report on Form 8-K dated June 5, 1997.
4.3.2 First Amendment to Loan Agreement, constituting
Exhibit 4.3.1 hereto, dated as of December 23, 1997,
between Hughes Electronics Corporation and PanAmSat.
4.3.3 Subordination and Amendment Agreement, dated as of
February 20, 1998, among Hughes Electronics Corporation,
PanAmSat and Citicorp USA, Inc., as administrative agent.
4.4 Indenture, dated as of January 16, 1998, between PanAmSat and The
Chase Manhattan Bank, as Trustee.
10.1 Participation Agreement, dated as of December 27, 1991,
among Satellite Transponder Leasing Corporation, GM
Hughes Electronics Corporation, Security Pacific Equipment
Leasing, Inc., Wilmington Trust Company, State Street Bank
and Trust Company of Connecticut, National Association
("State Street") and Goldman, Sachs & Co. is incorporated
herein by reference to Exhibit 10.1 to the Registration Statement.
10.2 Lease Agreement, dated as of December 27, 1991, among
GM Hughes Electronics Corporation, Satellite Transponder
Leasing Corporation and Wilmington Trust Company is
incorporated herein by reference to Exhibit 10.2 to the
Registration Statement.
10.3 Participation Agreement, dated as of December 27, 1991,
among Corporation, Student Loan Marketing Association,
Wilmington Trust Company, State Street and Goldman Sachs
& Co. is incorporated herein by reference to Exhibit 10.3
to the Registration Statement.
10.4 Lease Agreement, dated as of December 27, 1991, among
GM Hughes Electronics Corporation, Satellite Transponder
Leasing Corporation and Wilmington Trust Company is
incorporated herein by reference to Exhibit 10.4 to the
Registration Statement.
10.5.1 Participation Agreement and Purchase Agreement, dated
as of August 21, 1992, among Hughes Communications Galaxy,
Inc., Orion One, Inc., State Street, Wilmington Trust
Company, Hughes Communications, Inc. and BT Securities
Corporation, as agent is incorporated herein by reference
to Exhibit 10.5.1 to the Registration Statement.
10.5.2 First Amendment to Participation Agreement and Purchase
Agreement, among Hughes Communications Galaxy, Inc.,
Orion One, Inc., State Street, Hughes Communications,
Inc., Wilmington Trust Company, BT Securities Corporation,
as agent, and the other participants to the Transponder
Purchase Agreement is incorporated herein by reference
to Exhibit 10.5.2 to the Registration Statement.
10.5.3 Second Amendment to Participation Agreement and Purchase
Agreement, constituting Exhibit 10.5.1 hereto, dated as
of June 18, 1993, among Hughes Communications Galaxy, Inc.,
Orion One, Inc., State Street, CIBC Inc., Internationale
Nederlanden Lease Structured Finance B.V., Wilmington
Trust Company and BT Securities Corporation, as agent
is incorporated herein by reference to Exhibit 10.5.3
to the Registration Statement.
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10.6.1 Lease Agreement, dated as of December 31, 1992,
by and between Hughes Communications Galaxy, Inc.
and State Street is incorporated herein by reference
to Exhibit 10.6.1 to the Registration Statement.
10.6.2 First Amendment to Lease Agreement constituting
Exhibit 10.6.1, dated as of June 18, 1993, by and
between Hughes Communications Galaxy, Inc. and
State Street is incorporated herein by reference
to Exhibit 10.6.2 to the Registration Statement.
10.7 Schedule identifying certain agreements that have
been omitted on the basis that such agreements are
substantially identical to the agreements filed as
Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and
10.6.2 hereto is incorporated herein by reference to
Exhibit 10.7 to the Registration Statement.
10.8.1 Launch Services Agreement No. 9411-002, dated
November 14, 1994, between Lockheed-Khrunichev-Energia
International, Inc. and PanAmSat International is
incorporated herein by reference to Exhibit 10.10
to Amendment No. 3 to PanAmSat International's
Registration Statement on Form S-1 (Reg. No. 33-84836),
dated March 9, 1995. (1)
10.8.2 First Amendment to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto,
dated March 30, 1995, between Lockheed-Khrunichev-Energia
International, Inc. and PanAmSat International is
incorporated herein by reference to Exhibit 10.10.2
to Amendment No. 1 to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-95396), dated
August 17, 1995.(1)
10.8.3 Second Amendment to Launch Services Agreement No. 9411-002
constituting Exhibit 10.8.1 hereto, dated June 9, 1995,
between Lockheed-Khrunichev-Energia International, Inc.
and PanAmSat International is incorporated herein by
reference to Exhibit 10.10.3 to Amendment No. 1 to
PanAmSat International's Registration Statement on
Form S-1 (Reg. No. 33-95396), dated August 17, 1995.(1)
10.8.4 Amendment Number 3 to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto, dated
August 23, 1996, between Lockheed-Khrunichev-Energia
International, Inc. and PanAmSat International is
incorporated herein by reference to Exhibit 10.10.4
to PanAmSat International's Quarterly Report on
Form 10-Q for the period ended September 30, 1996. (1)
10.9.1 Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an
Ariane Launch Vehicle, No. 94.5.918, dated
November 21, 1994, between PanAmSat International and
Arianespace S.A. is incorporated herein by reference
to Exhibit 10.12 to Amendment No. 4 to PanAmSat
International's Registration Statement on Form S-1
(Reg. No. 33-84836), dated March 29, 1995.(1)
10.9.2 Amendment No. 1 to Agreement for the Launching into
Geostationary Transfer Orbit of the PanAmSat 6
Satellite by an Ariane Launch Vehicle, No. 94.5.918
constituting Exhibit 10.9.1 hereto, dated May 1995,
between PanAmSat International and Arianespace S.A.
is incorporated herein by reference to
Exhibit 10.12.2 to Amendment No. 1 to PanAmSat
International's Registration Statement on Form S-1
(Reg. No. 33-95396), dated August 17, 1995. (1)
10.9.3 Amendment No. 2 to Agreement for the Launching into
Geostationary Transfer Orbit of the PanAmSat 6
Satellite by an Ariane Launch Vehicle, No. 94.5.918
constituting Exhibit 10.9.1 hereto, dated as of
April 29, 1996, between PanAmSat International
and Arianespace S.A. is incorporated herein by
reference to Exhibit S-1 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended
March 31, 1996.
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10.6.1 Lease Agreement, dated as of December 31, 1992, by
and between Hughes Communications Galaxy, Inc. and
State Street is incorporated herein by reference to
Exhibit 10.6.1 to the Registration Statement.
10.6.2 First Amendment to Lease Agreement constituting
Exhibit 10.6.1, dated as of June 18, 1993, by and
between Hughes Communications Galaxy, Inc. and
State Street is incorporated herein by reference
to Exhibit 10.6.2 to the Registration Statement.
10.7 Schedule identifying certain agreements that have
been omitted on the basis that such agreements are
substantially identical to the agreements filed as
Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and
10.6.2 hereto is incorporated herein by reference
to Exhibit 10.7 to the Registration Statement.
10.8.1 Launch Services Agreement No. 9411-002, dated
November 14, 1994, between Lockheed-Khrunichev-
Energia International, Inc. and PanAmSat International
is incorporated herein by reference to Exhibit 10.10
to Amendment No. 3 to PanAmSat International's
Registration Statement on Form S-1 (Reg. No. 33-84836),
dated March 9, 1995. (1)
10.8.2 First Amendment to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto,
dated March 30, 1995, between
Lockheed-Khrunichev-Energia International, Inc.
and PanAmSat International is incorporated herein
by reference to Exhibit 10.10.2 to Amendment No. 1
to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-95396), dated
August 17, 1995. (1)
10.8.3 Second Amendment to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto,
dated June 9, 1995, between Lockheed-Khrunichev-
Energia International, Inc. and PanAmSat
International is incorporated herein by reference
to Exhibit 10.10.3 to Amendment No. 1 to PanAmSat
International's Registration Statement on
Form S-1 (Reg. No. 33-95396), dated August 17, 1995. (1)
10.8.4 Amendment Number 3 to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto,
dated August 23, 1996, between Lockheed-Khrunichev-
Energia International, Inc. and PanAmSat
International is incorporated herein by reference
to Exhibit 10.10.4 to PanAmSat International's
Quarterly Report on Form 10-Q for the period
ended September 30, 1996. (1)
10.9.1 Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an
Ariane Launch Vehicle, No. 94.5.918, dated
November 21, 1994, between PanAmSat International
and Arianespace S.A. is incorporated herein by
reference to Exhibit 10.12 to Amendment No. 4
to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-84836), dated
March 29, 1995. (1)
10.9.2 Amendment No. 1 to Agreement for the Launching
into Geostationary Transfer Orbit of the
PanAmSat 6 Satellite by an Ariane Launch Vehicle,
No. 94.5.918 constituting Exhibit 10.9.1 hereto,
dated May 1995, between PanAmSat International
and Arianespace S.A. is incorporated herein by
reference to Exhibit 10.12.2 to Amendment No. 1
to PanAmSat International's Registration Statement
on Form S-1 (Reg. No. 33-95396), dated
August 17, 1995. (1)
10.9.3 Amendment No. 2 to Agreement for the Launching
into Geostationary Transfer Orbit of the
PanAmSat 6 Satellite by an Ariane Launch
Vehicle, No. 94.5.918 constituting Exhibit 10.9.1
hereto, dated as of April 29, 1996, between
PanAmSat International and Arianespace S.A.
is incorporated herein by reference to
Exhibit S-1 to PanAmSat International's Quarterly
Report on Form 10-Q for the period ended
March 31, 1996.
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10.15.4 Amendment No. 2 to Agreement for Launching into
Geostationary Transfer Orbit of PanAmSat Satellites
by an Ariane Launch Vehicle, No. 95.5.933, dated
December 31, 1996, between PanAmSat International
and Arianespace S.A., constituting Exhibit 10.15.1
hereto, is incorporated herein by reference to
Exhibit 10.12.6 to PanAmSat International's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1996. (1)
10.16 Participation Agreement, dated as of February 7, 1996,
among Hughes Communications Galaxy, Inc., General
Motors Acceptance Corporation, Wilmington Trust
Company, Chemical Bank and the lending institutions
listed as loan participants in Schedule I to the
Agreement is incorporated herein by reference to
Exhibit 10.16 to the Registration Statement.
10.17 Lease Agreement, dated as of February 7, 1996,
by and between Wilmington Trust Company and Hughes
Communications Galaxy, Inc. is incorporated herein
by reference to Exhibit 10.17 to the Registration
Statement.
10.18.1 Letter Agreement, dated February 29, 1996, among
The News Corporation Limited, Globo Participacoes,
Ltd., Grupo Televisa, S.A., and PanAmSat
International is incorporated herein by reference
to Exhibit 10.17.1 to PanAmSat International's Quarterly
Report on Form 10-Q/A for the period ended March 31,
1996. (1)
10.18.2 Amendment to Letter Agreement, dated November 4, 1996,
constituting Exhibit 10.18.1 hereto, among The News
Corporation Limited, Globo Participacoes, Ltd.,
Grupo Televisa, S.A., and PanAmSat International is
incorporated herein by reference to Exhibit 10.17.2
to PanAmSat International's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
10.19 Amended and Restated Contract for PanAmSat Program,
dated May 2, 1996, between PanAmSat International
and Space Systems/Loral, Inc. is incorporated
herein by reference to Exhibit 10.7.3 to PanAmSat
International's Quarterly Report on Form 10-Q for
the period ended March 31, 1996. (1)
10.20 Letter Agreement, dated June 10, 1996, between
Hughes Communications Galaxy, Inc. and Hughes Space
and Communications Company regarding the construction
of Galaxy XI is incorporated herein by reference to
Exhibit 10.20 to the Registration Statement. (1)
10.21 Letter Agreement, dated August 12, 1996, between
Hughes Communications Galaxy, Inc. and Hughes
Space and Communications Company regarding the
construction of Galaxy XII is incorporated
herein by reference to Exhibit 10.21 to the
Registration Statement. (1)
10.22 Letter Agreement, dated August 12, 1996, between
Hughes Communications Galaxy, Inc. and Hughes
Space and Communications Company regarding the
construction of Galaxy XIII, XIV, XV and XVI is
incorporated herein by reference to Exhibit 10.22
to the Registration Statement. (1)
10.23 Letter Agreement, dated August 21, 1996,
between Hughes Communications Galaxy, Inc. and
Hughes Space and Communications Company regarding
the construction of Galaxy XI is incorporated
herein by reference to Exhibit 10.23 to the
Registration Statement. (1)
10.24 DTH Option Purchase Agreement, dated September
20, 1996, between PanAmSat International, Grupo
Televisa, S.A. and Satellite Company, L.L.C.
is incorporated herein by reference to Exhibit
10.13.1 to PanAmSat International's Quarterly Report
on Form 10-Q for the period ended September 30, 1996.
10.25 Full-Time Transponder Service Agreement From
PAS-3 (European Beam), dated as of September 20,
1996, between PanAmSat International and Televisa,
S.A. is incorporated herein by reference to
Exhibit 10.16 to PanAmSat International's Quarterly
Report on Form 10-Q for the period ended
September 30, 1996. (1)
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10.26 Transponder Purchase and Sale Agreement, dated as
of June 26, 1996, between PanAmSat International
and Net Sat Servicos Ltda. is incorporated herein
by reference to Exhibit 10.2 to Net Sat Servicios
Ltda.'s Registration Statement on Form F-4
(Reg. No. 333-6318), dated January 21, 1997. (1)
10.27 Amended and Restated Transponder Purchase and Sale
Agreement, dated as of June 26, 1996, between
PanAmSat International and Net Sat Servicos Ltda.
is incorporated herein by reference to Exhibit 10.2.1
to Net Sat Servicios Ltda.'s Registration Statement
on Form F-4 (Reg. No. 333-6318), dated
January 21, 1997. (1)
10.28 Amended and Restated Launch Services Agreement,
dated as of January 17, 1997, between Hughes
Communications Galaxy, Inc. and Hughes Space and
Communications International, Inc. is incorporated
herein by reference to Exhibit 10.28 to the
Registration Statement. (1)
10.29 Galaxy X Spacecraft, Related Services and
Documentation Contract (96-HCG-001), dated
March 20, 1997, between Hughes Communications Galaxy,
Inc. and Hughes Space and Communications Company is
incorporated herein by reference to Exhibit 10.29 to the
Registration Statement. (1)
10.30 Employment Agreement between PanAmSat and
Frederick A. Landman, dated as of May 15, 1997, is
incorporated herein by reference to Exhibit 10.30
to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.*
10.31 Amended and Restated Collateral Trust Agreement,
dated as of May 16, 1997 by and among PanAmSat,
Hughes Communications, Inc., Satellite Company,
LLC, Grupo Televisa, S.A. and IBJ Schroder Bank & Trust
Company is incorporated herein by reference to
Exhibit 10.31 to PanAmSat's Quarterly Report on
Form 10-Q for the period ended June 30, 1997.
10.32 Pledge and Security Agreement, dated as of
May 16, 1997, by and among Satellite Company,
LLC, Grupo Televisa, S.A., in favor of IBJ
Schroder Bank & Trust Company is incorporated
herein by reference to Exhibit 10.30 to
PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.
10.33 PanAmSat Corporation Long Term Incentive Plan
established in 1997 is incorporated herein by
reference to Exhibit 10.33 to PanAmSat's Quarterly
Report on Form 10-Q for the period ended June 30, 1997.*
10.34 PanAmSat Corporation Annual Incentive Plan, effective January l,
1997, is incorporated herein by reference to Exhibit 10.34 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended June
30, 1997.*
10.35 Intellectual Property Cross License Agreement, dated as of May 16,
1997, by and between PanAmSat and Hughes Electronics Corporation is
incorporated herein by reference to Exhibit 10.35 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
10.36 Leveraged Lease Guaranty Indemnification Agreement, dated as of May
16, 1997 by and between PanAmSat and Hughes Electronics Corporation
incorporated herein by reference to Exhibit 10.36 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
10.37 Fixed Price Contract between Hughes Communications Galaxy, Inc. and
Hughes Space & Communications Company for Galaxy XI HS702,
Spacecraft, Related Services and Documentation, Contract No. 96-HCG-
002, executed May 1997 is incorporated herein by reference to
Exhibit 10.37 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.38 Fixed Price Contract for PAS 1R and PAS 9 HS-702 Spacecraft, Related
Services and Documentation--Contract No. 97-HCG-001, dated as of
August 15, 1997, between Hughes Space and Communications Company,
Inc. and PanAmSat. (2)
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10.39 Transponder Sublease Agreement for Galaxy III-R between Hughes
Communications Galaxy, Inc. and California Broadcast Center, LLC,
dated April 21, 1997 is incorporated herein by reference to
Exhibit 10.39 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.40 Transponder Lease Agreement for Galaxy VIII(i) between Hughes
Communications Galaxy, Inc. and California Broadcast Center, LLC,
dated April 21, 1997 is incorporated herein by reference to
Exhibit 10.40 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.41.1 Form of Indemnity Agreement between PanAmSat and each of its
directors and executive officers is incorporated herein by
reference to Exhibit 10.41 to PanAmSat's Quarterly Report on Form
10-Q for the period ended June 30, 1997.*
10.41.2 Schedule identifying substantially identical agreements to the
Indemnity Agreement constituting Exhibit 10.41.1 hereto in favor
of Charles H. Noski, Frederick A. Landman, Patrick J. Costello,
Steven D. Dorfman, John J. Higgins, Ted G. Westerman, Dennis F.
Hightower, James M. Hoak, Joseph R. Wright, Jr., Michael T. Smith,
Lourdes Saralegui, Carl A. Brown, Kenneth N. Heintz, Robert A.
Bednarek, James W. Cuminale and David P. Berman.*
10.42 Credit Agreement, dated February 20, 1998, among PanAmSat, certain
lenders and Citicorp USA, Inc., as administrative agent.
10.43 Agreement, dated as of May 15, 1996, between PanAmSat
International and Patrick J. Costello is incorporated herein by
reference to Exhibit 10.11.19 to PanAmSat's Quarterly Report on
Form 10-Q for the period ended June 30, 1996.*
10.44 Agreement, dated as of March 21, 1997, between PanAmSat and
Patrick J. Costello.*
10.45 Agreement, dated as of May 15, 1996, between PanAmSat
International and Frederick A. Landman is incorporated herein by
reference to Exhibit 10.11.16 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.46 Agreement, dated as of May 15, 1996, between PanAmSat
International and Lourdes Saralegui is incorporated herein by
reference to Exhibit 10.11.17 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.47 Agreement, dated as of May 15, 1996, between PanAmSat
International and Robert A. Bednarek is incorporated herein by
reference to Exhibit 10.11.18 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.48 Agreement, dated as of May 15, 1996, between PanAmSat
International and James W. Cuminale is incorporated herein by
reference to Exhibit 10.11.20 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.49 Agreement, dated as of May 15, 1996, between PanAmSat
International and David P. Berman incorporated herein by reference
to Exhibit 10.11.21 to PanAmSat International's Quarterly Report
on Form 10-Q for the period ended June 30, 1996.*
10.50 Agreement, dated April 7, 1997, between PanAmSat and Hughes
Electronics Corporation, regarding the terms of assignment of
Kenneth N. Heintz to PanAmSat.*
21.1 Subsidiaries of PanAmSat.
24. l Powers of Attorney.
27.1 Financial Data Schedule.
- --------
(1) Portions of this Exhibit have been omitted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment with
respect thereto.
(2) Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.