Document
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
                 
 
 
FORM 6-K
 
 
  
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October, 2018
001-35878
(Commission File Number)
 
 
  
Intelsat S.A.
(Translation of registrant’s name into English)
 
 
  
4 rue Albert Borschette
Luxembourg
Grand Duchy of Luxembourg
L-1246
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F  ☒             Form 40-F  ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

 
  
INTELSAT S.A.
Quarterly Report for the three and nine months ended September 30, 2018
 
  
 
 


1

Table of Contents

TABLE OF CONTENTS
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
 
 

2

Table of Contents

INTRODUCTION
In this Quarterly Report, unless otherwise indicated or the context otherwise requires, (1) the terms “we,” “us,” “our,” “the Company” and “Intelsat S.A.” refer to Intelsat S.A. and its subsidiaries on a consolidated basis, (2) the term “Intelsat Holdings” refers to Intelsat Holdings S.A., Intelsat S.A.’s indirect wholly-owned subsidiary, (3) the term “Intelsat Investments” refers to Intelsat Investments S.A. (formerly Intelsat S.A.), Intelsat S.A.’s indirect wholly-owned subsidiary, (4) the term “Intelsat Luxembourg” refers to Intelsat (Luxembourg) S.A., Intelsat Investments’ direct wholly-owned subsidiary, (5) the term "Intelsat Envision" refers to Intelsat Envision Holdings LLC, Intelsat Luxembourg's direct wholly-owned subsidiary, (6) the terms “Intelsat Connect” and “ICF” refer to Intelsat Connect Finance S.A., Intelsat Envision's direct wholly-owned subsidiary, (7) the term “Intelsat Jackson” refers to Intelsat Jackson Holdings S.A., Intelsat Connect’s direct wholly-owned subsidiary, (8) the term “Intelsat US LLC” refers to Intelsat US LLC (formerly known as Intelsat Corporation), Intelsat Jackson’s indirect wholly-owned subsidiary and (9) the term “Intelsat General” refers to Intelsat General Communications LLC (formerly known as Intelsat General Corporation), our government business subsidiary.
In this Quarterly Report, unless the context otherwise requires, all references to transponder capacity or demand refer to transponder capacity or demand in the C-band and Ku-band frequencies only.
FINANCIAL AND OTHER INFORMATION
Unless otherwise indicated, all references to “dollars” and “$” in this Quarterly Report are to, and all monetary amounts in this Quarterly Report are presented in, U.S. dollars. Unless otherwise indicated, the financial information contained in this Quarterly Report has been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).
Certain monetary amounts, percentages and other figures included in this Quarterly Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
In this Quarterly Report, we refer to and rely on publicly available information regarding our industry and our competitors. Although we believe the information is reliable, we cannot guarantee the accuracy and completeness of the information and have not independently verified it.
FORWARD-LOOKING STATEMENTS
Some of the statements in this Quarterly Report on Form 6-K, or Quarterly Report, and oral statements made from time to time by our representatives constitute forward-looking statements that do not directly or exclusively relate to historical facts. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements as long as they are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements.
When used in this Quarterly Report, the words “may,” “will,” “might,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “intend,” “potential,” “outlook” and “continue,” and the negative of these terms, and other similar expressions are intended to identify forward-looking statements and information. Examples of these forward-looking statements include, but are not limited to, statements regarding the following: our intention to maximize the value of our spectrum rights, including the pursuit of partnerships to optimize new satellite business cases and the exploration of joint use of certain spectrum with the wireless sector in certain geographies; our expectations as to the potential timing of a final U.S. Federal Communications Commission (“FCC”) ruling with respect to our C-band joint-use proposal; the trends that we believe will impact our revenue and operating expenses in the future; and our expected capital expenditures in 2018 and during the next several years.
The forward-looking statements made in this Quarterly Report reflect our intentions, plans, expectations, assumptions, anticipations, projections, estimations, predictions, outlook and beliefs about future events. These forward-looking statements speak only as of the date of this Quarterly Report and are not guarantees of future performance or results and are subject to risks, uncertainties and other factors, many of which are outside of our control. These factors could cause actual results or developments to differ materially from the expectations expressed or implied in the forward-looking statements and include known and unknown risks. Known risks include, among others, the risks discussed in Item 3D—Risk Factors in our Annual Report on Form 20-F for the year ended December 31, 2017, the political, economic and legal conditions in the markets we are targeting for communications services or in which we operate, and other risks and uncertainties inherent in the telecommunications business in general and the satellite communications business in particular.

3

Table of Contents


The following list represents some, but not necessarily all, of the factors that could cause actual results to differ from historical results or those anticipated or predicted by these forward-looking statements:
 
risks associated with operating our in-orbit satellites;
satellite anomalies, launch failures, satellite launch and construction delays and in-orbit failures or reduced satellite performance;
potential changes in the number of companies offering commercial satellite launch services and the number of commercial satellite launch opportunities available in any given time period that could impact our ability to timely schedule future launches and the prices we pay for such launches;
our ability to obtain new satellite insurance policies with financially viable insurance carriers on commercially reasonable terms or at all, as well as the ability of our insurance carriers to fulfill their obligations;
possible future losses on satellites that are not adequately covered by insurance;
U.S. and other government regulation;
changes in our contracted backlog or expected contracted backlog for future services;
pricing pressure and overcapacity in the markets in which we compete;
our ability to access capital markets for debt or equity;
the competitive environment in which we operate;
customer defaults on their obligations to us;
our international operations and other uncertainties associated with doing business internationally;
litigation; and
other risks discussed in our Annual Report or this Quarterly Report.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee our future results, level of activity, performance or achievements. Because actual results could differ materially from our intentions, plans, expectations, assumptions, anticipations, projections, estimations, predictions, outlook and beliefs about the future, you are urged not to rely on forward-looking statements in this Quarterly Report and to view all forward-looking statements made in this Quarterly Report with caution. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

4

Table of Contents

PART I. FINANCIAL INFORMATION
 
Item 1.    Financial Statements
INTELSAT S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
 
As of
December 31,
2017
 
As of
September 30,
2018
 
 
 
(unaudited)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
525,215

 
$
660,800

Restricted cash
16,176

 
20,500

Receivables, net of allowances of $29,669 in 2017 and $28,681 in 2018
221,223

 
250,334

Contract assets

 
40,726

Prepaid expenses and other current assets
56,862

 
31,795

Total current assets
819,476

 
1,004,155

Satellites and other property and equipment, net
5,923,619

 
5,608,809

Goodwill
2,620,627

 
2,620,627

Non-amortizable intangible assets
2,452,900

 
2,452,900

Amortizable intangible assets, net
349,584

 
320,723

Contract assets, net of current portion

 
86,010

Other assets
443,830

 
421,099

Total assets
$
12,610,036

 
$
12,514,323

LIABILITIES AND SHAREHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable and accrued liabilities
$
116,396

 
$
96,321

Taxes payable
12,007

 
5,774

Employee related liabilities
29,328

 
31,236

Accrued interest payable
263,207

 
202,956

Current portion of long-term debt
96,572

 

Contract liabilities

 
152,284

Deferred satellite performance incentives
25,780

 
32,679

Deferred revenue
149,749

 

Other current liabilities
47,287

 
43,901

Total current liabilities
740,326

 
565,151

Long-term debt, net of current portion
14,112,086

 
14,270,498

Contract liabilities, net of current portion

 
1,135,391

Deferred satellite performance incentives, net of current portion
215,352

 
218,078

Deferred revenue, net of current portion
794,707

 

Deferred income taxes
48,434

 
94,766

Accrued retirement benefits
191,079

 
139,968

Other long-term liabilities
296,616

 
66,122

Shareholders’ deficit:
 
 


Common shares; nominal value $0.01 per share
1,196

 
1,369

Paid-in capital
2,173,367

 
2,549,281

Accumulated deficit
(5,894,659
)
 
(6,495,081
)
Accumulated other comprehensive loss
(87,774
)
 
(46,804
)
Total Intelsat S.A. shareholders’ deficit
(3,807,870
)
 
(3,991,235
)
Noncontrolling interest
19,306

 
15,584

Total liabilities and shareholders’ deficit
$
12,610,036

 
$
12,514,323

See accompanying notes to unaudited condensed consolidated financial statements.

5

Table of Contents

INTELSAT S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
 
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2018
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Revenue
$
538,759

 
$
536,922

 
$
1,610,472

 
$
1,618,418

Operating expenses:
 
 
 
 
 
 
 
Direct costs of revenue (excluding depreciation and amortization)
78,614

 
83,308

 
243,511

 
242,357

Selling, general and administrative
48,238

 
42,904

 
153,442

 
153,051

Depreciation and amortization
178,742

 
173,441

 
535,384

 
513,514

Total operating expenses
305,594

 
299,653

 
932,337

 
908,922

Income from operations
233,165

 
237,269

 
678,135

 
709,496

Interest expense, net
261,834

 
299,777

 
756,180

 
885,381

Loss on early extinguishment of debt
(4,565
)
 
(204,056
)
 
(4,109
)
 
(181,907
)
Other income, net
2,665

 
785

 
6,421

 
2,380

Loss before income taxes
(30,569
)

(265,779
)
 
(75,733
)
 
(355,412
)
Provision for (benefit from) income taxes
(1,153
)
 
107,863

 
10,125

 
129,919

Net loss
(29,416
)

(373,642
)
 
(85,858
)
 
(485,331
)
Net income attributable to noncontrolling interest
(996
)
 
(989
)
 
(2,919
)
 
(2,929
)
Net loss attributable to Intelsat S.A.
$
(30,412
)

$
(374,631
)
 
$
(88,777
)
 
$
(488,260
)
Net loss per common share attributable to Intelsat S.A.:
 
 
 
 
 
 
 
Basic
$
(0.26
)
 
$
(2.74
)
 
$
(0.75
)
 
$
(3.85
)
Diluted
$
(0.26
)
 
$
(2.74
)
 
$
(0.75
)
 
$
(3.85
)
See accompanying notes to unaudited condensed consolidated financial statements.

6

Table of Contents

INTELSAT S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2018
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Net loss
$
(29,416
)
 
$
(373,642
)
 
$
(85,858
)
 
$
(485,331
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Defined benefit retirement plans:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of unrecognized prior service credits, net of tax included in other income (expense), net
27

 
(210
)
 
23

 
(214
)
Reclassification adjustment for amortization of unrecognized actuarial loss, net of tax included in other income (expense), net
566

 
1,149

 
1,651

 
3,025

Benefit plan amendment, net of tax of $0.7 million

 
38,510

 

 
38,510

Marketable securities:
 
 
 
 
 
 
 
Unrealized gains on investments, net of tax
147

 

 
429

 

Reclassification adjustment for realized gain on investments, net of tax
(32
)
 

 
(61
)
 

Reclassification adjustment for pension assets’ gains, net of tax included in other income (expense), net

 

 

 
(351
)
Derivatives:
 
 
 
 
 
 
 
Unrealized gain on fair value of derivatives, net of tax
329

 

 
1,223

 

Other comprehensive income
1,037

 
39,449

 
3,265

 
40,970

Comprehensive loss
(28,379
)
 
(334,193
)
 
(82,593
)
 
(444,361
)
Comprehensive income attributable to noncontrolling interest
(996
)
 
(989
)
 
(2,919
)
 
(2,929
)
Comprehensive loss attributable to Intelsat S.A.
$
(29,375
)
 
$
(335,182
)
 
$
(85,512
)
 
$
(447,290
)
See accompanying notes to unaudited condensed consolidated financial statements.

7

Table of Contents

INTELSAT S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Cash flows from operating activities:
 
 
 
Net loss
$
(85,858
)
 
$
(485,331
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
535,384

 
513,514

(Benefit) provision for doubtful accounts
(5,891
)
 
24

Foreign currency transaction (gain) loss
(2,363
)
 
8,107

Loss on disposal of assets
26

 
19

Share-based compensation
13,848

 
4,642

Deferred income taxes
(10,610
)
 
84,752

Amortization of discount, premium, issuance costs and related costs
36,191

 
38,662

Loss on early extinguishment of debt
4,109

 
181,907

Amortization of actuarial loss and prior service credits for retirement benefits
2,537

 
3,405

Unrealized gains on derivatives and investments

 
(34,928
)
Other non-cash items
(301
)
 
(532
)
Changes in operating assets and liabilities:
 
 
 
Receivables
14,611

 
(42,740
)
Prepaid expenses, contract and other assets
(1,772
)
 
3,499

Accounts payable and accrued liabilities
(43,447
)
 
(4,429
)
Accrued interest payable
90,190

 
(60,251
)
Deferred revenue and contract liabilities
(85,272
)
 
(20,957
)
Accrued retirement benefits
(10,545
)
 
(12,514
)
Other long-term liabilities
(8,734
)
 
(2,635
)
Net cash provided by operating activities
442,103

 
174,214

Cash flows from investing activities:
 
 
 
Payments for satellites and other property and equipment (including capitalized interest)
(404,122
)
 
(175,977
)
Purchase of cost method investments
(16,000
)
 
(15,000
)
Capital contributions to unconsolidated affiliates
(23,355
)
 
(39,693
)
Proceeds from insurance settlements
28,351

 
5,709

Other proceeds from satellites

 
7,500

Net cash used in investing activities
(415,126
)
 
(217,461
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
1,500,000

 
3,880,625

Payments on debt exchange
(14
)
 

Repayments of long-term debt
(1,500,000
)
 
(3,827,801
)
Debt issuance costs
(21,188
)
 
(47,504
)
Proceeds from stock issuance, net of stock issuance costs

 
224,250

Payment of premium on early extinguishment of debt

 
(19,648
)
Other payments for satellites
(35,396
)
 

Principal payments on deferred satellite performance incentives
(33,976
)
 
(18,790
)
Dividends paid to noncontrolling interest
(6,596
)
 
(6,651
)
Proceeds from exercise of employee stock options
263

 
3,197

Other financing activities
415

 
385

Net cash provided by (used in) financing activities
(96,492
)
 
188,063

Effect of exchange rate changes on cash, cash equivalents and restricted cash
1,726

 
(4,907
)
Net change in cash, cash equivalents and restricted cash
(67,789
)
 
139,909

Cash, cash equivalents, and restricted cash beginning of period
666,024


541,391

Cash, cash equivalents, and restricted cash end of period
$
598,235

 
$
681,300

 
 
 
 

8

Table of Contents

Supplemental cash flow information:
 
 
 
Interest paid, net of amounts capitalized
$
631,676

 
$
857,926

Income taxes paid, net of refunds
30,394

 
53,690

Supplemental disclosure of non-cash investing activities:
 
 
 
Accrued capital expenditures
$
17,294

 
$
14,599

Capitalization of deferred satellite performance incentives
44,445

 
28,161

See accompanying notes to unaudited condensed consolidated financial statements.

9

Table of Contents

INTELSAT S.A.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2018
Note 1 General
Basis of Presentation
The accompanying condensed consolidated financial statements of Intelsat S.A. and its subsidiaries (“Intelsat S.A.,” “we,” “us,” “our” or the “Company”) have not been audited, but are prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. References to U.S. GAAP issued by the Financial Accounting Standards Board (“FASB”) in these footnotes are to the FASB Accounting Standards Codification (“ASC”). The unaudited condensed consolidated financial statements include all adjustments (consisting only of normal and recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of these financial statements. The results of operations for the periods presented are not necessarily indicative of operating results for the full year or for any future period. The condensed consolidated balance sheet as of December 31, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 20-F for the year ended December 31, 2017 on file with the U.S. Securities and Exchange Commission.
Use of Estimates
The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these condensed consolidated financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. Accordingly, ultimate results could differ from those estimates.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in FASB ASC Topic 605 – Revenue Recognition. The guidance in ASU 2014-09 clarifies the principles for recognizing revenue by creating a common revenue standard for U.S. GAAP (“ASC 606”). The FASB issued several amendments to the standard, including clarification of accounting for licenses of intellectual property and identifying performance obligations.
We adopted the standard effective January 1, 2018 using the modified retrospective method. We recognized the cumulative effect of initially applying the new standard as an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Based on our assessment, the adoption of the new standard impacts the total consideration for prepayment contracts, accounting of incremental costs for obtaining a contract, allocation of the transaction price to performance obligations and accounting for contract modifications, and requires additional disclosures.










10

Table of Contents


The cumulative effects of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASU 2014-09 were as follows (in thousands):
 
 
As of
December 31,
2017
 
Adjustment
 
As of
January 1,
2018
Condensed Consolidated Balance Sheets

 

 

Assets

 

 

Receivables
$
221,223

 
$
(11,025
)
 
$
210,198

Prepaid expenses and other current assets
56,862

 
(28,545
)
 
28,317

Contract assets

 
40,618

 
40,618

Contract assets, net of current portion

 
97,148

 
97,148

Other assets
443,830

 
(74,643
)
 
369,187

Liabilities

 

 

Accounts payable and accrued liabilities
$
116,396

 
$
(4,071
)
 
$
112,325

Deferred revenue
149,749

 
(149,749
)
 

Contract liabilities

 
143,705

 
143,705

Deferred revenue, net of current portion
794,707

 
(794,707
)
 

Contract liabilities, net of current portion

 
1,164,138

 
1,164,138

Deferred income taxes
48,434

 
(43,846
)
 
4,588

Other long-term liabilities
296,616

 
(10,176
)
 
286,440

Shareholders’ deficit

 

 

Accumulated deficit
$
(5,894,659
)
 
$
(281,741
)
 
$
(6,176,400
)

The cumulative effect adjustment was comprised of $347.0 million, ($8.5) million, ($7.0) million, and ($49.7) million for the significant financing component, timing of revenue recognition on our multi-product contracts that include both the provision of services and the delivery of equipment that are distinct, cost to obtain a contract adjustment and the related cumulative tax impact, respectively.






























11

Table of Contents


In accordance with the new revenue standard requirements, the disclosure of the impact of adoption of ASC 606 on our condensed consolidated statements of operations, balance sheets, and statements of cash flows was as set forth in the tables below (in thousands). The impact to our condensed consolidated statement of other comprehensive income was an increase in net loss of $40.8 million and $46.6 million for the three and nine months ended September 30, 2018, respectively.
 
For the Three Months Ended September 30, 2018
 
As Reported
 
Balances without
the adoption of
ASC 606
 
Effect of adoption
increase
(decrease)
Condensed Consolidated Statements of Operations

 

 

Revenue
$
536,922

 
$
511,864

 
$
25,058

Direct costs of revenue (excluding depreciation and amortization)
83,308

 
84,194

 
(886
)
Selling, general and administrative
42,904

 
43,254

 
(350
)
Interest expense, net
299,777

 
270,874

 
28,903

Other income, net
785

 
785

 

Provision for income taxes(1)
107,863

 
69,700

 
38,163

Net loss
(373,642
)
 
(332,869
)
 
(40,773
)
Net loss attributable to Intelsat S.A.
(374,631
)
 
(333,858
)
 
(40,773
)
Net loss per common share attributable to Intelsat S.A.:


 


 


    Basic
$
(2.74
)
 
$
(2.44
)
 
$
(0.30
)
    Diluted
$
(2.74
)
 
$
(2.44
)
 
$
(0.30
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Nine Months Ended September 30, 2018
 
As Reported
 
Balances without
the adoption of
ASC 606
 
Effect of adoption
increase
(decrease)
Condensed Consolidated Statements of Operations
 
 

 
 
Revenue
$
1,618,418

 
$
1,543,174

 
$
75,244

Direct costs of revenue (excluding depreciation and amortization)
242,357

 
245,196

 
(2,839
)
Selling, general and administrative
153,051

 
153,536

 
(485
)
Interest expense, net
885,381

 
798,144

 
87,237

Other income, net
2,380

 
3,168

 
(788
)
Provision for income taxes(1)
129,919

 
92,746

 
37,173

Net loss
(485,331
)
 
(438,700
)
 
(46,631
)
Net loss attributable to Intelsat S.A.
(488,260
)
 
(441,629
)
 
(46,631
)
Net loss per common share attributable to Intelsat S.A.:
 
 


 


    Basic
$
(3.85
)
 
$
(3.48
)
 
$
(0.37
)
    Diluted
$
(3.85
)
 
$
(3.48
)
 
$
(0.37
)

 
  
(1) Provision for income taxes includes a deferred tax asset that was established upon adoption of ASC 606 that was eliminated as a result of the 2018 Reorganization (see Note 12 - Income Taxes).



12

Table of Contents


As of September 30, 2018

As Reported
 
Balances without
the adoption of
ASC 606
 
Effect of adoption
increase
(decrease)
Condensed Consolidated Balance Sheets

 

 

Assets


 


 


Receivables
$
250,334

 
$
256,974

 
$
(6,640
)
Prepaid expenses and other current assets
31,795

 
62,933

 
(31,138
)
Contract assets
40,726

 

 
40,726

Contract assets, net of current portion
86,010

 

 
86,010

Other assets
421,099

 
491,292

 
(70,193
)
Liabilities
 
 
 
 
 
Accounts payable and accrued liabilities
$
96,321

 
$
101,803

 
$
(5,482
)
Deferred revenue

 
151,369

 
(151,369
)
Contract liabilities
152,284

 

 
152,284

Deferred revenue, net of current portion

 
767,310

 
(767,310
)
Contract liabilities, net of current portion
1,135,391

 

 
1,135,391

Taxes payable
5,774

 
11,389

 
(5,615
)
Other long-term liabilities
66,122

 
73,246

 
(7,124
)
Deferred income taxes
94,766

 
98,404

 
(3,638
)
Shareholders’ deficit
 
 
 
 
 
Accumulated deficit
$
(6,495,081
)
 
$
(6,166,709
)
 
$
(328,372
)

 
For the Nine Months Ended September 30, 2018
 
As Reported
 
Balances without
the adoption of
ASC 606
 
Effect of adoption
increase
(decrease)
Condensed Consolidated Statement of Cash Flows
 
 
 
 
 
Cash flows from operating activities
 
 
 
 
 
Net loss
$
(485,331
)
 
$
(438,700
)
 
$
(46,631
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
 
Deferred income taxes
84,752

 
44,544

 
40,208

Other non-cash items
714,820

 
714,820

 

Changes in operating assets and liabilities:
 
 
 
 
 
Receivables
(42,740
)
 
(38,355
)
 
(4,385
)
Prepaid expenses, contract and other assets
3,499

 
(5,674
)
 
9,173

Accounts payable and accrued liabilities
(4,429
)
 
2,597

 
(7,026
)
Accrued interest payable
(60,251
)
 
(60,251
)
 

Deferred revenue and contract liabilities
(20,957
)
 
(26,566
)
 
5,609

Accrued retirement benefits
(12,514
)
 
(12,514
)
 

Other long-term liabilities
(2,635
)
 
(5,687
)
 
3,052

Net cash provided by operating activities
$
174,214

 
$
174,214

 
$

Refer to Note 14—Business and Geographic Segment Information for the required disclosures related to the disaggregation of revenue.
We described below our accounting policy changes related to revenue recognition as a result of adopting ASC 606. Our accounting policies and reported amounts with respect to fiscal year 2017 and prior were not affected by the adoption of ASC 606.
Revenue from Contracts with Customers
We earn revenue primarily by providing services over satellite transponder capacity to our customers. Our customers generally obtain satellite services from us by placing an order pursuant to one of several master customer service agreements and related service orders. The service agreements specify, among other things, the amount of satellite bandwidth or throughput to be provided, whether service will be non-pre-emptible or pre-emptible and the service term. Most services are full time in nature, with service terms ranging from one year to as long as 16 years. Occasional use services used for video applications can be for much shorter periods, as small as

13

Table of Contents

including increments of one hour. Our service agreements offer different service types, including transponder services, managed services, and channel, which are all services that are provided on, or used to provide access to, our global network. We refer to these services as on-network services. Our service agreements also cover services that we procure from third parties and resell, which we refer to as off-network services. These services can include transponder services and other satellite-based transmission services sourced from other operators, often in frequencies not available on our network.
To determine the proper revenue recognition method for contracts, we evaluate whether two or more services should be combined and accounted for as a single performance obligation. Our specific revenue recognition policies are as follows:
Satellite Utilization Charges. The Company’s contracts for satellite utilization services often contain multiple service orders for the provision of capacity on or over different beams, satellites, frequencies, geographies or time periods. Under each separate service order, the Company’s satellite services, comprised of transponder services, managed services, channel services, and occasional use managed services, are delivered in a series of time periods that are distinct from each other and have the same pattern of transfer to the customer. In each period, the Company’s obligation is to make those services available to the customer. Throughout each period of services being provided, the customer simultaneously receives and consumes the benefits, resulting in revenue recognition over time. We have certain obligations, including providing spare or substitute capacity if available, in the event of satellite service failure under certain long-term agreements. We are generally not obligated to refund satellite utilization payments previously made.
Satellite Related Consulting and Technical Services. We recognize revenue from the provision of consulting services as those services are performed. We recognize revenue for consulting services with specific performance obligations, such as transfer orbit support services or training programs over the service period.
Tracking, Telemetry and Commanding (“TT&C”). We earn TT&C services revenue from providing operational services to other satellite owners and from certain customers on our satellites. TT&C agreements entered into in connection with our satellite utilization contracts are typically for the period of the related service agreement. We recognize this revenue over the term of the service agreement.
In-Orbit Backup Services. We provide back-up transponder capacity that is held on reserve for certain customers on agreed-upon terms. We recognize revenues for in-orbit protection services over the term of the related agreement.
Revenue Share Arrangements. We recognize revenues under revenue share agreements for satellite-related services either on a gross or net basis in accordance with the principal versus agent considerations of ASC 606.
We occasionally sell products or services individually or in some combination to our customers. When products or services are sold together, we allocate revenue for each performance obligation based on each obligation’s relative selling price. In these arrangements, revenue for products is recognized when the transfer of control passes to the customer while service revenue is recognized over the service term.
Contract Assets
Contract assets include unbilled amounts typically resulting from sales under our long-term contracts when the total contract value is recognized on a straight-line basis and the revenue recognized exceeds the amount billed to the customer.
Contract Liabilities
Contract liabilities consist of advance payments and collections in excess of revenue recognized and deferred revenue. Our contracts at times contain prepayment terms that range from one month to one year in advance of providing the service. As a practical expedient, we do not need to adjust the promised amount of consideration for the effects of a significant financing component if we expect, at contract inception, that the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service to be one year or less. For a small subset of contracts with advance payments that contain prepayment terms greater than one year and up to 15 years, we assess whether a significant financing component exists by considering the difference between the amount of promised consideration and the cash selling price of the promised services. The prepayment amount is generally based on a standard methodology that discounts the total of the standard monthly charges over the service term to determine the prepayment amount, resulting in a difference between the amount of promised consideration and the cash selling price of the promised services. The Company considers the timing difference between payment and the promised transfer of services, combined with the Company’s incremental borrowing rates, to determine whether a significant financing component exists. When a significant financing component exists, the amount of revenue recognized exceeds the amount of cash received from the customer. After receiving cash from the customer but prior to the Company providing services, the Company records additional contract liabilities as well as offsetting interest expense to reflect the upfront financing the Company is effectively receiving from the customer.

14

Table of Contents

Once the Company begins providing services, additional interest expense is recorded each period, using the effective interest method, as well as corresponding additional revenue which is recognized ratably over the service period.
For the nine months ended September 30, 2018, we recognized revenue of $192.0 million that was included in the contract liability balance as of January 1, 2018. In addition, the total amount of consideration included in contract assets as of January 1, 2018 that became unconditional for the nine months ended September 30, 2018 was $11.1 million.
Our remaining performance obligation is our expected future revenue under existing customer contracts, and includes both cancelable and non-cancelable contracts. Our remaining performance obligation was approximately $8.4 billion as of September 30, 2018, approximately 88% of which related to contracts that were non-cancelable and approximately 11% related to contracts that were cancelable subject to substantial termination fees. We assess the contract term of our cancelable contracts as the full stated term of the contract assuming each contract is not canceled since the termination penalty upon cancellation is substantive. As of September 30, 2018, the weighted average remaining customer contract life was approximately 5.2 years. Approximately 26%, 26%, and 48% of our total remaining performance obligation as of September 30, 2018 is expected to be recognized as revenue during 2018 and 2019, 2020 and 2021, and 2022 and thereafter, respectively. The amount included in the remaining performance obligation represents the full service charge for the duration of the contract and does not include termination fees. The amount of the termination fees, which is not included in the remaining performance obligation amount, is generally calculated as a percentage of the remaining performance obligation associated with the contract. In certain cases of breach for non-payment or customer financial distress or bankruptcy, we may not be able to recover the full value of certain contracts or termination fees. Our remaining performance obligation includes 100% of the remaining performance obligation of our consolidated ownership interests, which is consistent with the accounting for our ownership interest in these entities.
Assets Recognized from the Costs to Obtain a Customer Contract
We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that our sales incentive program meets the requirements to be capitalized due to the incremental nature of the costs and the expectation that the Company will recover such costs. The assets recognized from the costs to obtain a customer contract are amortized over a period that is consistent with the transfer to the customer of the services to which the asset relates. We capitalized $2.0 million and $5.0 million for our sales incentive program and amortized $1.6 million and $4.5 million for the three and nine months ended September 30, 2018, respectively.
Contract Modifications
Contracts are often modified to account for changes in contract specifications or requirements. We consider contract modifications to exist when the modification either creates new rights or obligations or changes the existing enforceable rights and obligations of either party. Most of our contract modifications are for goods and services that are distinct from the existing contract, as they consist of additional months of service priced at the Company’s standalone selling prices of the additional services and are therefore treated as separate contracts. For contract modifications that do not result in additional distinct goods or services, the effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue.
Significant Judgments
We occasionally enter into certain contracts in which the customer makes payments in advance of services to be delivered, which may be years in the future. The reasons for the prepayments in these contracts vary, but generally can be either for the customer’s benefit or for the Company’s benefit (ability to use the cash received from the customer to pay for the construction of a satellite asset). The determination of whether contracts with a prepayment provision contain a significant financing component requires judgment. The Company makes this determination based on various factors, including the differences between the amount of promised consideration and cash selling prices, the length of time between payment and the transfer of services and prevailing interest rates in the market.
Our contracts generally contain multiple performance obligations. When a contract is separated into multiple performance obligations, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling price of the promised good or service underlying such performance obligation. Judgment is required to determine the standalone selling price for each distinct performance obligation. In order to estimate standalone selling prices, we use an adjusted market assessment approach which involves an evaluation of the market and an estimate of the price that our customers are willing to pay, or an expected cost plus a margin approach.

15

Table of Contents

When more than one party is involved in providing goods or services to a customer, we generally recognize the transaction on a gross basis due to the level of control that we have prior to the transfer of the good or service. Judgment is required in determining whether we are the principal or the agent in transactions involving third parties.
Statement of Cash Flows
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses specific issues relating to diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Additionally, in November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force), which requires that amounts described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are effective for interim and annual periods beginning after December 15, 2017 for public business entities, on a retrospective basis.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our condensed consolidated balance sheets to the total sum of these same amounts reported in our condensed consolidated statements of cash flows:
 
 
As of
September 30,
2017
 
As of
September 30,
2018
Cash and cash equivalents
$
580,694

 
$
660,800

Restricted cash
17,541

 
20,500

Total cash, cash equivalents and restricted cash reported in the statements of cash flows
$
598,235

 
$
681,300

Restricted cash represents legally restricted amounts being held as a compensating balance for certain outstanding letters of credit.
We adopted ASU 2016-01, ASU 2016-16, ASU 2017-07, and ASU 2017-09 in the first quarter of 2018. See Note 8—Investments, Note 12— Income Taxes, Note 6—Retirement Plans and Other Retiree Benefits, and Note 4—Share-Based and Other Compensation Plans, respectively.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-10 Codification Improvements to Topic 842, Leases and ASU 2018-11 Targeted Improvements, which amend and clarify aspects of the guidance issued in ASU 2016-02. The initial release of ASU 2016-02 required the recognition and measurement of leases at the beginning of the earliest period presented using a modified retrospective approach. However, in July 2018, the FASB issued ASU 2018-11 which provides an alternative transition method (the “effective date method”). Under this new method, the cumulative-effect adjustment to the opening balance of retained earnings is recognized on the date of adoption. We have elected to adopt ASC 842 using the effective date method. Our implementation team is in the process of evaluating the impact that the ASUs will have on our consolidated financial statements and associated disclosures. As part of our evaluation, we have elected to adopt the package of practical expedients available in ASC 842 and the short-term lease exemption.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how companies measure and recognize credit impairment for any financial assets. The standard will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are within the scope of the standard. ASU 2016-13 is effective for interim and annual periods beginning after December 15, 2019 for public business entities that are SEC filers, on a modified retrospective basis. Early adoption is permitted for interim and annual periods beginning after December 15, 2018. We are in the process of evaluating the impact that ASU 2016-13 will have on our consolidated financial statements and associated disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which is intended to simplify the subsequent measurement of goodwill. The amendments in ASU 2017-04 modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity will no longer determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities, as if that reporting unit had been acquired in a business combination. ASU 2017-04 will be effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019 for public business entities, on a prospective basis. Early adoption

16

Table of Contents

is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. When adopted, we will measure impairment using the difference between the carrying amount and the fair value of the reporting unit, if required.
In February 2018, the FASB issued ASU 2018-02, Income Statement — Reporting Comprehensive Income (Topic 220), which allows for an optional reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act. Consequently, the amendments eliminated the stranded tax effects resulting from the U.S. Tax Cuts and Jobs Act for those entities that elect the optional reclassification. The amendments in this update will also require certain disclosures about stranded tax effects. ASU 2018-02 is effective for all entities for interim and annual periods beginning after December 15, 2018. We are in the process of evaluating the impact that ASU 2018-02 will have on our consolidated financial statements and associated disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), as part of its disclosure framework project to improve the effectiveness of disclosures in the notes to financial statements. ASU 2018-13 modifies disclosure requirements on fair value measurements in Topic 820, and is effective for all entities for interim and annual periods beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is allowed for any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption for the additional disclosures until their effective date. We are in the process of evaluating the impact that ASU 2018-13 will have on our consolidated financial statements and associated disclosures.
In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), as part of its disclosure framework project to improve the effectiveness of disclosures in the notes to financial statements. ASU 2018-14 modifies and clarifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments remove certain disclosure requirements and require additional disclosures including the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates, an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period, the projected benefit obligation "PBO" and fair value of plan assets for plans with PBOs in excess of plan assets, and the accumulated benefit obligation "ABO" and fair value of plan assets for plans with ABOs in excess of plan assets. ASU 2018-14 is effective for public business entities for fiscal years ending after December 15, 2020, on a retrospective basis to all periods presented with early adoption allowed. We are in the process of evaluating the impact that ASU 2018-14 will have on our consolidated financial statements and associated disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40), to improve current U.S. GAAP by clarifying the accounting for implementation costs of a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement (hosting arrangement) that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments require costs for implementation activities in the application development stage to be capitalized depending on the nature of the costs, and costs incurred during the preliminary project and post-implementation stages to be expensed as the activities are performed. ASU 2018-15 also requires the entity (customer) to expense capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, and the entity (customer) to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement, as well as classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. ASU 2018-15 is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. ASU 2018-15 can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption, with early adoption allowed. We are in the process of evaluating the impact that ASU 2018-15 will have on our consolidated financial statements and associated disclosures.
Note 2 Share Capital
Under our Articles of Incorporation, we have an authorized share capital of $10.0 million, represented by 1.0 billion shares of any class with a nominal value of $0.01 per share. At September 30, 2018, there were 136.9 million common shares issued and outstanding.
In June 2018, Intelsat S.A. completed an offering of 15,498,652 common shares, nominal value $0.01 per share, at a public offering price of $14.84 per common share.

17

Table of Contents

Note 3 Net Loss per Share
Basic earnings per share (“EPS”) is computed by dividing net loss attributable to Intelsat S.A.’s common shareholders by the weighted average number of common shares outstanding during the periods.
The following table sets forth the computation of basic and diluted net loss per share attributable to Intelsat S.A.:
 
(in thousands, except per share data or where otherwise noted)
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2018
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Numerator:
 
 
 
 
 
 
 
Net loss
$
(29,416
)
 
$
(373,642
)
 
$
(85,858
)
 
$
(485,331
)
Net income attributable to noncontrolling interest
(996
)
 
(989
)
 
(2,919
)
 
(2,929
)
Net loss attributable to Intelsat S.A.
(30,412
)
 
(374,631
)
 
(88,777
)
 
(488,260
)
Net loss attributable to common shareholders
(30,412
)
 
(374,631
)
 
(88,777
)
 
(488,260
)
Numerator for Basic EPS - loss available to common shareholders
(30,412
)
 
(374,631
)
 
(88,777
)
 
(488,260
)
Numerator for Diluted EPS
(30,412
)
 
(374,631
)
 
(88,777
)
 
(488,260
)
Denominator:
 
 
 
 
 
 
 
Basic weighted average shares outstanding (in millions)
119.0

 
136.8

 
118.7

 
126.9

Diluted weighted average shares outstanding (in millions)
119.0

 
136.8

 
118.7

 
126.9

Basic net loss per common share attributable to Intelsat S.A.
$
(0.26
)
 
$
(2.74
)
 
$
(0.75
)
 
$
(3.85
)
Diluted net loss per common share attributable to Intelsat S.A.
$
(0.26
)
 
$
(2.74
)
 
$
(0.75
)
 
$
(3.85
)
Due to a net loss for the three and nine months ended September 30, 2017 and 2018, there were no dilutive securities, and therefore, basic and diluted EPS were the same. The weighted average number of shares that could potentially dilute basic EPS in the future was 1.9 million and 4.9 million (consisting of restricted share units and options to purchase common shares) for the three months ended September 30, 2017 and 2018, respectively, and 1.2 million and 4.5 million for the nine months ended September 30, 2017 and 2018, respectively.
In June 2018, Intelsat S.A. completed an offering of $402.5 million aggregate principal amount of its 4.5% Convertible Senior Notes due 2025 (the “2025 Convertible Notes”). The 22.1 million shares underlying the conversion option in the 2025 Convertible Notes are not considered in the dilutive earnings per share calculation, as the Company is in a net loss position and the inclusion would be anti-dilutive. We do not expect to settle the principal amount of the 2025 Convertible Notes in cash, and therefore use the if-converted method for calculating any potential dilutive effect of the conversion on diluted net income per share, if applicable. The 2025 Convertible Notes were not eligible for conversion as of September 30, 2018.
Note 4 Share-Based and Other Compensation Plans
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which is intended to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under ASU 2017-09 modification accounting is required only if the fair value (or calculated intrinsic value, if those amounts are being used to measure the award under ASC 718), the vesting conditions, or the classification of the award changes as a result of the change in terms or conditions. ASU 2017-09 is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The adoption of this standard did not have an impact on our condensed consolidated financial statements and associated disclosures. We will continue to evaluate the impact of ASU 2017-09 as any modifications occur.
In April 2013, our board of directors adopted the amended and restated Intelsat Global, Ltd. 2008 Share Incentive Plan (as amended, the “2008 Equity Plan”). Also in April 2013, our board of directors adopted the Intelsat S.A. 2013 Equity Incentive Plan (the “2013 Equity Plan”). No new awards may be granted under the 2008 Equity Plan.
The 2013 Equity Plan provides for a variety of equity based awards, including incentive stock options (within the meaning of Section 422 of the United States Internal Revenue Service Tax Code), restricted shares, restricted share units (“RSUs”), other share-

18

Table of Contents

based awards and performance compensation awards. Effective June 16, 2016, we increased the aggregate number of common shares authorized for issuance under the 2013 Equity Plan to 20.0 million common shares.
For all share-based awards, we recognize the compensation costs over the vesting period during which the employee provides service in exchange for the award. During the nine months ended September 30, 2017 and 2018, we recorded compensation expense of $13.8 million and $4.6 million, respectively.
Time-based RSUs
We granted 1.3 million time-based RSUs during the nine months ended September 30, 2018. These RSUs vest over three years from the date of grant in equal annual installments.
The fair value of time-based RSUs is deemed to be the market price of common shares on the date of grant. The weighted average grant date fair value of time-based RSUs granted during the nine months ended September 30, 2018 was $5.66 per RSU.
Performance-based RSUs
We granted 0.9 million performance-based RSUs during the nine months ended September 30, 2018. These RSUs vest after three years from the date of grant upon achievement of an adjusted EBITDA target and achievement of a relative shareholder return, which is based on our relative shareholder return percentile ranking versus the S&P 900 Index as defined in the grant agreement.
We measure the fair value of performance-based RSUs at the date of grant using the market price of our common shares (to measure the portion of the award based on the adjusted EBITDA target).
The weighted average grant date fair value of performance-based RSUs granted during the nine months ended September 30, 2018 was $3.51 per RSU.
Note 5 Fair Value Measurements
FASB ASC Topic 820, Fair Value Measurements and Disclosure (“FASB ASC 820”) defines fair value, establishes a market-based framework or hierarchy for measuring fair value and provides for certain required disclosures about fair value measurements. The guidance is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value but does not require any new fair value measurements.
The fair value hierarchy prioritizes the inputs used in valuation techniques into three levels as follows:
 
Level 1—unadjusted quoted prices for identical assets or liabilities in active markets;
Level 2—quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable or that can be corroborated by observable market data by correlation; and
Level 3—unobservable inputs based upon the reporting entity’s internally developed assumptions which market participants would use in pricing the asset or liability.
We have identified investments in marketable securities, interest rate financial derivative instruments, warrant and put option embedded derivative instruments as items that meet the criteria of the disclosure requirements and fair value framework of FASB ASC 820.







19

Table of Contents


The following tables present assets and liabilities measured and recorded at fair value in our condensed consolidated balance sheets on a recurring basis and their corresponding level within the fair value hierarchy (in thousands), excluding long-term debt (see Note 10—Long-Term Debt). No transfers between Level 1, Level 2 and Level 3 fair value measurements occurred during the nine months ended September 30, 2018.
 
 
 
 
Fair Value Measurements at December 31, 2017
 
Description
As of December 31, 2017
 
Quoted Prices in Active
Markets for Identical
Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
Assets
 
 
 
 
 
 
 
 
Marketable securities(1)
$
5,776

 
$
5,776

 
$

 
$

 
Undesignated interest rate cap contracts(2)
22,336

 

 
22,336

 

 
Warrant(3)
4,100

 

 

 
4,100

 
Total assets
$
32,212


$
5,776


$
22,336


$
4,100

 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Put option embedded derivative(4)
$
658

 

 

 
$
658

 
Total liabilities
$
658


$


$


$
658

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Measurements at September 30, 2018
 
Description
As of
September 30,
2018
 
Quoted Prices in Active
Markets for Identical
Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
Assets
 
 
 
 
 
 
 
 
Marketable securities(1)
$
5,645

 
$
5,645

 
$

 
$

 
Undesignated interest rate cap contracts(2)
54,830

 

 
54,830

 

 
Warrant(3)
4,100

 

 

 
4,100

 
Total assets
$
64,575


$
5,645


$
54,830


$
4,100

 
 
 
 
 
 
 
 
 
 
 
(1)
The valuation measurement inputs of these marketable securities represent unadjusted quoted prices in active markets and, accordingly, we have classified such investments within Level 1 of the fair value hierarchy. The cost basis of our marketable securities was $4.7 million at December 31, 2017 and $4.4 million at September 30, 2018. We sold marketable securities with a cost basis of $0.1 million and $0.4 million during the three and nine months ended September 30, 2018, respectively, and recorded a nominal gain on the sale for both periods, which was included within other income, net in our condensed consolidated statement of operations.
(2)
The valuation of our interest rate derivative instruments reflects the fair value of premiums paid, taking into account observable inputs including current interest rates, the market expectation for future interest rate volatility and current creditworthiness of the counterparties. As a result, we have determined that our derivative valuations in their entirety are classified within Level 2 of the fair value hierarchy.
(3)
We valued the warrant using a valuation technique that reflects the risk-free interest rate, time to maturity and volatility of comparable companies. We identified the inputs used to calculate the fair value as Level 3 inputs and concluded that the valuation in its entirety was classified as Level 3 within the fair value hierarchy.
(4)
We valued the contingent put option embedded within Intelsat Connect’s 12.50% Senior Notes due 2022 (the “2022 ICF Notes”), using a valuation technique which reflects the estimated date and probability of a change of control, the fair value of the 2022 ICF Notes, and a credit valuation adjustment reflecting our credit spreads. We identified the inputs used to calculate the fair value as Level 3 inputs and concluded that the valuation in its entirety was classified as Level 3 within the fair value hierarchy. As the 2022 ICF Notes were fully redeemed and discharged in August 2018, the embedded put option did not exist as of September 30, 2018.

20

Table of Contents

Note 6 Retirement Plans and Other Retiree Benefits
In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, to require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period in the operating income section of the income statement, if one is presented. The other components of net benefit cost, as defined, are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this ASU also allow only the service cost component to be eligible for capitalization when applicable. ASU 2017-07 is effective for interim and annual periods beginning after December 15, 2017 for public business entities. Early adoption is permitted as of the beginning of an annual period for which interim or annual financial statements have not been issued. We adopted ASU 2017-07 on January 1, 2018 and presented the amortization of prior service credits reclassified from other comprehensive loss to net periodic pension benefit costs, and the amortization of actuarial loss reclassified from other comprehensive loss to net periodic pension benefit costs in other income (expense), net during the three and nine months ended September 30, 2018. We reclassified comparative amounts of ($0.9) million and ($2.6) million during the three and nine months ended September 30, 2017, respectively to other income (expense), net. There was no impact to net loss.
(a) Pension and Other Postretirement Benefits
We maintain a noncontributory defined benefit retirement plan covering substantially all of our employees hired prior to July 19, 2001. The cost of providing benefits to eligible participants under the defined benefit retirement plan is calculated using the plan’s benefit formulas, which take into account the participants’ remuneration, dates of hire, years of eligible service, and certain actuarial assumptions. In addition, as part of the overall medical plan, we provide postretirement medical benefits to certain current retirees who meet the criteria under the medical plan for postretirement benefit eligibility.
The defined benefit retirement plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. We expect that our future contributions to the defined benefit retirement plan will be based on the minimum funding requirements of the Internal Revenue Code and on the plan’s funded status. Any significant decline in the fair value of our defined benefit retirement plan assets or other adverse changes to the significant assumptions used to determine the plan’s funded status would negatively impact its funded status and could result in increased funding in future periods. The impact on the funded status is determined based upon market conditions in effect when we completed our annual valuation. During the nine months ended September 30, 2018, we made cash contributions to the defined benefit retirement plan of $3.8 million. We anticipate that our remaining contributions to the defined benefit retirement plan in 2018 will be approximately $1.3 million. We fund the postretirement medical benefits throughout the year based on benefits paid. We anticipate that our contributions to fund postretirement medical benefits in 2018 will be approximately $4.1 million.
Included in accumulated other comprehensive loss at September 30, 2018, is $96.2 million ($48.6 million, net of tax) that has not yet been recognized in the net periodic pension cost, which includes unrecognized actuarial losses.
In September 2018, the Company communicated a plan to its retiree medical group plan participants to transition to a private exchange, effective January 1, 2019, which was accounted for as a plan amendment. As a result of the plan amendment, we recognized a decrease of $38.5 million (net of $0.7 million in tax impact) in our other postretirement benefit obligation as of September 30, 2018 with a corresponding increase to other comprehensive income for the nine months ended September 30, 2018.








21

Table of Contents

Prior service credits and actuarial losses are reclassified from accumulated other comprehensive loss to net periodic pension benefit costs, which are included in other income, net on our condensed consolidated statements of operations for the nine months ended September 30, 2017 and September 30, 2018, respectively. The following table presents these reclassifications, net of tax, as well as the reclassification of the realized gain on investments, and the statement of operations line items that are impacted (in thousands):
 
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2018
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Amortization of prior service credits reclassified from other comprehensive loss to net periodic pension benefit costs included in:
 
 
 
 
 
 
 
Other income (expense), net
$
27

 
$
(210
)
 
$
23

 
$
(214
)
Total
$
27

 
$
(210
)
 
$
23

 
$
(214
)
Amortization of actuarial loss reclassified from other comprehensive loss to net periodic pension benefit costs included in:
 
 
 
 
 
 
 
Other income (expense), net
$
566

 
$
1,149

 
$
1,651

 
$
3,025

Total
$
566

 
$
1,149

 
$
1,651

 
$
3,025

Realized gain on investments included in:
 
 
 
 
 
 
 
Other income (expense), net
$
(32
)
 
$

 
$
(61
)
 
$
351

Total
$
(32
)
 
$

 
$
(61
)
 
$
351



Net periodic pension benefit costs included the following components (in thousands):
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2018
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Interest cost
$
3,695

 
$
3,607

 
$
11,084

 
$
10,821

Expected return on plan assets
(6,103
)
 
(6,121
)
 
(18,308
)
 
(18,361
)
Amortization of unrecognized net loss
938

 
1,327

 
2,813

 
3,980

Total benefit
$
(1,470
)
 
$
(1,187
)
 
$
(4,411
)
 
$
(3,560
)
Net periodic other postretirement benefit costs included the following components (in thousands):
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2018
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Interest cost
$
717

 
$
578

 
$
2,152

 
$
1,904

Amortization of unrecognized prior service credits
(2
)
 
(213
)
 
(6
)
 
(217
)
Amortization of unrecognized net gain
(114
)
 
(158
)
 
(342
)
 
(359
)
Total costs
$
601

 
$
207

 
$
1,804

 
$
1,328

(b) Other Retirement Plans
In connection with the amendment of the defined benefit retirement plan in the first quarter of 2015, the two defined contribution retirement plans we previously maintained for the benefit of our employees in the United States, were merged into a single plan, which is qualified under the provisions of Section 401(k) of the Internal Revenue Code. We recognized compensation expense for these plans of $5.9 million during the nine months ended September 30, 2017 and $6.0 million during the nine months ended September 30, 2018. We also maintain other defined contribution retirement plans in several non-U.S. jurisdictions, but such plans are not material to our financial position or results of operations.



22

Table of Contents

Note 7 Satellites and Other Property and Equipment
(a) Satellites and Other Property and Equipment, net
Satellites and other property and equipment, net were comprised of the following (in thousands):
 
As of
December 31,
2017
 
As of
September 30,
2018
Satellites and launch vehicles
$
10,653,213

 
$
10,761,057

Information systems and ground segment
808,203

 
865,119

Buildings and other
264,417

 
268,727

Total cost
11,725,833

 
11,894,903

Less: accumulated depreciation
(5,802,214
)
 
(6,286,094
)
Total
$
5,923,619

 
$
5,608,809

Satellites and other property and equipment are stated at historical cost, with the exception of satellites that have been impaired. Satellites and other property and equipment acquired as part of an acquisition are based on their fair value at the date of acquisition.
Satellites and other property and equipment, net as of December 31, 2017 and September 30, 2018 included construction-in-progress of $705.8 million and $320.1 million, respectively. These amounts relate primarily to satellites under construction and related launch services. Interest costs of $14.7 million and $6.2 million were capitalized during the three months ended September 30, 2017 and 2018, respectively, and $46.7 million and $23.1 million during the nine months ended September 30, 2017 and 2018, respectively.
We have entered into launch contracts for the launch of both specified and unspecified future satellites. Each of these launch contracts may be terminated at our option, subject to payment of a termination fee that increases as the applicable launch date approaches. In addition, in the event of a failure of any launch, we may exercise our right to obtain a replacement launch within a specified period following our request for re-launch.
(b) Recent Satellite Launches
Horizons 3e, a satellite owned by a joint venture between Intelsat S.A. and SKY Perfect JSAT ("JSAT"), was successfully launched on September 25, 2018 and will complete the Intelsat EpicNG constellation. Horizons 3e will bring high-throughput satellite ("HTS") solutions in both C- and Ku-bands to broadband, mobility and government customers in the Asia-Pacific region from its orbital slot at 169oE. Horizons 3e is the first Intelsat EpicNG satellite to feature a multiport amplifier that enables power portability across all Ku-band spot beams. This enhanced, advanced digital payload features full beam interconnectivity in three commercial bands and significant upgrades to power, efficiency and coverage flexibility. Horizons 3e is expected to enter into service in the first quarter of 2019.
Intelsat 38, a customized Ku-band payload positioned on a third-party satellite, was successfully launched on September 25, 2018. Intelsat 38 will replace Intelsat 12 at the 45oE location and host direct-to-home ("DTH") platforms for Central and Eastern Europe as well as the Asia-Pacific region. The satellite will also provide connectivity for corporate networks and government applications in Africa. Intelsat 38 is expected to enter into service in the first quarter of 2019.
Intelsat 37e, the fifth satellite in the Intelsat EpicNG fleet, was successfully launched in September 2017. The all-digital Intelsat 37e is the first HTS to offer full, high-resolution interconnectivity between C-, Ku- and Ka- bands, delivering additional services and improved throughput to support enterprise, broadband, government and mobility applications in the Americas, Africa and Europe. Intelsat 37e entered into service in March 2018.
Intelsat 33e is the second of six HTS satellites within our Intelsat EpicNG platform, featuring high-performance spot beams and an advanced digital payload. Due to a malfunction in the primary thruster for orbit raising, Intelsat 33e arrived at its 60ºE orbital location in December 2016 and entered into service in late January 2017. In addition, in February 2017, measurements indicated higher than expected fuel use while performing stationkeeping maneuvers. There is no evidence of any impact to the communications payload. A Failure Review Board was established to determine the cause of the primary thruster failure and a separate team to investigate the fuel use anomaly, and the final investigation reports were issued in the second quarter of 2018. We filed a loss claim in March 2017 with our insurers relating to the loss of life for approximately $78 million. We previously received payment of approximately $55.5 million from certain insurers and filed arbitration claims against the remaining insurers for the additional $22 million. During the third quarter of 2018, the arbitration claims were settled with all but one insurer. We expect to receive settlement payments in the fourth quarter of 2018 and continue arbitration with the remaining insurer. Intelsat 33e is fully operational, delivering

23

Table of Contents

commercial-grade services for enterprise, fixed and mobile network operators, aeronautical and maritime mobility service providers, and for government customers in the Africa, Europe, Middle East and Asia regions.
Note 8 Investments
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Topic 825), to require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer (the measurement alternative). In February 2018, the FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments Overall (Subtopic 825-10) to clarify certain aspects of the guidance issued in ASU 2016-01 that was effective for interim and annual periods beginning after December 15, 2017, including clarification that ASU 2016-01 related to equity investments without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. We adopted the standards in the first quarter of 2018 and have elected the measurement alternative. The Company considered available information for any observable orderly transactions for identical or similar investments and did not make any upward or downward adjustments to our investments. The adoption of the standards did not have a material impact on our condensed consolidated financial statements and associated disclosures.
We have an ownership interest in two entities that meet the criteria of a variable interest entity (“VIE”), Horizons Satellite Holdings, LLC (“Horizons Holdings”) and Horizons-3 Satellite LLC (“Horizons 3”), which are discussed in further detail below, including our analyses of the primary beneficiary determination as required under FASB ASC Topic 810, Consolidation (“FASB ASC 810”). We also own noncontrolling investments recognized under the measurement alternative, discussed further below.
(a) Horizons Holdings
Our first joint venture with JSAT International, Inc. (“JSAT”) is named Horizons Satellite Holdings, LLC, and consists of two investments: Horizons-1 Satellite LLC (“Horizons-1”) and Horizons-2 Satellite LLC (“Horizons-2”). Horizons Holdings borrowed from JSAT a portion of the funds necessary to finance the construction of the Horizons 2 satellite pursuant to a loan agreement. The borrowing was subsequently repaid. We provide certain services to the joint venture and utilize capacity from the joint venture.
We have determined that this joint venture meets the criteria of a VIE under FASB ASC 810, and we have concluded that we are the primary beneficiary because decisions relating to any future relocation of the Horizons 2 satellite, the most significant asset of the joint venture, are effectively controlled by us. In accordance with FASB ASC 810, as the primary beneficiary, we consolidate Horizons Holdings within our consolidated financial statements. Total assets of Horizons Holdings were $38.7 million and $31.2 million as of December 31, 2017, and September 30, 2018, respectively. Total liabilities were nominal as of both December 31, 2017 and September 30, 2018.
We have a revenue sharing agreement with JSAT related to services sold on the Horizons 1 and Horizons 2 satellites. We are responsible for billing and collection for such services, and we remit 50% of the revenue, less applicable fees and commissions, to JSAT. Amounts payable to JSAT related to the revenue sharing agreement, net of applicable fees and commissions, from the Horizons 1 and Horizons 2 satellites were $5.4 million and $6.3 million as of both December 31, 2017 and September 30, 2018, respectively.
(b) Horizons 3 Satellite LLC
On November 4, 2015, we entered into a new joint venture agreement with JSAT. The joint venture, named Horizons 3, was formed for the purpose of developing, launching, managing, operating and owning a high performance satellite to be located at the 169ºE orbital location.
Horizons 3, which is 50% owned by each of Intelsat and JSAT, was set up with a joint share of management authority and equal rights to profits and revenues from the joint venture. Similar to Horizons Holdings, we have a revenue sharing agreement with JSAT related to services sold on the Horizons 3 satellite. In addition, we are responsible for billing and collection for such services, and we remit 50% of the revenue, less applicable fees and commissions, to JSAT.
We have determined that this joint venture meets the criteria of a VIE under FASB ASC 810; however, we have concluded that we are not the primary beneficiary and therefore do not consolidate Horizons 3. The assessment considered both quantitative and qualitative factors, including an analysis of voting power and other means of control of the joint venture as well as each owner’s exposure to risk of loss or gain. Because we and JSAT equally share control over the operations of the joint venture and also equally share exposure to risk of losses or gains, we concluded that we are not the primary beneficiary of Horizons 3. Our investment,

24

Table of Contents

included within other assets in our condensed consolidated balance sheets, is accounted for using the equity method of accounting and the investment balance was $61.8 million and $101.5 million as of December 31, 2017 and September 30, 2018, respectively.
In connection with our investment in Horizons 3, we entered into a capital contribution and subscription agreement, which requires us to fund our 50% share of the amounts due in order to maintain our respective 50% interest in the joint venture. Pursuant to this agreement, we made contributions of $27.4 million and $34.9 million during the year ended December 31, 2017 and the nine months ended September 30, 2018, respectively. In addition, our indirect subsidiary that holds our investment in Horizons 3 has entered into a security and pledge agreement with Horizons 3, pursuant to which it has granted a security interest in its membership interests in Horizons 3. Further, our indirect subsidiary has granted a security interest to Horizons 3 in its customer capacity contracts and its ownership interest in its wholly-owned subsidiary that will hold the U.S. Federal Communications Commission license required for the joint venture’s operations.
(c) Investments Without Readily Determinable Fair Values
Our investments without readily determinable fair values recorded in other assets in our condensed consolidated balance sheets had total carrying value of $54.7 million and $69.7 million, consisting of five and six separate noncontrolling investments at December 31, 2017 and September 30, 2018, respectively.
(d) Equity Attributable to Intelsat S.A. and Noncontrolling Interest
The following tables present changes in equity attributable to the Company and equity attributable to our noncontrolling interests, which is included in the equity section of our condensed consolidated balance sheet (in thousands):
 
 
Intelsat S.A.
Shareholders’
Deficit
 
Noncontrolling
Interests
 
Total
Shareholders’
Deficit
Balance at January 1, 2017
$
(3,634,145
)
 
$
24,147

 
$
(3,609,998
)
Net income (loss)
(178,728
)
 
3,914

 
(174,814
)
Dividends paid to noncontrolling interests

 
(8,755
)
 
(8,755
)
Share-based compensation
16,472

 

 
16,472

Postretirement/pension liability adjustment
(11,801
)
 

 
(11,801
)
Other comprehensive income
332

 

 
332

Balance at December 31, 2017
$
(3,807,870
)

$
19,306


$
(3,788,564
)
 
Intelsat S.A.
Shareholders’
Deficit
 
Noncontrolling
Interests
 
Total
Shareholders’
Deficit
Balance at January 1, 2018
$
(3,807,870
)
 
$
19,306

 
$
(3,788,564
)
Adoption of accounting standards(1)
(112,162
)
 

 
(112,162
)
Net income (loss)
(488,260
)
 
2,929

 
(485,331
)
Dividends paid to noncontrolling interests

 
(6,651
)
 
(6,651
)
Common shares and 2025 Convertible Notes offering
368,247

 

 
368,247

Share-based compensation
7,840

 

 
7,840

Postretirement/pension liability adjustment
41,321

 

 
41,321

Other comprehensive income
(351
)
 

 
(351
)
Balance at September 30, 2018
$
(3,991,235
)
 
$
15,584

 
$
(3,975,651
)
 
 
(1)
See Note 1-General and Note 12-Income Taxes.
Note 9 Goodwill and Other Intangible Assets
The carrying amounts of goodwill and acquired intangible assets not subject to amortization consist of the following (in thousands):
 
As of
December 31,
2017
 
As of
September 30,
2018
Goodwill(1)
$
2,620,627

 
$
2,620,627

Orbital locations
2,387,700

 
2,387,700

Trade name
65,200

 
65,200


25

Table of Contents

 
  
(1)
Net of accumulated impairment losses of $4,160,200.
We account for goodwill and other non-amortizable intangible assets in accordance with FASB ASC Topic 350, Intangibles—Goodwill and Other, and have deemed these assets to have indefinite lives. Therefore, these assets are not amortized but are tested on an annual basis for impairment during the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable.
The carrying amount and accumulated amortization of acquired intangible assets subject to amortization consist of the following (in thousands):
 
As of December 31, 2017
 
As of September 30, 2018
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Carrying
Amount
Backlog and other
$
743,760

 
$
(686,425
)
 
$
57,335

 
$
743,760

 
$
(697,690
)
 
$
46,070

Customer relationships
534,030

 
(241,781
)
 
292,249

 
534,030

 
(259,377
)
 
274,653

Total
$
1,277,790


$
(928,206
)

$
349,584


$
1,277,790


$
(957,067
)

$
320,723

Intangible assets are amortized based on the expected pattern of consumption. We recorded amortization expense of $10.6 million and $9.6 million for the three months ended September 30, 2017 and 2018, respectively, and $31.7 million and $28.9 million for the nine months ended September 30, 2017 and 2018, respectively.
Note 10 Long-Term Debt
The carrying values and fair values of our notes payable and long-term debt were as follows (in thousands):
 
As of December 31, 2017
 
As of September 30, 2018
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Intelsat S.A.:
 
 
 
 
 
 
 
4.5% Convertible Senior Notes due June 2025
$

 
$

 
$
402,500

 
$
289,854

Unamortized prepaid debt issuance costs and discount on 4.5% Convertible Senior Notes

 

 
(151,736
)
 

Total Intelsat S.A. obligations

 

 
250,764

 
289,854

Intelsat Luxembourg:
 
 
 
 
 
 
 
6.75% Senior Notes due June 2018
$
96,650

 
$
94,717

 
$

 
$

Unamortized prepaid debt issuance costs and discount on 6.75% Senior Notes
(78
)
 

 

 

7.75% Senior Notes due June 2021
2,000,000

 
1,070,000

 
421,219

 
407,529

Unamortized prepaid debt issuance costs on 7.75% Senior Notes
(13,325
)
 

 
(2,254
)
 

8.125% Senior Notes due June 2023
1,000,000

 
515,000

 
1,000,000

 
892,500

Unamortized prepaid debt issuance costs on 8.125% Senior Notes
(8,562
)
 

 
(7,593
)
 

12.5% Senior Notes due November 2024
403,350

 
265,052

 
403,350

 
403,350

Unamortized prepaid debt issuance costs and discount on 12.5% Senior Notes
(209,165
)
 

 
(201,562
)
 

Total Intelsat Luxembourg obligations
3,268,870


1,944,769


1,613,160


1,703,379

Intelsat Connect Finance:
 
 
 
 
 
 
 
12.5% Senior Notes due April 2022
$
731,892

 
$
640,406

 
$

 
$

Unamortized prepaid debt issuance costs and discount on 12.5% Senior Notes
(267,108
)
 

 

 

9.5% Senior Notes due February 2023

 

 
1,250,000

 
1,237,500

Unamortized prepaid debt issuance costs and discount on 9.5% Senior Notes

 

 
(36,703
)
 

Total Intelsat Connect Finance obligations
464,784


640,406


1,213,297


1,237,500

Intelsat Jackson:
 
 
 
 
 
 
 
9.5% Senior Secured Notes due September 2022
$
490,000

 
$
565,950

 
$
490,000

 
$
568,400

Unamortized prepaid debt issuance costs and discount on 9.5% Senior Secured Notes
(17,556
)
 

 
(15,327
)
 


26

Table of Contents

8.0% Senior Secured Notes due February 2024
1,349,678

 
1,423,910

 
1,349,678

 
1,422,223

Unamortized prepaid debt issuance costs and premium on 8.0% Senior Secured Notes
(5,378
)
 

 
(4,853
)
 

7.25% Senior Notes due October 2020
2,200,000

 
2,068,000

 

 

Unamortized prepaid debt issuance costs and premium on 7.25% Senior Notes
(5,151
)
 

 

 

7.5% Senior Notes due April 2021
1,150,000

 
1,040,750

 
954,651

 
959,424

Unamortized prepaid debt issuance costs on 7.5% Senior Notes
(5,415
)
 

 
(3,554
)
 

5.5% Senior Notes due August 2023
2,000,000

 
1,630,000

 
1,985,000

 
1,826,200

Unamortized prepaid debt issuance costs on 5.5% Senior Notes
(12,977
)
 

 
(11,375
)
 

9.75% Senior Notes due July 2025
1,500,000

 
1,455,000

 
1,485,000

 
1,574,100

Unamortized prepaid debt issuance costs on 9.75% Senior Notes
(20,315
)
 

 
(18,718
)
 

8.5% Senior Notes due October 2024

 

 
2,250,000

 
2,272,500

Unamortized prepaid debt issuance costs on 8.5% Senior Notes

 

 
(19,030
)
 

Senior Secured Credit Facilities due June 2019
1,095,000

 
1,093,631

 

 

Unamortized prepaid debt issuance costs and discount on Senior Secured Credit Facilities
(4,636
)
 

 

 

Senior Secured Credit Facilities due November 2023
2,000,000

 
1,947,500

 
2,000,000

 
2,007,500

Unamortized prepaid debt issuance costs and discount on Senior Secured Credit Facilities
(28,600
)
 

 
(25,513
)
 

Senior Secured Credit Facilities due January 2024

 

 
395,000

 
415,244

Unamortized prepaid debt issuance costs and discount on Senior Secured Credit Facilities

 

 
(1,496
)
 

6.625% Senior Secured Credit Facilities due January 2024

 

 
700,000

 
728,875

Unamortized prepaid debt issuance costs and discount on Senior Secured Credit Facilities

 

 
(2,653
)
 

Total Intelsat Jackson obligations
11,684,650


11,224,741


11,506,810


11,774,466

Eliminations:
 
 
 
 
 
 
 
7.75% Senior Notes of Intelsat Luxembourg due June 2021 owned by Intelsat Connect Finance
$
(979,168
)
 
$
(523,855
)
 
$

 
$

Unamortized prepaid debt issuance costs on 7.75% Senior Notes
6,524

 

 

 

8.125% Senior Notes of Intelsat Luxembourg due June 2023 owned by Intelsat Connect Finance
(111,663
)
 
(57,506
)
 
(111,663
)
 
(99,659
)
Unamortized prepaid debt issuance costs on 8.125% Senior Notes
956

 

 
848

 

Unamortized prepaid debt issuance costs and discount on 12.5% Senior Notes due April 2022
67,525

 

 

 

12.5% Senior Notes of Intelsat Luxembourg due November 2024 owned by Intelsat Connect Finance
(402,595
)
 
(264,556
)
 
(402,595
)
 
(402,595
)
12.5% Senior Notes of Intelsat Luxembourg due November 2024 owned by Intelsat Envision

 

 
(650
)
 
(650
)
Unamortized prepaid debt issuance costs and discount on 12.5% Senior Notes
208,775

 

 
201,510

 

Unamortized prepaid debt issuance costs and discount on 4.5% Convertible Senior Notes

 

 
(983
)
 

Total eliminations:
(1,209,646
)

(845,917
)

(313,533
)

(502,904
)
Total Intelsat S.A. long-term debt
$
14,208,658


$
12,963,999


$
14,270,498


$
14,502,295

Less:
 
 
 
 
 
 
 
Current portion of long-term debt
$
96,572

 
 
 
$

 
 
Total long-term debt, excluding current portion
$
14,112,086

 
 
 
$
14,270,498

 
 

27

Table of Contents

The fair value for publicly traded instruments is determined using quoted market prices, and for non-publicly traded instruments, fair value is based upon composite pricing from a variety of sources, including market leading data providers, market makers, and leading brokerage firms. Substantially all of the inputs used to determine the fair value of our debt are classified as Level 1 inputs within the fair value hierarchy from FASB ASC 820, except our senior secured credit facilities and Intelsat S.A.'s 2025 Convertible Notes, the inputs for which are classified as Level 2.
Intelsat Jackson Senior Secured Credit Agreement
On January 12, 2011, Intelsat Jackson entered into a secured credit agreement (the “Intelsat Jackson Secured Credit Agreement”), which included a $3.25 billion term loan facility and a $500.0 million revolving credit facility, and borrowed the full $3.25 billion under the term loan facility. The term loan facility required regularly scheduled quarterly payments of principal equal to 0.25% of the original principal amount of the term loan beginning six months after January 12, 2011, with the remaining unpaid amount due and payable at maturity.
On October 3, 2012, Intelsat Jackson entered into an Amendment and Joinder Agreement (the “Jackson Credit Agreement Amendment”), which amended the Intelsat Jackson Secured Credit Agreement. As a result of the Jackson Credit Agreement Amendment, interest rates for borrowings under the term loan facility and the revolving credit facility were reduced. In April 2013, our corporate family rating was upgraded by Moody’s, and as a result, the interest rate for the borrowing under the term loan facility and revolving credit facility were further reduced to LIBOR plus 3.00% or the Above Bank Rate (“ABR”) plus 2.00%.
On November 27, 2013, Intelsat Jackson entered into a Second Amendment and Joinder Agreement (the “Second Jackson Credit Agreement Amendment”), which further amended the Intelsat Jackson Secured Credit Agreement. The Second Jackson Credit Agreement Amendment reduced interest rates for borrowings under the term loan facility and extended the maturity of the term loan facility. In addition, it reduced the interest rate applicable to $450 million of the $500 million total revolving credit facility and extended the maturity of such portion. As a result of the Second Jackson Credit Agreement Amendment, interest rates for borrowings under the term loan facility and the new tranche of the revolving credit facility were (i) LIBOR plus 2.75%, or (ii) the ABR plus 1.75%. The LIBOR and the ABR, plus applicable margins, related to the term loan facility and the new tranche of the revolving credit facility were determined as specified in the Intelsat Jackson Secured Credit Agreement, as amended by the Second Jackson Credit Agreement Amendment, and the LIBOR was not to be less than 1.00% per annum. The maturity date of the term loan facility was extended from April 2, 2018 to June 30, 2019 and the maturity of the new $450 million tranche of the revolving credit facility was extended from January 12, 2016 to July 12, 2017. The interest rates and maturity date applicable to the $50 million tranche of the revolving credit facility that was not amended did not change. The Second Jackson Credit Agreement Amendment further removed the requirement for regularly scheduled quarterly principal payments under the term loan facility.
In June 2017, Intelsat Jackson terminated all remaining commitments under its revolving credit facility.
On November 27, 2017, Intelsat Jackson entered into a Third Amendment and Joinder Agreement (the “Third Jackson Credit Agreement Amendment”), which further amended the Intelsat Jackson Secured Credit Agreement. The Third Jackson Credit Agreement Amendment extended the maturity date of $2.0 billion of the existing B-2 Tranche of term loans (the “B-3 Tranche Term Loans”), to November 27, 2023, subject to springing maturity in the event that certain series of Intelsat Jackson’s senior notes are not refinanced prior to the dates specified in the Third Jackson Credit Agreement Amendment. The B-3 Tranche Term Loans have an applicable interest rate margin of 3.75% for LIBOR loans and 2.75% for base rate loans (at Intelsat Jackson’s election as applicable). The B-3 Tranche Term Loans are subject to a prepayment premium of 1.00% of the principal amount for any voluntary prepayment of, or amendment or modification in respect of, the B-3 Tranche Term Loans prior to November 27, 2018 in connection with prepayments, amendments or modifications that have the effect of reducing the applicable interest rate margin on the B-3 Tranche Term Loans, subject to certain exceptions. The Third Jackson Credit Agreement Amendment also (i) added a provision requiring that, beginning with the fiscal year ending December 31, 2018, Intelsat Jackson apply a certain percentage of its Excess Cash Flow (as defined in the Third Jackson Credit Agreement Amendment), if any, after operational needs for each fiscal year towards the repayment of outstanding term loans, subject to certain deductions, (ii) amended the most-favored nation provision with respect to the incurrence of certain indebtedness by Intelsat Jackson and its restricted subsidiaries, and (iii) amended the covenant limiting the ability of Intelsat Jackson to make certain dividends, distributions and other restricted payments to its shareholders based on its leverage level at that time.
On December 12, 2017, Intelsat Jackson further amended the Intelsat Jackson Secured Credit Agreement by entering into a Fourth Amendment and Joinder Agreement (the “Fourth Jackson Credit Agreement Amendment”), which, among other things, (i) permitted Intelsat Jackson to establish one or more series of additional incremental term loan tranches if the proceeds thereof are used to refinance an existing tranche of term loans, and (ii) added a most-favored nation provision applicable to the B-3 Tranche Term Loans for further extensions of the existing B-2 Tranche Term Loans under certain circumstances.

28

Table of Contents

On January 2, 2018, Intelsat Jackson entered into a Fifth Amendment and Joinder Agreement (the “Fifth Jackson Credit Agreement Amendment”), which further amended the Intelsat Jackson Secured Credit Agreement. The Fifth Jackson Credit Agreement Amendment refinanced the remaining $1.095 billion B-2 Tranche Term Loans, through the creation of (i) a new incremental floating rate tranche of term loans with a principal amount of $395.0 million (the “B-4 Tranche Term Loans”), and (ii) a new incremental fixed rate tranche of term loans with a principal amount of $700.0 million (the “B-5 Tranche Term Loans”). The maturity date of both the B-4 Tranche Term Loans and the B-5 Tranche Term Loans is January 2, 2024, subject to springing maturity in the event that certain series of Intelsat Jackson’s senior notes are not refinanced or repaid prior to the dates specified in the Fifth Jackson Credit Agreement Amendment. The B-4 Tranche Term Loans have an applicable interest rate margin of 4.50% per annum for LIBOR loans and 3.50% per annum for base rate loans (at Intelsat Jackson’s election as applicable). We entered into interest rate cap contracts in December 2017 and amended them in May 2018 to mitigate the risk of interest rate increases on the B-4 Tranche Term Loans. The B-5 Tranche Term Loans have an interest rate of 6.625% per annum. The Fifth Jackson Credit Agreement Amendment also specified make-whole and prepayment premiums applicable to the B-4 Tranche Term Loans and the B-5 Tranche Term Loans at various dates.
Intelsat Jackson’s obligations under the Intelsat Jackson Secured Credit Agreement are guaranteed by ICF and certain of Intelsat Jackson’s subsidiaries. Intelsat Jackson’s obligations under the Intelsat Jackson Secured Credit Agreement are secured by a first priority security interest in substantially all of the assets of Intelsat Jackson and the guarantors party thereto, to the extent legally permissible and subject to certain agreed exceptions, and by a pledge of the equity interests of the subsidiary guarantors and the direct subsidiaries of each guarantor, subject to certain exceptions, including exceptions for equity interests in certain non-U.S. subsidiaries, existing contractual prohibitions and prohibitions under other legal requirements.
The Intelsat Jackson Secured Credit Agreement includes two financial covenants. Intelsat Jackson must maintain a consolidated secured debt to consolidated EBITDA ratio equal to or less than 3.50 to 1.00 at the end of each fiscal quarter, as well as a consolidated EBITDA to consolidated interest expense ratio equal to or greater than 1.75 to 1.00 at the end of each fiscal quarter, in each case as such financial measures are defined in the Intelsat Jackson Secured Credit Agreement. Intelsat Jackson was in compliance with these financial maintenance covenant ratios with a consolidated secured debt to consolidated EBITDA ratio of 2.74 to 1.00 and a consolidated EBITDA to consolidated interest expense ratio of 1.85 to 1.00 as of September 30, 2018.
June 2018 Intelsat S.A. Senior Convertible Notes Offering and Common Shares Offering
In June 2018, we completed an offering of 15,498,652 Intelsat S.A. common shares, nominal value $0.01 per share (the “Common Shares”), at a public offering price of $14.84 per common share, and we completed an offering of $402.5 million aggregate principal amount of the 2025 Convertible Notes. These notes are guaranteed by a direct subsidiary of Intelsat Luxembourg, Intelsat Envision. The net proceeds from the Common Shares offering and 2025 Convertible Notes offering were used to repurchase approximately $600 million aggregate principal amount of Intelsat Luxembourg’s 7.75% Senior Notes due 2021 (the “2021 Luxembourg Notes”) in privately negotiated transactions with individual holders in June 2018. In connection with the repurchase of the 2021 Luxembourg Notes, we recognized a net gain on early extinguishment of debt of $22.1 million consisting of the difference between the carrying value of debt repurchased and the total cash amount paid (including related fees and expenses), together with a write-off of unamortized debt issuance costs. We intend to use the remaining net proceeds of the Common Shares offering and 2025 Convertible Notes offering for further repurchases of 2021 Luxembourg Notes and for other general corporate purposes, which may include repurchases of other tranches of debt of Intelsat S.A.’s subsidiaries.
The 2025 Convertible Notes mature on June 15, 2025 unless earlier repurchased, converted or redeemed, as set forth in the indenture governing the 2025 Convertible Notes (the “2025 Indenture”). Holders may elect to convert their notes depending upon the trading price of our common shares and under other conditions set forth in the 2025 Indenture until December 15, 2024, and thereafter without regard to any conditions. The initial conversion rate is 55.0085 common shares per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $18.18 per common share, subject to customary adjustments, and will be increased upon the occurrence of specified events set forth in the 2025 Indenture. We may redeem the 2025 Convertible Notes at our option, on or after June 15, 2022, and prior to the forty-second scheduled trading day preceding the maturity date, in whole or in part, depending upon the trading price of our common shares as set forth in the optional redemption provisions in the 2025 Indenture or in the event of certain developments affecting taxation with respect to the 2025 Convertible Notes.
    
In accounting for the transaction, the 2025 Convertible Notes were separated into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component is $149.4 million, which is also recognized as a discount on the 2025 Convertible Notes and represents the value assigned to the conversion option which was determined by deducting the fair value of the liability component from the par value of the 2025 Convertible Notes. The $149.4 million equity component is included in additional paid-in capital on our condensed consolidated balance sheet as of June 30, 2018 and will not be remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the liability component over its carrying amount was recorded as a discount on the 2025 Convertible Notes and will be amortized to interest expense over the

29

Table of Contents

contractual term of the 2025 Convertible Notes at an effective interest rate of 13.0%.

We incurred debt issuance costs of $12.7 million related to the 2025 Convertible Notes, which were allocated to the liability and equity components based on their relative values. Issuance costs attributable to the liability component were $7.3 million and will be amortized to interest expense using the effective interest method over the contractual term of the 2025 Convertible Notes. Issuance costs attributable to the equity component were netted against the equity component in additional paid-in capital.
August 2018 Intelsat Connect Senior Notes Refinancing and Exchange of Intelsat Luxembourg Senior Notes

In August 2018, Intelsat Connect completed an offering of $1.25 billion aggregate principal amount of 9.5% Senior Notes due 2023 (the "2023 ICF Notes"). These notes are guaranteed by Intelsat Envision and Intelsat Luxembourg. Intelsat Connect used the net proceeds from the offering to repurchase or redeem all $731.9 million outstanding aggregate principal amount of the 2022 ICF Notes. The remaining net proceeds from the offering were used to repurchase approximately $448.9 million of aggregate principal amount of Intelsat Jackson's 7.25% Senior Notes due 2020 (the "2020 Jackson Notes") and $30.0 million aggregate principal amount of other unsecured notes of Intelsat Jackson. Also in August 2018, Intelsat Connect and Intelsat Envision completed debt exchanges receiving new notes issued by Intelsat Luxembourg, which mature in August 2026 and have an interest rate of 13.5% in exchange for $1.58 billion aggregate principal amount of 2021 Luxembourg Notes that were previously held by Intelsat Connect and Intelsat Envision. In connection with these transactions, we recognized a loss on extinguishment of debt of $188.2 million, consisting of the difference between the carrying value of the debt and the total cash amount paid (including related fees and expenses), together with a write-off of unamortized debt issuance costs and unamortized discount or premium, if applicable.
September 2018 Intelsat Jackson Senior Notes Offering and Tender Offer

In September 2018, Intelsat Jackson completed an offering of $2.25 billion aggregate principal amount of 8.5% Senior Notes due 2024 (the "2024 Jackson Senior Unsecured Notes"). The notes are guaranteed by all of Intelsat Jackson’s subsidiaries that guarantee its obligations under the Intelsat Jackson Secured Credit Agreement, as well as by certain of Intelsat Jackson’s parent entities. Intelsat Jackson used the net proceeds from the offering to repurchase through a tender offer and redeem all remaining outstanding 2020 Jackson Notes. The remaining net proceeds from the 2024 Jackson Senior Unsecured Notes offering were used to repurchase and redeem $195.3 million aggregate principal amount of Intelsat Jackson's 7.5% Senior Notes due 2021 (the "2021 Jackson Notes") as of September 30, 2018, $246.0 million additional aggregate principal amount of 2021 Jackson Notes in October 2018, and to pay related fees and expenses. In connection with the repurchase and redemption, we recognized a loss on extinguishment of debt of $15.9 million, consisting of the difference between the carrying value of the debt and the total cash amount paid (including related fees and expenses), together with a write-off of unamortized debt issuance costs and unamortized premium, if applicable.
October 2018 Intelsat Jackson Senior Notes Add-On Offering and Redemption of 2021 Jackson Notes

In October 2018, Intelsat Jackson completed an add-on offering of $700 million aggregate principal amount of its 2024 Jackson Senior Unsecured Notes. The net proceeds from the add-on offering, together with cash on hand, were used to repurchase and redeem all of the remaining approximately $708.7 million aggregate principal amount of outstanding 2021 Jackson Notes in October 2018 that were not earlier repurchased or redeemed, and to pay related fees and expenses. In connection with the repurchases and redemptions completed in October 2018, we expect to recognize a loss on extinguishment of debt of approximately $16 million, consisting of the difference between the carrying value of the debt and the total cash amount paid (including related fees and expenses), together with a write-off of unamortized debt issuance costs.

30

Table of Contents

Note 11 Derivative Instruments and Hedging Activities
Undesignated Interest Rate Cap Contracts
During 2017, we entered into interest rate cap contracts and amended them in May 2018, to mitigate our risk of interest rate increases on the floating rate portion of our senior secured credit facilities with a notional value of $2.4 billion. The fair value of the derivative included in “Other assets” on the condensed consolidated balance sheets as of December 31, 2017 and September 30, 2018, was $22.3 million and $54.8 million, respectively.
Put Option Embedded Derivative Instrument
The 2022 ICF Notes contain a contingent put option clause within the host contract, which affords the holders of the notes the option to require us to repurchase such notes at 101% of their principal amount in the event of a change of control, as defined in the indenture governing the notes. We concluded that the contingent put option required bifurcation in accordance with FASB ASC 815, and have recorded the embedded derivative at fair value on the consolidated balance sheet in “Other long-term liabilities.” We estimated the fair value of the put option derivative using a valuation technique which reflects the estimated date and probability of a change of control, the fair value of the 2022 ICF Notes, and a credit valuation adjustment reflecting our credit spreads. As the 2022 ICF Notes were fully redeemed and discharged in August 2018, no embedded put option existed as of September 30, 2018. The fair value of the embedded derivative was $0.7 million as of December 31, 2017.
Preferred Stock Warrant
During 2017, we were issued a warrant to purchase preferred shares of one of our investments. We concluded that the warrant is a free standing derivative in accordance with FASB ASC 815. The fair value of the derivative, included in “Other assets” on the condensed consolidated balance sheets as of December 31, 2017 and September 30, 2018, was $4.1 million.
The following table sets forth the fair value of our derivatives by category (in thousands):
Derivatives not designated as hedging
instruments
 
Balance Sheets Location
 
As of
December 31,
2017
 
As of
September 30,
2018
Undesignated interest rate cap
 
Other assets
 
$
22,336

 
$
54,830

Preferred stock warrant
 
Other assets
 
4,100

 
4,100

Put option embedded derivative
 
Other long-term liabilities
 
658

 

Total derivatives
 
 
 
$
27,094

 
$
58,930

The following table sets forth the effect of the derivative instruments in our condensed consolidated statements of operations (in thousands): 
Derivatives not designated as hedging
instruments
 
Presentation in Statements of
Operations
 
Three Months Ended
September 30, 2017
 
Three Months Ended
September 30, 2018
 
Nine Months Ended
September 30, 2017
 
Nine Months Ended
September 30, 2018
Undesignated interest rate cap
 
Included in interest expense, net
 
$

 
$
5,343

 
$

 
$
33,811

Put option embedded derivative
 
Included in other income (expense), net
 

 
73

 

 
658

Total gain on derivative financial instruments
 
 
 
$

 
$
5,416

 
$

 
$
34,469

Note 12 Income Taxes
In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The amendments in ASU 2016-16 eliminate the current requirement to defer the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2017 for public business entities, on a modified retrospective basis. Early adoption is permitted as of the beginning of an annual reporting period for which interim or annual financial statements have not been issued. We adopted the amendments in the first quarter of 2018 and this resulted in approximately $170 million benefit to retained earnings. The benefit relates to certain deferred intercompany gains/losses, mostly in connection with a series of intercompany transactions in 2011 and 2017 and related steps that reorganized the ownership of our assets among our subsidiaries.


31

Table of Contents

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act includes a number of provisions, including the lowering of the United States (“U.S.”) corporate tax rate from 35 percent to 21 percent, effective January 1, 2018. The Act limits our U.S. interest expense deductions to approximately 30 percent of EBITDA through December 31, 2021 and approximately 30 percent of earnings before net interest and taxes thereafter. The Act also introduced a new minimum tax, the Base Erosion Anti-Abuse Tax (“BEAT”). We are treati