Maxar Technologies Reports Second Quarter 2020 Results

Changes in revenues from year to year are influenced by the size, timing and number of satellite contracts awarded in the current and preceding years and the length of the construction period for satellite contracts awarded. Revenues on satellite contracts are recognized using the cost-to-cost method of accounting to determine the percentage of completion over the construction period, which typically ranges between 20 to 36 months and up to 48 months in certain situations. Adjusted EBITDA margins can vary from quarter to quarter due to the mix of our revenues and changes in our estimated costs to complete as our risks are retired and as our estimated costs to complete are increased or decreased based on contract performance.

Revenues from the Space Infrastructure segment increased to $184 million from $181 million, or by $3 million, for the three months ended June 30, 2020, compared to the same period of 2019. Revenues increased primarily as a result of the impact of an increase in volume related to U.S. government contracts of $42 million during the three months ended June 30, 2020 compared to the same period in 2019 which was partially offset by reduced volumes on commercial programs of $40 million. There was COVID-19 related EAC growth of $6 million which negatively impacted revenue for the three months ended June 30, 2020. The increases in the EACs are due to increases in estimated program costs associated with the COVID-19 operating posture and the estimated impact of certain items such as supplier delays and increased labor hours.

Adjusted EBITDA increased to $11 million from $7 million, or by $4 million, for the three months ended June 30, 2020, compared to the same period of 2019. The increase in the Space Infrastructure segment is primarily related to increased revenues and higher margins on certain programs. The increase was partially offset by $10 million due to a change in the compensation structure from retention payments to bonuses which were not included in segment Adjusted EBITDA in 2019, a recovery of a previously reserved amount of $7 million in 2019 which did not reoccur in 2020, $17 million of losses incurred on developmental builds and a $6 million negative impact related to our COVID-19 operating posture, a portion of which is included in the losses incurred on developmental builds.

Corporate and other expenses

Corporate and other expenses include items such as corporate office costs, regulatory costs, executive and director compensation, foreign exchange gains and losses, retention costs, and fees for legal and consulting services.

Corporate and other expenses for the three months ended June 30, 2020 decreased to $12 million from $19 million, or by $7 million, compared to the same period in 2019. The decrease was primarily driven by a $6 million decrease in retention costs related to a 2019 program within the Space Infrastructure segment. The decrease was partially offset by a decrease in the foreign exchange gain recognized and an increase in selling, general and administrative expenses for the three months ended June 30, 2020, compared to the same period in 2019.

Intersegment eliminations

Intersegment eliminations are related to projects between our segments, including WorldView Legion. Intersegment eliminations have increased to $7 million from $4 million, or by $3 million, for the three months ended June 30, 2020 compared to the same period in 2019 primarily related to an increase in intersegment satellite construction activity.

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2020

 

2019

 

2020

 

2019

Revenues:

 

 

 

 

 

 

 

 

Product

 

$

157

 

 

$

144

 

 

$

264

 

 

$

310

 

Service

 

 

282

 

 

 

268

 

 

 

556

 

 

 

533

 

Total revenues

 

 

439

 

 

 

412

 

 

 

820

 

 

 

843

 

Costs and expenses:

 

 

 

 

 

 

 

 

Product costs, excluding depreciation and amortization

 

 

144

 

 

 

141

 

 

 

289

 

 

 

312

 

Service costs, excluding depreciation and amortization

 

 

87

 

 

 

103

 

 

 

180

 

 

 

195

 

Selling, general and administrative

 

 

79

 

 

 

66

 

 

 

147

 

 

 

151

 

Depreciation and amortization

 

 

89

 

 

 

96

 

 

 

179

 

 

 

191

 

Impairment loss

 

 

 

 

 

 

 

 

14

 

 

 

 

Satellite insurance recovery

 

 

 

 

 

(183

)

 

 

 

 

 

(183

)

Operating income

 

 

40

 

 

 

189

 

 

 

11

 

 

 

177

 

Interest expense, net

 

 

48

 

 

 

49

 

 

 

97

 

 

 

98

 

Other (income) expense, net

 

 

(4

)

 

 

(2

)

 

 

(7

)

 

 

3

 

(Loss) income before taxes

 

 

(4

)

 

 

142

 

 

 

(79

)

 

 

76

 

Income tax (benefit) expense

 

 

(2

)

 

 

1

 

 

 

 

 

 

2

 

Equity in (income) loss from joint ventures, net of tax

 

 

(2

)

 

 

2

 

 

 

(1

)

 

 

3

 

Income (loss) from continuing operations

 

 

 

 

 

139

 

 

 

(78

)

 

 

71

 

Discontinued operations

 

 

 

 

 

 

 

 

Income from operations of discontinued operations, net of tax

 

 

2

 

 

 

9

 

 

 

32

 

 

 

20

 

Gain on disposal of discontinued operations, net of tax

 

 

304

 

 

 

 

 

 

304

 

 

 

 

Income from discontinued operations, net of tax

 

 

306

 

 

 

9

 

 

 

336

 

 

 

20

 

Net income

 

$

306

 

 

$

148

 

 

$

258

 

 

$

91

 

 

 

 

 

 

 

 

 

 

Basic income per common share:

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

 

 

$

2.33

 

 

$

(1.29

)

 

$

1.19

 

Income from discontinued operations, net of tax

 

 

5.05

 

 

 

0.15

 

 

 

5.56

 

 

 

0.34

 

Basic income per common share

 

$

5.05

 

 

$

2.48

 

 

$

4.27

 

 

$

1.53

 

 

 

 

 

 

 

 

 

 

Diluted income per common share:

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

 

 

$

2.32

 

 

$

(1.29

)

 

$

1.19

 

Income from discontinued operations, net of tax

 

 

4.94

 

 

 

0.15

 

 

 

5.56

 

 

 

0.33

 

Diluted income per common share

 

$

4.94

 

 

$

2.47

 

 

$

4.27

 

 

$

1.52

 

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Balance Sheets

(In millions, except per share amounts)

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

2020

 

2019

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

177

 

 

$

59

 

Trade and other receivables, net

 

 

312

 

 

 

357

 

Inventory

 

 

21

 

 

 

20

 

Advances to suppliers

 

 

51

 

 

 

42

 

Prepaid and other current assets

 

 

41

 

 

 

32

 

Current assets held for sale

 

 

 

 

 

751

 

Total current assets

 

 

602

 

 

 

1,261

 

Non-current assets:

 

 

 

 

Orbital receivables, net

 

 

354

 

 

 

382

 

Property, plant and equipment, net

 

 

823

 

 

 

758

 

Intangible assets, net

 

 

901

 

 

 

991

 

Non-current operating lease assets

 

 

170

 

 

 

176

 

Goodwill

 

 

1,455

 

 

 

1,455

 

Other non-current assets

 

 

124

 

 

 

134

 

Total assets

 

$

4,429

 

 

$

5,157

 

Liabilities and stockholders’ equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

155

 

 

$

153

 

Accrued liabilities

 

 

57

 

 

 

130

 

Accrued compensation and benefits

 

 

60

 

 

 

93

 

Contract liabilities

 

 

234

 

 

 

271

 

Current portion of long-term debt

 

 

9

 

 

 

30

 

Current operating lease liabilities

 

 

41

 

 

 

40

 

Other current liabilities

 

 

85

 

 

 

49

 

Current liabilities held for sale

 

 

 

 

 

230

 

Total current liabilities

 

 

641

 

 

 

996

 

Non-current liabilities:

 

 

 

 

Pension and other postretirement benefits

 

 

193

 

 

 

197

 

Contract liabilities

 

 

3

 

 

 

4

 

Operating lease liabilities

 

 

165

 

 

 

173

 

Long-term debt

 

 

2,407

 

 

 

2,915

 

Other non-current liabilities

 

 

118

 

 

 

110

 

Total liabilities

 

 

3,527

 

 

 

4,395

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock ($0.0001 par value, 240 million common shares authorized; 60.7 million and 59.9 million outstanding at June 30, 2020 and December 31, 2019, respectively)

 

 

 

 

 

 

Additional paid-in capital

 

 

1,794

 

 

 

1,784

 

Accumulated deficit

 

 

(825

)

 

 

(1,082

)

Accumulated other comprehensive (loss) income

 

 

(68

)

 

 

59

 

Total Maxar stockholders' equity

 

 

901

 

 

 

761

 

Noncontrolling interest

 

 

1

 

 

 

1

 

Total stockholders' equity

 

 

902

 

 

 

762

 

Total liabilities and stockholders' equity

 

$

4,429

 

 

$

5,157

 

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(In millions)

 

 

 

 

 

 

 

Six Months Ended

 

 

June 30,

 

 

2020

 

2019

Cash flows (used in) provided by:

 

 

 

 

Operating activities:

 

 

 

 

Net income

 

$

258

 

 

$

91

 

Income from operations of discontinued operations, net of tax

 

 

32

 

 

 

20

 

Gain on disposal of discontinued operations, net of tax

 

 

304

 

 

 

 

(Loss) income from continuing operations

 

 

(78

)

 

 

71

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

 

 

 

 

Impairment losses including inventory

 

 

14

 

 

 

3

 

Depreciation and amortization

 

 

179

 

 

 

191

 

Loss from extinguishment of debt

 

 

7

 

 

 

 

Amortization of debt issuance costs and other non-cash interest expense

 

 

8

 

 

 

4

 

Stock-based compensation expense

 

 

13

 

 

 

4

 

Other

 

 

2

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

Trade and other receivables

 

 

40

 

 

 

(20

)

Advances to suppliers

 

 

(9

)

 

 

32

 

Accounts payables and accrued liabilities

 

 

(76

)

 

 

(92

)

Contract liabilities

 

 

(38

)

 

 

(124

)

Other

 

 

4

 

 

 

7

 

Cash provided by operating activities - continuing operations

 

 

66

 

 

 

76

 

Cash used in operating activities - discontinued operations

 

 

(30

)

 

 

(15

)

Cash provided by operating activities

 

 

36

 

 

 

61

 

Investing activities:

 

 

 

 

Purchase of property, plant and equipment and development or purchase of software

 

 

(128

)

 

 

(124

)

Return of capital from discontinued operations

 

 

20

 

 

 

 

Cash used in investing activities - continuing operations

 

 

(108

)

 

 

(124

)

Cash provided by (used in) investing activities - discontinued operations

 

 

723

 

 

 

(3

)

Cash provided by (used in) investing activities

 

 

615

 

 

 

(127

)

Financing activities:

 

 

 

 

Net proceeds of revolving credit facility

 

 

 

 

 

97

 

Net proceeds from issuance of 2027 Notes

 

 

147

 

 

 

 

Repurchase of 2023 Notes, including premium

 

 

(169

)

 

 

 

Repayments of long-term debt

 

 

(516

)

 

 

(11

)

Settlement of securitization liability

 

 

(7

)

 

 

(8

)

Payment of dividends

 

 

(1

)

 

 

(1

)

Other

 

 

(3

)

 

 

 

Cash (used in) provided by financing activities - continuing operations

 

 

(549

)

 

 

77

 

Cash (used in) provided by financing activities - discontinued operations

 

 

(24

)

 

 

14

 

Cash (used in) provided by financing activities

 

 

(573

)

 

 

91

 

Increase in cash, cash equivalents, and restricted cash

 

 

78

 

 

 

25

 

Effect of foreign exchange on cash, cash equivalents, and restricted cash

 

 

(5

)

 

 

1

 

Cash, cash equivalents, and restricted cash, beginning of year

 

 

110

 

 

 

43

 

Cash, cash equivalents, and restricted cash, end of period

 

$

183

 

 

$

69

 

 

 

 

 

 

Reconciliation of cash flow information:

 

 

 

 

Cash and cash equivalents

 

$

179

 

 

$

63

 

Restricted cash included in prepaid and other current assets

 

 

1

 

 

 

5

 

Restricted cash included in other non-current assets

 

 

3

 

 

 

1

 

Total cash, cash equivalents, and restricted cash

 

$

183

 

 

$

69

 


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