**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C.  20549**

 

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**FORM 10-Q**

 

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**(Mark One)**

 
| **ý** | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                              |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                                                                                                                                                                                                      |
|       |       | **For the quarterly period ended September  30, 2005**                                                                                                                                                                                                                                                                    |
|       |       |                                                                                                                                                                                                                                                                                                                      |
| **or**     |
|       |       |                                                                                                                                                                                                                                                                                                                      |
| **o**      | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                             |
|       |       | ** **                                                                                                                                                                                                                                                                                                                |
|       |       | **For the transition period from                        to                       ** |

 

**Commission File Number:  333-123420**

 

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**NEW SKIES SATELLITES B.V.**

(Exact nameof Registrant as specified in its charter)

 
| **The Netherlands**             | ** ** | **20-1814083**         |
|---------------------------------|------------|------------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer       |
| Incorporation or Organization)  |       | Identification Number) |

 

**Rooseveltplantsoen4**

**2517 KR The Hague**

**The Netherlands**

(Address,including zip code, of Registrant’s Principal Executive Offices)

 

**(31) 70-306-4100**

(Registrant’stelephone number, including area code)

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.   ý Yes  o No

 

Indicate by check mark whether the registrantis an accelerated filed (as defined in Rule 12b-2 of the Exchange Act).   o Yes  ý No

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act).   o Yes  ý No

 

As of October 31, 2005, 18,200 ordinaryshares of our common stock were outstanding.

 

 

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**NEWSKIES SATELLITES B.V.**

**TABLEOF CONTENTS**

 
| Introduction                                       |                                                                                         |   |
|----------------------------------------------------|----------------------------------------------------------------------------------------------|--------|
|                                               |                                                                                         |   |
| Special Note Regarding  Forward-Looking Statements |                                                                                         |
|                                               |                                                                                         |   |
| Part I – Financial Information                |                                                                                         |
|                                               |                                                                                         |   |
| Item 1.                                            | Financial Statements.                                                                        |   |
|                                               |                                                                                         |   |
|                                               | Condensed Consolidated  Balance Sheets (Unaudited)                                           |   |
|                                               |                                                                                         |   |
|                                               | Condensed Consolidated  Statements of Operations (Unaudited)                                 |   |
|                                               |                                                                                         |   |
|                                               | Condensed Consolidated  Statements of Cash Flows (Unaudited)                                 |   |
|                                               |                                                                                         |   |
|                                               | Notes To Condensed  Consolidated Financial Statements (Unaudited)                            |   |
|                                               |                                                                                         |   |
| Item 2.                                            | Management’s Discussion And  Analysis of Financial Condition and Results of Operations. |   |
|                                               |                                                                                         |   |
| Item 3.                                            | Quantitative and  Qualitiative Disclosure About Market Risk.                                 |   |
|                                               |                                                                                         |   |
| Item 4.                                            | Controls and Procedures.                                                                     |   |
|                                               |                                                                                         |   |
| Part II – Other Information                   |                                                                                         |
|                                               |                                                                                         |   |
| Item 1.                                            | Legal Proceedings.                                                                           |   |
|                                               |                                                                                         |   |
| Item 2.                                            | Unregistered Sales of Equity  Securities and Use of Proceeds.                                |   |
|                                               |                                                                                         |   |
| Item 3.                                            | Defaults Upon Senior  Securities.                                                            |   |
|                                               |                                                                                         |   |
| Item 4.                                            | Submission of Matters to a  Vote of Security Holders.                                        |   |
|                                               |                                                                                         |   |
| Item 5.                                            | Other Information.                                                                           |   |
|                                               |                                                                                         |   |
| Item  6.                                           | Exhibits.                                                                                    |   |

 

1

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# **INTRODUCTION**

 

In this quarterly report,all references to “New Skies,” “the Company,” “we,” “us,” “our” and “ours”refer to New Skies Satellites B.V. and its subsidiaries, unless the contextotherwise requires or it is otherwise indicated.

 

# **SPECIAL NOTEREGARDING FORWARD-LOOKING STATEMENTS**

 

Certain statements in thisquarterly report are not historical facts and are “forward-looking statements”within the meaning of the U.S. federal securities laws. The Private SecuritiesLitigation Reform Act of 1995 provides a “safe harbor” for certainforward-looking statements as long as such information is identified as forward-lookingand is accompanied by meaningful cautionary statements identifying importantfactors that could cause actual results to differ materially from thoseprojected in the information. We intend that forward-looking statementscontained in this report be covered by the safe harbors created under the U.S.federal securities laws. Words such as “believes,” “expects,” “estimates,” “may,”“intends,” “will,” “should” or “anticipates” and similar expressions or theirnegatives identify forward-looking statements.

 

Forward-looking statements,such as the statements regarding our ability to develop and expand ourbusiness, our ability to manage costs, our ability to exploit and respond totechnological innovation, the effects of laws and regulations (including taxlaws and regulations) and legal and regulatory changes, the opportunities forstrategic business combinations and the effects of consolidation in ourindustry on us and our competitors, our anticipated future revenues, ouranticipated capital spending (including for future satellite procurements), ouranticipated financial resources, our expectations about the future operationalperformance of our satellites (including their projected operational lives),the expected strength of and growth prospects for our existing customers andthe markets that we serve, and other statements contained in this reportregarding matters that are not historical facts, involve predictions.Statements of that sort involve known and unknown risks, uncertainties andother factors that may cause our actual results, performance or achievements orindustry results to be materially different from any future results,performance or achievements expressed or implied by any statements of thatsort. These risks and uncertainties include, among other things:

 

•             the level and type of demand for our services and for the products andservices provided by our customers to third parties, including the extent towhich changes in demand and our competitive position as well as the creditworthinessof our customers may result in changes to our contractual backlog for futureservices and in pricing pressure and overcapacity in the markets in which wecompete;

 

•             problems with respect to the construction, launch or in-orbitperformance of our existing and future satellites, including possible futurelosses on satellites that are not fully covered by insurance, or with theperformance of our ground-based facilities, including with the performance ofour Satellite Operations Center;

 

•             our ability to attract sufficient funding to meet our future capitaland debt-repayment requirements;

 

•             competition and our competitiveness vis-à-vis other providers ofsatellite and ground-based services;

 

•             the pace and effects of industry consolidation;

 

•             the continued availability of insurance on commercially reasonableterms, and the effects of any insurance exclusions;

 

•             changing technology;

 

•             changes in our business strategy or development plans;

 

•             our ability to attract and retain qualified personnel;

 

•             worldwide economic, geopolitical and business conditions and risksassociated with doing business on a global basis;

 

2

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•             control by certain investment funds affiliated with The BlackstoneGroup; and

 

•             legal, regulatory, and tax developments, including changes in domesticand international governmental regulation.

 

We caution you that theforegoing list of important factors is not exclusive. These risks anduncertainties could cause actual results to vary materially from future resultsindicated, expressed or implied in any forward-looking statements. In addition,in light of these risks and uncertainties, the matters referred to in theforward-looking statements may not in fact occur. We undertake no obligation toupdate or revise publicly any forward-looking statement as a result of newinformation, future events or otherwise, except as otherwise required by law.

 

3

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# **PART I – FINANCIALINFORMATION**

 

## **ITEM 1.**FINANCIALSTATEMENTS.

 

**NEW SKIES SATELLITES B.V.**

### **CONDENSEDCONSOLIDATED BALANCE SHEETS (UNAUDITED)**

***(in thousands of U.S. dollars,except per share data)***

 
| ** **                                                                                                                                    | ** ** | **As of****December 31, 2004** | ** ** | **As of  September 30, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|-------------------------------|------------|
| **Assets**                                                                                                                                    |       |                           |       |                          |       |
| **Current assets**                                                                                                                            |       |                           |       |                          |       |
| Cash and cash equivalents                                                                                                                     |       | $                              | 37,958     |                          | $          | 53,522 |   |
| Trade receivables, net of allowance for  doubtful accounts of $7,262 and $8,172 as of December 31, 2004 and September  30, 2005, respectively |       | 36,371                         |       | 35,421                        |       |
| Prepaid expenses and other assets                                                                                                             |       | 10,591                         |       | 5,143                         |       |
| **Total current assets**                                                                                                                      |       | 84,920                         |       | 94,086                        |       |
|                                                                                                                                          |       |                           |       |                          |       |
| Communications, plant and other property,  net                                                                                                |       | 895,906                        |       | 634,640                       |       |
| Intangible assets (see Note 2)                                                                                                                |       | —                         |       | 28,276                        |       |
| Deferred tax assets                                                                                                                           |       | 17,754                         |       | 21,827                        |       |
| Debt issuance costs and other assets                                                                                                          |       | 32,109                         |       | 20,096                        |       |
| Restricted cash                                                                                                                               |       | —                         |       | 30,000                        |       |
| **TOTAL ASSETS**                                                                                                                              |       | $                              | 1,030,689  |                          | $          | 828,925 |   |
| ** **                                                                                                                                    |       |                           |       |                          |       |
| **Liabilities and Shareholder’s  Deficiency**                                                                                            |       |                           |       |                          |       |
| **Current liabilities**                                                                                                                       |       |                           |       |                          |       |
| Accounts payable and accrued liabilities                                                                                                      |       | $                              | 28,381     |                          | $          | 26,953 |   |
| Accrued interest                                                                                                                              |       | 4,880                          |       | 12,805                        |       |
| Income taxes payable                                                                                                                          |       | 20,480                         |       | 19,995                        |       |
| Deferred tax liabilities                                                                                                                      |       | 10,848                         |       | 7,468                         |       |
| Deferred revenues and other liabilities                                                                                                       |       | 21,007                         |       | 24,291                        |       |
| Satellite performance incentives                                                                                                              |       | 6,332                          |       | 5,090                         |       |
| **Total current liabilities**                                                                                                                 |       | 91,928                         |       | 96,602                        |       |
|                                                                                                                                          |       |                           |       |                          |       |
| Deferred revenues and other liabilities                                                                                                       |       | 10,224                         |       | 9,052                         |       |
| Satellite performance incentives                                                                                                              |       | 30,597                         |       | 29,531                        |       |
| Term loan facility                                                                                                                            |       | 460,000                        |       | 203,560                       |       |
| Fixed and floating rate notes                                                                                                                 |       | 285,000                        |       | 285,000                       |       |
| Subordinated shareholder PIK loan                                                                                                             |       | 155,884                        |       | 169,381                       |       |
| Other subordinated shareholder loans                                                                                                          |       | —                         |       | 41,047                        |       |
| **Total liabilities**                                                                                                                         |       | 1,033,633                      |       | 834,173                       |       |
|                                                                                                                                          |       |                           |       |                          |       |
| **Shareholder’s Deficiency**                                                                                                             |       |                           |       |                          |       |
| Ordinary shares                                                                                                                               |       | 23                             |       | 23                            |       |
| Additional paid in capital                                                                                                                    |       | 10,000                         |       | 22,126                        |       |
| Accumulated deficit                                                                                                                           |       | (13,637                        | )          | (27,781                       | )          |
| Accumulated other comprehensive income                                                                                                        |       | 670                            |       | 384                           |       |
| **Total shareholder’s  deficiency**                                                                                                      |       | (2,944                         | )          | (5,248                        | )          |
| **TOTAL LIABILITIES AND  SHAREHOLDERS’ DEFICIENCY**                                                                                      |       | $                              | 1,030,689  |                          | $          | 828,925 |   |

 

**See notes to condensed consolidated financialstatements.**

 

4

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**NEW SKIES SATELLITES B.V.**

### **CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

***(in thousands of U.S. dollars)***

 
| ** **                                             | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **                                             | ** ** | **2004**                             | ** ** | **2005**                            | ** ** | **2004** | ** ** | **2005** | ** ** |
| ** **                                             | ** ** | **(Predecessor)**                    | ** ** | **(Successor)**                     | ** ** | **(Predecessor)** | ** ** | **(Successor)** | ** ** |
|                                                   |       |                                 |       |                                |       |   |   |   |   |
| **Revenues**                                           |       | $                                    | 53,781     |                                | $          | 61,242 |   | $ | 156,889 |   | $ | 179,136 |   |
| **Operating expenses:**                                |       |                                 |       |                                |       |   |   |   |   |
| Depreciation and amortization                          |       | 25,976                               |       | 24,039                              |       | 77,619 |   | 71,317 |   |
| Cost of operations:                                    |       |                                 |       |                                |       |   |   |   |   |
| General                                                |       | 13,548                               |       | 11,239                              |       | 40,759 |   | 33,067 |   |
| Stock-based compensation                               |       | 24                                   |       | 521                                 |       | 188 |   | 1,998 |   |
| Selling, general and administrative:                   |       |                                 |       |                                |       |   |   |   |   |
| General                                                |       | 9,692                                |       | 9,886                               |       | 30,452 |   | 30,526 |   |
| Stock-based compensation                               |       | 174                                  |       | 3,891                               |       | 1,406 |   | 15,583 |   |
| Transaction related expenses                           |       | 780                                  |       | —                              |       | 3,626 |   | — |   |
| Monitoring agreement fees                              |       | —                               |       | —                              |       | — |   | 6,938 |   |
| **Total Operating Expenses**                           |       | 50,194                               |       | 49,576                              |       | 154,050 |   | 159,429 |   |
| Gain arising on frequency coordination                 |       | —                               |       | 9,500                               |       | 32,000 |   | 19,500 |   |
| **Operating Income**                                   |       | 3,587                                |       | 21,166                              |       | 34,839 |   | 39,207 |   |
| Interest expense, net                                  |       | 194                                  |       | 18,256                              |       | 782 |   | 58,989 |   |
| **Income (Loss) Before Income  Tax Expense (Benefit)** |       | 3,393                                |       | 2,910                               |       | 34,057 |   | (19,782 | ) |
| Income tax expense (benefit)                           |       | 1,222                                |       | 829                                 |       | 12,261 |   | (5,638 | ) |
|                                                   |       |                                 |       |                                |       |   |   |   |   |
| **Net Income (Loss)**                                  |       | $                                    | 2,171      |                                | $          | 2,081 |   | $ | 21,796 |   | $ | (14,144 | ) |

 

**See notes to condensed consolidated financialstatements.**

 

5

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**NEW SKIES SATELLITES B.V.**

### **CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

***(in thousands of U.S. dollars)***

 
| ** **                                                    | ** ** | **Three Months Ended****September 30** | ** ** | **Nine Months Ended****September 30** | ** ** |
|---------------------------------------------------------------|------------|----------------------------------------|------------|---------------------------------------|------------|
| ** **                                                    | ** ** | **2004**                               | ** ** | **2005**                              | ** ** | **2004** | ** ** | **2005** | ** ** |
| ** **                                                    | ** ** | **(Predecessor)**                      | ** ** | **(Successor)**                       | ** ** | **(Predecessor)** | ** ** | **(Successor)** | ** ** |
| Cash flows from operating activities:                         |       |                                   |       |                                  |       |   |   |   |   |
| Net income (loss)                                             |       | $                                      | 2,171      |                                  | $          | 2,081 |   | $ | 21,796 |   | $ | (14,144 | ) |
| Adjustments for non-cash items:                               |       |                                   |       |                                  |       |   |   |   |   |
| Depreciation and amortization                                 |       | 25,976                                 |       | 24,039                                |       | 77,619 |   | 71,317 |   |
| Non-cash interest on PIK and other  shareholder loans         |       | —                                 |       | 6,436                                 |       | — |   | 16,069 |   |
| Deferred taxes                                                |       | 282                                    |       | 221                                   |       | 1,057 |   | (7,443 | ) |
| Non-cash stock-based compensation expense                     |       | 198                                    |       | 4,387                                 |       | 1,594 |   | 12,126 |   |
| Amortization of debt issuance costs                           |       | —                                 |       | 1,750                                 |       | 321 |   | 12,527 |   |
| Changes in operating assets and  liabilities:                 |       |                                   |       |                                  |       |   |   |   |   |
| Trade receivables                                             |       | 1,271                                  |       | 987                                   |       | (302 | ) | 926 |   |
| Prepaid expenses and other assets                             |       | 3,445                                  |       | 4,580                                 |       | 5,742 |   | 5,575 |   |
| Accounts payable and accrued liabilities                      |       | (2,732                                 | )          | (2,403                                | )          | 2,696 |   | (1,337 | ) |
| Accrued interest                                              |       | —                                 |       | 5,711                                 |       | — |   | 7,925 |   |
| Income taxes payable                                          |       | 527                                    |       | 221                                   |       | 10,373 |   | (468 | ) |
| Other liabilities                                             |       | 507                                    |       | 1,137                                 |       | 960 |   | 2,134 |   |
| **Net Cash Provided by  Operating Activities**                |       | 31,645                                 |       | 49,147                                |       | 121,856 |   | 105,207 |   |
| Cash flows from investing activities:                         |       |                                   |       |                                  |       |   |   |   |   |
| Payments for communication, plant and other  property         |       | (2,102                                 | )          | (817                                  | )          | (5,961 | ) | (4,379 | ) |
| Reimbursement of NSS-8 construction costs                     |       | —                                 |       | —                                |       | — |   | 168,000 |   |
| Increase in restricted cash                                   |       | —                                 |       | —                                |       | — |   | (30,000 | ) |
| **Net Cash Provided by  (Used in) Investing Activities** |       | (2,102                                 | )          | (817                                  | )          | (5,961 | ) | 133,621 |   |
| Cash flows from financing activities:                         |       |                                   |       |                                  |       |   |   |   |   |
| Stock options exercised                                       |       | 2,397                                  |       | —                                |       | 3,138 |   | — |   |
| Dividends paid                                                |       | (472                                   | )          | —                                |       | (4,457 | ) | — |   |
| Satellite performance incentives and other                    |       | (1,373                                 | )          | (1,418                                | )          | (4,532 | ) | (5,247 | ) |
| Repayments of senior long-term debt                           |       | —                                 |       | (25,000                               | )          | — |   | (256,440 | ) |
| Borrowings under shareholder loans                            |       | —                                 |       | —                                |       | — |   | 145,043 |   |
| Payments under shareholder loans                              |       | —                                 |       | (8,860                                | )          | — |   | (106,568 | ) |
| **Net Cash Provided By (Used  in) Financing Activities**      |       | 552                                    |       | (35,278                               | )          | (5,851 | ) | (223,212 | ) |
| **Effect of exchange rate  differences**                      |       | 688                                    |       | 3                                     |       | 403 |   | (52 | ) |
| **Net increase in cash and cash  equivalents**                |       | 30,783                                 |       | 13,055                                |       | 110,447 |   | 15,564 |   |
| **Cash and cash equivalents,  beginning of period**           |       | 102,917                                |       | 40,467                                |       | 23,253 |   | 37,958 |   |
| **Cash and cash equivalents,  end of period**                 |       | $                                      | 133,700    |                                  | $          | 53,522 |   | $ | 133,700 |   | $ | 53,522 |   |

 

**See notes to condensed consolidated financialstatements.**

 

6

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**NEW SKIES SATELLITES B.V.**

 

### **NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

 

**1.****           ****BASIS OFPRESENTATION**

 

References made to the “Company”or “New Skies” shall mean New Skies Satellites N.V. and its subsidiaries forthe period up to and including November 1, 2004 and New Skies Satellites B.V.and its subsidiaries for periods thereafter.

 

New Skies Satellites B.V.was formed on September 7, 2004 as a corporation organized under the laws ofthe Netherlands. The Company is currently controlled by investment fundsaffiliated with The Blackstone Group (the “investment funds”).

 

The accompanying condensedconsolidated financial statements have been prepared on the basis of theconsolidated results of New Skies Satellites B.V. and subsidiaries followingthe acquisition of substantially all of the assets and assumption ofsubstantially all of the liabilities of New Skies Satellites N.V. (the “Acquisition”).Accordingly, the accompanying consolidated financial statements have beenprepared by presenting the results for the periods prior to the Acquisition ofNew Skies Satellites N.V. (labelled as “Predecessor”) with those for the periodsubsequent to the Acquisition (labelled as “Successor”).

 

These unaudited interimcondensed consolidated financial statements have been prepared in accordancewith generally accepted accounting principles for interim financial informationand with the instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, they do not include all of the information and footnotes requiredby accounting principles generally accepted in the United States for completefinancial statements. In the opinion of management, the unaudited interimconsolidated financial statements have been prepared on a basis consistent withthe audited consolidated financial statements and include all adjustments,which are of a normal recurring nature, that management considers necessary fora fair statement of the Company’s consolidated financial position and resultsof operations for the interim periods presented. The results of operations forthe three and nine month periods ended September 30, 2005 are not necessarilyindicative of the results that may be expected for the year ending December 31,2005.

 

The condensed consolidatedbalance sheet at December 31, 2004 has been derived from the auditedconsolidated financial statements at that date but does not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements.

 

For further information,refer to the audited consolidated financial statements and footnotes theretoincluded in the Company’s audited consolidated financial statements for theyear ended December 31, 2004 included in the Company’s registration statementon Form S-4 (File No. 333-123420) filed with the Securities and ExchangeCommission (“SEC”), as such registration statement became effective on June 8,2005.

 

**2.****           ****DESCRIPTION OFBUSINESS**

 

*Acquisitionof New Skies Satellites N.V.*

 

The Company purchasedsubstantially all of the assets and liabilities of New Skies Satellites N.V. onNovember 2, 2004. The Company acquired these assets and liabilities for cashconsideration of $958.0 million and direct acquisition costs of $24.8 million,for a total purchase price of $982.8 million.

 

During the three monthperiod ended September 30, 2005, the Company finalized the purchase priceallocation to the assets and liabilities acquired, based on the results of anindependent valuation study.

 

7

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A preliminary purchase price allocation had initiallybeen performed based on management’s best estimate of the fair values of theassets acquired and liabilities assumed at the date of Acquisition.  Cashand cash equivalents, trade receivables, prepaid and other expenses, accountspayable and accrued liabilities and deferred revenues and other liabilitieswere stated at historical carrying values. Given the short-term nature of theseassets and liabilities it was determined that these historical carrying valuesapproximated fair value. Communications, plant and other property, satelliteperformance incentives and income taxes payable were recorded at estimated fairvalue based on evaluations performed by the Company as of the date of theAcquisition.

 

The Company, in connection with the purchase priceallocation, engaged an independent valuation firm to further analyze the transaction. Based on their findings, the preliminary purchase price allocation wasadjusted, in the third quarter of 2005, primarily to reflect the recognition ofcertain intangible assets.  As a result, the fair value of communications,plant and other property was reduced by $28.5 million and the following itemswere separately recorded as part of the Company’s long-lived assets:  intangible assets relating to in-use orbitalslots in the amount of $19.9 million, trade names in the amount of $3.8 millionand goodwill in the amount of $4.8 million.  The Company determinedthat the in-use orbital slots and the goodwill have indefinite lives and theintangible asset associated with the Company’s trade name has a determinablelife of 15 years.

 

The following table providesa breakdown of the fair values assigned to the assets acquired and liabilitiesassumed at the date of Acquisition (in thousands of U.S. dollars):

 

| Cash and cash equivalents                 |   | $       | 121,014 |   |
|-------------------------------------------|--------|---------|---------|--------|
| Trade  receivables                        |   | 44,406  |    |
| Prepaid and  other expenses               |   | 5,849   |    |
| Communications,  plant and other property |   | 881,067 |    |
| Intangible  assets                        |   | 28,505  |    |
| Deferred tax  assets                      |   | 1,680   |    |
| Accounts  payable and accrued liabilities |   | (23,985 | )       |
| Income taxes  payable                     |   | (20,182 | )       |
| Deferred  revenues and other liabilities  |   | (14,861 | )       |
| Satellite  performance incentives         |   | (40,738 | )       |
| Total                                     |   | $       | 982,755 |   |

 

In connection with theAcquisition, the investment funds contributed $153.0 million in the form of asubordinated shareholder PIK loan (see Note 9). In addition, the Companyentered into senior secured credit facilities, consisting of a $460.0 millionterm loan facility and a $75.0 million revolving credit facility, issued $160.0million aggregate principal amount of Floating Rate Notes due 2011 and issued$125.0 million aggregate principal amount of 91¤8% Senior Subordinated Notes due 2012 to fundthe Acquisition (see Note 8).

 

*Prepaymentof Credit Facility and Shareholder Loans; Amendment of Credit Facilities*

 

In the first quarter 2005,the Company entered into an amended agreement for the NSS-8 satellite, pursuantto which the manufacturer refunded to the Company all construction paymentsthat had been made to date. In February 2005, the Company used this refund,along with cash-on-hand, to pay down $88.8 million under the term loan facilityand to make an $88.5 million distribution to its direct parent and shareholder,New Skies Holding B.V., resulting in a corresponding net reduction in amountsowed under the shareholder loans outstanding.

 

In connection with the NSSIPO, the Company’s senior secured credit agreement was amended to increase thelevel of permitted dividends and to make the other changes described in Item 2,“Management’s Discussion and Analysis of Financial Condition and Results ofOperations —Liquidity and Capital Resources”. The amended credit facilitiesallow for the payment of dividends by the Company and New Skies Holding B.V. ofup to $65 million for 2005 and annual dividends thereafter in an amount equalto 105% of the amount permitted to be paid in the immediately preceding fiscalyear. Such dividends will

 

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be permitted only so long as no events of defaultexist under the credit agreement and provided that the Company’s debt toAdjusted EBITDA is below certain thresholds at the time of payment. The amountof dividends available will also be reduced by certain shareholder and otherpayments made by the Company. This amendment became effective upon theconsummation of the Initial Public Offering (“NSS IPO”) of New Skies HoldingsLtd. (“Holdings”), our ultimate parent company, that occurred on May 13, 2005(as further discussed below). Pursuant to the amendment to the senior securedcredit agreement, the amounts allowed for additional dividends increased (i)from $95.0 million to $100.0 million (to allow for the distribution paid inconnection with the amended NSS-8 agreement, as discussed above) and (ii) from$10.0 million to $20.0 million, increasing to $30.0 million if the Company’sTotal Leverage Ratio is equal to or less than 5.0x.

 

In connection with the NSSIPO, the Company also amended the terms of the Subordinated Shareholder PIKLoans to provide for the option to make payments of principal and interest incash or in-kind in order to accommodate the payment of dividends by the Companyto Holdings, which will allow Holdings to pay dividends to its shareholdersgoing forward.

 

*InitialPublic Offering*

 

On May 13, 2005, Holdingscompleted the sale of 11.9 million newly issued ordinary shares, equivalent toapproximately 37% of the total issued and outstanding ordinary shares, in aninitial public offering. Holdings also sold an additional 1.8 million shares onMay 27, 2005 pursuant to the underwriters’ over-allotment option. The principalasset of Holdings, which is a holding company and has no direct operations, isits equity interest in the Company.

 

Holdings provided theCompany with $137.3 million of the NSS IPO net proceeds by way of an indirectshareholder loan. We used $131.2 million of these funds, together with $11.4million of cash-on-hand, to repay $142.6 million of the term loan facility andthe remaining $6.1 million of these funds to pay a fee to Blackstone ManagementPartners IV L.L.C. in connection with the termination of the transaction andmonitoring fee agreement.

 

Prior to the consummation ofthe NSS IPO, Holdings completed an internal restructuring pursuant to which theinvestment funds and management contributed 100% of the equity, preferredequity certificates and convertible preferred equity certificates of New SkiesInvestments S.a.r.l. (our previous ultimate holding company) to Holdings. Dueto this reorganization, the investment funds and management became owners of100% of the equity of Holdings. As a result, New Skies Investments S.a.r.l., NewSkies Holding B.V. and the Company became indirect wholly-owned subsidiaries ofHoldings.

 

In connection with the NSSIPO, Holdings granted options to some of the Company’s employees, including itssenior executives, to purchase shares of its common stock. See Note 10 and Item2, “Management’s Discussion and Analysis of Financial Condition and Results ofOperations —Stock Compensation.”

 

*DividendPolicy*

 

The board of directors ofHoldings has adopted a dividend policy which reflects an intention to distributea substantial portion of the cash generated by its business in excess ofoperating expenses and working capital requirements, interest and capitalexpenditures as regular quarterly dividends to its shareholders.

 

*Offersto Exchange Senior Floating Rate Notes and Senior Subordinated Notes*

 

In July of 2005, the Companyconcluded an offer to exchange $160,000,000 principal amount of its SeniorFloating Rate Notes due 2011 registered under the Securities Act of 1933 forany and all of its previously outstanding $160,000,000 Senior Floating RateNotes due 2011 and to exchange $125,000,000 principal amount of its 9 1/8%Senior Subordinated Notes due 2012 registered under the Securities Act of 1933for any and all of its previously outstanding $125,000,000 9 1/8% SeniorSubordinated Notes due 2012. All previously outstanding notes were tendered inthe exchange offers. The Company conducted the exchange offers in order tosatisfy certain of its obligations under the registration rights agreementsentered into in connection with the placement of the outstanding notes. Theterms of the exchange notes issued in the exchange offers are substantiallyidentical to the outstanding notes, except that the exchange notes are freelytradeable. The Company did not receive any cash proceeds from the issuance ofthe exchange notes

 

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in the exchange offers.

 

**3.****           ****SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

 

The Company’s significantaccounting policies are summarized in its audited consolidated financialstatements for the year ended December 31, 2004 included its registrationstatement on Form S-4 (File No. 333-123420) filed with the SEC, as suchregistration statement became effective on June 8, 2005. There have been nomaterial changes to the Company’s significant accounting policies since thatdate.

 

*RecentlyIssued But Not Adopted Accounting Standard*

 

In May 2005, the FinancialAccounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”)No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”) which replacesAccounting Principles Board Opinion No. 20, “Accounting Changes”, and SFAS No.3, “Reporting Accounting Changes in Interim Financial Statements.” Thisstatement applies to all voluntary changes in accounting principle and changesresulting from the adoption of a new accounting pronouncement that do notspecify transition requirements. SFAS 154 requires retrospective application toprior periods’ financial statements for changes in accounting principle unlessit is impracticable to determine either the period-specific effects or thecumulative effect of the change. SFAS 154 also requires that retrospectiveapplication of a change in accounting principle be limited to the directeffects of the change. Indirect effects of a change in accounting principleshould be recognized in the period of the accounting change. SFAS 154 iseffective for accounting changes and corrections of errors made in fiscal yearsbeginning after December 15, 2005 with early implementation permitted foraccounting changes and corrections of errors made in fiscal years beginningafter the date this statement was issued. SFAS 154 is effective for the Companyas of January 1, 2006 and is not expected to have a material impact on theCompany’s consolidated financial statements.

 

**4.****           ****COMPREHENSIVEINCOME (LOSS)**

 

Comprehensive income (loss)includes net income (loss) and translation adjustments that were recognizeddirectly in equity. Translation adjustments of $0.6 million for the threemonths ended September 30, 2004 and $(0.3) million for the nine months endedSeptember 30, 2005, were incurred and consequently, comprehensive income (loss)in these periods is equal to $2.8 million, $2.1 million, $21.8 million and$(14.4) million in the three month periods ended September 30, 2004 and 2005and nine month periods ended September 30, 2004 and 2005, respectively.

 

**5.****           ****COMMUNICATIONS,PLANT AND OTHER PROPERTY**

 

Communications, plant andother property consisted of the following (in thousands of U.S. dollars):

 
| ** **                        | ** ** | **December 31,  2004** | ** ** | **September 30,  2005** | ** ** |
|-----------------------------------|------------|------------------------|------------|-------------------------|------------|
| Spacecraft  and launch costs      |       | $                      | 684,348    |                    | $          | 647,744 |   |
| Construction-in-progress          |       | 171,684                |       | 14,976                  |       |
| Communications  support and other |       | 35,883                 |       | 39,567                  |       |
| Buildings                         |       | 20,013                 |       | 19,463                  |       |
|                              |       | 911,928                |       | 721,750                 |       |
| Less:  accumulated depreciation   |       | 16,022                 |       | 87,110                  |       |
| Total                             |       | $                      | 895,906    |                    | $          | 634,640 |   |

 

Construction-in-progressrelates primarily to satellites under construction and related launch services.

 

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In January 2005, the Companyentered into an amended agreement for the NSS-8 satellite, which (among otherthings) amended the satellite’s contractual delivery deadline and the paymentterms. Under the prior agreement, NSS-8 was scheduled to enter commercialservice in the first quarter of 2005. Consistent with the terms of the amendedagreement, NSS-8 is projected to be launched in the second half of 2006 and toenter commercial service approximately 90 days after launch. In considerationfor the agreement to increase the purchase price and to amend the deliverydeadline, the manufacturer agreed to refund all construction payments made todate, amounting to $168.0 million. The entire purchase price, including $30.0million that has been placed in escrow, will be paid as satellite performanceincentives, subject to satisfactory performance of the satellite during itscontractual design life, and the Company will provide commercially reasonablesecurity to the manufacturer with respect to unpaid incentives.

 

Upon acceptance of aspacecraft from a satellite manufacturer, the net present value of performanceincentive payments is recorded as a part of the historical cost of thesatellite.

 

**6.****           ****CONTRACTUALCOMMITMENTS**

 

In further development andoperation of the Company’s global commercial communications satellite system,significant additional expenditures are anticipated. At September 30, 2005, theCompany had a contract for the construction, development and launch of theNSS-8 satellite with future committed payments on this program. Suchcommitments (“satellite incentives”) totalled $386.5 million at September 30,2005, including interest that will be accrued thereon, that are scheduled tofall due over the anticipated operating life of this satellite, to the extentthat the satellite operates successfully throughout its contractual designlife.

 

The Company has recorded aliability of $4.5 million at September 30, 2005 representing the present value,at a weighted average discount rate of approximately 8%, for incentive paymentson the NSS-5, NSS-703 and NSS-806 satellites. Incentive payments of $0.4million, $1.4 million, $1.4 million, $0.9 million, $0.5 million and $0.4million are due for the three months ending December 31, 2005 and for the yearsending 2006, 2007, 2008, 2009 and 2010, respectively.

 

Additionally, the Companyhas recorded a liability of $30.1 million at September 30, 2005 representingincentive payments, before interest, on the NSS-6 and NSS-7 satellitesrequiring payments of $0.9 million in the fourth quarter of 2005, $3.5 millionin each of the four subsequent years ending December 31, 2009 and $17.4 millionin the years thereafter. A variable interest charge equivalent to LIBOR plus 1%on the outstanding principal will also be incurred on these payments.

 

**7.****           ****INCOME TAXES**

 

The Company has yet toconclude its discussions with the Dutch tax authorities regarding the final taxobligation of its Predecessor, New Skies Satellites N.V. Such obligation was aliability assumed by the Company in connection with the Acquisition, andaccordingly, the Company recorded a provision for income tax liabilities of$20.0 million at the date of Acquisition. The Company believes that thisadequately covers the liability assumed with respect to the predecessor’s taxliability.

 

Certain countries withinwhich the Company operates have sought to impose withholding taxes or incometaxes on payments from customers in those countries, notwithstanding theexistence of tax treaties that the Company believes do not permit theimposition of such taxes. In particular, the Government of India hascharacterized payments made by Indian-based customers and certain payments madeby non-resident customers in India as “royalty payments”. The Government ofIndia has assessed taxes on these payments for the period April 1999 to March2002 and may in the future assess taxes on these payments for subsequentperiods. The Company has appealed the assessment in accordance with applicableprocedures for handling disputed tax assessments. However, the Company believesit is probable that a loss has been incurred and has recorded an accrualtotalling $5.0 million as of September 30, 2005, representing management’s bestestimate of the amount of the withholding tax obligations that have accrued throughSeptember 30, 2005. There were no material developments in these proceedingsduring the three and nine month periods ended September 30, 2005.

 

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For further information onthese matters, see Note 6 to the Notes to Consolidated Financial Statementsincluded in the Company’s registration statement on Form S-4 (File No.333-123420) filed with the SEC, as such registration statement became effectiveon June 8, 2005.

 

**8.****            ****FINANCINGARRANGEMENTS**

 

At September 30, 2005,senior long-term debt consisted of the following (in thousands of U.S.dollars):

 
| Senior Secured Credit Facilities              |   | $       | 203,560 |   |
|-----------------------------------------------|--------|---------|---------|--------|
| Senior  Floating Rate Notes due 2011          |   | 160,000 |    |
| 91¤8% Senior Subordinated Notes due 2012 |   | 125,000 |    |
| Total senior  long-term debt                  |   | $       | 488,560 |   |

 

In addition, at September30, 2005 the Company had $125.0 million available under its revolving creditfacility against which $3.0 million of standby letters of credit had beendrawn.

 

*SeniorSecured Credit Facilities*

 

Concurrent with theconsummation of the Acquisition, the Company entered into senior secured creditfacilities consisting of a $460.0 million senior secured term loan facilitythat matures in May 2011 and a $75.0 million senior secured revolving creditfacility that matures in November 2010. During the first half of 2005, theCompany prepaid $256.4 million of the term loan borrowings and entered into anamendment to the credit facilities that, among other things, increased therevolving credit facility to $125.0 million. See Note 2. During the three monthperiod ended September 30, 2005, the Company prepaid an additional further$25.0 million of the term loan borrowings. Borrowings under the facilities bear interest at an adjustable ratebased on LIBOR for the associated period of draw-down plus an applicablemargin. The facilities are subject to customary covenant requirements andrestrictions, including a maximum leverage ratio and a minimum interestcoverage ratio. At maturity any outstanding borrowings on the facilities mustbe repaid in full.

 

At September 30, 2005, aone-month draw-down under the senior secured credit facilities would bearinterest at 6.1% per annum. In addition, a commitment fee of 0.375% is paid onthe unused revolving credit amount. At September 30, 2005 there was $203.6million outstanding on the senior secured term loan facility and no amountsoutstanding under the senior secured revolving credit facility.

 

*SeniorFloating Rate Notes due 2011*

 

In connection with theAcquisition, the Company issued $160.0 million aggregate principal amount ofSenior Floating Rate Notes due 2011. The notes bear interest at a rate perannum, reset semi-annually, equal to LIBOR plus 51/8%.The notes rank equally in right of payment to all existing and future seniorindebtedness; rank senior in right of payment to all the Company’s existing andfuture senior subordinated indebtedness and subordinated indebtedness and ranksubordinated in right of payment to the Company’s secured indebtedness. Earlyredemption is permitted without penalty on or after November 1, 2006.Redemption prior to this date is subject to a reducing premium of a maximum of2% of the principal amount. The notes are subject to customary covenantrequirements and restrictions. On July 9, 2005, the Company concluded anexchange offer pursuant to which all outstanding Senior Floating Rate Notes due2011 were exchanged for Senior Floating Rate Notes due 2011 that have beenregistered under the Securities Act of 1933. See Note 2. At September 30, 2005,the $160.0 million of outstanding notes bore an interest rate of approximately8.5% per annum.

 

*9*1/8*% Senior Subordinated Notes due 2012*

 

In connection with theAcquisition, the Company issued $125.0 million aggregate principal amount of 91/8% Senior Subordinated Notes due 2012. The notes rank junior in right ofpayment to all existing and future senior indebtedness; rank equal in right ofpayment to all the Company’s existing and future senior subordinatedindebtedness and rank subordinated in right of payment to the Company’s securedindebtedness. Early redemption is permitted without penalty on or afterNovember 1, 2007. Redemption

 

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prior to this date is subject to a reducing premiumof a maximum of 4.6% of the principal amount. The notes are subject tocustomary covenant requirements and restrictions. On July 9, 2005, the Companyconcluded an exchange offer pursuant to which all outstanding SeniorSubordinated Notes due 2012 were exchanged for Senior Subordinated Notes due2012 that been registered under the Securities Act of 1933. See Note 2. AtSeptember 30, 2005, all $125.0 million of issued notes were outstanding.

 

**9.****           ****SUBORDINATEDSHAREHOLDER LOANS**

 

In connection with theAcquisition, the Company received a loan with a $153.0 million aggregateprincipal amount (“Subordinated shareholder PIK loan”) from New Skies HoldingB.V., the Company’s direct parent. Interest accrues at the rate of 11.5% per annum on a cumulative basis,payable on maturity on April 1, 2014. The loan is subordinated to all currentand future indebtedness of the Company. At September 30, 2005, $169.4 millionof this Subordinated shareholder PIK loan including accrued interest wasoutstanding.

 

In addition, at September30, 2005, $41.0 million of other subordinated shareholder loans, includingaccrued interest, were outstanding. These comprised $110.6 million, includingaccrued interest thereon, that was indirectly due from Holdings following a$88.5 million distribution made out of the proceeds of the NSS-8 refund and$22.1 million of expenses paid on behalf of Holdings together with accruedinterest offset by indirectly received loans totalling $151.6 million fromHoldings, including interest accrued thereon, primarily from the proceedsgenerated from the NSS IPO. These funds were used, in part, to repay $131.2million of the Company’s senior long term debt and the fee arising from thetermination of the monitoring agreement with Blackstone Management Partners IVL.L.C. The other subordinated shareholder loans all mature on December 31, 2014and accrue interest at the rate of 11.5% per annum on a cumulative basis.

 

**10.****        ****STOCK-BASED COMPENSATION**

 

In conjunction with the NSSIPO, Holdings granted 2,016,524 options to the Company’s employees to acquireshares of Holdings common stock pursuant to Holdings’ Stock Incentive Plan. Theaggregate stock-based compensation associated with these awards isapproximately $21.7 million, reflecting the estimated fair value of the optionsat the date of grant. The non-cash stock-based compensation is being recognizedas an operating expense over the vesting period of the options. Certain of theoptions will vest based solely on continued employment over the next four yearsand the remaining options will vest upon the achievement of performance goalsover the next four to seven years or imputed returns realized on sales ofHoldings shares by the investment funds.

 

Certain of the optionsgranted in conjunction with the NSS IPO vested upon issuance and wereimmediately exercised, allowing the Company’s employees to acquire 108,763shares of Holdings’ common stock.

 

The Company’s optionholdersalso received a bonus in May of 2005 of approximately $4.3 million from cash onhand as a consequence of the underwriters’ decision to exercise theiroverallotment option.

 

During the three monthperiods ending June 30 and September 30, 2005 11,701 and 20,055 of the issuedand outstanding options were exercised, respectively, allowing the Company’semployees to acquire 6,312 and 10,900 shares of Holdings’ common stock,respectively.  Holdings also granted22,401 and 39,305 new options during the three month periods ended June 30 andSeptember 30, 2005, respectively.

 

All options must beexercised or forfeited upon vesting. At September 30, 2005, all options hadexercise prices of approximately $2.99 and weighted average remainingcontractual lives of approximately three years. No options were exercisable atSeptember 30, 2005. Upon the payment of dividends by Holdings, options will beadjusted to take into account that the optionholder will not receive thebenefit of that dividend.

 

The Company recognized $4.4million and $17.6 million of stock-based compensation expense for the three andnine months periods ended September 30, 2005, respectively, under the StockIncentive Plan. For the three and nine months periods ended September 30, 2004stock-based compensation was $0.2 million

 

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and $1.6 million,respectively.

 

**11.****        ****SUBSEQUENT EVENT**

 

On November 8, 2005 theCompany sold one of its wholly-owned subsidiaries, New Skies Networks PtyLimited, to Multiemedia for cash consideration of $10.0 million.  Concurrent with the sale, the Company alsoentered into a five year Teleport Service Ordering agreement and a five yearSpace Segment Capacity agreement which ensures that the services that werepreviously provided to and received from New Skies Networks Pty Limitedcontinue to be received and from which the Company will continue to generatesignificant direct cash flows. Accordingly, the results of New Skies Networks Pty Limited for the threeand nine month periods ended September 30, 2005 are shown as generated fromcontinuing operations.

 

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## **ITEM 2.**                 MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

*Thefollowing discussion and analysis of our financial condition and results ofoperations should be read in conjunction with our consolidated financialstatements and related notes included elsewhere in this report and with ourmanagement’s discussion and analysis included in our registration statement onForm S-4 (File No. 333-123420) filed with the SEC, as such registrationstatement became effective on June 8, 2005. This discussion containsforward-looking statements. Please see “Special Note Regarding Forward-LookingStatements” and the Risk Factors included in our registration statement on FormS-4 for a discussion of certain of the uncertainties, risks and assumptionsassociated with these statements.*

 

*Referencesmade to the “Company”, “New Skies”, “we” or “our” shall mean New SkiesSatellites N.V. and its subsidiaries for the period up to and includingNovember 1, 2004 and New Skies Satellites B.V. and its subsidiaries for periodsthereafter.*

 

***Management Overview***

 

We are a global satellitecommunications company that owns and operates five in-orbit satellites and hasone additional satellite under construction. We provide satellite-based transpondercapacity for the transmission of data services, video services,Internet-related services and voice services. We also offer ground-basedservices in conjunction with our satellite capacity in order to provide ourcustomers with end-to-end communications services for certain applications.

 

Overall, the businessclimate for the three and nine month periods ended September 30, 2005, whilecontinuing to improve somewhat, on balance remained difficult. Because pricingwas relatively stable throughout these periods at approximately $1.2 millionper 36 MHz-equivalent transponder, the growth in our fill rate from 55% atSeptember 30, 2004 to 63% at September 30, 2005 resulted in a 14% revenuegrowth over this period.

 

As discussed in Note 1 tothe Condensed Consolidated Financial Statements, the Company’s consolidatedfinancial statements have been prepared on the basis of the consolidatedresults of New Skies Satellites B.V. and subsidiaries following the acquisitionof substantially all of the assets and assumption of substantially all of theliabilities of New Skies Satellites N.V. (the “Acquisition”). Accordingly, theresults for the periods prior to the acquisition of New Skies Satellites N.V.have been labelled as “Predecessor” and those for the period subsequent to theAcquisition have been labelled as “Successor”.

 

***Revenues***

 

We earn revenues byproviding transponder capacity, or a combination of transponder capacity andterrestrial facilities and services, to customers around the globe to allowthem to transmit and receive signals using our satellites. We providetransponder capacity on both a fixed term and occasional use basis. For thethree and nine month periods ended September 30, 2004 and 2005, we derived ourrevenues from the following geographic regions (based on the billing addressesof our customers):

 
| ** **                    | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|-------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **Region**                    | ** ** | **2004**                             | ** ** | **2005**                            | ** ** | **2004** | ** ** | **2005** | ** ** |
| ** **                    | ** ** | **(Predecessor)**                    | ** ** | **(Successor)**                     | ** ** | **(Predecessor)** | ** ** | **(Successor)** | ** ** |
| North America                 |       | 36                                   | %          | 40                                  | %          | 33 | % | 40 | % |
| Europe                        |       | 20                                   |       | 22                                  |       | 21 |   | 21 |   |
| India, Middle East and Africa |       | 22                                   |       | 19                                  |       | 23 |   | 18 |   |
| Latin America                 |       | 13                                   |       | 11                                  |       | 14 |   | 11 |   |
| Asia Pacific                  |       | 9                                    |       | 8                                   |       | 9 |   | 10 |   |
| Total                         |       | 100                                  | %          | 100                                 | %          | 100 | % | 100 | % |

 

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Generally, the region withinwhich a customer purchases services provides a reasonable indication of thelocation where the services are used. However, some of our customers maypurchase capacity to provide services outside of their home country and, as aresult, this distribution may not reflect actual traffic flow on oursatellites. Based on our analysis of market trends, we believe that we willcontinue to experience geographic diversity of our revenues going forward.

 

The table below presents ourestimate, based on our analysis of information provided by our customers, ofthe percentage of our revenues for the three and nine month periods endedSeptember 30, 2004 and 2005 that were attributable to each of the three broadcategories of content for which our customers used our services: data and voicetransmissions for government and corporate communications networks andinternational carriers; video transmissions for broadcasting, cable, and otherentertainment media; and the transmission of Internet content for Internet serviceproviders and others.

 
| ** **              | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|-------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **Services**            | ** ** | **2004**                             | ** ** | **2005**                            | ** ** | **2004** | ** ** | **2005** | ** ** |
| ** **              | ** ** | **(Predecessor)**                    | ** ** | **(Successor)**                     | ** ** | **(Predecessor)** | ** ** | **(Successor)** | ** ** |
| Data and voice services |       | 47                                   | %          | 55                                  | %          | 47 | % | 55 | % |
| Video services          |       | 35                                   |       | 29                                  |       | 35 |   | 31 |   |
| IP services             |       | 18                                   |       | 16                                  |       | 18 |   | 14 |   |
| Total                   |       | 100                                  | %          | 100                                 | %          | 100 | % | 100 | % |

 

Based on an analysis ofinformation provided by our customers, we estimate that during both the threeand nine month periods ended September 30, 2005, we derived approximatelyone-third of our revenues from services to customers where the ultimate enduser was a governmental entity.

 

On August 29, 2005, IntelsatLtd. announced that it and PanAmSat Holding Corporation had signed a definitivemerger agreement.  Intelsat and PanAmSatare two of our largest competitors, with 28 and 25 in-orbit satellites,respectively.  The net effect of themerger of these two companies, if concluded, is difficult to determine.  On the one hand, the combined entity willpotentially be able to compete more effectively in light of its significantlylarger scale.  At the same time, thecombination of these two entities may help to rationalize further the supply ofsatellite capacity and, consequently, help to reduce the oversupply of capacityand the resulting risk of downward pricing pressure for satellite services.

 

***Results of Operations***

 

***Three and nine month periods ended September 30, 2005compared to the three and nine month periods ended September 30, 2004***

 

*Revenues.*Ourrevenues for the three month period ended September 30, 2005 were $61.2million, an increase of $7.4 million, or 14%, as compared to $53.8 million forthe same period in 2004. Our revenues for the nine month period ended September30, 2005 were $179.1 million, an increase of $22.2 million, or 14%, as comparedto $156.9 million for the same period in 2004.

 

Our revenue growth duringthe three and nine months periods ended September 30, 2005 was primarily due toan increase in the overall satellite fleet fill rate to 63% as of September 30,2005 compared to 55% as of September 30, 2004. This growth in fill rate wasprincipally driven by increased demand for NSS-6 capacity serving the Indiansubcontinent, central Asia, and the Middle East, and from restoration servicesprovided to Intelsat on NSS-5 commencing in the first quarter of 2005.

 

*Depreciationand amortization*. Depreciation and amortization decreased by $2.0 million, or 8%, to$24.0 million for the three month period ended September 30, 2005 from $26.0million for the same period last year. Depreciation and amortization decreasedby $6.3 million, or 8%, to $71.3 million for the nine month period endedSeptember 30, 2005 from $77.6 million for the same period last year.

 

In both cases, the netdecrease was primarily due to the fair value adjustment of our fixed asset base

 

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that occurred in connection with the Acquisition.

 

*Costof operations.*Our cost of operations for the three month period ended September 30,2005 decreased by $1.8 million, or 13%, to $11.8 million from $13.6 million forthe same period in 2004. Our cost of operations for the nine month period endedSeptember 30, 2005 decreased by $5.8 million, or 14%, to $35.1 million from$40.9 million for the same period in 2004.

 

The decrease in our cost ofoperations resulted from reductions in third party teleport and satellitecapacity procurements as well as overall reductions in other operatingexpenditures offset, in part, by increases in stock-based compensation expense.

 

*Selling,general and administrative.*For the quarter ended September 30, 2005, ourselling, general and administrative expenses increased $3.9 million, or 39%, to$13.8 million from $9.9 million in the same period in 2004. For the nine monthperiod ended September 30, 2005, our selling, general and administrativeexpenses increased $14.2 million, or 45%, to $46.1 million from $31.9 millionin the same period in 2004.

 

The increase in each periodprimarily resulted from the stock-based compensation expense of $3.9 millionand $15.6 million for the three and nine months periods ended September 30,2005, respectively, compared to $0.2 million and $1.4 million, respectively, inthe same periods in 2004.

 

*Transaction-relatedexpenses.*Wedid not incur any transaction-related expenses during the three and nine monthperiods ended September 30, 2005. New Skies Satellites N.V. incurred $0.8million and $3.6 million of transaction-related expenses for the three and ninemonth periods ended September 30, 2004, respectively.

 

These expenditures relatedto financial advisory fees and expenses, legal costs and accounting fees inconnection with the sale of substantially all the assets and liabilities of NewSkies Satellites N.V. on November 2, 2004.

 

*Monitoringagreement fees.*In connection with the Acquisition, Blackstone Management Partners IVL.L.C. entered into a transaction fee and monitoring agreement with the Companyrelating to certain monitoring, advisory and consulting services for a periodof ten years ending November 2, 2014. In connection with the NSS IPO,Blackstone Management Partners IV L.L.C. terminated this agreement. Ascontemplated by this agreement, the Company paid, in the second quarter of2005, a termination fee to Blackstone Management Partners IV L.L.C. of $6.1million from the proceeds of the NSS IPO. In addition, the company paid $0.8million for these services in 2005 during the period prior to the agreementbeing terminated. No such costs were incurred in the equivalent periods during2004.

 

*Gainarising on frequency coordination.*In the first quarter of 2005, we received aone-time payment of $10.0 million from SES Global affiliates and in the thirdquarter of 2005 we received a one-time payment of $9.5 million from SES Globalaffiliates, in each case following the successful resolution of certainfrequency coordination matters. These payments positively affected ouroperating income for the three and nine month periods ended September 30, 2005.Similarly, in the second quarter of 2004, we received a one-time payment of$32.0 million from Intelsat LLC following the successful resolution of certainfrequency coordination matters. This payment also positively affected ouroperating income for the nine month period ended September 30, 2004.

 

*Interestexpense, net.*Interest expense, net was $18.3 million and $59.0 million for the threeand nine month periods ended September 30, 2005, respectively, compared to $0.2million and $0.8 million, respectively, in the same period in 2004. The netincrease was due to the addition of new debt used to finance the Acquisition.

 

*Incometax expense (benefit).*Our income tax expense for the quarter ended September 30, 2005 was$0.8 million compared to $1.2 million for the quarter ended September 30, 2004.Our effective income tax rate for the quarter ended September 30, 2005decreased to 28.5% as compared to 36% in the same period in 2004. Our incometax benefit for the nine month period ended September 30, 2005 was $5.6million, compared to income tax expense of $12.3 million for the same period in2004. Our effective income tax rate for the nine month period ended September30, 2005 was 28.5%, as compared to 36% in the same period in 2004.

 

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In both cases, the decreasein our effective tax rate was primarily due to the reduction in the statutoryrate of taxation in The Netherlands, our tax jurisdiction, from 34.5% to 30.0%during the period in which we expect to realize the benefits of our tax losscarryforwards.

 

***Backlog***

 

At September 30, 2005, wehad a contractual backlog for future services of $537.5 million, with $58.1million of payments scheduled to fall due during the fourth quarter of 2005,$159.7 million for 2006, $100.6 million for 2007, $64.7 million for 2008, $46.3million for 2009 and $108.1 million for 2010 and thereafter.

 

***Liquidity and Capital Resources***

 

Historically, our principalsources of liquidity have been cash flow provided by operating activities andamounts available under our revolving credit facility.

 

Based upon our current levelof operations, we believe that our cash from operating activities, togetherwith available borrowings under our revolving credit facility, will be adequateto meet our anticipated requirements for the foreseeable future.

 

If we do not generatesufficient cash flow provided by operating activities to satisfy our debtservice obligations, we may have to undertake alternative financing plans, suchas refinancing or restructuring our indebtedness, selling assets, reducing ordelaying capital investments or seeking to raise additional capital. Ourability to restructure or refinance our debt will depend on the capital marketsand our financial condition at such time. Any refinancing of our debt could beat higher interest rates and may require us to comply with more onerouscovenants, which could further restrict our business operations. In addition,the terms of existing or future debt instruments, including the senior securedcredit facilities and the indentures governing the notes, may restrict us fromadopting some of these alternatives. Furthermore, the investment funds do nothave any obligation to provide us with debt or equity financing in the future.Our inability to generate sufficient cash flow to satisfy our debt serviceobligations, or to refinance our obligations on commercially reasonable terms,would have an adverse effect, which could be material, on our business,financial position, results of operations and cash flows, as well as on ourability to satisfy our obligations in respect of the notes and the seniorsecured credit facilities.

 

In connection with ourpurchase of New Skies Satellites N.V. in November 2004, we entered into seniorsecured credit facilities, consisting of a $460.0 million term loan facilityand a $75.0 million revolving credit facility. During the quarter ended March31, 2005, we repaid $88.8 million of borrowings under our term loan facilityusing proceeds of the NSS-8 satellite construction milestone payment refund andcash-on-hand and, during the quarter ended June 30, 2005, we repaid $142.6million of borrowings under our term loan facility from a loan indirectlyreceived from Holdings out of the proceeds of the NSS IPO and from cash onhand. See Note 2 to Condensed Consolidated Financial Statements(Unaudited).  In the three month periodended September 30, 2005 we repaid an additional $25.0 million of borrowingsunder our term loan facility from cash-on-hand.

 

In connection with the NSSIPO and effective upon its consummation, and as a result of the prepaymentsthat had been made to date, we amended our senior secured credit facilities to,among other things:

 

•             increase the amount of permitted dividends (see Note 2 to CondensedConsolidated Financial Statements (Unaudited));

 

•             eliminate the requirement that we repay the term loans under the seniorsecured credit facilities with excess cash flow;

 

•             reduce the maximum required total leverage ratio covenant;

 

•             lower the applicable margins for the term loan facility;

 

•             permit the payment of the management fee to Blackstone ManagementPartners IV L.L.C. in connection with the termination of the transaction andmonitoring fee agreement;

 

18

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•             conform the change of control definition to the change of controldefinition in the indentures governing the notes; and

 

•             increase the revolving credit facility from $75.0 million to $125.0million.

 

As of September 30, 2005, wehad $488.6 million outstanding in aggregate senior indebtedness, with an additional$125.0 million of available borrowings under our revolving credit facility(excluding $3.0 million of outstanding letters of credit, which reduce theamount available under the revolving credit facility).

 

Our credit facilitiesrequire us to maintain certain financial covenants and also subject us tocertain restrictive covenants. As of September 30, 2005, we were in compliancewith all of such covenants.

 

On May 13, 2005, Holdings,which is our ultimate parent company, completed the NSS IPO.  (See Note 2 to Condensed ConsolidatedFinancial Statements (Unaudited).) The principal asset of Holdings, which is aholding company and has no direct operations, is its equity interest in us.Holdings provided us with $137.3 million of the NSS IPO net proceeds by way ofan indirect shareholder loan. As noted above, we used $131.2 million of thesefunds, together with $11.4 million of cash-on-hand, to repay $142.6 million ofour term loan facility.

 

***Dividend Policy***

 

The board of directors ofHoldings has adopted a dividend policy which reflects an intention todistribute a substantial portion of the cash generated by our business inexcess of operating expenses and working capital requirements, interest andcapital expenditures as regular quarterly dividends to its shareholders. Inconnection with the NSS IPO, we amended our senior secured credit facilitiesand Subordinated Shareholder PIK Loan to, among other things, permit greaterflexibility to pay dividends to Holdings’ shareholders.

 

***Sources and Uses of Cash***

 
| ** **                                                | ** ** | **Three Months Ended  September 30** | ** ** | **Nine Months Ended  September 30** | ** ** |
|-----------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| **(In millions of US  dollars)**                          | ** ** | **2004**                             | ** ** | **2005**                            | ** ** | **2004** | ** ** | **2005** | ** ** |
| ** **                                                | ** ** | **(****Predecessor)**                | ** ** | **(Successor)**                     | ** ** | **(Predecessor)** | ** ** | **(Successor)** | ** ** |
|                                                      |       |                                 |       |                                |       |   |   |   |   |
| Net cash provided by operating activities                 |       | $                                    | 31.6       |                                | $          | 49.1 |   | $ | 121.9 |   | $ | 105.2 |   |
| Net cash provided by (used in)  investing activities |       | (2.1                                 | )          | (0.8                                | )          | (6.0 | ) | 133.6 |   |
| Net cash provided by (used in) financing  activities      |       | 0.6                                  |       | (35.3                               | )          | (5.9 | ) | (223.2 | ) |
|                                                           |            |                                      |            |                                     |            |  |  |  |  |  |  |  |  |

 

Net cash provided byoperating activities for the three and nine month periods ended September 30,2005 totalled $49.1 million and $105.2 million, respectively, compared to $31.6million and $121.9 million, respectively, for the same periods in 2004. We hadcash and cash equivalents of approximately $53.5 million as of September 30,2005, and net trade receivables of $35.4 million, of which $26.8 million, orapproximately 76%, were current or less than 30 days overdue.

 

Cash used in investingactivities during the three and nine months periods ended September 30, 2005was funded using cash flow from operating activities. Net cash used ininvesting activities totalled $0.8 million and $4.4 million in the three andnine month periods ended September 30, 2005, respectively, excluding $168.0million of satellite procurement milestone payments refunded to us in the firstquarter of 2005 of which $30.0 million of cash was placed in escrow as part ofthe amended NSS-8 agreement.

 

Net cash used in financingactivities included $256.4 million of repayments made against our senior

 

19

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long term debt in the nine month period endedSeptember 30, 2005 from operating cash flows, the NSS-8 refund referred toabove and from the net proceeds of the NSS IPO that were provided to us by way ofshareholder loans.

 

***Contractual Obligations***

 

The following tablesummarizes our contractual obligations, including related estimated interestpayments based on actual applicable rates for fixed rate obligations andforward interest rates for the relevant period for variable rate obligations,and commercial commitments as of September 30, 2005:

 
| ** **                                    | ** ** | **Payments Due by Period** | ** ** |
|-----------------------------------------------|------------|----------------------------|------------|
| **(In millions of US  Dollars)**              | ** ** | **Total**                  | ** ** | **Less than  one year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **After 5  years** | ** ** |
|                                          |       |                       |       |   |   |   |   |   |   |   |   |
| Long-term debt:                               |       |                       |       |   |   |   |   |   |   |   |   |
| Term loan facility(1)                         |       | $                          | 282.6      |   | $ | 10.2 |   | $ | 28.3 |   | $ | 28.5 |   | $ | 215.6 |   |
| Senior floating rate notes(1)                 |       | 254.8                      |       | 11.3 |   | 31.1 |   | 31.3 |   | 181.1 |   |
| Senior subordinated notes(1)                  |       | 205.8                      |       | 8.6 |   | 22.8 |   | 22.8 |   | 151.6 |   |
| Subordinated shareholder loans(1)             |       | 244.6                      |       | — |   | — |   | — |   | 244.6 |   |
| Operating leases                              |       | 2.7                        |       | 0.7 |   | 1.5 |   | 0.5 |   | — |   |
| Unconditional purchase obligations(2)         |       | 16.3                       |       | 5.3 |   | 5.8 |   | 2.3 |   | 2.9 |   |
| Conditional payment obligations(3)            |       | 46.0                       |       | 6.8 |   | 12.5 |   | 10.1 |   | 16.6 |   |
| Contingent conditional payment obligations(4) |       | 386.5                      |       | — |   | 57.8 |   | 27.1 |   | 301.6 |   |
| Total                                         |       | $                          | 1,439.3    |   | $ | 42.9 |   | $ | 159.8 |   | $ | 122.6 |   | $ | 1,114.0 |   |

 

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(1)   The senior secured creditfacilities consist of a $460.0 million senior secured term loan facility thatmatures in May 2011 and a $125.0 million senior secured revolving creditfacility that matures in November 2010. Borrowings under the facilities bearinterest at an adjustable rate based on LIBOR for the associated period ofdraw-down plus an applicable margin. At September 30, 2005, a one-month draw-downunder the facilities would bear interest at 6.1% per annum. In addition, acommitment fee of 0.375% is paid on the unused revolving credit amount.

 

Theoutstanding senior floating rate notes bear interest at a rate per annum, resetsemi-annually, equal to LIBOR plus 5 1/8%. At September 30, 2005, these notesaccrued interest at a rate of approximately 8.5% per annum.

 

The outstanding seniorsubordinated notes bear interest at a rate of 9 1/8%.

 

The subordinated shareholderloans all have fixed repayment dates of December 31, 2014, except thesubordinated shareholder PIK loan which matures on April 1, 2014. Shareholderloans bear interest at 11.5% per annum on a cumulative basis.

 

(2)   Unconditional purchase obligationsreflect agreements for the procurement of fiber, satellite capacity andteleport services.

 

(3)   Conditional payment obligationsreflect the in-orbit performance incentives of our in-orbit satellite fleet andare paid over the lifetime of the respective satellite.

 

(4)   Contingent conditional paymentobligations reflect the in-orbit incentives of our NSS-8 satellite, currentlyunder construction. The payment obligation is contingently payable on thesatisfactory performance of the spacecraft and is paid over its lifetime.

 

20

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***Off-Balance Sheet Arrangements***

 

We do not have anyoff-balance sheet arrangements as defined under SEC rules.

 

***Stock Compensation***

 

In conjunction with the NSSIPO, Holdings granted 2,016,524 options to our employees to acquire shares ofits common stock pursuant to Holdings’ Stock Incentive Plan. The aggregatestock-based compensation associated with these awards is approximately $21.7million, reflecting the estimated fair value of the options at the date ofgrant. The non-cash stock-based compensation is being recognized as anoperating expense over the vesting period of the options. Certain of theoptions will vest based solely on continued employment over the next four yearsand the remaining options will vest upon the achievement of performance goalsover the next four to seven years or imputed returns realized on sales ofHoldings shares by the investment funds.

 

Certain of the optionsgranted in conjunction with the NSS IPO vested upon issuance and wereimmediately exercised, allowing our employees to acquire 108,763 shares ofHoldings’ common stock.

 

Our optionholders alsoreceived a bonus in May 2005 of approximately $4.3 million from cash on hand asa consequence of the underwriters’ decision to exercise their overallotmentoption.

 

During the three monthperiods ending June 30 and September 30, 2005 11,701 and 20,055 of the issuedand outstanding options were exercised, respectively, allowing the Company’semployees to acquire 6,312 and 10,900 shares of Holdings’ common stock,respectively.  Holdings also granted22,401 and 39,305 new options during the three month periods ended June 30 andSeptember 30, 2005, respectively.

 

All options must beexercised or forfeited upon vesting. At September 30, 2005, all options hadexercise prices of approximately $2.99 and weighted average remainingcontractual lives of approximately three years. No options were exercisable atSeptember 30, 2005. Upon the payment of dividends by Holdings, options will beadjusted to take into account that the optionholder will not receive thebenefit of that dividend.

 

The Company recognized $4.4million and $17.6 million of stock-based compensation expense for the three andnine month periods ended September 30, 2005, respectively, under the StockIncentive Plan. For the three and nine month periods ended September 30, 2004,stock-based compensation was $0.2 million and $1.6 million, respectively.

 

As a result of the non-cashstock-based compensation costs noted above, our operating expenses for thethree month period ended September 30, 2005 were, and we anticipate that ouroperating expenses for 2005 will be, higher than for prior periods.Additionally, the recognition of the deferred stock-based compensation over theapplicable vesting periods will result in non-cash expense in the respectiveperiods, thereby reducing our earnings in those periods.

 

**Taxation**

 

We have yet to conclude ourdiscussions with the Dutch tax authorities regarding the final tax obligationof our Predecessor, New Skies Satellites N.V. Such obligation was a liabilityassumed by us in connection with the Acquisition, and accordingly, we recordeda provision for income tax liabilities of $20.0 million at the date ofAcquisition. We believe that this adequately covers the liability assumed withrespect to the Predecessor’s tax liability.

 

Certain countries withinwhich we operate have sought to impose withholding taxes or income taxes onpayments from customers in those countries, notwithstanding the existence oftax treaties that we believe do not permit the imposition of such taxes. Inparticular, the Government of India has characterized payments made byIndian-based customers and certain payments made by non-resident customers inIndia as “royalty payments”. The Government of India has assessed taxes onthese payments and may in future assess taxes on these payments for subsequentperiods. We have appealed the tax assessment in accordance with applicableprocedures for handling disputed tax assessments. However, we believe it isprobable that a loss has been incurred and have recorded an accrual totalling$5.0 million as of September 30, 2005,

 

21

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representing management’s best estimate of theamount of the withholding tax obligations that have accrued through September30, 2005. There were no material developments in this proceeding during thethree month period ended September 30, 2005.

 

**RecentlyIssued But Not Yet Adopted Accounting Standards**

 

In May 2005, the FinancialAccounting Standards Board issued SFAS No. 154, “Accounting Changes and ErrorCorrections” (“SFAS 154”), which replaces Accounting Principles Board OpinionsNo. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes inInterim Financial Statements.” This statement applies to all voluntary changesin accounting principle and changes resulting from the adoption of a newaccounting pronouncement that do not specify transition requirements. SFAS 154requires retrospective application to prior periods’ financial statements forchanges in accounting principle unless it is impracticable to determine eitherthe period-specific effects or the cumulative effect of the change. SFAS 154also requires that retrospective application of a change in accounting principlebe limited to the direct effects of the change. Indirect effects of a change inaccounting principle should be recognized in the period of the accountingchange. SFAS 154 is effective for accounting changes and corrections of errorsmade in fiscal years beginning after December 15, 2005 with earlyimplementation permitted for accounting changes and corrections of errors madein fiscal years beginning after the date this statement was issued. SFAS 154 iseffective for us as of January 1, 2006 and is not expected to have a materialimpact on our consolidated financial statements.

 

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## **ITEM 3.**                  QUANTITATIVE ANDQUALITIATIVE DISCLOSURE ABOUT MARKET RISK.

 

For a discussion of themarket risks affecting us, see “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations – Market Risk” in ourregistration statement on Form S-4 (File No. 333-123420) filed with the SEC, assuch registration statement became effective on June 8, 2005

 

As of September 30, 2005,our senior debt consisted of $125.0 million of senior subordinated notes,$160.0 million of senior floating rate notes and $203.6 million outstandingunder our floating rate term loan facility. The potential effect of ahypothetical 10% adverse fluctuation in interest rates for one year on ourfixed rate borrowings outstanding at September 30, 2005 would be a reduction infair value of approximately $1.0 million. The potential effect of ahypothetical 10% adverse fluctuation in interest rates for one year on $160.0million of floating rate notes and $203.6 million of floating rate term loansat September 30, 2005 would be a reduction in cash flows of approximately $1.1million and $1.4 million, respectively, and a reduction in net income ofapproximately $0.8 million and $1.0 million, respectively.

 

## **ITEM 4.**                 CONTROLS AND PROCEDURES.

 

We maintain disclosurecontrols and procedures that are designed to ensure that information requiredto be disclosed in our report under the Securities Exchange Act of 1934, asamended (the “Exchange Act”), is recorded, processed, summarized and reportedwithin the time periods specified in the Securities and Exchange Commission’srules and forms, and that such information is accumulated and communicated toour management, including our Chief Executive Officer and Chief FinancialOfficer, as appropriate, to allow timely decisions regarding requireddisclosures. Any controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving the desiredcontrol objectives. Our management, with the participation of our ChiefExecutive Officer and Chief Financial Officer, has evaluated the effectivenessof the design and operation of our disclosure controls and procedures as ofSeptember 30, 2005. Based upon that evaluation and subject to the foregoing,our Chief Executive Officer and Chief Financial Officer concluded that thedesign and operation of our disclosure controls and procedures providedreasonable assurance that the disclosure controls and procedures are effectiveto accomplish their objectives.

 

In addition, there was nochange in our internal control over financial reporting that occurred duringthe quarter ended September 30, 2005 that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

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# **PART II – OTHER INFORMATION**

 

## **ITEM 1.**                 LEGAL PROCEEDINGS.

 

None.

 

## **ITEM 2.**                 UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS.

 

None.

 

## **ITEM 3.**                 DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

## **ITEM 4.**                 SUBMISSION OF MATTERS TO A VOTEOF SECURITY HOLDERS.

 

None.

 

## **ITEM 5.**                 OTHER INFORMATION.

 

In January 2005, Intelsat,Ltd. (“Intelsat”) announced that its IS-804 satellite, a Lockheed Martin Series7000 satellite, experienced an electrical power system anomaly that caused thetotal loss of the spacecraft.  Lockheed Martin has completed itsinvestigation of this failure, although it has not yet released its final report. Based upon information provided to us by Lockheed Martin, it is ourunderstanding that the IS-804 failure was not likely to have been caused by anIS-804 specific workmanship or hardware element, but most likely was caused bya high current event in the battery circuitry triggered by an electrostaticdischarge that propagated to cause the failure of the satellite’s high voltagepower system.  We further understand that, although this risk exists forother satellites of the same series manufactured by Lockheed Martin, includingtwo satellites owned by us (NSS-5 and NSS-806), the risk to any individualsatellite is low.  We do not currently believe that any changes to ouroperating procedures or satellite deployment plans are required to mitigate therisk.  We will be meeting with Lockheed-Martin over the next severalmonths to discuss whether any operational procedure modifications might bebeneficial.

 

As a result of the IS-804failure, our insurers have excluded from insurance coverage any losses arisingfrom power losses and/or failures on our NSS-5 or NSS-806 satellites if theyare due to a defect or defects identical to the defect(s) that caused theIS-804 and/or Telstar 401 and Telstar 402-R in-orbit failures.  (Telstar401 and Telstar 402-R are two other LM Series 7000 satellites that havesuffered in-orbit failures due to power subsystem anomalies.  Lockheed Martin previously attributed themost likely potential causes of the failures of the two Telstar satellites tofailure modes other than the most likely cause(s) of the IS-804 failure.  Due to design differences between the Telstarsatellites and our satellites, Lockheed Martin had believed that it wasunlikely that our satellites could experience these other failure modes.  In light of the most recent IS-804 failure,however, Lockheed Martin believes that there is insufficient information todetermine the exact relationship between these events or different failuremodes.)  We have the burden of proving that the exclusion does not applyin the event of a failure.  This exclusion is subject to review when dataconcerning Lockheed Martin’s analysis of the IS-804 failure becomes available.

 

## **ITEM 6.**                 EXHIBITS.

 

Alist of exhibits filed in this Quarterly Report on Form 10-Q is set forth inthe Exhibit Index and is incorporated in this Item 6 by reference.

 

24

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
|   | NEW SKIES SATELLITES B.V.                      |
|--------|------------------------------------------------|
|   |                                           |
|   | November 14, 2005                              |
|   |                                           |
|   |                                           |
|   | /s/ Andrew M. Browne                           |
|   | Andrew M. Browne                               |
|   | Chief Financial Officer and Managing  Director |
|   | (Principal Financial Officer)                  |
|   |                                           |
|   |                                           |
|   | /s/ Mary J. Dent                               |   |
|   | Mary J. Dent                                   |
|   | Authorized U.S. Representative                 |

 

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**EXHIBITINDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1 (1)             |       | Acquisition Agreement among Neptune One  Holdings Ltd., Munaro Holdings B.V. and New Skies Satellites N.V., dated  June 5, 2004                                                                                                                                                                                                                                                                                                                          |
| 3.1 (6)             |       | Deed of Incorporation of New Skies  Satellites B.V                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.2 (7)             |       | Articles of Association of New Skies  Satellites B.V.                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.1 (2)             |       | Indenture, dated November 2, 2004,  between New Skies Satellites B.V. and U.S. Bank National Association (Senior  Floating Rate Notes)                                                                                                                                                                                                                                                                                                                   |
| 4.2 (2)             |       | Indenture, dated November 2, 2004,  between New Skies Satellites B.V. and U.S. Bank National Association (Senior  Subordinated Notes)                                                                                                                                                                                                                                                                                                                    |
| 10.1 (1)            |       | Credit Agreement, dated November 2,  2004, among New Skies Holding B.V., New Skies Satellites B.V., certain other  subsidiaries, the lenders party thereto from time to time, Deutsche Bank AG,  New York Branch, as Administrative Agent and as Collateral Agent for the  Lenders, ABN Amro Bank N.V., as Syndication Agent and Deutsche Bank  Securities Inc. and ABN Amro Incorporated, as Joint Lead Arrangers and  Joint Book Running Managers |
| 10.2 (1)            |       | Parent Guarantee and U.S. Pledge Agreement,  dated November 2, 2004, between New Skies Satellites B.V. and Deutsche  Bank AG, New York Branch                                                                                                                                                                                                                                                                                                            |
| 10.3 (1)            |       | Holdings Guarantee, dated November 2,  2004, between New Skies Holding B.V. and Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                                                                                        |
| 10.4 (2)            |       | Equitable Charge of Shares, dated  November 2, 2004, between New Skies Satellites B.V. and Deutsche Bank  AG, New York Branch                                                                                                                                                                                                                                                                                                                            |
| 10.5 (1)            |       | Subordinated Intercompany Loan Agreement,  dated November 2, 2004, between New Skies Satellites B.V. and New Skies  Holding B.V.                                                                                                                                                                                                                                                                                                                         |
| 10.6 (1)            |       | Subordinated Intercompany Loan Agreement,  dated November 2, 2004, between New Skies Holding B.V. and New Skies  Investments S.à.r.l.                                                                                                                                                                                                                                                                                                               |
| 10.7 (1)            |       | Agreement of Undisclosed Pledge of Third  Party Accounts Receivable, dated November 2, 2004, between New Skies  Satellites B.V. and Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                                    |
| 10.8 (1)            |       | Agreement of Disclosed Pledge of  Subordinated Intercompany Loan Receivables, dated November 2, 2004,  between New Skies Holding B.V. and Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                              |
| 10.9 (1)            |       | Agreement of Disclosed Pledge of Bank  Accounts, dated November 2, 2004, between New Skies Satellites B.V. and  Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                                                        |
| 10.10 (1)           |       | Agreement of Non-Possessory Pledge of  Assets, dated November 2, 2004, between New Skies Satellites B.V. and  Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                                                          |
| 10.11 (1)           |       | Agreement of Disclosed Pledge of Insurance  Receivables, Subordinated Intercompany Loan Agreement, dated November 2,  2004, between New Skies Satellites B.V. and Deutsche Bank AG                                                                                                                                                                                                                                                                       |
| 10.12 (1)           |       | Agreement of Pledge of Intellectual  Property Rights, dated November 2, 2004, between New Skies Satellites  B.V. and Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                                                   |
| 10.13 (1)           |       | Agreement and Deed of Mortgage and Pledge,  dated November 2, 2004, between New Skies Satellites B.V. and Deutsche  Bank AG, New York Branch                                                                                                                                                                                                                                                                                                             |
| 10.14 (1)           |       | Agreement and Deed of Pledge of Shares in  New Skies Satellites MAR B.V., dated November 2, 2004, between New Skies  Satellites B.V. and Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                               |
| 10.15 (1)           |       | Agreement and Deed of Pledge of Shares in  Morharras B.V., dated November 2, 2004, between New Skies Satellites  B.V. and Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                                              |
| 10.16 (1)           |       | Agreement of Disclosed Pledge of Intercompany  Accounts Receivable, dated November 2, 2004, between New Skies  Satellites B.V. and Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                                     |
| 10.17 (1)           |       | Agreement and Deed of Pledge of Shares in  New Skies Satellites B.V., dated November 2, 2004, between New Skies  Holding B.V. and Deutsche Bank AG, New York Branch                                                                                                                                                                                                                                                                                      |
| 10.18 (2)           |       | Transaction and Monitoring Fee Agreement,  dated November 2, 2004, between New Skies Satellites B.V. and Blackstone  Management Partners IV L.L.C.                                                                                                                                                                                                                                                                                                            |
| 10.19 (8)           |       | Amended and Restated Employment Agreement, dated  October 10, 2005, between New Skies Satellites B.V. and Daniel S.  Goldberg                                                                                                                                                                                                                                                                                                                       |
| 10.20 (8)           |       | Amended and Restated Employment Agreement,  dated October 10, 2005, between New Skies Satellites B.V. and  Andrew M. Browne                                                                                                                                                                                                                                                                                                                         |

 

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| 10.21 (8)        |   | Amended and Restated Employment Agreement,  dated October 10, 2005, between New Skies Satellites B.V. and  Scott J. Sprague                                                                                                                                                                                    |
|------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.22 (8)        |   | Amended and Restated Employment Agreement,  dated October 10, 2005, between New Skies Satellites B.V. and  Michael C. Schwartz                                                                                                                                                                                 |
| 10.23 (8)        |   | Amended and Restated Employment Agreement,  dated October 10, 2005, between New Skies Satellites B.V. and  Stephen J. Stott                                                                                                                                                                                    |
| 10.30 (2)        |   | Agreement, dated April 29, 2004,  between New Skies Satellites N.V. and Intelsat LLC                                                                                                                                                                                                                                |
| 10.31 (2)        |   | Agreement, dated March 2, 2005, between  New Skies Satellites B.V. and SES Global Satellite Leasing Limited                                                                                                                                                                                                         |
| 10.32 (2)        |   | Satellite and In-orbit Insurance Policy  No. 875/A3F005932                                                                                                                                                                                                                                                          |
| 10.33 (2)        |   | Satellite and In-orbit Insurance Policy  No. 875/A4F024902                                                                                                                                                                                                                                                          |
| 10.34 (5) † |   | Term Sheet, dated February 17, 2005,  between New Skies Satellites B.V. and Intelsat Global Sales &  Marketing Ltd.                                                                                                                                                                                   |
| 10.35 (5) † |   | Composite Compiled Satellite Contract,  dated February 22, 2005, between New Skies Satellites B.V. and Boeing  Satellites Systems International, Inc. for NSS-8 Spacecraft and  Associated Equipment and Services, Contract No. NSS-20-03-01, as amended                                                       |
| 10.36 (4)        |   | First Amendment to Credit Agreement, dated  February 22, 2005, among New Skies Holding B.V., New Skies Satellites  B.V., the lenders party to the Credit Agreement named therein, Deutsche Bank  AG, New York Branch, as Administrative Agent and as Collateral Agent and ABN  Amro Bank N.V., as Syndication Agent |
| 10.37 (4)        |   | First Amendment to Agreement of  Non-Possessory Pledge of Assets, dated February 22, 2005, between New  Skies Satellites B.V., as Pledgor, and Deutsche Bank AG, New York Branch, as  Pledgee                                                                                                                       |
| 10.38 (4)        |   | First Amendment to Agreement of Disclosed  Pledge of Bank Accounts, dated February 22, 2005, between New Skies  Satellites B.V., as Pledgor, and Deutsche Bank AG, New York Branch, as  Pledgee                                                                                                                     |
| 10.39 (4)        |   | First Amendment to Agreement of Undisclosed  Pledge of Third Party Accounts Receivable, dated February 22, 2005,  between New Skies Satellites B.V., as Pledgor, and Deutsche Bank AG, New York  Branch, as Pledgee                                                                                                 |
| 10.40 (9)        |   | Share Purchase Agreement, dated as of  August 24, 2005, by and among New Skies Networks Pty Ltd., New Skies Networks  Australia Pty Ltd., New Skies Satellites B.V., NSN Holdings Pty Ltd. and  Multimedia Limited                                                                                                       |
| 31.1             |   | Certification of Chief Executive Officer  pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act  of 1934, as amended                                                                                                                                                                              |
| 31.2             |   | Certification of Chief Financial Officer  pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act  of 1934, as amended                                                                                                                                                                              |
| 32.1 +           |   | Certification of Chief Executive Officer  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                                                                                                                                                      |
| 32.2 +           |   | Certification of Chief Financial Officer  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                                                                                                                                                      |

 

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(1)           Incorporated byreference to the Registration Statement on Form S-1 of New SkiesSatellites Holdings Ltd. (File No. 333-122322) filed on January 27,2005.

 

(2)           Incorporated byreference to Amendment No. 1 to the Registration Statement on Form S-1 ofNew Skies Satellites Holdings Ltd. (File No. 333-122322) filed onMarch 9, 2005.

 

(3)           Incorporated byreference to Amendment No. 2 to the Registration Statement on Form S-1 of NewSkies Satellites Holdings Ltd. (File No. 333-122322) filed on March 28,2005.

 

(4)           Incorporated byreference to Amendment No. 3 to the Registration Statement on Form S-1 ofNew Skies Satellites Holdings Ltd. (File No. 333-122322) filed onApril 25, 2005.

 

(5)           Incorporated by referenceto Amendment No. 4 to the Registration Statement on Form S-1 of New SkiesSatellites Holdings Ltd. (File No. 333-122322) filed on May 6, 2005.

 

(6)           Incorporated by reference to the Registration Statement on Form S-4of New Skies Satellites B.V. (File No. 333-123420) filed on May 27, 2005.

 

(7)                                  Incorporatedby reference to the Quarterly Report on Form 10-Q of New Skies Satellites B.V.(File No. 333-123420) filed on August 15, 2005.

 

(8)                                  Incorporatedby reference to the Current Report on Form 8-K of New Skies Satellites HoldingsLtd. (File No. 001-32495) filed on October 13, 2005.

 

(9)                                  Incorporatedby reference to the Current Report on Form 8-K of New Skies Satellites HoldingsLtd. (File No. 001-32495) filed on November 14, 2005.

 

†              Confidential treatment has been granted forportions of this document.

 

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+              Pursuant to Commission Release No.33-8212, this certification will be treated as “accompanying” this QuarterlyReport on Form 10-Q and not “filed” as part of such report for purposes ofSection 18 of the Exchange Act, or otherwise subject to the liability ofSection 18 of the Exchange Act and this certification will not be deemed to beincorporated by reference into any filing under the Securities Act of 1933, asamended, or the Exchange Act, except to the extent that the registrantspecifically incorporates it by reference.

 

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