UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2022 | |
or | |
☐ | 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: 001-38228
Maxar Technologies Inc.
Delaware | 83-2809420 | |||
(State or jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
1300 W. 120th Avenue, Westminster, Colorado | 80234 | |
(Address of principal executive offices) | (Zip Code) |
303-684-7660 |
(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock par value of $0.0001 per share | MAXR | New York Stock Exchange Toronto Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ⌧ | Accelerated Filer ◻ | Non-accelerated Filer ◻ | Smaller Reporting Company ☐ Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
As of May 2, 2022, there were 73,711,203 shares of the registrant’s common stock, at $0.0001 par value, outstanding.
Maxar Technologies Inc.
Quarterly Report on Form 10-Q
For the period ended March 31, 2022
2
PART I. FINANCIAL INFORMATION
MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Revenues: | ||||||
Product | $ | 154 | $ | 142 | ||
Service | 251 | 250 | ||||
Total revenues | 405 | 392 | ||||
Costs and expenses: | ||||||
Product costs, excluding depreciation and amortization | 127 | 148 | ||||
Service costs, excluding depreciation and amortization | 93 | 93 | ||||
Selling, general and administrative | 104 | 84 | ||||
Depreciation and amortization |
| 68 |
| 74 | ||
Operating income (loss) |
| 13 |
| (7) | ||
Interest expense, net |
| 23 |
| 78 | ||
Other income, net | (3) | (1) | ||||
Loss before taxes |
| (7) |
| (84) | ||
Income tax (benefit) expense |
| — |
| — | ||
Net loss | $ | (7) | $ | (84) | ||
Net loss per common share: | ||||||
Basic | $ | (0.10) | $ | (1.30) | ||
Diluted | $ | (0.10) | $ | (1.30) | ||
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
3
MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(In millions)
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Net loss | $ | (7) | $ | (84) | ||
Other comprehensive income (loss), net of tax: | ||||||
Unrealized gain on interest rate swaps |
| 11 | 6 | |||
Foreign currency translation adjustments |
| — | (1) | |||
Gain on pension and other postretirement benefit plans | — | 1 | ||||
Other comprehensive income, net of tax |
| 11 | 6 | |||
Comprehensive income (loss), net of tax | $ | 4 | $ | (78) | ||
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
4
MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Balance Sheets
(In millions)
| March 31, |
| December 31, | |||
2022 | 2021 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents |
| $ | 22 | $ | 47 | |
Trade and other receivables, net |
|
| 333 |
| 355 | |
Inventory, net |
|
| 36 |
| 39 | |
Advances to suppliers | 25 | 31 | ||||
Prepaid assets | 31 | 35 | ||||
Other current assets | 22 | 22 | ||||
Total current assets |
|
| 469 |
| 529 | |
Non-current assets: |
|
|
|
| ||
Orbital receivables, net |
|
| 362 | 368 | ||
Property, plant and equipment, net |
|
| 968 | 940 | ||
Intangible assets, net |
|
| 761 | 787 | ||
Non-current operating lease assets | 138 | 145 | ||||
Goodwill |
|
| 1,627 | 1,627 | ||
Other non-current assets | 115 | 102 | ||||
Total assets |
| $ | 4,440 | $ | 4,498 | |
Liabilities and stockholders’ equity |
|
| ||||
Current liabilities: |
|
| ||||
Accounts payable |
| $ | 81 | $ | 75 | |
Accrued liabilities | 62 | 43 | ||||
Accrued compensation and benefits |
|
| 71 |
| 111 | |
Contract liabilities |
|
| 250 |
| 289 | |
Current portion of long-term debt |
|
| 29 |
| 24 | |
Current operating lease liabilities | 40 | 42 | ||||
Other current liabilities | 37 | 38 | ||||
Total current liabilities |
| 570 |
| 622 | ||
Non-current liabilities: |
|
| ||||
Pension and other postretirement benefits |
|
| 131 | 134 | ||
Operating lease liabilities | 133 | 138 | ||||
Long-term debt |
|
| 2,060 | 2,062 | ||
Other non-current liabilities | 71 | 79 | ||||
Total liabilities |
|
| 2,965 |
| 3,035 | |
Commitments and contingencies | ||||||
Stockholders’ equity: |
|
| ||||
Common stock ($0.0001 par value, 240 million common shares authorized; 73.4 million and 72.7 million and at March 31, 2022 and December 31, 2021, respectively) |
|
| ||||
Additional paid-in capital |
|
| 2,243 | 2,235 | ||
Accumulated deficit |
|
| (727) | (720) | ||
Accumulated other comprehensive loss |
|
| (42) | (53) | ||
Total Maxar stockholders' equity | 1,474 | 1,462 | ||||
Noncontrolling interest | 1 | 1 | ||||
Total stockholders' equity |
|
| 1,475 |
| 1,463 | |
Total liabilities and stockholders' equity |
| $ | 4,440 | $ | 4,498 | |
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
5
MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(In millions)
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Cash flows (used in) provided by: | ||||||
Operating activities: |
| |||||
Net loss | $ | (7) | $ | (84) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||
Depreciation and amortization |
| 68 |
| 74 | ||
Stock-based compensation expense |
| 15 |
| 11 | ||
Amortization of debt issuance costs and other non-cash interest expense | 3 | 4 | ||||
Loss from early extinguishment of debt | — | 41 | ||||
Cumulative adjustment to SXM-7 revenue | — | 25 | ||||
Other | 5 | 4 | ||||
Changes in operating assets and liabilities: | ||||||
Trade and other receivables, net | 29 | 3 | ||||
Accounts payable and liabilities | (25) | (49) | ||||
Contract liabilities | (39) | 6 | ||||
Other | (1) | (8) | ||||
Cash provided by operating activities |
| 48 | 27 | |||
Investing activities: | ||||||
Purchase of property, plant and equipment and development or purchase of software |
| (64) |
| (50) | ||
Acquisition of investment | (2) | — | ||||
Cash used in investing activities |
| (66) |
| (50) | ||
Financing activities: | ||||||
Net proceeds of revolving credit facility | — | 25 | ||||
Repurchase of 2023 Notes, including premium | — | (384) | ||||
Net proceeds from issuance of common stock | — | 380 | ||||
Settlement of securitization liability | (4) | (3) | ||||
Repayments of long-term debt | (1) | (2) | ||||
Other | (2) | 1 | ||||
Cash (used in) provided by financing activities | (7) | 17 | ||||
Decrease in cash, cash equivalents, and restricted cash | (25) | (6) | ||||
Effect of foreign exchange on cash, cash equivalents, and restricted cash | — | — | ||||
Cash, cash equivalents, and restricted cash, beginning of year | 48 | 32 | ||||
Cash, cash equivalents, and restricted cash, end of period | $ | 23 | $ | 26 | ||
Reconciliation of cash flow information: | ||||||
Cash and cash equivalents | $ | 22 | $ | 22 | ||
Restricted cash included in prepaid and other current assets | 1 | 4 | ||||
Total cash, cash equivalents, and restricted cash | $ | 23 | $ | 26 | ||
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
6
MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity
(In millions, except per share amounts)
Three months ended March 31, 2022:
Accumulated | ||||||||||||||||||||
other | Total | |||||||||||||||||||
Common Stock | Additional | Accumulated | comprehensive | Noncontrolling | stockholders’ | |||||||||||||||
| Shares |
| Amount |
| paid-in capital |
| Deficit |
| income (loss) |
| interest |
| equity | |||||||
Balance as of December 31, 2021 | 72.7 | $ | — | $ | 2,235 | $ | (720) | $ | (53) | $ | 1 | $ | 1,463 | |||||||
Common stock issued under employee stock purchase plan | 0.1 | — | 2 | — | — | — | 2 | |||||||||||||
Equity classified stock-based compensation expense | 0.6 | — | 6 | — | — | — | 6 | |||||||||||||
Dividends ($0.01 per common share) | — | — | — | — | — | — | — | |||||||||||||
Comprehensive income (loss) | — | — | — | (7) | 11 | — | 4 | |||||||||||||
Balance as of March 31, 2022 | 73.4 | $ | — | $ | 2,243 | $ | (727) | $ | (42) | $ | 1 | $ | 1,475 | |||||||
Three months ended March 31, 2021:
Accumulated | ||||||||||||||||||||
other | Total | |||||||||||||||||||
Common Stock | Additional | Accumulated | comprehensive | Noncontrolling | stockholders’ | |||||||||||||||
Shares |
| Amount |
| paid-in capital |
| Deficit |
| income (loss) |
| interest |
| equity | ||||||||
Balance as of December 31, 2020 | 61.2 | $ | — | $ | 1,818 | $ | (763) | $ | (120) | $ | 1 | $ | 936 | |||||||
Common stock issuance, net of transaction fees | 10.0 | — | 380 | — | — | — | 380 | |||||||||||||
Common stock issued under employee stock purchase plan | 0.1 | — | 2 | — | — | — | 2 | |||||||||||||
Equity classified stock-based compensation expense | 0.4 | — | 7 | — | — | — | 7 | |||||||||||||
Dividends ($0.01 per common share) | — | — | — | — | — | — | — | |||||||||||||
Comprehensive income (loss) | — | — | — | (84) | 6 | — | (78) | |||||||||||||
Balance as of March 31, 2021 | 71.7 | $ | — | $ | 2,207 | $ | (847) | $ | (114) | $ | 1 | $ | 1,247 | |||||||
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
7
MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions of dollars, unless otherwise noted)
1. | GENERAL BUSINESS DESCRIPTION |
Maxar Technologies Inc. (the “Company” or “Maxar”) is a provider of comprehensive space solutions and secure, precise, geospatial intelligence. Maxar helps government and commercial customers monitor, understand and navigate our changing planet; deliver global broadband communications; and explore and advance the use of space. The Company’s approach combines decades of deep mission understanding and a proven commercial and defense foundation to deploy solutions and deliver insights with speed, scale and cost effectiveness. Maxar’s stock trades on the New York Stock Exchange and Toronto Stock Exchange under the symbol “MAXR.”
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of presentation
The Unaudited Condensed Consolidated Financial Statements include the accounts of Maxar Technologies Inc., and all consolidated subsidiary entities. The Company’s Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). All intercompany balances and transactions are eliminated on consolidation.
The Company’s Unaudited Condensed Consolidated Financial Statements are presented in U.S. dollars and have been prepared on a historical cost basis, except for certain financial assets and liabilities including derivative financial instruments which are stated at fair value.
The Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s annual audited consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K filed with the SEC. Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. In management’s opinion, all adjustments of a normal recurring nature that are necessary for a fair statement of the accompanying Unaudited Condensed Consolidated Financial Statements have been included.
Use of estimates, assumptions and judgments
The preparation of the Unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the reporting date, as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared using the most current and best available information; however, actual results could differ materially from those estimates.
Recent Accounting Guidance Not Yet Adopted
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which together with subsequent amendments, is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. This guidance was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company expects that it will elect to apply some of the expedients and
8
MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
exceptions in ASU 2020-04. The Company has completed its preliminary analysis and does not expect that the adoption of ASU 2020-04 and subsequent amendments will have a material impact on the Company's financial statements.
3. | TRADE AND OTHER RECEIVABLES, NET |
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Billed | $ | 163 | $ | 162 | ||
Unbilled |
| 123 |
| 143 | ||
Total trade receivables | 286 | 305 | ||||
Orbital receivables, current portion | 45 | 49 | ||||
Other | 3 | 2 | ||||
Allowance for doubtful accounts | (1) | (1) | ||||
Trade and other receivables, net | $ | 333 | $ | 355 | ||
The Company had orbital receivables from 13 customers for which the largest customer’s value represented 30% of the stated current and non-current balance sheet values as of both March 31, 2022 and December 31, 2021.
During the first quarter of 2021, the Company reduced its outstanding receivables related to the SXM-7 satellite for the final milestone and expected orbital payments by $15 million and $14 million, respectively. See Note 10 for additional details regarding the adjustment to revenue.
There have been no changes in the allowance for expected credit losses related to non-current orbital receivables for the three months ended March 31, 2022.
Securitization liabilities as of March 31, 2022 and December 31, 2021, are as follows:
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Current portion | $ | 16 | $ | 16 | ||
Non-current portion |
| 28 |
| 32 | ||
Total securitization liabilities | $ | 44 | $ | 48 | ||
4. | INVENTORY, NET |
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Raw materials | $ | 28 | $ | 34 | ||
Work in process | 9 | 6 | ||||
Total | $ | 37 | $ | 40 | ||
Inventory reserve | (1) | (1) | ||||
Inventory, net | $ | 36 | $ | 39 | ||
5.PROPERTY, PLANT AND EQUIPMENT, NET
9
MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Satellites | $ | 397 | $ | 397 | ||
Equipment | 220 | 221 | ||||
Computer hardware | 98 | 95 | ||||
Leasehold improvements | 83 | 83 | ||||
Furniture and fixtures | 16 | 16 | ||||
Construction in process1 | 711 | 668 | ||||
Property, plant and equipment, at cost | 1,525 | 1,480 | ||||
Accumulated depreciation |
| (557) | (540) | |||
Property, plant and equipment, net | $ | 968 | $ | 940 | ||
1Construction in process is primarily related to the construction of the Company’s WorldView-Legion satellites.
Depreciation expense for property, plant and equipment was $19 million and $23 million for the three months ended March 31, 2022 and 2021, respectively.
6. | INTANGIBLE ASSETS |
March 31, 2022 | December 31, 2021 | |||||||||||||||||
| Gross |
| Accumulated |
| Net |
| Gross |
| Accumulated |
| Net | |||||||
Customer relationships | $ | 615 | $ | (201) | $ | 414 | $ | 615 | $ | (190) | $ | 425 | ||||||
Software | 402 | (161) | 241 | 379 | (152) | 227 | ||||||||||||
Technologies | 367 | (295) | 72 | 367 | (278) | 89 | ||||||||||||
Backlog |
| 107 |
| (96) |
| 11 |
| 107 |
| (89) |
| 18 | ||||||
Image library | 80 | (74) | 6 | 80 | (71) | 9 | ||||||||||||
Trade names and other | 37 | (20) | 17 | 37 | (18) | 19 | ||||||||||||
Intangible assets | $ | 1,608 | $ | (847) | $ | 761 | $ | 1,585 | $ | (798) | $ | 787 | ||||||
Amortization expense related to intangible assets was $49 million and $51 million for the three months ended March 31, 2022 and 2021, respectively.
7. | LONG-TERM DEBT AND INTEREST EXPENSE, NET |
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Syndicated Credit Facility: |
| |||||
Term Loan B | $ | 1,444 | $ | 1,444 | ||
2023 Notes | 500 | 500 | ||||
2027 Notes | 150 | 150 | ||||
Deferred financing | 24 | 26 | ||||
Obligations under finance leases and other |
| 7 |
| 5 | ||
Debt discount and issuance costs |
| (36) |
| (39) | ||
Total long-term debt |
| 2,089 |
| 2,086 | ||
Current portion of long-term debt |
| (29) |
| (24) | ||
Non-current portion of long-term debt | $ | 2,060 | $ | 2,062 | ||
Syndicated Credit Facility
10
MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
As of March 31, 2022, the Company’s senior secured syndicated credit facility (“Syndicated Credit Facility”) is composed of: (i) a senior secured first lien revolving credit facility in an aggregate capacity of up to $500 million maturing in December 2023 (“Revolving Credit Facility”) and (ii) a senior secured first lien term B facility in an original aggregate principal amount of $2.0 billion maturing in October 2024 (“Term Loan B”).
The maximum consolidated debt leverage ratios permitted under the Syndicated Credit Facility are 7.25x at the end of each fiscal quarter until the quarter ending September 30, 2022, 6.25x at the end of each fiscal quarter thereafter until the fiscal quarter ending March 31, 2023, and 5.50x for each fiscal quarter thereafter (subject to a 0.25x reduction in each maximum level upon a disposition of a business line for greater than $500 million). As of March 31, 2022 and December 31, 2021, the Company was in compliance with its debt covenants.
The Revolving Credit Facility includes an aggregate $200 million sub limit under which letters of credit can be issued. The Company had $28 million of issued and undrawn letters of credit outstanding under the Revolving Credit Facility as of March 31, 2022 and December 31, 2021.
Senior Secured Notes due 2023
On December 2, 2019, the Company issued $1.0 billion in aggregate principal amount of 9.75% Senior Secured Notes due 2023 (“2023 Notes”). The 2023 Notes were offered and sold to qualified institutional buyers in the U.S. pursuant to Rule 144A and outside the U.S. pursuant to Regulation S under the Securities Act of 1933, as amended. The 2023 Notes were issued at a price of 98% and are recorded as long-term debt in the consolidated financial statements. The 2023 Notes bear interest at the rate of 9.75% per year, payable semi-annually in cash in arrears, which interest payments commenced in June 2020. The 2023 Notes will mature on December 31, 2023, unless earlier redeemed or repurchased. The 2023 Notes are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility.
On June 25, 2020, the Company repurchased $150 million aggregate principal amount of its 2023 Notes using proceeds from the sale of its former Canadian subsidiary. The 2023 Notes were repurchased (“2023 Notes Repurchase”) at a price of approximately 112.45% of the principal amount repurchased.
On March 26, 2021, the Company redeemed $350 million aggregate principal amount of its 2023 Notes using a portion of the net proceeds from an underwritten offering of 10 million shares of its common stock (“Offering”). The Company paid premiums of approximately $34 million related to the early redemption. This resulted in a loss on debt extinguishment of $41 million that was recorded in the first quarter of 2021, which is included as part of Interest expense, net within the Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021. See Note 9 for additional details on the Offering.
Senior Secured Notes due 2027
On June 25, 2020, the Company issued $150 million in aggregate principal amount of 7.54% Senior Secured Notes due 2027 (“2027 Notes”). The 2027 Notes were offered and sold to qualified institutional buyers in the U.S. pursuant to Rule 144A and outside the U.S. pursuant to Regulation S under the Securities Act of 1933, as amended. The 2027 Notes were issued at a price of 98.25% and are recorded as long-term debt in the consolidated financial statements. The 2027 Notes bear interest at the rate of 7.54% per year, payable semi-annually in cash in arrears, for which interest payments commenced December 2020. The 2027 Notes will mature on December 31, 2027, unless earlier redeemed or repurchased. The 2027 Notes are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility and the 2023 Notes.
11
MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
The Company accounted for the issuance of the 2027 Notes and the 2023 Notes Repurchase as debt modifications. As a result, the 12.45% premium paid on the repurchase of the $150 million aggregate principal amount of 2023 Notes is accounted for as an incremental discount that is amortized over the life of the 2027 Notes. Separately, the previously incurred unamortized debt discount and debt issuance costs are amortized over the remaining life of the outstanding 2023 Notes.
Interest expense, net on long-term debt and other obligations is as follows:
8. | FINANCIAL INSTRUMENTS AND FAIR VALUE DISCLOSURES |
Factors used in determining the fair value of financial assets and liabilities are summarized into three categories in accordance with Accounting Standards Codification 820 - Fair Value Measurements:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: Inputs for the asset or liability that are based on unobservable inputs
12
MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
The following tables present assets and liabilities that are measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
Recurring Fair Value Measurements as of March 31, 2022 | ||||||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Assets |
|
|
|
| ||||||||
Orbital receivables 1 | $ | — | $ | 469 | $ | — | $ | 469 | ||||
Interest rate swaps | — | 10 | — | 10 | ||||||||
$ | — | $ | 479 | $ | — | $ | 479 | |||||
Liabilities | ||||||||||||
Interest rate swaps | $ | — | $ | 1 | $ | — | $ | 1 | ||||
Long-term debt 2 | — | 2,114 | — | 2,114 | ||||||||
$ | — | $ | 2,115 | $ | — | $ | 2,115 | |||||
Recurring Fair Value Measurements as of December 31, 2021 | ||||||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Assets |
| |||||||||||
Orbital receivables 1 | $ | — | $ | 481 | $ | — | $ | 481 | ||||
Interest rate swaps | — | 3 | — | 3 | ||||||||
$ | — | $ | 484 | $ | — | $ | 484 | |||||
Liabilities | ||||||||||||
Interest rate swaps | $ | — | $ | 4 | $ | — | $ | 4 | ||||
Long-term debt 2 | — | 2,132 | — | 2,132 | ||||||||
$ | — | $ | 2,136 | $ | — | $ | 2,136 | |||||
1 | The carrying value of orbital receivables was $407 million and $417 million as of March 31, 2022 and December 31, 2021, respectively. |
2 | Long-term debt excludes finance leases, borrowings under the Revolving Credit Facility, deferred financing and other and is carried at amortized cost. The outstanding carrying value was $2,058 million and $2,055 million as of March 31, 2022 and December 31, 2021, respectively. The carrying value of borrowings under the Revolving Credit Facility approximates their fair value. |
As of March 31, 2022, an aggregate of $1.0 billion of the Company’s variable rate long-term debt is fixed at an average rate of 1.43% (excluding the margin specified in the Syndicated Credit Facility) pursuant to the Company’s outstanding interest rate swaps. On April 29, 2022, $500 million of the Company’s interest rate swaps matured.
The Company determines fair value of its derivative financial instruments and orbital receivables based on internal valuation models, such as a discounted cash flow analysis, using management estimates and observable market-based inputs, as applicable. Management estimates include assumptions concerning the amount and timing of estimated future cash flows and application of appropriate discount rates. Observable market-based inputs are sourced from third parties and include interest rates and yield curves, currency spot and forward rates and credit spreads, as applicable.
The Company determines fair value of long-term debt that is actively traded in the secondary market using external pricing data, including any available quoted market prices and other observable inputs from available market information. For debt that is not actively traded in the secondary market, the fair value is based on the Company’s indicative borrowing cost derived from dealer quotes or discounted cash flows.
Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are all short-term in nature; therefore, the carrying value of these items approximates their fair value.
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
There were no transfers into or out of each of the levels of the fair value hierarchy during the periods ended March 31, 2022 and December 31, 2021.
9. | STOCKHOLDERS’ EQUITY |
Changes in the components of Accumulated other comprehensive income (loss) are as follows:
Foreign Currency Translation Adjustments | Unrealized (Loss) Gain on Interest Rate Swaps | Loss on Pension and Other Postretirement Plans | Total Accumulated Other Comprehensive (Loss) Income | |||||||||
Balance as of December 31, 2021 |
| $ | (1) |
| $ | (1) |
| $ | (51) |
| $ | (53) |
Other comprehensive income | — | 11 | — | 11 | ||||||||
Tax benefit (expense) | — | — | — | — | ||||||||
Balance as of March 31, 2022 | $ | (1) | $ | 10 | $ | (51) | $ | (42) | ||||
On March 22, 2021, the Company completed the Offering of 10 million shares of common stock at a public offering price of $40 per share. The Company received proceeds of $380 million, net of $20 million of transaction fees.
10. | REVENUES |
As of March 31, 2022, the Company had $1.6 billion of remaining performance obligations, which represents the transaction price of firm orders less inception-to-date revenues recognized. Remaining performance obligations generally exclude unexercised contract options and indefinite delivery/indefinite quantity contracts. The Company expects to recognize revenues relating to existing performance obligations of approximately $1.0 , $0.4 and $0.2 for the remaining nine months ending December 31, 2022, the year ending December 31, 2023 and thereafter, respectively.
Contract liabilities by segment are as follows:
Contract liabilities decreased to $250 million as of March 31, 2022 from $289 million as of December 31, 2021. The decrease in contract liabilities is primarily due to revenues recognized based upon the satisfaction of performance obligations within the Space Infrastructure segment. The Company had an immaterial balance of non-current contract liabilities as of March 31, 2022 and December 31, 2021. Non-current contract liabilities are included in Other non-current liabilities on the Unaudited Condensed Consolidated Balance Sheets.
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
The Company’s primary sources of revenues are as follows:
Three Months Ended March 31, 2022 |
| Earth |
| Space |
| Eliminations |
| Total | ||||
Product revenues | $ | — | $ | 154 | $ | — | $ | 154 | ||||
Service revenues |
| 251 |
| — |
| — |
| 251 | ||||
Intersegment | — |
| 23 |
| (23) |
| — | |||||
$ | 251 | $ | 177 | $ | (23) | $ | 405 | |||||
Three Months Ended March 31, 2021 |
| Earth |
| Space |
| Eliminations |
| Total | ||||
Product revenues | $ | — | $ | 142 | $ | — | $ | 142 | ||||
Service revenues |
| 250 |
| — |
| — |
| 250 | ||||
Intersegment | — | 13 | (13) | — | ||||||||
$ | 250 | $ | 155 | $ | (13) | $ | 392 | |||||
Certain of the Company’s contracts with customers in the Space Infrastructure segment include a significant financing component since payments are received from the customer more than one year after delivery of the promised goods or services. The Company recognized orbital interest revenue of $6 million for the three months ended March 31, 2022, compared to $7 million for the three months ended March 31, 2021, related to these contracts, which is included in product revenues in the Unaudited Condensed Consolidated Statements of Operations.
Revenue in the Space Infrastructure segment is primarily generated from long-term construction contracts. Due to the long-term nature of these contracts, the Company generally recognizes revenue over time using the cost-to-cost method to measure progress. Under the cost-to-cost method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion ("EAC"). Revenue recognition is also contingent on estimated contractual consideration. An EAC includes all direct costs and indirect costs directly attributable to a program or allocable based on program cost pooling arrangements. Estimates regarding the Company’s costs associated with the design, manufacture and delivery of products and services are used in determining the EAC. Changes to an EAC or estimated contractual consideration are recorded as a cumulative adjustment to revenue.
The Company recognized a cumulative adjustment to revenue of $25 million for the three months ended March 31, 2021 related to the Sirius XM contract with Sirius XM Holdings Inc. (“Sirius XM”). This adjustment resulted primarily from adjusting the EAC transaction price for the amount of the final milestone and expected orbital payments from Sirius XM due to the non-performance of the SXM-7 satellite and other adjustments. See Note 3 for additional details regarding the adjustment to trade and other receivables.
The Company has certain programs in the Space Infrastructure segment which contain significant development efforts that have experienced delays and cost growth primarily due to the complexity of the programs resulting in an overall loss position. The Company recorded $9 million in EAC adjustments on loss contracts during the three months ended March 31, 2022 compared to $10 million for the three months ended March 31, 2021.
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
Revenues based on the geographic location of customers are as follows:
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
United States | $ | 335 | $ | 323 | ||
Asia | 22 | 22 | ||||
Europe | 17 | 15 | ||||
Middle East | 15 | 11 | ||||
Australia | 7 | 2 | ||||
Canada | 6 | 14 | ||||
Other | 3 | 5 | ||||
Total revenues | $ | 405 | $ | 392 | ||
Revenues from significant customers are as follows:
The Company had revenues from a commercial customer in the Space Infrastructure segment that represented 11% of total revenues for the three months ended March 31, 2022. The revenues from this commercial customer in the Space Infrastructure segment represented 19% of the Company’s total revenues for the three months ended March 31, 2021.
11. | SEGMENT INFORMATION |
The Company’s business is organized into two reportable segments: Earth Intelligence and Space Infrastructure. The Earth Intelligence reportable segment is a supplier of high-resolution, high accuracy Earth imagery and other geospatial data sourced from the Company’s advanced satellite constellation and third-party providers, as well as a provider of advanced geospatial information applications and analytic services for national security and commercial solutions. The Space Infrastructure reportable segment is a supplier of space-based infrastructure, robotics, subsystems and information solutions to satellite operators and government agencies.
The Company’s Chief Operating Decision Maker measures the performance of each segment based on revenue and Adjusted EBITDA. Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization (“EBITDA”) adjusted for certain items affecting comparability of the Company’s ongoing operating results as specified in the calculation. Certain items affecting the comparability of our ongoing operating results between periods include restructuring, impairments, insurance recoveries, gain (loss) on sale of assets, (gain) loss on orbital receivables allowance and transaction and integration related expense. Transaction and integration related expense includes costs associated with de-leveraging activities, acquisitions and dispositions and the integration of acquisitions. Corporate and other expenses include items such as corporate office costs, regulatory costs, executive and director compensation, foreign exchange gains and losses and fees for audit, legal and consulting services.
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
Intersegment sales are generally recorded at cost plus a specified margin, which may differ from what the segment may be able to obtain on sales to external customers.
The following table summarizes the operating performance of the Company’s segments:
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Revenues: |
|
|
| |||
Earth Intelligence | $ | 251 | $ | 250 | ||
Space Infrastructure |
| 177 |
| 155 | ||
Intersegment eliminations | (23) | (13) | ||||
Total revenues | $ | 405 | $ | 392 | ||
Adjusted EBITDA: | ||||||
Earth Intelligence |
| $ | 99 |
| $ | 107 |
Space Infrastructure | 19 | (12) | ||||
Intersegment eliminations | (9) | (5) | ||||
Corporate and other expenses | (25) | (23) | ||||
Restructuring | (1) | — | ||||
Depreciation and amortization | (68) | (74) | ||||
Interest expense, net | (23) | (78) | ||||
Interest income 1 | 1 | 1 | ||||
Loss before taxes | $ | (7) | $ | (84) |
1 | Included in Other income, net on the Unaudited Condensed Consolidated Statements of Operations. |
The Company’s capital expenditures are as follows:
Substantially all of the Company’s long-lived tangible assets were in the United States as of March 31, 2022 and December 31, 2021.
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
12. | EMPLOYEE BENEFIT PLANS |
The following table summarizes the components of net periodic benefit (credit) cost for the Company’s pension plans:
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Interest cost | $ | 4 | $ | 3 | ||
Expected return on plan assets | (7) | (7) | ||||
Amortization of net loss | — | 1 | ||||
Expenses paid | 1 | 1 | ||||
Net periodic benefit credit | $ | (2) | $ | (2) | ||
Contributions
The funding policy for the Company’s pension plans is to contribute at least the minimum required by applicable laws and regulations or to directly make benefit payments where appropriate. In 2021, the Company elected to take advantage of certain provisions of the American Rescue Plan Act of 2021 and due to the Company’s election, there are no required contributions for the Company’s qualified pension plan for the year ending December 31, 2022.
13. | INCOME TAXES |
For the three months ended March 31, 2022 and 2021, the effective tax rate on pre-tax income was 0.0%. The effective tax rates for the three months ended March 31, 2022 and 2021 differ from the statutory U.S. federal income tax rate of 21.0% primarily due to estimated permanent differences and changes in valuation allowance. The Company does not anticipate a significant change to the Company’s gross unrecognized tax benefits within the next 12 months.
The Company assesses the deferred tax assets for recoverability on a quarterly basis. Based upon all available positive and negative evidence, the Company maintains a valuation allowance to reduce the net U.S. deferred tax asset to the amount that is more-likely-than-not realizable.
The Company computes an estimated annual effective tax rate (“AETR”) each quarter based on the current and forecasted continuing operating results. The income tax expense or benefit associated with the interim period is computed using the most recent estimated AETR applied to the year-to-date ordinary income or loss, plus the tax effect of any significant or infrequently occurring items recorded during the interim period. The computation of the estimated AETR at each interim period requires certain estimates and significant judgments including, but not limited to, the expected operating income (loss) for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent differences and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur and additional information becomes known or as the tax environment changes.
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
14. | NET LOSS PER COMMON SHARE |
The following table includes the calculation of basic and diluted net loss per common share:
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Net loss | $ | (7) | $ | (84) | ||
Weighted average number of common shares outstanding-basic | 73.2 | 64.8 | ||||
Weighted dilutive effect of equity awards |
| — |
| — | ||
Weighted average number of common shares outstanding-diluted | 73.2 | 64.8 | ||||
Net loss per common share | ||||||
Basic | $ | (0.10) | $ | (1.30) | ||
Diluted | $ | (0.10) | $ | (1.30) | ||
For the three months ended March 31, 2022 and 2021, approximately 3 million and 5 million shares subject to equity awards, respectively, were excluded from the diluted weighted average number of ordinary common shares outstanding calculation because their effect would have been anti-dilutive.
15. | COMMITMENTS AND CONTINGENCIES |
Contingencies in the Normal Course of Business
Satellite construction contracts may include performance incentives whereby payment for a portion of the purchase price of the satellite is contingent upon in-orbit performance of the satellite. The Company’s ultimate receipt of orbital performance incentives is subject to the continued performance of its satellites generally over the contractually stipulated life of the satellites. A complete or partial loss of a satellite’s functionality can result in loss of orbital receivable payments or repayment of amounts received by the Company under a warranty payback arrangement. The Company generally receives the present value of the orbital receivables if there is a launch failure or a failure caused by a customer error, but will forfeit some or all of the orbital receivables if the loss is caused by satellite failure or as a result of Company error. The Company recognizes orbital performance incentives in the financial statements based on the amounts that are expected to be received and believes that it will not incur a material loss relating to the incentives recognized. With respect to the Company’s securitized liability for the orbital receivables, upon the occurrence of an event of default under the securitization facility agreement or upon the occurrence of limited events, the Company may be required to repurchase on demand any effected receivables at their then net present value.
The Company may incur liquidated damages on programs as a result of delays due to slippage, or for programs which fail to meet all milestone requirements as outlined within the contractual arrangements with customers. Losses on programs related to liquidated damages result in a reduction of revenue. Changes in estimates related to contracts accounted for using the cost-to-cost method are recognized in the period in which such changes are made for the inception-to-date effect of the changes. Unrecoverable costs on contracts that are expected to be incurred in future periods are recorded in program cost in the current period. Additionally, construction contracts may have termination for default clauses, which if triggered, could result in potential losses and legal disputes.
The Company enters into agreements in the ordinary course of business with resellers and others. Most of these agreements require the Company to indemnify the other party against third-party claims alleging that one of its products infringes or misappropriates a patent, copyright, trademark, trade secret or other intellectual property right. Certain of
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
these agreements require the Company to indemnify the other party against claims relating to property damage, personal injury or acts or omissions by the Company, its employees, agents or representatives.
From time to time, the Company has made guarantees regarding the performance of its systems to its customers. Some of these agreements do not limit the maximum potential future payments the Company could be obligated to make. The Company evaluates and estimates potential losses from such indemnification based on the likelihood that the future event will occur. The Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such indemnification and guarantees in the Unaudited Condensed Consolidated Financial Statements.
The Company has entered into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition to entering into contracts for its products and services from certain customers in foreign countries. These agreements are designed to return economic value to the foreign country and may be satisfied through activities that do not require a direct cash payment, including transferring technology and providing manufacturing, training and other consulting support to in-country projects. These agreements may provide for penalties in the event the Company fails to perform in accordance with offset requirements. The Company has historically not been required to pay any such penalties.
Risks and uncertainties related to COVID-19
The near and long-term impacts of the pandemic on the cost and schedule of the numerous programs in the Company’s existing backlog and the timing of new awards remain uncertain. The Company is observing stress in its supplier base inside and outside the U.S. and will continue to monitor and assess the actual and potential COVID-19 impacts on employees, customers, suppliers and the productivity of the work being done, all of which to some extent could affect revenues, estimated costs to complete projects, earnings and cash flow. The Company has received some force majeure claims from suppliers related to COVID-19; however, at this time the Company does not expect the claims to result in a material financial impact.
Legal proceedings
On January 14, 2019, a Maxar stockholder filed a putative class action lawsuit captioned Oregon Laborers Employers Pension Trust Fund, et al. v. Maxar Technologies Inc., No. 1:19-cv-00124-WJM-SKC in the United States District Court for the District of Colorado (“Colorado Action”), naming Maxar and members of management as defendants alleging, among other things, that the Company’s public disclosures were deficient in violation of the federal securities laws and seeking monetary damages. On October 7, 2019, the lead plaintiff filed a consolidated amended complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company and members of management in connection with the Company’s public disclosures between March 26, 2018 and January 6, 2019. The consolidated complaint alleges that the Company’s statements regarding the AMOS-8 contract, accounting for its GEO communications assets, and WorldView-4 were allegedly false and/or misleading during the class period. On September 11, 2020, the court granted in part, and denied in part, defendants’ motion to dismiss. On July 16, 2021, the court in the Colorado Action certified a class consisting of investors who purchased or acquired Maxar stock between May 9, 2018 and October 30, 2018, inclusive. The Company intends to vigorously defend against this lawsuit.
In January 2019, a Maxar stockholder resident in Canada issued a putative class action lawsuit captioned Charles O’Brien v. Maxar Technologies Inc., No. CV-19-00613564-00CP in the Ontario Superior Court of Justice against Maxar and members of management claiming misrepresentations in Maxar’s public disclosures and seeking monetary damages. On November 15, 2019, Mr. O’Brien and another Maxar stockholder resident in Canada issued a new putative class action lawsuit captioned Charles O’Brien v. Maxar Technologies Inc., No. CV-19-00631107-00CP, naming Maxar and certain members of management and the board of directors as defendants as well as Maxar’s auditor, KPMG LLP. On February 7, 2020, the January 2019 lawsuit was discontinued. The Statement of Claim in the November
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
2019 lawsuit alleges that the Company’s statements regarding the AMOS-8 contract, accounting for its GEO communications assets, and WorldView-4 were false and/or misleading during the class period and claims damages of $700 million. On April 24, 2020, the plaintiffs served their motion record for leave under the Securities Act (Ontario) and to certify the action as a class proceeding. By order dated September 23, 2021, the action against KPMG LLP was discontinued. On March 10, 2022, the plaintiffs’ motion for leave and certification was dismissed. The plaintiffs have not appealed the dismissal and the time period for such appeal expired on April 11, 2022.
On October 21, 2019, a Maxar stockholder filed a putative class action lawsuit captioned McCurdy v. Maxar Technologies Inc., et al., No. I9CV35070 in the Superior Court of the State of California, County of Santa Clara, naming Maxar and certain members of management and the board of directors as defendants. The lawsuit alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 in connection with the Company’s June 2, 2017 Registration Statement and Prospectus (“Offering Materials”) filed in anticipation of its October 5, 2017 merger with DigitalGlobe, Inc. (the “DigitalGlobe Merger”). On April 30, 2020, the plaintiff filed an amended complaint alleging the same causes of action against the same set of defendants as set forth in his original complaint. The lawsuit is based upon many of the same underlying factual allegations as the Colorado Action. Specifically, the lawsuit alleges the Company’s statements regarding its accounting methods and risk factors, including those related to the GEO communications business, were false and/or misleading when made. On January 24, 2021, the court granted in part, and denied in part, defendants’ motion to dismiss. On August 20, 2021, the court certified a class consisting of investors who acquired Maxar stock in exchange for DigitalGlobe stock pursuant to the Offering Materials issued in connection with the DigitalGlobe Merger. The Company intends to vigorously defend against this lawsuit.
On November 14, 2019, a derivative action was filed against Maxar and certain current and former members of management and the board of directors in United States District Court for the District of Delaware, captioned as Dorling, Derivatively on Behalf of Nominal Defendant Maxar Technologies Inc. v. Lance, et al., No. 19-cv-02134-UNA. On September 18, 2020, another purported derivative action was filed in the same court against Maxar and certain current and former members of management and the board of directors, captioned as Golub, Derivatively on Behalf of Maxar Technologies Inc. v. Lance, et al., No. 20-cv-01251-UNA. Both complaints concern the same factual allegations as asserted in the Colorado Action. The court has consolidated and stayed both derivative cases.
On September 15, 2021, a derivative action was filed against Maxar and certain current and former members of management and the board of directors in the Court of Chancery of the State of Delaware, captioned as Egan, on behalf of Maxar Technologies, Inc., v. Lance et al., C.A. No. 2021-0796-PAF. The complaint concerns the same factual allegations as asserted in the Colorado Action. The action is currently stayed by stipulation of the parties.
The Company is a party to various other legal proceedings and claims that arise in the ordinary course of business as either a plaintiff or defendant. As a matter of course, the Company is prepared both to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. The Company establishes accrued liabilities for these matters where losses are deemed probable and reasonably estimable. The outcome of any of these other proceedings, either individually or in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity. The Company expenses legal fees related to contingencies as incurred.
The Company maintains insurance policies for settlements and judgments, as well as legal defense costs, for lawsuits such as those described in the preceding paragraphs, although the amount of insurance coverage that the Company maintains may not be adequate to cover all claims or liabilities. In addition, provisions of the Company’s Certificate of Incorporation, Bylaws and indemnification agreements entered into with current and former directors and officers require the Company, among other things, to indemnify these directors and officers against certain liabilities that may arise by reason of their status or service as directors or officers and to advance expenses to such directors or officers in connection therewith.
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MAXAR TECHNOLOGIES INC.
Notes to the Unaudited Condensed Consolidated Financial Statements
(Tabular amounts in millions, unless otherwise noted)
16. | SUPPLEMENTAL CASH FLOW |
Selected cash payments and non-cash activities are as follows:
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Supplemental cash flow information: | ||||||
Cash paid for interest | $ | 15 | $ | 27 | ||
Income tax payments, net of (refunds) | (8) | — | ||||
Supplemental non-cash investing and financing activities: | ||||||
Accrued capital expenditures | 19 | 13 | ||||
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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains “forward-looking statements” as defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements usually relate to future events and may include statements regarding, among other things, our anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by the words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “may,” “estimate,” “outlook” and similar expressions, including the negative thereof.
These forward-looking statements are based on management’s current expectations and assumptions based on information currently known to us and our projections of the future, about which we cannot be certain. Forward-looking statements are subject to various risks and uncertainties which could cause actual results to differ materially from the anticipated results or expectations expressed in this Quarterly Report on Form 10-Q. As a result, although we believe we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be accurate. Risks and uncertainties that could cause actual results to differ materially from current expectations include those set forth in Part II, Item 1A, “Risk Factors” and elsewhere in this MD&A, as such risks and uncertainties may be updated or superseded from time to time by subsequent reports we file with the Securities and Exchange Commission. The forward-looking statements contained in this Quarterly Report on Form 10-Q speak only as of the date hereof and are expressly qualified in their entirety by the foregoing risks and uncertainties. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition, results of operations and cash flows. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required by law.
*****
Unless stated otherwise or the context otherwise requires, references to the terms “Company,” “Maxar,” “we,” “us,” and “our” refer collectively to Maxar Technologies Inc. and its consolidated subsidiaries.
OVERVIEW
We are a provider of comprehensive space solutions and secure, precise, geospatial intelligence. We help government and commercial customers monitor, understand and navigate our changing planet; deliver global broadband communications; and explore and advance the use of space. Our approach combines decades of deep mission understanding and a proven commercial and defense foundation to deploy solutions and deliver insights with speed, scale and cost effectiveness. Our businesses are organized and managed in two reportable segments: Earth Intelligence and Space Infrastructure, as described below under “Segment Results”.
Unless otherwise indicated, our significant accounting policies and estimates, material cash requirements, commitments, contingencies and business risks and uncertainties as described in our MD&A and consolidated financial statements for the year ended December 31, 2021, are substantially unchanged.
RECENT DEVELOPMENTS
COVID-19 operational posture and current impact
We continue to monitor and adapt our pandemic crisis response plan, while maintaining a focus on the protection of the health and safety of our employees, families, customers and communities. Changes in our operations in response to COVID-19 and employee illnesses resulting from the pandemic have resulted in inefficiencies and delays of our projects, impacts to service level contracts, including in sales and product development efforts and additional costs related to business continuity initiatives that cannot be fully mitigated through succession planning or employees working remotely. Additionally, we have and continue to observe stress in our supplier base inside and outside the U.S. We will continue to monitor and assess the actual and potential COVID-19 impacts on employees, customers, suppliers
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and the productivity of the work being done, all of which to some extent will affect revenues, estimated costs to complete projects, earnings and cash flow. Our results of operations for the quarter ended March 31, 2022, were not materially impacted by COVID-19.
Refer to Part II Item IA. “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of our risks related to COVID-19.
WorldView Legion satellites update
We experienced a test configuration anomaly that is in the process of being re-executed. In addition, the war in Ukraine has limited the use of the Antonov aircraft that typically flies satellites to launch sites, which has put further pressure on the overall schedule as we will likely need to use ground transportation to move the satellites from our manufacturing facility in California to the launch site in Florida. Assuming no major issues arise, we now expect the first launch of the WorldView Legion satellites in the September 2022 timeframe. The second and third launches are still expected to be within three and six months, respectively, after the first launch.
Electro-Optical Commercial Layer (“EOCL”) contract
In November 2021, the National Reconnaissance Office (“NRO”) announced the release of the EOCL contract Request for Proposal (“EOCL RFP”) which is expected to replace the existing EnhancedView Follow On contract (“EnhancedView Contract”). In December 2021, we submitted our response to the EOCL RFP and anticipate the NRO to award EOCL contracts prior to the expiration of the EnhancedView Contract, including remaining option years.
SEGMENT RESULTS
Our Chief Operating Decision Maker measures performance of our reportable segments based on revenue and Adjusted EBITDA. Our operating and reportable segments are: Earth Intelligence and Space Infrastructure.
Earth Intelligence
In the Earth Intelligence segment, we are a global leader in high resolution space-based Earth observation imagery products and analytics. We launched the world’s first high resolution commercial imaging satellite in 1999 and currently operate a four-satellite imaging constellation, providing us with over two decades and approximately 137 petabytes of imagery over our history (referred to as our “Image Library”) of the highest-resolution, commercially available imagery. Our imagery solutions provide customers with timely, accurate and mission-critical information about our changing planet and support a wide variety of government and commercial applications, including mission planning, mapping and analysis, environmental monitoring, disaster management, crop management, oil and gas exploration and infrastructure management. We continue to innovate as demands for new satellite technology and advanced analytic tools increase. We are a leader in commercial satellite imagery, and our commitment to accuracy, clarity and recency of foundational mapping enables us to provide the highest quality imagery basemaps for our customers. The high-quality satellite imagery also enables us to provide advanced 3D modeling for augmented reality, virtual reality and interactive engagement through our Precision3D Suite of tools. The U.S. government is the largest customer of our Earth Intelligence segment through the EnhancedView Contract, Global Enhanced GEOINT Delivery and One World Terrain programs and various classified and unclassified contract vehicles. In the commercial satellite Earth observation industry, we are a leader across U.S. government agencies, international government agencies and commercial customer verticals.
We also provide geospatial services that combine imagery, analytic expertise and innovative technology to deliver intelligence solutions to customers. Our cleared personnel support analytic solutions that accurately document change and enable geospatial modeling and analysis that help predict where events will occur. Our primary customer of geospatial services is the U.S. government, but we also support intelligence requirements for other U.S. allied governments, global development organizations and commercial customers.
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Space Infrastructure
In the Space Infrastructure segment, we provide solutions for communications, Earth observation, remote sensing, on-orbit servicing, robotic assembly and space exploration. We address a broad spectrum of needs for our customers, including mission systems engineering, product design, spacecraft manufacturing, assembly, integration and testing. Our principal customers in the Space Infrastructure segment are commercial satellite operators and government agencies worldwide. Our approach combines proven success gained over six decades in the industry with the nimbleness and agility of a smaller space company.
RESULTS OF OPERATIONS
Three Months Ended March 31, | $ | % | ||||||||||
| 2022 |
| 2021 |
| Change |
| Change | |||||
($ millions) | ||||||||||||
Revenues: | ||||||||||||
Product | $ | 154 | $ | 142 | $ | 12 | 8 | % | ||||
Service | 251 | 250 | 1 | 0 | ||||||||
Total revenues | 405 | 392 | 13 | 3 | ||||||||
Costs and expenses: | ||||||||||||
Product costs, excluding depreciation and amortization | 127 | 148 | (21) | (14) | ||||||||
Service costs, excluding depreciation and amortization | 93 | 93 | — | — | ||||||||
Selling, general and administrative | 104 | 84 | 20 | 24 | ||||||||
Depreciation and amortization | 68 | 74 | (6) | (8) | ||||||||
Operating income (loss) | $ | 13 | $ | (7) | $ | 20 | * | % | ||||
Interest expense, net | 23 | 78 | (55) | (71) | ||||||||
Other income, net | (3) | (1) | (2) | 200 | ||||||||
Loss before taxes | $ | (7) | $ | (84) | $ | 77 | (92) | % | ||||
Income tax (benefit) expense | — | — | — | * | ||||||||
Net loss | $ | (7) | $ | (84) | $ | 77 | (92) | % | ||||
* Not meaningful.
Product and service revenues
Three Months Ended March 31, | $ | % | ||||||||||
| 2022 |
| 2021 |
| Change |
| Change | |||||
($ millions) | ||||||||||||
Product revenues |
| $ | 154 | $ | 142 | $ | 12 |
| 8 | % | ||
Service revenues | 251 | 250 | 1 | 0 | ||||||||
Total revenues |
| $ | 405 | $ | 392 | $ | 13 |
| 3 | % | ||
Total revenues increased to $405 million from $392 million, or by $13 million, for the three months ended March 31, 2022, compared to the same period of 2021. The increase in revenues was driven by an increase in product revenues within our Space Infrastructure segment.
Further discussion of the drivers behind changes in revenues is included within the “Results by Segment” section below.
See Note 10, “Revenue” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Information” for product and service revenue by segment.
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Product and service costs
Three Months Ended March 31, | $ | % | ||||||||||
| 2022 |
| 2021 |
| Change |
| Change | |||||
($ millions) | ||||||||||||
Product costs, excluding depreciation and amortization |
| $ | 127 |
| $ | 148 | $ | (21) |
| (14) | % | |
Service costs, excluding depreciation and amortization | 93 | 93 | — | — | ||||||||
Total costs |
| $ | 220 |
| $ | 241 | $ | (21) |
| (9) | % | |
Total costs of product and services decreased to $220 million from $241 million, or by $21 million, for the three months ended March 31, 2022, compared to the same period of 2021. The decrease in costs was driven by a decrease in product costs within our Space Infrastructure segment.
Selling, general and administrative
Three Months Ended March 31, | $ | % | ||||||||||
| 2022 |
| 2021 |
| Change |
| Change | |||||
($ millions) | ||||||||||||
Selling, general and administrative |
| $ | 104 |
| $ | 84 | $ | 20 | 24 | % | ||
Selling, general and administrative costs increased to $104 million from $84 million, or by $20 million, for the three months ended March 31, 2022, compared to the same period of 2021. The increase was primarily due to a $7 million increase in labor related expenses driven by annual merit increases, increases in fringe benefits and an increase in efforts related to internal business projects, including our enterprise resource planning (“ERP”) project for the three months ended March 31, 2022 compared to the same period of 2021. There was also an increase in stock-based compensation expense of $4 million for the three months ended March 31, 2022. The increase in stock-based compensation was primarily due to incremental expense related to liability classified awards driven by an increase in stock price. There was also an increase of $3 million in sales and marketing expenses primarily within our Space Infrastructure segment, a $3 million increase in professional service expenses primarily driven by our ERP project and a $2 million increase in research and development expenses within our Space Infrastructure segment for the three months ended March 31, 2022, compared to the same period of 2021.
Depreciation and amortization
Three Months Ended March 31, | $ | % | ||||||||||
| 2022 |
| 2021 |
| Change |
| Change | |||||
($ millions) | ||||||||||||
Property, plant and equipment |
| $ | 19 |
| $ | 23 | $ | (4) |
| (17) | % | |
Intangible assets |
| 49 |
| 51 | (2) |
| (4) | |||||
Depreciation and amortization expense |
| $ | 68 |
| $ | 74 | $ | (6) |
| (8) | % | |
Depreciation and amortization expense decreased to $68 million from $74 million, or by $6 million, for the three months ended March 31, 2022, compared to the same period of 2021. The decrease was primarily driven by a decrease in depreciation expense related to the extension of the useful lives of three satellites in the fourth quarter of 2021.
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Interest expense, net
Three Months Ended March 31, | $ | % | ||||||||||
| 2022 |
| 2021 |
| Change |
| Change | |||||
($ millions) | ||||||||||||
Interest expense: | ||||||||||||
Interest on long-term debt |
| $ | 33 |
| $ | 44 | $ | (11) |
| (25) | % | |
Interest on orbital securitization liability | 1 | 1 | — | — | ||||||||
Loss on debt extinguishment | — | 41 | (41) | (100) | ||||||||
Imputed interest and other | — | 1 | (1) | (100) | ||||||||
Capitalized interest | (11) | (9) | (2) | 22 | ||||||||
Interest expense, net |
| $ | 23 |
| $ | 78 | $ | (55) |
| (71) | % | |
Interest expense, net decreased to $23 million from $78 million, or by $55 million, for the three months ended March 31, 2022, compared to the same period in 2021. The decrease was primarily driven by a $41 million loss on debt extinguishment during the three months ended March 31, 2021 from the partial redemption of our 9.75% Senior Secured Notes due 2023 (“2023 Notes”) using proceeds from a March 2021 underwritten public offering of our common stock (“Offering”), compared to no loss on debt extinguishment for the same period of 2022. The decrease is also driven by an $11 million decrease in interest on long-term debt primarily due to a lower principal balance on the 2023 Notes due to the partial redemption of the 2023 Notes in the first quarter of 2021.
RESULTS BY SEGMENT
We analyze financial performance by segments, which group related activities within our business. We report our financial performance based on two reportable segments: Earth Intelligence and Space Infrastructure. Intrasegment transactions have been eliminated from the segmented financial information discussed below.
Three Months Ended March 31, | $ | % | ||||||||||
| 2022 |
| 2021 |
| Change |
| Change | |||||
($ millions) | ||||||||||||
Revenues: |
|
|
|
|
| |||||||
Earth Intelligence | $ | 251 | $ | 250 | $ | 1 | 0 | % | ||||
Space Infrastructure |
| 177 |
| 155 |
| 22 | 14 | |||||
Intersegment eliminations | (23) | (13) | (10) | 77 | ||||||||
Total revenues | $ | 405 | $ | 392 | $ | 13 | 3 | % | ||||
Adjusted EBITDA: | ||||||||||||
Earth Intelligence | $ | 99 | $ | 107 | $ | (8) | (7) | % | ||||
Space Infrastructure | 19 | (12) | 31 | * | ||||||||
Intersegment eliminations | (9) | (5) | (4) | 80 | ||||||||
Corporate and other expenses | (25) | (23) | (2) | 9 | ||||||||
Total Adjusted EBITDA | $ | 84 | $ | 67 | $ | 17 | 25 | % | ||||
* Not meaningful.
Adjusted EBITDA disclosures throughout this section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are non-GAAP measures. See “Non-GAAP Financial Measures” below for further discussion of Adjusted EBITDA disclosures. See also Note 11, “Segment Information” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Information” in this Quarterly Report on Form 10-Q for additional information about how we use Adjusted EBITDA to measure the performance of each of our segments.
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Earth Intelligence
The following table provides selected financial information for the Earth Intelligence segment.
Three Months Ended March 31, | $ | % | ||||||||||
|
| 2022 |
| 2021 |
| Change |
| Change | ||||
($ millions) |
|
|
| |||||||||
Total revenues | $ | 251 |
| $ | 250 | $ | 1 |
| 0 | % | ||
Adjusted EBITDA | $ | 99 |
| $ | 107 | $ | (8) | (7) | % | |||
Adjusted EBITDA margin (as a % of total revenues) | 39.4 | % | 42.8 | % | ||||||||
Revenues from the Earth Intelligence segment increased to $251 million from $250 million, or by $1 million, for the three months ended March 31, 2022, compared to the same period in 2021. The increase was primarily driven by a $2 million increase in revenues from international defense and intelligence customers and a $1 million increase in revenues from commercial programs. These increases were partially offset by a $2 million decrease in revenues from the U.S. government.
Adjusted EBITDA decreased to $99 million from $107 million, or by $8 million, for the three months ended March 31, 2022, compared to the same period of 2021. The decrease was primarily related to an increase in selling, general and administrative costs, compared to the same period of 2021. The increase in selling, general and administrative costs was primarily due to an increase in labor related expenses driven by employee compensation and fringe benefits.
Space Infrastructure
The following table provides selected financial information for the Space Infrastructure segment.
Three Months Ended March 31, | $ | % | ||||||||||
|
| 2022 |
| 2021 |
| Change |
| Change | ||||
($ millions) |
|
|
| |||||||||
Total revenues | $ | 177 | $ | 155 | $ | 22 |
| 14 | % | |||
Adjusted EBITDA | $ | 19 | $ | (12) | $ | 31 | * | |||||
Adjusted EBITDA margin (as a % of total revenues) | 10.7 | % | (7.7) | % | ||||||||
* Not meaningful.
Changes in revenues from year to year are influenced by the size, timing and number of satellite contracts awarded in the current and preceding years and the length of the construction period for satellite contracts awarded. Revenues on satellite contracts are recognized using the cost-to-cost method to determine the percentage of completion over the construction period, which typically ranges between 20 to 36 months, and up to 48 months in certain situations. Adjusted EBITDA margins can vary from quarter to quarter due to the mix of our revenues and changes in our estimated total costs at completion (“EAC”) as our risks are retired and as our EACs are increased or decreased based on contract performance. Adjusted EBITDA margins are also impacted by estimated contractual consideration.
Revenues from the Space Infrastructure segment increased to $177 million from $155 million, or by $22 million, for the three months ended March 31, 2022, compared to the same period in 2021. Revenues increased primarily as a result of a $28 million aggregate impact due to the non-performance of the SXM-7 satellite during the three months ended March 31, 2021, which did not reoccur in the same period in 2022. This increase was partially offset by a $3 million decrease in revenues from U.S. government contracts and a $2 million decrease in revenues from recurring commercial programs during the three months ended March 31, 2022.
Adjusted EBITDA in the Space Infrastructure segment increased to $19 million from a loss of $12 million, or by $31 million, for the three months ended March 31, 2022, compared to the same period of 2021. The increase was primarily
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related to the above-mentioned SXM-7 satellite impacts which did not reoccur in the same period in 2022. The increase was also driven by an $11 million decrease in indirect costs primarily due to reduced overhead costs during the three months ended March 31, 2022. These increases were partially offset by a $9 million increase in selling, general and administrative costs primarily due to an increase in labor related expenses driven by employee compensation, fringe benefits and an increase in efforts related to internal business projects. There was also an increase in sales and marketing expenses and research and development expenses.
Corporate and other expenses
Corporate and other expenses include items such as corporate office costs, regulatory costs, executive and director compensation, foreign exchange gains and losses, retention costs and fees for legal and consulting services.
Corporate and other expenses increased to $25 million from $23 million, or by $2 million, for the three months ended March 31, 2022, compared to the same period in 2021. The increase was primarily driven by an increase in stock-based compensation expense of $3 million for the three months ended March 31, 2022, which was primarily due to incremental expense related to liability classified awards.
Intersegment eliminations
Intersegment eliminations are related to projects between our segments, including the construction of our WorldView Legion satellites. Intersegment eliminations increased to $9 million from $5 million, or by $4 million, for the three months ended March 31, 2022, compared to the same period in 2021, primarily related to an increase in intersegment satellite construction activity.
BACKLOG
Our backlog by segment is as follows:
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
($ millions) | ||||||
Earth Intelligence | $ | 876 | $ | 1,028 | ||
Space Infrastructure | 745 | 865 | ||||
Total backlog | 1,621 | 1,893 | ||||
Unfunded contract options | 763 | 650 | ||||
Total | $ | 2,384 | $ | 2,543 | ||
Order backlog, representing the estimated dollar value of firm contracts for which work has not yet been performed (also known as the remaining performance obligations on a contract), was $1,621 million as of March 31, 2022 compared to $1,893 million as of December 31, 2021. Order backlog generally does not include unexercised contract options and potential orders under indefinite delivery/indefinite quantity contracts.
Backlog in the Space Infrastructure segment is primarily comprised of multi-year awards, such as satellite builds. Fluctuations in backlog are driven primarily by the timing of large program wins. Backlog in the Earth Intelligence segment consists of both multi-year and annual contracts, which renew at various times throughout the year. As a result, the timing of when contracts are awarded and when option years are exercised may cause backlog to fluctuate significantly from period to period.
Although backlog reflects business that is considered to be firm, terminations, amendments or cancellations may occur, which could result in a reduction in our total backlog.
Our unfunded contract options totaled $763 million and $650 million as of March 31, 2022 and December 31, 2021, respectively. Unfunded contract options represent estimated amounts of revenue to be earned in the future from negotiated contracts with unexercised contract options and indefinite delivery/indefinite quantity contracts. Unfunded
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contract options as of March 31, 2022, were primarily comprised of the option year in the EnhancedView Contract (September 1, 2022 through July 12, 2023) and other U.S. government contracts. In November 2021, the NRO announced the release of the EOCL RFP which is expected to replace the existing EnhancedView Contract. In December 2021, we submitted our response to the EOCL RFP and anticipate the NRO to award EOCL contracts prior to the expiration of the EnhancedView Contract, including remaining option years.
LIQUIDITY & CAPITAL RESOURCES
Our sources of liquidity include cash provided by operations, access to existing credit facilities, collection or securitization of orbital receivables and, when available and efficient, access to the capital markets. We generally maintain limited cash on hand and use available cash to pay down borrowings on our Syndicated Credit Facility (as defined below). Our primary short-term cash requirements are to fund working capital, including requirements on long-term construction contracts (including our geostationary satellite contracts), fixed overhead costs, and to fund increased capital expenditures, including the construction of our WorldView Legion satellites. Working capital requirements can vary significantly from period to period, particularly as a result of the timing of receipts and disbursements related to long-term construction contracts.
Our medium-term to long-term cash requirements are to service and repay debt and make investments, including in facilities, equipment, technologies, and research and development for growth initiatives. These capital investments include investments to replace the capability or capacity of satellites which have or will go out of service in the future. Over the near-term to medium-term, it is also possible that our customers may fully or partially fund the construction of additional Legion satellites. Cash is also used to pay dividends and finance other long-term strategic business initiatives.
Our first maturity of long-term debt is in the fourth quarter of 2023 and relates to the 2023 Notes and Revolving Credit Facility (as defined below). On March 26, 2021, we redeemed $350 million aggregate principal amount of our 2023 Notes using a portion of the net proceeds from the Offering.
We have significant purchase obligations in the normal course of business for goods and services, under agreements with defined terms as to quantity, price and timing of delivery. Purchase obligations represent open purchase orders and other commitments for the purchase or construction of property, plant and equipment or intangible assets, operational commitments related to remote ground terminals, or with subcontractors on long-term construction contracts that we have with customers in the normal course of business.
We also have short and long-term requirements to fund our pension plans within the Space Infrastructure segment. Funding requirements under applicable laws and regulations are a major consideration in making contributions to our pension plans. Failure to satisfy the minimum funding thresholds with respect to appropriate laws and regulations could result in restrictions on our ability to amend the plans or make benefit payments. With respect to our qualified pension plan, we intend to contribute annually not less than the required minimum funding thresholds. In 2021, we elected to take advantage of certain provisions of the American Rescue Plan Act of 2021 and due to our election, there are no required contributions for the qualified pension plan for the year ending December 31, 2022.
Our ability to fund our cash needs will depend, in part, on our ability to generate cash in the future, which depends on our future financial results. Our future results are subject to general economic, financial, competitive, legislative and regulatory factors that may be outside of our control. Our future access to, and the availability of credit on acceptable terms and conditions is impacted by many factors, including capital market liquidity and overall economic conditions.
We believe that our cash from operating activities generated from continuing operations, together with available borrowings under our Revolving Credit Facility, will be adequate for the next twelve months and the foreseeable future to meet our anticipated uses of cash flow, including working capital, capital expenditure, debt service costs, dividend and other commitments. While we intend to reduce debt over time using cash provided by operations, we may also seek to meet long-term debt obligations, if necessary, and fund future capital investments by obtaining capital from a variety of
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additional sources or by refinancing existing obligations. These sources include public or private capital markets, bank financings, proceeds from dispositions or other third-party sources.
Summary of cash flows
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
($ millions) | ||||||
Cash provided by operating activities |
| $ | 48 |
| $ | 27 |
Cash used in investing activities |
| (66) |
| (50) | ||
Cash used in financing activities |
| (7) |
| 17 | ||
Effect of foreign exchange on cash, cash equivalents and restricted cash | — | — | ||||
Cash, cash equivalents, and restricted cash, beginning of year |
| 48 |
| 32 | ||
Cash, cash equivalents, and restricted cash, end of period |
| $ | 23 |
| $ | 26 |
Operating activities
Cash flows from operating activities can vary significantly from period to period as a result of our working capital requirements, given our portfolio of large construction programs and the timing of milestone receipts and payments with customers and suppliers in the ordinary course of business. Investment in working capital is also necessary to build our business and manage lead times in construction activities. We expect working capital account balances to continue to vary from period to period. We efficiently fund our working capital requirements with the Revolving Credit Facility (as defined below).
Cash provided by operating activities increased to $48 million from $27 million, or by $21 million, for the three months ended March 31, 2022 compared to the same period in 2021. This change was primarily driven by favorable changes in working capital inclusive of $8 million of tax refunds received for the three months ended March 31, 2022, compared to the same period in 2021.
Investing activities
Cash used in investing activities increased to $66 million from $50 million, or by $16 million, for the three months ended March 31, 2022 compared to the same period in 2021. Our primary investing activities included expenditures on property, plant and equipment of $43 million and $26 million for the three months ended March 31, 2022 and 2021, respectively, and investments in intangible assets primarily related to internally developed software of $21 million and $24 million for the three months ended March 31, 2022 and 2021, respectively. Property, plant and equipment expenditures for the three months ended March 31, 2022 and 2021 primarily related to the construction of our WorldView Legion satellites.
Financing activities
Cash used in financing activities decreased to $7 million compared to cash provided by financing activities of $17 million, or by $24 million, for the three months ended March 31, 2022 compared to the same period in 2021. During the three months ended March 31, 2022, cash used in financing activities included the settlement of the securitization liability of $4 million. During the three months ended March 31, 2021, cash provided by financing activities primarily included net proceeds of $380 million from the Offering and $25 million in net proceeds from the Revolving Credit Facility. These were partially offset by $384 million used for the partial redemption of the 2023 Notes, including approximately $34 million in premiums paid to redeem such 2023 Notes.
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Long-term debt
The following table summarizes our long-term debt:
As of March 31, 2022 and December 31, 2021, we were in compliance with our debt covenants.
Syndicated Credit Facility
As of March 31, 2022, the senior secured syndicated credit facility (“Syndicated Credit Facility”) is composed of: (i) a senior secured first lien revolving credit facility in an aggregate capacity of up to $500 million maturing in December 2023 (“Revolving Credit Facility”) and (ii) a senior secured first lien term B facility in an original aggregate principal amount of $2.0 billion maturing in October 2024 (“Term Loan B”). The Revolving Credit Facility includes an aggregate $200 million sub limit under which letters of credit can be issued. As of March 31, 2022 and December 31, 2021, we had $28 million of issued and undrawn letters of credit outstanding under the Revolving Credit Facility.
Senior Secured Notes due 2023
In December 2019, we issued $1.0 billion in aggregate principal amount of 2023 Notes in a private placement to institutional buyers. The 2023 Notes were issued at a price of 98% and are recorded as long-term debt in our consolidated financial statements. The 2023 Notes bear interest at the rate of 9.75% per year, payable semi-annually in cash in arrears, for which interest payments commenced in June 2020. The 2023 Notes will mature on December 31, 2023, unless earlier redeemed or repurchased. The 2023 Notes are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility.
Senior Secured Notes due 2027
In June 2020, we issued $150 million in aggregate principal amount of 7.54% Senior Secured Notes due 2027 (“2027 Notes”) in a private placement to institutional buyers. The 2027 Notes were issued at a price of 98.25% and are recorded as long-term debt in our consolidated financial statements. The 2027 Notes bear interest at the rate of 7.54% per year, payable semi-annually in cash in arrears, for which interest payments commenced in December 2020. The 2027 Notes will mature on December 31, 2027, unless earlier redeemed or repurchased. The 2027 Notes are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility and the 2023 Notes.
Leaseback Deferred Financing
In December 2019, we completed the sale and subsequent leaseback of our owned properties in Palo Alto, California for proceeds of $291 million. We determined that the leaseback terms were off-market. In accordance with Accounting Standards Codification 842 – Leases, we accounted for the excess of the leaseback payments over the present value of market rental payments as additional financing, separate from the lease liability. This resulted in recognition of a deferred financing liability of $33 million which is repayable over the 10-year leaseback term.
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See Note 7, “Long-term debt and interest expense, net” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Information” in this Quarterly Report on Form 10-Q for further details on our long-term debt.
Securitization liability
We have in place, a revolving securitization facility agreement with an international financial institution. Under the terms of the Syndicated Credit Facility, we may offer to sell eligible orbital receivables from time to time with terms of seven years or less, discounted to face value using prevailing market rates. There were no sales or repurchases of eligible receivables executed in the three months ended March 31, 2022 or 2021.
The orbital receivables that were securitized remain on our balance sheet as the accounting criteria for surrendering control of the orbital receivables were not met. The net proceeds received have been recognized as securitization liabilities that have been subsequently measured at amortized cost using the effective interest rate method. The securitized orbital receivables and securitization liabilities are being drawn down as payments are received from customers and passed on to the international financial institution. We continue to recognize orbital revenue on the orbital receivables that are subject to the securitization transactions and recognize interest expense to accrete the securitization liability.
Interest rate swaps
As of March 31, 2022, an aggregate of $1.0 billion of our variable rate long-term debt is fixed at an average rate of 1.43% (excluding the margin specified in the Syndicated Credit Facility) pursuant to our outstanding interest rate swaps. On April 29, 2022, $500 million of our interest rate swaps matured.
Off-balance sheet arrangements
As of March 31, 2022, we had no outstanding foreign exchange sales contracts. As of March 31, 2022, we had $28 million in letters of credit guaranteed by the Syndicated Credit Facility, while indemnified by us. Such arrangements are not expected to have a material effect on our liquidity or capital resources, financial position or results of operations.
We use, from time to time, derivative financial instruments to manage existing foreign currency exposures. We consider the management of financial risks to be an important part of our overall corporate risk management policy. Foreign exchange forward contracts are used to hedge our exposure to currency risk on sales, purchases, cash, net investments and loans denominated in a currency other than the functional currency of our domestic and foreign operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There were no material changes to our critical accounting policies, estimates or judgments, that occurred in the period covered by this report from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2021.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2, “Summary of Significant Accounting Policies” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item I, “Financial Information” in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
NON-GAAP FINANCIAL MEASURES
In addition to results reported in accordance with U.S. GAAP, we use certain non-GAAP financial measures as supplemental indicators of our financial and operating performance. These non-GAAP financial measures include EBITDA, Adjusted EBITDA and Adjusted EBITDA margin.
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We define EBITDA as earnings before interest, taxes, depreciation and amortization, Adjusted EBITDA as EBITDA adjusted for certain items affecting the comparability of our ongoing operating results as specified in the calculation and Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. Certain items affecting the comparability of our ongoing operating results between periods include restructuring, impairments, insurance recoveries, gain (loss) on sale of assets, (gain) loss on orbital receivables allowance and transaction and integration related expense. Transaction and integration related expense includes costs associated with de-leveraging activities, acquisitions and dispositions and the integration of acquisitions. Management believes that exclusion of these items assists in providing a more complete understanding of our underlying results and trends, and management uses these measures along with the corresponding U.S. GAAP financial measures to manage our business, evaluate our performance compared to prior periods and the marketplace, and to establish operational goals. Adjusted EBITDA is a measure being used as a key element of our incentive compensation plan. The Syndicated Credit Facility also uses Adjusted EBITDA in the determination of our debt leverage covenant ratio. The definition of Adjusted EBITDA in the Syndicated Credit Facility includes a more comprehensive set of adjustments that may result in a different calculation therein.
We believe that these non-GAAP measures, when read in conjunction with our U.S. GAAP results, provide useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business, and the comparison of our operating results against analyst financial models and operating results of other public companies.
EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under U.S. GAAP and may not be defined similarly by other companies. EBITDA and Adjusted EBITDA should not be considered alternatives to net (loss) income as indications of financial performance or as alternate to cash flows from operations as measures of liquidity. EBITDA and Adjusted EBITDA have limitations as an analytical tool and should not be considered in isolation or as a substitute for our results reported under U.S. GAAP.
The table below reconciles our net income (loss) to EBITDA and Total Adjusted EBITDA for the three months ended March 31, 2022 and 2021:
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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our market risks from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We performed an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2022. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, under the supervision of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2022.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting that occurred during the first quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
Because of the inherent limitations in a cost-effective control system, any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will prevent or detect all misstatements, due to error or fraud, from occurring in the consolidated financial statements. Additionally, management is required to use judgment in evaluating controls and procedures.
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
Currently, we are involved in a number of legal proceedings. For a discussion of material legal proceedings, see Note 15, “Commitments and Contingencies” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item I, “Financial Information” in this Quarterly Report on Form 10-Q, which is hereby incorporated by reference.
ITEM 1A. RISK FACTORS
We operate in a changing global environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. The occurrence of any of the following risks could materially and adversely affect our business, financial condition, prospects, results of operations and cash flows. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition, results of operations and cash flows.
Risk Factors Summary
Below is a summary of the principal risk factors that could adversely affect our business. This summary does not address all the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks, can be found after this summary in Item 1A of this Quarterly Report on Form 10-Q.
| ● | Our business, financial condition and results of operations could be materially adversely affected by impacts resulting from the conflict in Ukraine or related geopolitical tensions. |
| ● | We are unable to predict the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance, results of operations and stock price. |
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| ● | The future revenue and operating results of the Space Infrastructure segment are dependent on our ability to generate a sustainable order rate for the satellite and space manufacturing operations and develop new technologies to meet the needs of our customers or potential new customers. |
| ● | Our business with various governmental entities is subject to the policies, priorities, regulations, mandates and funding levels of such governmental entities and may be negatively or positively impacted by any change thereto. |
| ● | Our revenue, results of operations and reputation may be negatively impacted if our programs fail to meet contractual requirements or our products contain defects or fail to operate in the expected manner. |
| ● | Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, and security threats could result in a loss or degradation of service, unauthorized disclosure of data, or theft or tampering of intellectual property, any of which could materially adversely impact our business. |
| ● | Satellites are subject to construction and launch delays, launch failures, damage or destruction during launch, the occurrence of which can materially and adversely affect our operations. |
| ● | If our satellites fail to operate as intended, it could have a material adverse effect on our business, financial condition and results of operations. |
| ● | Loss of, or damage to, a satellite and the failure to obtain data or alternate sources of data for our products may have an adverse impact on our results of operations and financial condition. |
| ● | Interruption or failure of our infrastructure or national infrastructure could hurt our ability to effectively perform our daily operations and provide and produce our products and services, which could damage our reputation and harm our operating results. |
| ● | Our business with various governmental entities is concentrated in a small number of primary contracts. The loss or reduction in scope of any one of our primary contracts would materially reduce our revenue. |
| ● | We operate in highly competitive industries and in various jurisdictions across the world, which may cause us to have to reduce our prices or to lose market share. |
| ● | We are a party to legal proceedings, investigations and other claims or disputes, which are costly to defend and, if determined adversely to us, could require us to pay fines or damages, undertake remedial measures or prevent us from taking certain actions, any of which could adversely affect our business. |
| ● | Disruptions in U.S. government operations and funding could have a material adverse effect on our revenues, earnings and cash flows and otherwise adversely affect our financial condition. |
| ● | Changes in U.S. government policy regarding use of commercial data or space infrastructure providers, or material delay or cancellation of certain U.S. government programs, may have a material adverse effect on our revenue and our ability to achieve our growth objectives. |
| ● | Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and financial condition. |
| ● | Our business involves significant risks and uncertainties that may not be covered by insurance. |
| ● | We often rely on a single vendor or a limited number of vendors to provide certain key products or services and the inability of these key vendors to meet our needs could have a material adverse effect on our business. |
| ● | Disruptions in the supply of key raw materials or components and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact us. |
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| ● | We are dependent on our ability to attract, train and retain employees. Our inability to do so, or the loss of key personnel, would cause serious harm to our business. |
| ● | Changes in our accounting estimates and assumptions could negatively affect our financial position and results of operations. |
| ● | We may be required to recognize impairment charges. |
| ● | Our business is capital intensive, and we may not be able to raise adequate capital to finance our business strategies, including funding future satellites, or to refinance or renew our debt financing arrangements, or we may be able to do so only on terms that significantly restrict our ability to operate our business. |
| ● | Our ability to obtain additional debt or equity financing or government grants to finance operating working capital requirements and growth initiatives may be limited or difficult to obtain, which could adversely affect our operations and financial condition. |
| ● | Our indebtedness and other contractual obligations could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and our ability to pay our debts and could divert our cash flow from operations for debt payments. |
| ● | Our current financing arrangements contain certain restrictive covenants that impact our future operating and financial flexibility. |
| ● | Our actual operating results may differ significantly from our guidance. |
| ● | We could be adversely impacted by actions of activist stockholders, and such activism could impact the value of our securities. |
| ● | The price of our common stock has been volatile and may fluctuate substantially. |
| ● | Our operations in the U.S. government market are subject to significant regulatory risk. |
| ● | Failure to comply with the requirements of the National Industrial Security Program Operating Manual could result in interruption, delay or suspension of our ability to provide our products and services, and could result in loss of current and future business with the U.S. government. |
| ● | Our business is subject to various regulatory risks that could adversely affect our operations. |
| ● | Changes in tax law, in our tax rates or in exposure to additional income tax liabilities or assessments may materially and adversely affect our financial condition, results of operations and cash flows. |
| ● | Our ability to use our U.S. federal and state net operating loss carryforwards and certain other tax attributes may be limited. |
| ● | Our operations are subject to governmental law and regulations relating to environmental matters, which may expose us to significant costs and liabilities that could negatively impact our financial condition. |
Risks Related to Our Business
Our business, financial condition and results of operations could be materially adversely affected by impacts resulting from the conflict in Ukraine or related geopolitical tensions.
U.S. and global businesses and markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, it was reported that a full-scale military invasion of Ukraine by Russian troops began. The recent military conflict in Ukraine has also led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia. Additional potential sanctions and penalties have also been proposed and/or threatened. Although the length and impact
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of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to regional instability, market disruptions, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates, and the supply chain, which could create or exacerbate risks facing our business.
For example, market disruptions caused by Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to significant volatility and instability in credit and capital markets and a lack of liquidity in capital markets, potentially making it more difficult for us to raise capital.
Further, because of our recent prominence in the media and continued support of the U.S. government and other governments and various media outlets throughout the world, we (and/or partners we use) may be susceptible to attacks by advanced, persistent and highly organized adversaries, including nation states and hostile foreign governments such as Russia and its allies. These attacks could come in the form of, among others, anti-satellite devices, electromagnetic or radio interference with our satellites, cyber and other security attacks, and other similar types of attacks, any or all of which are potentially capable of destroying our satellites or ground systems architecture or rendering them permanently impaired or inoperable. In the event of one or more of these attacks on us and/or our partners, there can be no assurance that any insurance proceeds will be available for any partial or total loss of a satellite or a satellite’s performance or any resulting business interruption, and our business, financial condition and results of operations could be materially adversely affected. See also “Our business involves significant risks and uncertainties that may not be covered by insurance” below.
Additionally, although we believe there are alternative sources available to us for products, materials, components and services, if these conditions continue for a prolonged period, we may also experience supply chain disruptions, logistics restrictions, shortages in the availability of key materials and components and our reputation and relationships with our customers may become impaired if we are unable to meet a customer’s expectations or contractual requirements. The occurrence of any of the foregoing, especially over a prolonged period, could have a material adverse effect on our financial condition and results of operations.
We are actively monitoring the situation in Ukraine and globally and assessing its potential impact on our business. Although our business has not been materially impacted by the ongoing military conflict between Russia and Ukraine to date, it is impossible to predict the extent to which our operations, or those of our suppliers, vendors, and customers, will be impacted in the short and long term, the course the current conflict may take in the future including its scope or severity, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such impacts or disruptions may also magnify the impact of other risks described in this Quarterly Report on Form 10-Q.
We are unable to predict the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance, results of operations and stock price.
The COVID-19 outbreak, declared a pandemic by the World Health Organization, has impacted nearly all regions of the world. Preventative measures taken to contain or mitigate the outbreak and their impact on the global supply chain have affected, and continue to affect, the global economy and the U.S. economy and have created periods of significant volatility in the global financial markets, the effects of which have adversely impacted our business and the businesses of our customers, including the U.S. and foreign governments and suppliers.
Our supply chain is under stress inside and outside of the U.S., and we continue to monitor and assess the actual and potential COVID-19 or related force majeure impacts on the supply chain, our operations and customer commitments. There is a risk that these schedule delays could result in obligations for material liquidated damages owed to our customers. We have received some force majeure claims from suppliers related to COVID-19; however, at this time we do not expect the claims to result in a material financial impact.
From time to time, we have experienced a variation in the consumption of access minutes by our customers as a result of COVID-19 and the preventative measures instituted by governments and businesses to mitigate its spread, which have resulted in periods of business slowdown. This impact could be more significant in the future, which could negatively impact revenue. In many instances, COVID-19 represents a force majeure event and as such, we have notified certain
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customers that we will be exercising our contractual legal rights, and in some instances we have made claims exercising such rights, given the uncertain nature of the current pandemic and its near and long-term impacts on the cost and schedule of the numerous programs in our existing backlog. Additionally, our customers may slow down their development of new projects or may experience financial difficulties impacting their ability to fund projects already in backlog.
Changes in our operations in response to COVID-19 and employee illnesses resulting from the pandemic have resulted in inefficiencies and delays of our projects, impacts to service level contracts, including in sales and product development efforts and additional costs related to business continuity initiatives, that cannot be fully mitigated through succession planning or employees working remotely. Additionally, to provide for the health and safety of our workforce and business continuity, we have implemented a Vaccination Policy which requires that Maxar employees are vaccinated for COVID-19 unless they have an approved accommodation.
We cannot predict the degree to which, or the time period that, global economic conditions, the global supply chain and our sales and operations will continue to be affected by COVID-19 and preventative measures imposed from time to time by governments and businesses to prevent its spread. The degree to which COVID-19 will continue to impact us will depend on numerous factors and future developments, including, but not limited to, the unknown duration of the pandemic, the impact of potential future resurgences and new virus variants and any actions that may be taken by governmental authorities to minimize the spread of the pandemic or to stimulate the economy. We also cannot predict the degree to which the disruption of global financial markets could have a negative impact on our ability to raise capital in the future. The long-term impacts of COVID-19 on government budgets and funding priorities that impact demand for our products and services are difficult to predict.
Even after the COVID-19 pandemic has subsided, we may experience an impact to our business as a result of any economic downturn, recession or depression that has occurred or may occur in the future. The effects of these risks on our business, sales, financial condition, liquidity and results of operations could be material.
The future revenue and operating results of the Space Infrastructure segment are dependent on our ability to generate a sustainable order rate for the satellite and space manufacturing operations and develop new technologies to meet the needs of our customers or potential new customers.
The Space Infrastructure segment’s financial performance is dependent on its ability to generate a sustainable order rate for its satellite and space manufacturing operations. This can be challenging and may fluctuate on an annual basis as the number of satellite construction contracts awarded varies and in 2018 there was a substantial step down in the total number and dollar value of geostationary communication satellite contracts awarded compared to such historical averages prior to 2015. Many satellite operators in the communications industry have continued to defer new satellite construction awards to evaluate geostationary and other competing satellite system architectures and other market factors. If we are unable to win new awards or execute existing contracts as expected, our business, results of operations and financial position could be further adversely affected.
The cyclical nature of the commercial satellite market could negatively impact our ability to accurately forecast customer demand. The markets that we serve may not grow in the future and we may not be able to maintain adequate gross margins or profits in these markets. Specifically, sales of the 1300 bus have historically been important to our results and there is no assurance that this market will continue to grow or demand levels will increase, nor is there assurance that the market for the smaller bus, which spans a range from 500kg to 1300kg, will offset any decreases in the market for the 1300 bus or provide future growth. Our growth is dependent on the growth in the sales of services provided by our customers, our customers’ ability to anticipate market trends and our ability to anticipate changes in the businesses of our customers and to successfully identify and enter new markets. If we fail to anticipate such changes in demand, our business, results of operations and financial position could be adversely affected.
On January 1, 2019, we completed a reorganization of our corporate structure pursuant to which we directly acquired all of the issued and outstanding shares of Maxar Technologies Ltd. (“Maxar Canada”) and we replaced Maxar Canada as the publicly-held parent company of the Maxar group (“U.S. Domestication”). As part of our U.S. Domestication we believe that we will continue to capitalize on projected benefits within the Space Infrastructure segment. These benefits
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include anticipated growth within our U.S. government customer base as well as diversifying into national and civil missions. The failure to do so may have a material adverse effect on our business, results of operations and financial condition.
The satellite manufacturing industry is driven by continued investment in technologies to meet changing customer demand for complex and reliable services. Our satellite systems embody complex technologies and may not always be compatible with current and evolving technical standards and systems developed by others. Other satellite manufacturers have developed or are developing digital payloads which increase flexibility for geostationary satellites in circumstances with unpredictable demand. We plan to team with providers of this technology to enhance our offering if our customers express interest in it.
Failure or delays to develop technologies or team with providers to obtain technologies to meet the requisite and evolving industry or user standards could have a material adverse effect on our business, results of operations and financial condition. Failure of suppliers to deliver against end customer requirements could lead to a material adverse effect on our financial results within the Space Infrastructure segment.
Our business with various governmental entities is subject to the policies, priorities, regulations, mandates and funding levels of such governmental entities and may be negatively or positively impacted by any change thereto.
Changes in government policies, priorities, regulations, use of commercial data providers to meet U.S. government imagery needs, government agency mandates, funding levels through agency budget reductions, the imposition of budgetary constraints or a decline in government support or deferment of funding for programs in which we or our customers participate could result in contract terminations, delays in contract awards, reduction in contract scope, performance penalties or breaches of our contracts, the failure to exercise contract options, the cancellation of planned procurements and fewer new business opportunities, all of which could negatively impact our business, financial condition, results of operations and cash flows.
We are subject to the procurement policies and procedures set forth in the Federal Acquisition Regulation (“FAR”). FAR governs all aspects of government contracting, including contractor qualifications and acquisition procedures. The FAR provisions in U.S. government contracts must be complied with in order for the contract to be awarded and provides for audits and reviews of contract procurement, performance and administration. Failure to comply with the provisions of the FAR could result in contract termination.
In addition, contracts with any government, including the U.S. government, may be terminated or suspended by the government at any time and could result in significant liability obligations for us. We seek to have in place as standard provisions, termination for convenience language which reimburses us for reasonable costs incurred, subcontractor and employee termination and wind-down costs plus a reasonable amount of profit thereon. However, reparations for termination may fall short of the financial benefit associated with full completion and operation of a contract. In addition, we may not be able to procure new contracts to offset the revenue or backlog lost as a result of any termination of government contracts. The loss of one or more large contracts could have a material adverse impact on our business, financial condition, results of operations and cash flows. See also “Our business with various governmental entities is concentrated in a small number of primary contracts. The loss or reduction in scope of any one of our primary contracts would materially reduce our revenue” below.
Our revenue, results of operations and reputation may be negatively impacted if our programs fail to meet contractual requirements or our products contain defects or fail to operate in the expected manner.
We sell complex and technologically advanced systems, including satellites, products, hardware and software. Sophisticated software, including software developed by us, may contain defects that can unexpectedly interfere with the software’s intended operation. Defects may also occur in components and products that we manufacture or purchase from third parties. Most of the satellites and systems we have developed must function under demanding and unpredictable operating conditions and in harsh and potentially destructive environments. In addition, we may agree to the in-orbit delivery of a satellite, adding further risks to our ability to perform under a contract. Failure to achieve successful in-orbit delivery could result in significant penalties and other obligations on us.
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We employ sophisticated design and testing processes and practices, which include a range of stringent factory and on-site acceptance tests with criteria and requirements that are jointly developed with customers. Our systems may not be successfully implemented, pass required acceptance criteria, or operate or give the desired output, or we may not be able to detect and fix all defects in the satellites, products, hardware and software we sell or resolve any delays or availability issues in the launch services we procure. Failure to do so could result in increased costs, lost revenue and damage to our reputation and may adversely affect our ability to win new contract awards. We manufacture satellites with the intention of receiving full contractual value for builds; however, due to the inherent complexity, a number of adverse variables could negatively impact our ability to collect on the full amount of contractual consideration including circumstances where we may work in advance of customer funding. Such variables include, among others, schedule delays, including those caused by suppliers or major subcontractors, contractual disputes, failure to meet technological requirements and customer solvency concerns. These variables could lead to termination for convenience or default on our contracts which could have a material adverse effect on our financial results. Historically, we have experienced significant delays in the building of certain satellites. The schedule delays we from time to time experience in our satellite builds, some of which are significant, are due to a number of factors, inclusive of COVID-19 delays, subcontractor issues and technological requirements and we work closely with our customers to address these delays. We have, where appropriate, asserted force majeure provisions in our contracts but these can be subject to dispute.
Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, and security threats could result in a loss or degradation of service, unauthorized disclosure of data, or theft or tampering of intellectual property, any of which could materially adversely impact our business.
Our operations, products, solutions, analysis and intellectual property are inherently at risk of loss, unauthorized access, tampering by both insider threats and external bad actors, or disruption due to inadvertent misconfiguration of our computers and networks. In particular, our operations face various cyber and other security threats, including those caused by physical or electronic break-ins, computer viruses, malware, worms, attacks by hackers or foreign governments, disruptions from unauthorized access and tampering, including through social engineering such as phishing attacks, coordinated denial-of-service attacks and similar incidents. These cyber and other security threats could result in attempts to gain unauthorized access to sensitive information, intellectual property, mission operations and networks. Our systems (internal, customer and partner systems) and assets may also be subject to damage or interruption from natural and other disaster events or disruptions including tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, epidemics or pandemics, acts of domestic or foreign terrorism, workplace violence, power shortages and blackouts, aging infrastructures and telecommunications failures. In addition, threats to the safety of our directors and employees, threats to the security of our facilities, infrastructure and supply chain, or the release of misleading or deceptive information by criminal, terrorist, or other bad actors, could have a material adverse impact on our business.
Our products, solutions and analysis that we develop or deliver to our customers are also at risk of disruption, loss, or tampering. The integrity of the data (e.g., pixels), information, and analysis in our products and services is at risk of being manipulated either before or after delivery to a customer. Our products with derived information characteristics are also at risk of being incorrect due to errors of deceptive practices by others.
Our customers and partners (including our supply chain and joint ventures) face similar threats. Customer or partner proprietary, classified, or sensitive information stored on our networks is at risk. Assets and intellectual property and products in customer or partner environments are also inherently at risk. We also have risk where we have access to customer and partner networks and face risks of breach, disruption or loss as well. Our supply chain for products and services also is becoming more diverse and therefore the risk is growing.
We have implemented certain systems and processes to help thwart bad actors and protect our data and our systems and assets. The techniques used to gain unauthorized access are constantly evolving, however, and we may be unable to prevent or mitigate all unauthorized access, disruption, loss, or harm. Because of our highly desired intellectual property and our support of the U.S. government and other governments, we (and/or partners we use) may be a particularly attractive target for such attacks by advanced, persistent and highly organized adversaries, including nation states and
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hostile foreign governments, such as Russia and its allies. The risk of these attacks could be exacerbated by the conflict between Russian and Ukraine discussed above. From time to time, we have experienced attacks on our systems from bad actors that, to date, have not had a material adverse effect on our business. We cannot offer assurances, however, that future attacks will not materially adversely affect our business.
A security event or other significant disruption of our systems, assets, products or solutions could:
| • | disrupt the proper functioning of our networks, applications and systems and therefore our operations and/or those of certain of our customers, or partners; |
| • | result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, our or our customers’ proprietary, confidential, sensitive or otherwise valuable information, including trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; |
| • | destroy or degrade assets including space, ground and intellectual property assets; |
| • | manipulate or tamper with our products, solutions, analysis, or other systems delivered to our customers or partners; |
| • | compromise other sensitive government functions; and |
| • | damage our reputation with our customers (particularly agencies of various governments) and the public generally. |
A security event that involves classified or other sensitive government information or certain controlled technical information, could subject us to civil or criminal penalties and could result in loss of our secure facility clearance and other accreditations, loss of our government contracts, loss of access to classified information, loss of export privileges or debarment as a government contractor. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of web-based products and services we offer as well as increase the number of countries within which we do business.
Satellites are subject to construction and launch delays, launch failures, damage or destruction during launch, the occurrence of which can materially and adversely affect our operations.
Delays in the construction of satellites and the procurement of requisite components and launch vehicles, limited availability of appropriate launch windows, possible delays in obtaining regulatory approvals, satellite damage or destruction during launch, launch failures, or incorrect orbital placement could have a material adverse effect on our business, financial condition and results of operations. The loss of, or damage to, a satellite due to a launch failure could result in significant delays in anticipated revenue to be generated by that satellite. Any significant delay in the commencement of service of a satellite would delay or potentially permanently reduce the revenue anticipated to be generated by that satellite. In addition, if the loss of a satellite were to occur, such as with our loss of WorldView-4, we may not be able to accommodate affected customers with our other satellites or data from another source until a replacement satellite is available, and we may not have on hand, or be able to obtain in a timely manner, the necessary funds to cover the cost of any necessary satellite replacement. We may also dispute with customers the extent and consequences of any loss or delay. Any launch delay, launch failure, underperformance, delay or perceived delay could have a material adverse effect on our results of operations, business prospects and financial condition.
If our satellites fail to operate as intended, it could have a material adverse effect on our business, financial condition and results of operations.
The manufacturing, testing, launching and operation of satellites involves complex processes and technology. Our satellites employ advanced technologies and sensors that are exposed to severe environmental stresses in space that have and could affect the performance of our satellites. Hardware component problems in space could lead to deterioration in performance or loss of functionality of a satellite. In addition, human operators may execute improper implementation commands that may negatively impact a satellite’s performance. Exposure of our satellites to an unanticipated catastrophic event, such as a meteor shower or a collision with space debris, could reduce the performance of, or completely destroy, the affected satellite. In December 2018, our WorldView-4 satellite experienced a failure in its control moment gyros, preventing the satellite from collecting imagery.
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We cannot provide assurances that our satellites will continue to operate successfully in space throughout their expected operational lives. Even if a satellite is operated properly, technical flaws in that satellite’s sensors or other technical deficiencies or anomalies could significantly hinder its performance, which could materially affect our ability to collect imagery and market our products and services successfully. While some anomalies are covered by insurance policies, others are not or may not be covered, or may be subject to large deductibles.
If we suffer a partial or total loss of a deployed satellite, such as the failure of WorldView-4, we would need a significant amount of time and would incur substantial expense to replace that satellite. We may experience other problems with our satellites that may reduce their performance. During any period of time in which a satellite is not fully operational, we may lose most or all of the revenue that otherwise would have been derived from that satellite. Our inability to repair or replace a defective satellite or correct any other technical problem in a timely manner could result in a significant loss of revenue. If a satellite experiences a significant anomaly such that it becomes impaired or is no longer functional, it would significantly impact our business, prospects and profitability. Additionally, our review of satellite lives could extend or shorten the depreciable lives of our satellites, which would have an impact on the depreciation we recognize.
Loss of, or damage to, a satellite, adversarial actions impacting the function of our satellites and the failure to obtain data or alternate sources of data for our products may have an adverse impact on our results of operations and financial condition.
In the Earth Intelligence segment, we rely on data collected from a number of sources including data obtained from satellites. We may become unable or limited in our ability to collect such data. For example, satellites can temporarily go out of service and be recovered, or cease to function for reasons beyond our control, including the quality of design and construction, the supply of fuel, the expected gradual environmental degradation of solar panels, the durability of various satellite components and the orbits and space environments in which the satellites are placed and operated. Electrostatic storms, collisions with other objects or actions by malicious actors, including cyber related, could also damage the satellites. Our satellites may be subject to an increased risk of collision with other space objects due to growth in the number of commercial and government satellites. In addition, the functioning of our satellites could be adversely impacted by potential adversarial actions that may create more space debris or through anti-satellite devices, electromagnetic or radio interference with our satellites, cyber and other security attacks, and other similar types of attacks, any or all of which are potentially capable of destroying our satellites or ground systems architecture or rendering them permanently impaired or inoperable. The risk of these malicious and adversarial actions could be exacerbated by the conflict between Russia and Ukraine discussed above. Additionally, in certain instances, governments may discontinue for periods of time the access to or operation of a satellite for any particular area on the Earth and for various reasons may not permit transmission of certain data, whether from a satellite owned by the government or not.
We cannot offer assurances that each of our satellites will remain in operation. Our satellites have certain redundant systems which can fail partially or in their entirety and accordingly satellites may operate for extended periods without all redundant systems in operation, but with single points of failure. The failure of satellite components could cause damage to or loss of the use of a satellite before the end of its expected operational life. Certain of our satellites are nearing the end of their expected operational lives and we can offer no assurance that our satellites will maintain their prescribed orbits or remain operational and we may not have replacement satellites that are immediately available.
Interruption or failure of our infrastructure or national infrastructure could hurt our ability to effectively perform our daily operations and provide and produce our products and services, which could damage our reputation and harm our operating results.
We are vulnerable to natural disasters and significant disruptions including tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, epidemics or pandemics, acts of domestic or foreign terrorism, workplace violence, power shortages and blackouts, aging infrastructures and telecommunications failures. Furthermore, climate change has increased, and may continue to increase, the rate, size and scope of these natural disasters. In the event of such a natural disaster or other disruption, we could experience: disruptions to our operations or the operations of suppliers, subcontractors, distributors or customers; destruction of facilities; and/or loss of life.
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The availability of many of our products and services depends on the continuing operation of our satellite operations infrastructure, satellite manufacturing operations, information technology, communications systems and national infrastructure. Any downtime, damage to or failure of our systems could result in interruptions in our service, which could reduce our revenue and profits. Our systems are vulnerable to damage or interruption from floods, fires, power loss, aging infrastructure, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. We do not currently maintain a fully comprehensive back-up production facility from which we can continue to collect, process and deliver imagery in the event of the loss of our primary facility. In the event we are unable to collect, process and deliver imagery from our facility, our daily operations and operating results would be materially and adversely affected. In addition, our ground terminal centers are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, aging infrastructure, telecommunications failures and similar events. Our satellite manufacturing operations are located in California in proximity to the San Andreas fault line, one of the longest and most heavily populated earthquake-prone rifts in the world. Our satellite manufacturing facilities are also subject to risks associated with an aging infrastructure. An infrastructure failure could result in the destruction of satellites under construction or inventory, manufacturing delays or additional costs incurred. We do not maintain back-up manufacturing facilities or operations. The occurrence of any of the foregoing could result in lengthy interruptions in our services and/or damage our reputation, which could have a material adverse effect on our financial condition and results of operations.
Our business with various governmental entities is concentrated in a small number of primary contracts. The loss or reduction in scope of any one of our primary contracts would materially reduce our revenue.
Our business with various governmental entities is concentrated in a small number of primary contracts. We recognize significant revenue from U.S. government agencies and a significant amount of our U.S. government revenue is currently generated from a single contract, the EnhancedView Contract. The EnhancedView Contract is a service level agreement to provide image-tasking capacity on our satellites, and other imagery-derived products and services to the U.S. government. Our ability to service other customers could be negatively impacted if we are unable to maintain our current collection capacity. In addition, any inability on our part to meet the performance requirements of the EnhancedView Contract, or replacement contract, could result in a performance penalty or breach of that contract. A breach of our contract with government customers or reduction in service to our other customers could have a material adverse effect on our business, financial condition and results of operations. The U.S. government may also terminate or suspend our contracts, including the EnhancedView Contract, at any time with or without cause. In November 2021, the NRO announced the release of the EOCL RFP. The EOCL contract is expected to replace the existing EnhancedView Contract. In December 2021, we submitted our response to the EOCL RFP and we anticipate the NRO to award EOCL contracts prior to the expiration of the EnhancedView Contract, including remaining option years. Any changes in the size, scope or term of the EnhancedView Contract, or any award we receive for the EOCL contract, could impact our satellite replenishment strategy and our ability to repay or refinance our long-term debt. Although our contracts generally involve fixed annual minimum commitments, such commitments, along with all other contracts with the U.S. government, are subject to annual Congressional appropriations and the federal budget process, and as a result, the U.S. government may not continue to fund these contracts at current or anticipated levels. Similarly, our contracts in other jurisdictions are also subject to government procurement policies and procedures.
We face competition that may cause us to have to either reduce our prices for imagery and related services or to lose market share.
Our services compete with satellite and aerial imagery and related services offered by a range of private and government providers. Our current or future competitors may have superior technologies or greater financial, personnel and other resources than we have. The value of our imagery may also be diluted by Earth imagery that is available free of charge.
The U.S. government and foreign governments may develop, construct, launch and operate their own imagery satellites, which could reduce their need to rely on us and other commercial suppliers. In addition, such governments could sell or provide free of charge Earth imagery from their satellites and thereby compete with our imagery and related services. Also, governments may at times make our imagery freely available for humanitarian purposes, which could impair our
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revenue growth with non-governmental organizations. These governments could also subsidize the development, launch and operation of imagery satellites by our current or future competitors.
Our competitors or potential competitors could, in the future, offer satellite-based imagery or other services with more attractive features than our services. The emergence of new remote imaging technologies or the continued growth of low-cost imaging satellites, could negatively affect our marketing efforts. More importantly, if competitors develop and launch satellites or other imagery-content sources with more advanced capabilities and technologies than ours, or offer services at lower prices than ours, our business and results of operations could be harmed. Due to competitive pricing pressures, such as new product introductions by us or our competitors or other factors, the selling price of our services may further decrease. If we are unable to offset decreases in our average selling prices by increasing our sales volumes or by adjusting our service mix, our revenue and operating margins may decline and our financial position may be harmed.
We operate in highly competitive industries and in various jurisdictions across the world, which may cause us to have to reduce our prices.
We operate in highly competitive industries and many of our competitors are larger and have substantially greater resources than we have. Our primary competitors for satellite manufacturing contracts include the Boeing Company, Lockheed Martin Corporation and Northrop Grumman Corporation in the United States and Thales S.A. and Airbus Defence and Space, a subsidiary of the Airbus Group, in Europe. We may also face competition in the future from more emerging low-cost competitors, some of which could be subsidized or well-funded. Competition in our Earth Intelligence segment is highly diverse, and while our competitors offer different products, there is often competition for contracts that are part of governmental budgets. Our major existing and potential competitors for our Earth Intelligence segment include commercial satellite imagery companies, state-owned imagery providers, aerial imagery companies, free sources of imagery and unmanned aerial vehicles. Our Earth Intelligence segment faces competition from companies that provide geospatial analytic information and services to the U.S. government, including defense prime contractors such as L3Harris and Booz Allen Hamilton.
In addition, some of our foreign competitors currently benefit from, and others may benefit in the future from, protective measures by their home countries where governments are providing financial support, including significant investments in the development of new technologies. Government support of this nature greatly reduces the commercial risks associated with satellite development activities for these competitors. This market environment may result in increased pressures on our pricing and other competitive factors.
We are a party to legal proceedings, investigations and other claims or disputes, which are costly to defend and, if determined adversely to us, could require us to pay fines or damages, undertake remedial measures or prevent us from taking certain actions, any of which could adversely affect our business.
We are, and in the future may be, a party to legal proceedings, investigations and other claims or disputes, which may relate to subjects including commercial transactions, intellectual property, securities, employee relations, or compliance with applicable laws and regulations.
For instance, in January 2019, a Maxar stockholder filed a putative class action lawsuit in the Federal District Court of Colorado, naming Maxar and members of management as defendants alleging, among other things, that our public disclosures were false or misleading in violation of the Securities Exchange Act of 1934 and seeking monetary damages. An amended consolidated complaint was filed in that case in October 2019. On September 11, 2020, the court granted in part, and denied in part, Maxar’s motion to dismiss. On July 16, 2021, the Federal District Court of Colorado certified a class consisting of investors who purchased or acquired Maxar stock between May 9, 2018 and October 30, 2018, inclusive. Also, in January 2019, a Maxar stockholder resident in Canada issued a putative class action lawsuit in the Ontario Superior Court of Justice against Maxar and members of management claiming misrepresentations in our public disclosures and seeking monetary damages under Canadian securities laws. In November 2019, a second putative class action lawsuit was issued by the same Maxar stockholder resident in Canada, adding a second representative plaintiff and three additional defendants, including Maxar’s auditor KPMG LLP. The action against KPMG LLP was later discontinued. In February 2020, the January 2019 Canadian lawsuit was discontinued. And, in March 2022, the
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November 2019 Canadian lawsuit was dismissed against all of the Maxar defendants. In October 2019, a Maxar stockholder filed a putative class action lawsuit in California state court, naming Maxar and certain members of management and the board of directors as defendants. The lawsuit is based upon many of the same underlying factual allegations as the federal class action but asserts claims under the Securities Act of 1933. An amended complaint was filed in April 2020. In November 2020, defendants filed a demurrer to the operative complaint, and in January 2021, the court largely overruled the demurrer. On August 20, 2021, the court certified a class consisting of investors who acquired Maxar stock in exchange for DigitalGlobe stock pursuant to the Company’s June 2, 2017 Registration Statement and Prospectus issued in connection with Maxar’s October 2017 acquisition of DigitalGlobe. In November 2019, a purported derivative complaint was filed against Maxar, certain current and former members of management and the board of directors in the Federal District Court of Delaware, also based on the same factual allegations as the federal putative class action. On September 18, 2020, a second purported derivative case was filed in the Federal District Court of Delaware, based on the same allegations as the earlier derivative case. The two derivative cases pending in the Federal District Court of Delaware have been consolidated and are stayed. On September 15, 2021, a third purported derivative complaint was filed against Maxar, certain current and former members of management and the board of directors in the Court of Chancery of the State of Delaware, also based on the same factual allegations as the federal class action. In November 2021, the parties stipulated to a stay of this action.
These legal proceedings could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition. These and other legal proceedings and investigations are inherently uncertain and we cannot predict their duration, scope, outcome or consequences. There can be no assurance that these or any such matters that have been or may in the future be brought against us will be resolved favorably. In connection with any government investigations, in the event the government takes action against us or the parties resolve or settle the matter, we may be required to pay substantial fines or civil and criminal penalties and/or be subject to equitable remedies, including disgorgement or injunctive relief. Other legal or regulatory proceedings, including lawsuits filed by private litigants, may also follow as a consequence. These matters are likely to be expensive and time-consuming to defend, settle and/or resolve and may require us to implement certain remedial measures that could prove costly or disruptive to our business and operations. They may also cause damage to our business reputation. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows.
Acquisitions or divestitures could result in adverse impacts on our operations.
In order to grow our business, we may acquire additional assets or companies, including for example, our recent Vricon Acquisition completed on July 1, 2020. In connection with the Vricon Acquisition or any future acquisitions, there can be no assurance that we will be able to identify, acquire, or obtain the required regulatory approvals, or profitably manage the additional businesses or successfully integrate any acquired businesses, products or technologies without substantial expenses, delays or other operational, regulatory, or financial problems. In addition, any acquired businesses, products or technologies may not achieve anticipated revenues and income growth.
Further, acquisitions may involve a number of additional risks, including diversion of management’s attention, failure to retain key personnel, or failure to attract the necessary talent to manage organizational growth. We may become responsible for unexpected liabilities that were not discovered or disclosed in the course of due diligence in connection with historical acquisitions and any future acquisitions. Additionally, acquisitions with international operations such as the Vricon Acquisition with operations in Sweden, expose us to greater international business risks. If we do not realize the expected benefits or synergies of an acquisition, such as revenue gains or cost reductions, there could be a material adverse effect on our business, results of operations and financial condition.
We may also seek to divest portions of our businesses which may no longer be aligned with our strategic initiatives and long-term objectives. Various factors could materially affect our ability to successfully do so, including the availability of buyers willing to purchase the assets on terms acceptable to us, difficulties in the separation of operations, the diversion of management's attention from other business concerns, the disruption of our business, the potential loss of key employees and the retention of uncertain contingent liabilities related to the divested business. We cannot assure that we will be successful in managing these or any other significant risks that we encounter in divesting a business or
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product line, and any divestiture we undertake could materially and adversely affect our business, financial condition, results of operations and cash flows.
Disruptions in U.S. government operations and funding could have a material adverse effect on our revenues, earnings and cash flows and otherwise adversely affect our financial condition.
Any disruptions in federal government operations could have a material adverse effect on our revenues, earnings and cash flows. A prolonged failure to maintain significant U.S. government operations, particularly those pertaining to our business, could have a material adverse effect on our revenues, earnings and cash flows. Continued uncertainty related to recent and future U.S. federal government shutdowns, the U.S. budget and/or failure of the U.S. government to enact annual appropriations, such as long-term funding under a continuing resolution, could have a material adverse effect on our revenues, earnings and cash flows. Additionally, disruptions in federal government operations may negatively impact regulatory approvals and guidance that are important to our operations.
Changes in U.S. government policy regarding use of commercial data or space infrastructure providers, or material delay or cancellation of certain U.S. government programs, may have a material adverse effect on our revenue and our ability to achieve our growth objectives.
Current U.S. government policy encourages the U.S. government’s use of commercial data and Space Infrastructure providers to support U.S. national security objectives. Under the EnhancedView Contract, our contractual counterparty acquires imagery and imagery-derived products on behalf of our customers within the U.S. government. We are considered by the U.S. government to be a commercial data provider. U.S. government policy is subject to change and any change in policy away from supporting the use of commercial data and Space Infrastructure providers to meet U.S. government imagery and Space Infrastructure needs, or any material delay or cancellation of planned U.S. government programs, including the EnhancedView Contract, could materially adversely affect our revenue and our ability to achieve our growth objectives.
Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and financial condition.
Our results of operations are materially affected by economic and political conditions in the United States and internationally, including inflation, deflation, interest rates, availability of capital, energy and commodity prices, trade laws, the effects of governmental initiatives to manage economic conditions, geopolitical tensions and military conflicts, such as the current situation in Ukraine. Current or potential customers may delay or decrease spending on our products and services as their business and/or budgets are impacted by economic conditions. The inability of current and potential customers to pay us for our products and services may adversely affect our earnings and cash flows.
Our business involves significant risks and uncertainties that may not be covered by insurance.
A significant portion of our business relates to designing, developing and manufacturing advanced space technology products and systems. New technologies may be untested or unproven. Failure of some of these products and services could result in extensive property damage. Accordingly, we may incur liabilities that are unique to our products and services.
We endeavor to obtain insurance coverage from established insurance carriers to cover these risks and liabilities. However, the amount of insurance coverage that we maintain may not be adequate to cover all claims or liabilities. Existing coverage may be canceled while we remain exposed to the risk and it is not possible to obtain insurance to protect against all operational risks, natural hazards and liabilities.
We have historically insured satellites in our constellation to the extent that insurance was available on acceptable premiums and other terms. The insurance proceeds received in connection with a partial or total loss of the functional capacity of any of our satellites would not be sufficient to cover the replacement cost, if we choose to do so, of an equivalent high-resolution satellite. In addition, this insurance will not protect us against all losses to our satellites due to specified exclusions, deductibles and material change limitations customary in the industry. Exclusions generally
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include, for example, acts of war or other hostile actions for which exclusions are customary in the industry at the time the policy is written. In the event we experience potential adversarial actions that destroy or impair the operability or functioning of any of our satellites, whether through actions creating more space debris or through anti-satellite devices, electromagnetic or radio interference with our satellites, cyber and other security attacks affecting our satellites or ground systems architecture, or other similar types of attacks, there can be no assurance that any insurance proceeds will be available for any partial or total loss of a satellite or a satellite’s performance. In addition, it may be difficult or impossible to insure against certain risks, including a partial deterioration in satellite performance and satellite re-entry.
The price and availability of insurance fluctuate significantly. Although we have historically been able to obtain insurance coverage for in-orbit satellites, we cannot guarantee that we will be able to do so in the future. We intend to maintain insurance for our operating satellites, but any determination we make as to whether to obtain insurance coverage will depend on a variety of factors, including the availability of insurance in the market, the cost of available insurance and the redundancy of our operating satellites. Insurance market conditions or factors outside our control at the time we are in the market for the required insurance, such as failure of a satellite using similar components, could cause premiums to be significantly higher than current estimates and could reduce amounts of available coverage. The cost of our insurance has been increasing and may continue to increase. Higher premiums on insurance policies will reduce our operating income by the amount of such increased premiums. If the terms of in-orbit insurance policies become less favorable than those currently available, there may be limits on the amount of coverage that we can obtain, or we may not be able to obtain insurance at all.
In addition, even though we carry business interruption insurance policies, any business interruption losses could exceed the coverage available or be excluded from our insurance policies, which include customary exclusions such as acts of war, among others. Any disruption of our ability to operate our business could result in a material decrease in our revenues or significant additional costs to replace, repair or insure our assets, which could have a material adverse impact on our financial condition and results of operations.
We often rely on a single vendor or a limited number of vendors to provide certain key products or services and the inability of these key vendors to meet our needs could have a material adverse effect on our business.
Historically, we have contracted with a single vendor or a limited number of vendors to provide certain key products or services, such as construction of satellites and launch vehicles and management of certain remote ground terminals and direct access facilities. In addition, our manufacturing operations depend on specific technologies and companies for which there may be a limited number of vendors. We are increasingly dependent upon subcontractors and suppliers which subjects our business and results of operations to risks of supplier interruption. If these vendors are unable to meet our needs because they fail to perform adequately, are unable to match new technological requirements or opportunities, or are unable to dedicate engineering and other resources necessary to provide the services contracted for, our business, financial position and results of operations may be adversely affected. While alternative sources for these products, services and technologies may exist, we may not be able to develop these alternative sources quickly and cost-effectively, which could materially impair our ability to operate our business. Furthermore, these vendors may request changes in pricing, payment terms or other contractual obligations, which could cause us to make substantial additional investments.
Additionally, some of our suppliers’ employees are represented by labor unions. Labor union actions at suppliers can also affect us. Work stoppages and instability in our relationships with labor unions could delay the production and/or development of our products, which could strain relationships with customers, cause a loss of revenues and adversely affect our operations.
Disruptions in the supply of key raw materials or components and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact us.
Many raw materials, major components and product equipment items, particularly in our Space Infrastructure segment, are procured or subcontracted on a single or sole-source basis. Although we maintain a qualification and performance surveillance process and we believe that near-term sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future. Supply shortages
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related to electronic chips is an example of some of the challenges we may face with materials. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers’ inability to scale production and adjust delivery of long-lead time products during times of volatile demand. Our inability to fill our supply needs would jeopardize our ability to fulfill obligations under commercial and government contracts, which could, in turn, result in reduced sales and profits, contract penalties or terminations and damage to customer relationships and could have a material adverse effect on our operating results, financial condition, or cash flows.
Key raw materials used in our operations include metals such as aluminum and titanium, which are usually procured by our suppliers who manufacture parts in accordance with our drawings. We also purchase materials such as chemicals; composites; electronic, electro-mechanical and mechanical components; subassemblies; and subsystems that are integrated with the manufactured parts for final assembly into finished products and systems. We are impacted by increases in the prices of raw materials used in production on fixed-price business.
We monitor sources of supply to attempt to assure that adequate raw materials and other supplies needed in manufacturing processes are available.
Although we have not experienced significant difficulty in our ability to procure raw materials, components, sub-assemblies and other supplies required in our manufacturing processes, prolonged disruptions in the supply of any of our key raw materials or components, difficulty completing qualification of new sources of supply, implementing use of replacement materials, components or new sources of supply, or a continuing increase in the prices of raw materials, energy or components could have a material adverse effect on our operating results, financial condition, or cash flows.
We are dependent on resellers of our services for a portion of our revenue. If these resellers fail to market or sell our services successfully, our business could be harmed.
The Earth Intelligence segment has historically generated a portion of its revenue from foreign and domestic resellers. In the Earth Intelligence segment, we rely on foreign resellers and partners to market and sell the majority of our services in the international market. Our foreign resellers and partners may not have the skill or experience to develop regional commercial markets for our services, or may have competing interests that negatively affect their sales of our services. If we fail to enter into reseller agreements on a timely basis or if our resellers and partners fail to market and sell our services successfully, these failures could negatively impact our business, financial condition and results of operations.
We may not be successful in developing new technology and the technology we are successful in developing may not meet the needs of our customers or potential new customers.
The markets in which we operate are characterized by changing technology and evolving industry standards. Despite years of experience in meeting customer systems requirements with the latest in technological solutions, we may not be successful in identifying, developing and marketing products or systems that respond to rapid technological change, evolving technical standards and systems developed by others. Our competitors may develop technology that better meets the needs of our customers. If we do not continue to develop, manufacture and market innovative technologies or applications that meet customers’ requirements, sales may suffer and our business may not continue to grow in line with historical rates or at all. If we are unable to achieve sustained growth, we may be unable to execute our business strategy, expand our business or fund other liquidity needs and our business prospects, financial condition and results of operations could be materially and adversely affected.
Our technology may violate the proprietary rights of third parties and our intellectual property may be misappropriated or infringed upon by third parties, each of which could have a negative impact on our operations.
If any of our technology violates proprietary rights, including copyrights and patents, third parties may assert infringement claims against us. Certain software modules and other intellectual property used by us or in our satellites, systems and products make use of or incorporate licensed software components and other licensed technology. These components are developed by third parties over whom we have no control. Any claims brought against us may result in limitations on our ability to use the intellectual property subject to these claims. We may be required to redesign our
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satellites, systems or products or to obtain licenses from third parties to continue offering our satellites, systems or products without substantially re-engineering such products or systems.
Our intellectual property rights may be invalidated, circumvented, challenged, infringed or required to be licensed to others. An infringement or misappropriation could harm any competitive advantage we currently derive or may derive from our proprietary rights.
To protect our proprietary rights, we rely on a combination of patent protections, copyrights, trade secrets, trademark laws, confidentiality agreements with employees and third parties and protective contractual provisions such as those contained in license agreements with consultants, subcontractors, vendors and customers. Although we apply rigorous standards, documents and processes to protect our intellectual property, there is no absolute assurance that the steps taken to protect our technology will prevent misappropriation or infringement. Litigation may be necessary to enforce or protect our intellectual property rights, our trade secrets or determine the validity and scope of the proprietary rights of others. Such litigation may be time-consuming and expensive to prosecute or defend and could result in the diversion of our time and resources. In addition, competitors may design around our technology or develop competing technologies.
The acceptance of our imagery services may not continue and our historic growth rates should not be relied upon as an indicator of future growth.
We cannot accurately predict the extent of the market acceptance of our services or whether there will continue to be a market for our services on terms we find acceptable. Market acceptance of our commercial high-resolution Earth imagery and related services depends on a number of factors, including the quality, scope, timeliness, sophistication, price and the availability of substitute services. Changes in the market acceptance of our offerings, or other services that utilize our imagery, failure of new markets to develop, the impact of competitive conditions, or our need to make significant investments to achieve acceptance by the market would negatively affect our business, financial condition and results of operations. We may not continue to grow in line with historical rates or at all. If we are unable to achieve sustained growth, we may be unable to execute our business strategy, expand our business or fund other liquidity needs and our business prospects, financial condition and results of operations could be materially and adversely affected.
We are dependent on our ability to attract, train and retain employees. Our inability to do so, or the loss of key personnel, would cause serious harm to our business.
Our success is largely dependent on the abilities and experience of our executive officers and other key personnel to oversee all aspects of our operations and to deliver on our corporate strategies. Competition for highly skilled management, technical, research and development and other personnel is intense in our industry. In order to maintain our ability to compete, we must continuously retain the services of a core group of specialists in a wide variety of disciplines. To the extent that the demand for qualified personnel exceeds supply, we could experience higher labor, recruiting or training costs in order to attract and retain such employees, or could experience difficulties in performing under contracts if our need for such employees is unmet. We may not be able to retain our current executive officers or key personnel or attract and retain additional executive officers or key personnel as needed to deliver on our corporate strategy. Furthermore, the recent volatility in our stock price may undermine the use of our equity as a retention tool and may make it more difficult to retain key personnel.
Changes in our accounting estimates and assumptions could negatively affect our financial position and results of operations.
We prepare our consolidated financial statements in accordance with U.S. GAAP. These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements. We are also required to make certain judgments that affect the reported amounts of revenues and expenses during each reporting period. We periodically evaluate our estimates and assumptions including, but not limited to, those relating to our critical accounting policies of revenue recognition, including our long-term contracts accounted for utilizing the cost-to-cost method and income taxes in addition to other estimates related to restructuring costs, recoverability of assets including customer receivables, valuation of goodwill and intangibles, contingencies and stock-based compensation. We base our estimates on historical
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experience and various assumptions that we believe to be reasonable based on specific circumstances. These assumptions and estimates involve the exercise of judgment and discretion, which may evolve over time in light of operational experience, regulatory direction, developments in accounting principles and other factors. Actual results could differ from these estimates as a result of changes in circumstances, assumptions, policies or developments in the business, which could materially affect our consolidated financial statements.
We may be required to recognize impairment charges.
Long-lived assets, including goodwill and intangible assets, are tested annually for impairment in the fourth quarter or whenever there is an indication that an asset may be impaired. In the past, we have recognized significant impairment losses related to goodwill, intangible assets, property, plant and equipment, inventory and orbital receivables.
Disruptions to our business, unexpected significant declines in our operating results, adverse technological events or changes in the regulatory markets in which we operate, and significant declines in our stock price have resulted and may result in further impairment charges to our tangible and intangible assets. Any future impairment charges could substantially affect our reported results.
Pension and other postretirement benefit obligations may materially impact our earnings, stockholders’ equity and cash flows from operations, and could have significant adverse impacts in future periods.
We maintain defined benefit pension and other postretirement benefits plans for some of our employees. Potential pension contributions include discretionary contributions to improve the plans’ funded status. The extent of future contributions depends heavily on market factors such as the discount rate and the actual return on plan assets. We estimate future contributions to these plans using assumptions with respect to these and other items. Changes to those assumptions could have a significant effect on future contributions, annual pension and other postretirement costs, the value of plan assets and our benefit obligations.
Significant changes in actual return on pension assets, discount rates and other factors could adversely affect our results of operations and require cash pension contributions in future periods. Changes in discount rates and actual asset returns different than our expected asset returns can result in significant non-cash actuarial gains or losses which we record in the fourth quarter of each fiscal year and, if applicable, in any quarter in which an interim re-measurement is triggered. With regard to cash pension contributions, funding requirements for our pension plans are largely dependent upon interest rates, actual investment returns on pension assets and the impact of legislative or regulatory changes related to pension funding obligations.
We also provide other postretirement benefits to certain of our employees, consisting principally of health care, dental and life insurance for eligible retirees and qualifying dependents. Our estimates of future costs associated with these benefits are also subject to assumptions, including estimates of the level of medical cost increases and discount rates.
Fluctuations in foreign exchange rates could have a negative impact on our business.
Our revenues, expenses, assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars for the purposes of compiling our Consolidated Financial Statements. We have in the past and may in the future, use hedging strategies to manage and minimize the impact of exchange rate fluctuations on our cash flow and economic profits. There are complexities inherent in determining whether and when foreign exchange exposures will materialize, in particular given the possibility of unpredictable revenue variations arising from schedule delays and contract postponements. Furthermore, if we use hedging strategies in the future, we could be exposed to the risk of non-performance of our hedging counterparties. We may also have difficulty with our hedging strategy in the future depending on the willingness of hedging counterparties to extend credit. Accordingly, no assurances may be given that our exchange rate hedging strategy would protect us from significant changes or fluctuations in revenues and expenses denominated in U.S. dollars.
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Our restructuring activities and cost saving initiatives may not achieve the results we anticipate.
We have previously and may in the future undertake cost reduction initiatives and organizational restructurings to improve operating efficiencies, optimize our asset base and generate cost savings. We cannot be certain that these initiatives have been or will be completed as planned or without business interruption, that these initiatives will not generate additional costs, such as severance or other charges, or that the estimated operating efficiencies or cost savings from such activities will be fully realized or maintained over time.
Risks Related to Our Indebtedness and Our Common Stock
Our business is capital intensive, and we may not be able to raise adequate capital to finance our business strategies, including funding future satellites, or to refinance or renew our debt financing arrangements, or we may be able to do so only on terms that significantly restrict our ability to operate our business.
The implementation of our business strategies, such as expanding our satellite constellation and our products and services offerings, requires a substantial outlay of capital. As we pursue our business strategies and seek to respond to opportunities and trends in our industry, our actual capital expenditures may differ from our expected capital expenditures, and there can be no assurance that we will be able to satisfy our capital requirements in the future. We are highly leveraged, but we currently expect that our ongoing liquidity requirements for sustaining our operations will be satisfied by cash on hand and cash generated from our existing and future operations supplemented, where necessary, by available credit. However, we cannot provide assurances that our businesses will generate sufficient cash flow from operations in the future or that additional capital will be available in amounts sufficient to enable us to execute our business strategies or refinance our indebtedness. Our ability to refinance or increase our debt financing and/or renew existing credit facilities may be limited by our existing financial and non-financial covenants, credit objectives, or the conditions of the debt capital market generally. Furthermore, our current financing arrangements contain certain restrictive financial and non-financial covenants (e.g., the achievement or maintenance of stated financial ratios) that may impact our access to those facilities and significantly limit future operating and financial flexibility.
Finally, the recent Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to significant volatility and instability and lack of liquidity in capital markets, potentially making it more difficult for us to raise adequate capital to finance our business strategies, refinance or increase our debt financing, and/or renew existing credit facilities. See also “Our business, financial condition and results of operations could be materially adversely affected by impacts resulting from the conflict in Ukraine or any other geopolitical tensions” above.
Our ability to obtain additional debt or equity financing or government grants to finance operating working capital requirements and growth initiatives may be limited or difficult to obtain, which could adversely affect our operations and financial condition.
We need capital to finance operating working capital requirements and growth initiatives and to pay our outstanding debt obligations as they become due for payment. If the cash generated from our businesses, together with the credit available under existing bank facilities, is not sufficient to fund future capital requirements, we will require additional debt or equity financing. Our ability to access capital markets on terms that are acceptable to us will be dependent on prevailing market conditions, as well as our future financial condition. Further, our ability to refinance or increase our debt financing and/or renew existing facilities may be limited by our existing leverage, financial and non-financial covenants, credit objectives and debt capital market conditions.
We have in the past, and may continue in the future to, receive government grants for research and development activities and other business initiatives. Any agreement or grant of this nature with government may be accompanied by contractual obligations applicable to us, which may result in the grant money becoming repayable if certain requirements are not met. A failure to meet contractual obligations under such agreements and grants and a consequent requirement to repay money received could negatively impact our results of operations and financial condition.
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Our indebtedness and other contractual obligations could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and our ability to pay our debts and could divert our cash flow from operations for debt payments.
We have a significant amount of indebtedness and leverage. Our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal of, interest on, or other amounts due with respect to our indebtedness. Our long-term debt under our Syndicated Credit Facility bears interest at floating rates related to U.S. LIBOR (for U.S. dollar borrowings), plus a margin. As a result, our interest payment obligations on such indebtedness will increase if such interest rates increase to the extent these changes are not mitigated by our interest rate swaps. Our leverage and debt service obligations could adversely impact our business, including by:
| • | impairing our ability to meet one or more of the financial ratios contained in our credit facilities or to generate cash sufficient to pay interest or principal, including periodic principal payments; |
| • | increasing our vulnerability to general adverse economic and industry conditions; |
| • | limiting our ability to obtain additional debt or equity financing on favorable terms, if at all; |
| • | requiring the dedication of a portion of our cash flow from operations to service our debt, thereby reducing the amount of our cash flow available for other purposes, including capital expenditures, dividends to stockholders or to pursue future business opportunities; |
| • | requiring us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations; |
| • | limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we compete; and |
| • | placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources. |
Any of the forgoing factors could have negative consequences on our financial condition and results of operation.
Our current financing arrangements contain certain restrictive covenants that impact our future operating and financial flexibility.
Our current financing arrangements contain certain restrictive covenants that may impact our future operating and financial flexibility. Our debt funding is provided under our financing agreements, which contains a series of positive and negative covenants with which we must comply, including financial and non-financial covenants. If we fail to comply with any covenants and are unable to obtain a waiver or other cure thereof, the lenders under the Syndicated Credit Facility or the holders of the 2023 Notes or 2027 Notes may be able to take certain actions with respect to the amounts owing under such agreements or notes, as applicable, including requiring early payment thereof. Any such actions could have a material adverse effect on our financial condition. These covenants could also have the effect of limiting our flexibility in planning for or reacting to changes in our business and the markets in which we compete.
Our actual operating results may differ significantly from our guidance.
From time to time, we release guidance regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which consists of forward-looking statements, is prepared by our management and is qualified by, and subject to, the assumptions and the other information contained or referred to in the release. Our guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither any independent registered public accounting firm nor any other independent expert or outside party compiles, examines or reviews the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto.
Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity
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analysis as variables are changed but are not intended to represent that actual results could not fall outside of these ranges. The principal reason that we release this data is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such persons.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results, particularly any guidance relating to the results of operations of acquired businesses or companies as our management will be less familiar with their business, procedures and operations. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results will vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data will diminish the farther in the future that the data are forecast. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this Quarterly Report on Form 10-Q could result in the actual operating results being different than the guidance, and such differences may be adverse and material.
We could be adversely impacted by actions of activist stockholders, and such activism could impact the value of our securities.
We value constructive input from our stockholders and the investment community. However, there is no assurance that the actions taken by our Board of Directors and management in seeking to maintain constructive engagement with our stockholders will be successful. Certain of our stockholders have expressed views with respect to the operation of our business, our business strategy, corporate governance considerations or other matters. Responding to actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees. The perceived uncertainties as to our future direction due to activist actions could affect the market price of our stock, result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel, board members and business partners.
The price of our common stock has been volatile and may fluctuate substantially.
Our common stock is listed on the NYSE and the TSX and the price for our common stock has historically been volatile. The market price of our common stock may continue to be highly volatile and may fluctuate substantially due to the following factors (in addition to the other risk factors described in this section):
| • | general economic conditions; |
| • | fluctuations in our operating results; |
| • | variance in our financial performance from the expectations of equity and/or debt research analysts; |
| • | techniques employed by short sellers to drive down the market price of our common stock; |
| • | conditions and trends in the markets we serve; |
| • | additions of or changes to key employees; |
| • | changes in market valuations or earnings of our competitors; |
| • | trading volumes of our common stock; |
| • | future sales of our equity securities and/or future issuances of indebtedness; |
| • | changes in the estimation of the future sizes and growth rates of our markets; and |
| • | legislation or regulatory policies, practices or actions. |
In addition, the stock markets in general have experienced extreme price and volume fluctuations that have at times been unrelated or disproportionate to the operating performance of the particular companies affected. Technical factors in the public trading market for our common stock may produce price movements that may or may not comport with macro, industry or company-specific fundamentals, including, without limitation, the sentiment of retail investors (including as may be expressed on financial trading and other social media sites), the amount and status of short interest in our common stock, access to margin debt and trading in options and other derivatives on our common stock. These market
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and industry factors may materially harm the market price of our common stock irrespective of our operating performance.
A significant or prolonged decrease in our market capitalization, including a decline in stock price, or a negative long-term performance outlook, could result in an impairment of our assets which results when the carrying value of our assets exceed their fair value.
In the past several years, our securities have been the subject of short selling. Reports and information have been published about us that we believe are mischaracterized or incorrect, and which have in the past been followed by a decline in our stock price. If there are short seller allegations in the future, we may have to expend a significant amount of resources to investigate such allegations and/or defend ourselves.
In addition, in the first quarter of 2019, we became subject to certain securities class action litigation as a result of volatility in the price of our common stock, which could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition. See Part II, Item 1, “Legal Proceedings” in this Quarterly Report on Form 10-Q for additional information.
Uncertainty with respect to the cessation of the London Interbank Offered Rate (“LIBOR”) could impact our cost of borrowing and interest rate risk.
We have outstanding debt and interest rate swaps with variable interest rates using LIBOR as a factor to determine the interest rates. In July 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. In addition, on March 5, 2021, the ICE Benchmark Administration confirmed its intention to cease publication of (i) one week and two month USD LIBOR settings after December 31, 2021 and (ii) the remaining USD LIBOR settings after June 30, 2023. It is unclear if at that time whether or not LIBOR will cease. The cessation of the one week and two month USD LIBOR settings at the end of 2021 has not affected our debt and interest rate swaps, and USD LIBOR rates for the remaining settings are still currently available. Recent proposals for alternative overnight and term rates may result in the establishment of new methods of calculating one or more alternative benchmark rates.
In the United States, the Alternative Reference Rate Committee ("ARRC"), a group of diverse private-market participants assembled by the Federal Reserve Board and the Federal Reserve Bank of New York, has begun publishing a Secured Overnight Financing Rate (“SOFR”), and has proposed a paced market transition to SOFR from LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities in the repurchase agreement market. Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in comparable benchmark or market rates, and SOFR over time may bear little or no relation to the historical actual or historical indicative data. At this time, it is not possible to predict how markets will respond to SOFR or the effect of any changes to LIBOR or the discontinuation of LIBOR.
The cessation of LIBOR, including the exact timing of its cessation, as well as its transition to another benchmark rate, or rates, could have adverse impacts on our outstanding interest rate swaps maturing in 2022 and 2023 and our Syndicated Credit Facility maturing in 2023 and 2024. This change may necessitate updates to our swaps and Syndicated Credit Facility, and ultimately, adversely affect our financial condition and results of operations. For example, if future rates based upon a successor reference rate such as SOFR (or a new method of calculating LIBOR) are higher or more volatile than LIBOR rates as currently determined or if our lenders have increased costs due to changes in LIBOR, we may experience increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows.
If securities or industry analysts discontinue publishing research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our stock price would
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likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
Our amended and restated certificate of incorporation and our amended and restated bylaws may impede or discourage a takeover, changes in management or changes in the Board of Directors, which could reduce the market price of our common stock.
Certain provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may delay or prevent a third-party from acquiring control of us, even if a change in control would be beneficial to our existing stockholders. These provisions include:
| • | no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
| • | the exclusive right of the Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board of Directors; |
| • | the ability of the Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
| • | a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders; |
| • | the requirement that a special meeting of stockholders may be called only by the chairman of the Board of Directors or two or more stockholders who hold, in the aggregate, at least ten percent (10%) of the voting power of our outstanding shares, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; |
| • | a supermajority vote of our stockholders to amend our amended and restated bylaws and certain provisions of our amended and restated certificate of incorporation; and |
| • | advance notice procedures that stockholders must comply with in order to nominate candidates to the Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our business. |
These provisions could impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our common stock, which, under certain circumstances, could reduce the market price of our common stock.
In addition, our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware (the “Delaware Exclusive Forum Provision”). Our amended and restated bylaws further provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action under the Securities Act of 1933, as amended (the “Federal Forum Provision”).
The Delaware Exclusive Forum Provision is intended to apply to claims arising under Delaware state law and would not apply to claims brought pursuant to the Exchange Act or the Securities Act or any other claim for which the federal courts have exclusive jurisdiction. In addition, the Federal Forum Provision is intended to apply to claims arising under the Securities Act and would not apply to claims brought pursuant to the Exchange Act. These exclusive forum provisions will not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder and, accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal courts.
These exclusive forum provisions may limit a stockholders’ ability to bring a claim in a judicial forum of its choosing for disputes with the company or its directors, officers or other employees, which may discourage lawsuits against the Company and its directors, officers and other employees. In addition, stockholders who do bring a claim in the Court of
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Chancery of the State of Delaware pursuant to the Delaware Exclusive Forum Provision could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The court in the designated forum under our exclusive forum provisions may also reach different judgments on results than would other courts, including courts where a stockholder would otherwise choose to bring the action, and such judgments or results may be more favorable to the Company than to our stockholders. Further, the enforceability of similar exclusive forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and it is possible that a court could find any of our exclusive forum provisions to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find all or any part of our exclusive forum provisions to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions.
There can be no assurance that we will continue to pay dividends on our common stock.
Our Board of Directors significantly reduced our dividends in the first quarter of 2019. Although our Board of Directors has historically declared a quarterly cash dividend which we have paid, the payment of future dividends is subject to a number of risks and uncertainties, and we may not pay quarterly dividends in the same amounts or at all in the future. The declaration, amount and timing of cash dividends are subject to capital availability and determinations by our Board of Directors that such dividends are in the best interest of our stockholders and are in compliance with all respective laws and applicable agreements. Our ability to pay dividends will depend upon, among other factors, our cash balances and potential future capital requirements for strategic transactions, including acquisitions, debt service requirements, results of operations, financial condition and other factors that our Board of Directors may deem relevant. The elimination of our dividend payments and/or our dividend program could have a negative effect on our stock price.
Risks Related to Legal and Regulatory Matters
Our operations in the U.S. government market are subject to significant regulatory risk.
Our operations in the U.S. government market are subject to significant government regulation. A failure by us to maintain the relevant clearances and approvals could limit our ability to operate in the U.S. market. Further, there can be no assurance that we will continue to be awarded contracts by the U.S. government. In addition, a failure by us to keep current and compliant with relevant U.S. regulations could result in fines, penalties, repayments, or suspension or debarment from U.S. government contracting or subcontracting for a period of time and could have an adverse effect on our standing and eligibility for future U.S. government contracts.
Failure to comply with the requirements of the National Industrial Security Program Operating Manual could result in interruption, delay or suspension of our ability to provide our products and services, and could result in loss of current and future business with the U.S. government.
We and our subsidiaries are parties to certain contracts with various departments and agencies of the U.S. government, including the U.S. Department of Defense, which require that certain of our legal entities be issued facility security clearances under the National Industrial Security Program. The National Industrial Security Program requires that a corporation maintaining a facility security clearance be effectively insulated from foreign ownership, control or influence (“FOCI”). Prior to the U.S. Domestication, we were incorporated under the laws of Canada, and had entered into a Security Control Agreement, dated January 26, 2017, by and among us, our wholly owned subsidiary, Maxar Technologies Holdings Inc. and the U.S. Department of Defense (“SCA”), as a suitable FOCI mitigation arrangement under the National Industrial Security Program Operating Manual. Upon U.S. Domestication, the SCA was dissolved and we entered into a Board Resolution to mitigate remaining FOCI risks as seen by the U.S. government. Failure to maintain an agreement with the U.S. Department of Defense regarding the appropriate FOCI mitigation arrangement could result in invalidation or termination of the facility security clearances, which in turn would mean that our U.S. subsidiaries would not be able to enter into future contracts with the U.S. government requiring facility security
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clearances, and may result in the loss of the ability of those subsidiaries to complete existing contracts with the U.S. government.
Our business is subject to various regulatory risks that could adversely affect our operations.
The environment in which we operate is highly regulated due to the sensitive nature of our complex and technologically advanced systems, including satellites, products, hardware and software, in addition to those regulations broadly applicable to publicly listed corporations. There are numerous regulatory risks that could adversely affect operations, including but not limited to:
| • | Changes in laws and regulations. It is possible that the laws and regulations governing our business and operations will change in the future. A substantial portion of our revenue is generated from customers outside of the U.S. There may be a material adverse effect on our financial condition and results of operations if we are required to alter our business to comply with changes in both domestic and foreign regulations, telecommunications standards, foreign policy, tariffs or taxes and other trade barriers that reduce or restrict our ability to sell our products and services on a global basis, or by political and economic instability in the countries in which we conduct business. Any failure to comply with such regulatory requirements could also subject us to various fines, penalties or sanctions. |
| • | Export Restrictions. Certain of our businesses and satellites, systems, products, services or technologies we have developed require the implementation or acquisition of products or technologies from third parties, including those in other jurisdictions. In addition, certain of our satellites, systems, products or technologies may be required to be forwarded or exported to other jurisdictions. In certain cases, if the use of the technologies can be viewed by the jurisdiction in which that supplier or subcontractor resides as being subject to export constraints or restrictions relating to national security, we may not be able to obtain the technologies and products that we require from suppliers or subcontractors who would otherwise be our preferred choice or may not be able to obtain the export permits necessary to transfer or export our technology. To the extent that we are able, we obtain pre-authorization for re-export prior to signing contracts which oblige us to export subject technologies, including specific foreign government approval as needed. In the event of export restrictions, we may have the ability through contract force majeure provisions to be excused from our obligations. Notwithstanding these provisions, the inability to obtain export approvals, export restrictions or changes during contract execution or non-compliance by our customers could have an adverse effect on our revenues and margins. |
| • | U.S. Government Approval Requirements. For certain aspects of our business operations, we are required to obtain U.S. government licenses and approvals to enter into agreements or engage in commercial transactions with various end users (including government bodies) in order to export satellites and related equipment, disclose technical data or provide defense services to foreign persons. The delayed receipt of or the failure to obtain the necessary U.S. government licenses, approvals and agreements may prohibit entry into or interrupt the completion of contracts which could lead to a customer’s termination of a contract for default, monetary penalties and/or the loss of incentive payments. |
| • | Competitive Impact of U.S. Regulations on Satellite Sales. Some of our customers and potential customers, along with insurance underwriters and brokers, have asserted that U.S. export control laws and regulations governing disclosures to foreign persons excessively restrict their access to information about the satellite during construction and on-orbit. Office of Foreign Assets Control (“OFAC”) sanctions and requirements may also limit certain business opportunities or delay or restrict our ability to contract with potential foreign customers or operators. To the extent that our non-U.S. competitors are not subject to OFAC or similar export control or economic sanctions laws and regulations, they may enjoy a competitive advantage with foreign customers, and it could become increasingly difficult for the U.S. satellite manufacturing industry, including us, to recapture this lost market share. Customers concerned over the possibility that the U.S. government may deny the export license necessary for us to deliver their purchased satellite to them, or the restrictions or delays imposed by the U.S. government licensing requirements, even where an export license is granted, may elect to choose a satellite that is purportedly free of International Traffic in Arms Regulations (“ITAR”) offered by a |
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| non-U.S. supplier. We are further disadvantaged by the fact that a purportedly “ITAR-free” satellite may be launched less expensively in China on the Chinese Long March rocket, a launch vehicle that, because of ITAR restrictions, is not available to us. |
| • | Anti-Corruption Laws. As part of the regulatory and legal environments in which we operate, we are subject to global anti-corruption laws that prohibit improper payments directly or indirectly to government officials, authorities or persons defined in those anti-corruption laws in order to obtain or retain business or other improper advantages in the conduct of business. Our policies mandate compliance with anti-corruption laws. Failure by our employees, agents, subcontractors, suppliers and/or partners to comply with anti-corruption laws could impact us in various ways that include, but are not limited to, criminal, civil and administrative fines and/or legal sanctions and the inability to bid for or enter into contracts with certain entities, all of which could have a significant adverse effect on our reputation, operations and financial results. |
Changes in tax law, in our tax rates or in exposure to additional income tax liabilities or assessments may materially and adversely affect our financial condition, results of operations and cash flows.
Changes in law and policy relating to taxes, including those with retroactive effect, may materially and adversely affect our financial condition, results of operations and cash flows. For example, the Administration and Congress could make changes to existing tax law, such as increasing the corporate tax rate and enacting a minimum tax on worldwide book income. We continue to monitor tax law developments and assess the impact on the Company.
The U.S. enacted the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”) on December 22, 2017, which significantly changed the U.S. federal income taxation of U.S. corporations. The 2017 Tax Act remains unclear in many respects and has been, and may continue to be, the subject of amendments and technical corrections, as well as interpretations and implementing regulations by the Treasury and IRS, which have mitigated or increased certain adverse impacts of the 2017 Tax Act and may continue to do so in the future.
Our ability to use our U.S. federal and state net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2021, we had approximately $520 million, $874 million and $12 million of federal, state and foreign net operating loss (“NOL”) carryforwards and $83 million of U.S. tax credit carryforwards primarily related to research and development expenditures, net of unrecognized tax benefits.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (“Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change U.S. federal NOL carryforwards and other tax attributes (such as research tax credits) to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a greater than 50 percentage point change (by value) in a corporation’s equity ownership by certain stockholders over a rolling three-year period. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. While we do not believe that we have experienced ownership changes in the past that would materially limit our ability to utilize our NOL carryforwards, the Section 382 rules are complex and there is no assurance our view is correct. In the event that we experience ownership changes in the future, our ability to use pre-change NOL carryforwards and other tax attributes to offset post-change taxable income will be subject to limitations. As a result, we may be unable to use a material portion of our NOL carryforwards and other tax attributes, which could adversely affect our future cash flows.
Our operations are subject to governmental law and regulations relating to environmental matters, which may expose us to significant costs and liabilities that could negatively impact our financial condition.
We are subject to various federal, state, provincial and local environmental laws and regulations relating to the operation of our businesses, including those governing pollution, the handling, storage, disposal and transportation of hazardous substances and the ownership and operation of real property. In addition, we could be affected by future regulations imposed in response to concerns over climate change, other aspects of the environment or natural resources. We have been designated, along with other companies, as a named discharger potentially responsible for the cleanup of
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groundwater contamination at certain sites in California where we operate and there can be no assurance that the previous owners of those properties strictly complied with such environmental laws and regulations. Such laws and regulations may result in significant liabilities and costs to us due to the actions or inactions of the previous owners. In addition, new laws and regulations, more stringent enforcement of existing laws and regulations or the discovery of previously unknown contamination could result in additional costs.
We have incurred and will continue to incur increased costs and demands in order to comply with laws and regulations applicable to public companies.
In January 2019, we became a “domestic issuer” for SEC reporting purposes and a reporting issuer in each of the jurisdictions in Canada in which Maxar Canada was a reporting issuer. The obligations of being a public company in the U.S. and Canada require significant expenditures and will place significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the U.S. Securities Exchange Act of 1934, as amended, applicable Canadian securities laws, and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the listing requirements of the NYSE and the TSX. These rules require that we maintain effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to monitor and maintain compliance with. Additionally, new standards, as well as investor expectations are developing around environmental, social and governance matters (“ESG”) and other emerging socioeconomic trends and matters, which require continual monitoring and compliance. Our management and other personnel will continue to devote a substantial amount of time to ensure compliance with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to reputational damage, litigation or being delisted, among other potential problems.
Our international business exposes us to risks relating to regulation, currency fluctuations and political or economic instability in foreign markets, which could adversely affect our revenue, earnings, cash flows and our financial condition.
A significant portion of our revenue is derived from non-U.S. sales, and we intend to continue to pursue international contracts. International operations are subject to certain risks, such as: changes in domestic and foreign governmental regulations and licensing requirements; deterioration of relations between the U.S. and/or a particular foreign country; increases in tariffs and taxes and other trade barriers; foreign currency fluctuations; changes in political and economic stability both in the U.S. and internationally; effects of austerity programs or similar significant budget reduction programs; potential preferences by prospective customers to purchase from local (non-U.S.) sources; difficulties in obtaining or enforcing judgments in foreign jurisdictions; and unforeseen developments and conditions, including war, epidemics and pandemics and international tensions and conflicts.
In addition, our international contracts may include industrial cooperation agreements requiring specific in-country purchases, investments, manufacturing agreements or other financial obligations, known as offset obligations, and provide for penalties if we fail to meet such requirements. The impact of these factors is difficult to predict, but one or more of them could adversely affect our financial position, results of operations, or cash flows.
Exposure to United Kingdom political developments, including the effect of its withdrawal from the European Union, could be costly and difficult to comply with and could harm our business.
In June 2016, a referendum was passed in the United Kingdom to leave the European Union, commonly referred to as “Brexit.” This decision created an uncertain political and economic environment in the United Kingdom and other European Union countries. The United Kingdom formally left the European Union on January 31, 2020 and the transition period provided for in the withdrawal agreement entered by the United Kingdom and the European Union ended on December 31, 2020. In December 2020, the United Kingdom and the European Union agreed on a trade and cooperation agreement that will apply provisionally after the end of the transition period until it is ratified by the parties to the agreement. On December 31, 2020, the United Kingdom passed legislation giving effect to the trade and cooperation agreement, with the European Union formally adopting the agreement in April 2021. The trade and
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cooperation agreement covers the general objectives and framework of the relationship between the United Kingdom and the European Union. Depending on the application of the terms of the trade and cooperation agreement, we could face new regulatory costs and challenges.
Our United Kingdom operations service customers in the United Kingdom as well as in other countries in the EU, and these operations could be disrupted by Brexit. The political and economic instability created by Brexit has caused and may continue to cause significant volatility in global financial markets and uncertainty regarding the regulation of data protection in the United Kingdom. In particular, the United Kingdom enacted a Data Protection Act in May 2018 that is consistent with the EU General Data Protection Regulation. In June 2021, the European Union determined that the United Kingdom’s Data Protection Act was adequate to permit the flow of certain data between the European Union and the United Kingdom without additional restrictions for a period of up to four years. This decision temporarily reduces the uncertainty surrounding how data transfers between the European Union and the United Kingdom will be regulated. Brexit could also have the effect of disrupting the free movement of goods, services, capital and people between the United Kingdom, the European Union and elsewhere including, for example, the United Kingdom’s documentation requirements on goods imported from the European Union.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
ITEM 5. | OTHER INFORMATION |
None.
ITEM 6. | EXHIBITS |
The exhibits listed in the Exhibit Index are filed with, or incorporated by reference in, this Form 10-Q.
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EXHIBIT INDEX
Incorporated by Reference | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit No. |
| Exhibit Description |
| Form |
| SEC File No. |
| Exhibit |
| Filing Date |
| Filed or Furnished |
3.1 | 8-K | 001-38228 | 3.1 | 1/2/2019 | ||||||||
3.2 | Second Amended and Restated Bylaws of Maxar Technologies Inc. | 8-K | 001-38228 | 3.1 | 10/29/2020 | |||||||
10.1* | Form of Restricted Stock Unit Award Grant Notice – 2019 Plan | X | ||||||||||
31.1 | X | |||||||||||
31.2 | X | |||||||||||
32.1† | X | |||||||||||
32.2† | X | |||||||||||
101 | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL: (i) Unaudited Condensed Consolidated Statements of Operations, (ii) Unaudited | X | ||||||||||
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Incorporated by Reference | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit No. |
| Exhibit Description |
| Form |
| SEC File No. |
| Exhibit |
| Filing Date |
| Filed or Furnished |
Condensed Consolidated Statements of Comprehensive Income, (iii) Unaudited Condensed Consolidated Balance Sheets, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, (v) Consolidated Statements of Cash Flows, (vi) Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity, and (vii) Notes to the Unaudited Condensed Consolidated Financial Statements | ||||||||||||
104 | Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document | |||||||||||
† | Furnished herewith. |
* | Management contract or compensatory plan arrangement |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
May 9, 2022 | Maxar Technologies Inc. |
By: /s/ Daniel L. Jablonsky Daniel L. Jablonsky Chief Executive Officer (Principal Executive Officer and Duly Authorized Officer) | |
By: /s/ Biggs C. Porter Biggs C. Porter Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |
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Exhibit 10.1
MAXAR TECHNOLOGIES INC.
2019 INCENTIVE AWARD PLAN
RESTRICTED STOCK UNIT AWARD GRANT NOTICE
Maxar Technologies Inc., a Delaware corporation, (the “Company”), pursuant to its 2019 Incentive Award Plan, as amended from time to time (the “Plan”), hereby grants to the holder listed below (the “Participant”), an award of restricted stock units (“Restricted Stock Units” or “RSUs”). Each vested Restricted Stock Unit represents the right to receive, in accordance with the Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the “Agreement”), one share of Common Stock (“Share”). This award of Restricted Stock Units is subject to all of the terms and conditions set forth herein and in the Agreement and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Unit Award Grant Notice (the “Grant Notice”) and the Agreement.
Participant: | [__________________________] |
Grant Date: | [__________________________] |
Total Number of RSUs: | [_____________] |
Vesting Commencement Date: | [_____________] |
Vesting Schedule: | Subject to the Participant’s continued service with the Company or a Subsidiary through each applicable vesting date, 33% of the RSUs shall vest on the first and second anniversaries of the Vesting Commencement Date set forth above and 34% of the RSUs shall vest on the third anniversary of the Vesting Commencement Date. |
Termination: | As set forth in Section 2.5 of the Agreement and subject to the terms of the Plan, if the Participant experiences a Termination of Service, all RSUs that have not become vested on or prior to the date of such Termination of Service will thereupon be automatically forfeited by the Participant without payment of any consideration therefor. |
By his or her signature and the Company’s signature below, the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement. In addition, by signing below, the Participant also agrees that the Company, in its sole discretion, may satisfy any withholding obligations in accordance with Section 2.6(b) of the Agreement by (i) withholding shares of Common Stock otherwise issuable to the Participant upon vesting of the RSUs, (ii) instructing a broker on the Participant’s behalf to sell shares of Common Stock otherwise issuable to the Participant upon vesting of the RSUs and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.6(b) of the Agreement or the Plan.
MAXAR TECHNOLOGIES INC.: |
| PARTICIPANT: | ||
| | | ||
PARTICIPANT: | | | ||
| | | ||
By: | | | By: | |
Print Name: | | | Print Name: | |
Title: | | | | |
Address: | | | Address: | |
| | | | |
EXHIBIT A
TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE
RESTRICTED STOCK UNIT AWARD AGREEMENT
Pursuant to the Restricted Stock Unit Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Unit Award Agreement (this “Agreement”) is attached, Maxar Technologies Inc., a Delaware corporation (the “Company”), has granted to the Participant the number of restricted stock units (“Restricted Stock Units” or “RSUs”) set forth in the Grant Notice under the Company’s 2019 Incentive Award Plan, as amended from time to time (the “Plan”). Each Restricted Stock Unit represents the right to receive one share of Common Stock (a “Share”) upon vesting. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and Grant Notice.
ARTICLE I.
GENERAL
1.1Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions of the Plan, which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ARTICLE II.
GRANT OF RESTRICTED STOCK UNITS
2.1Grant of RSUs. Pursuant to the Grant Notice and upon the terms and conditions set forth in the Plan and this Agreement, effective as of the Grant Date set forth in the Grant Notice, the Company hereby grants to the Participant an award of RSUs under the Plan in consideration of the Participant’s past and/or continued employment with or service to the Company or any Subsidiaries and for other good and valuable consideration.
2.2Unsecured Obligation to RSUs. Unless and until the RSUs have vested in the manner set forth in Article 2 hereof, the Participant will have no right to receive Common Stock under any such RSUs. Prior to actual payment of any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.
2.3Vesting Schedule. Subject to Section 2.5 hereof, the RSUs shall vest and become nonforfeitable with respect to the applicable portion thereof according to the vesting schedule set forth in the Grant Notice (rounding down to the nearest whole Share).
2.4Consideration to the Company. In consideration of the grant of the award of RSUs pursuant hereto, the Participant agrees to render faithful and efficient services to the Company or any Subsidiary.
2.5Forfeiture, Termination and Cancellation upon Termination of Service. Subject to the provisions of the Plan, upon the Participant’s Termination of Service for any or no reason, all Restricted Stock Units which have not vested prior to or in connection with such Termination of Service shall thereupon automatically be forfeited, terminated and cancelled as of the applicable termination date without payment of any consideration by the Company, and the Participant, or the Participant’s beneficiary or personal representative, as the case may be, shall have no further rights hereunder. Subject to the provisions
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of the Plan, no portion of the RSUs which has not become vested as of the date on which the Participant incurs a Termination of Service shall thereafter become vested.
In the event that, at the time of the Participant’s Termination of Service, the Participant is a party to a written employment agreement with the Company that provides for the accelerated or continued vesting of all or part of the RSUs in connection with the circumstances of the Participant’s Termination of Service, then (subject to the satisfaction of any applicable conditions to such accelerated or continued vesting as set forth in such employment agreement) the accelerated or continued vesting required under the terms of such employment agreement shall be given effect before applying the immediately preceding paragraph. Furthermore, if such employment agreement provides for continued vesting of the all or a portion of the RSUs in such circumstances, the RSUs that would become vested after the Participant’s Termination of Service and over the applicable continued vesting period shall (subject to the satisfaction of any applicable conditions to such accelerated or continued vesting as set forth in such employment agreement) instead accelerate and be considered to have vested as of the Participant’s Termination of Service, and this provision shall control over such employment agreement. Any RSUs that become vested pursuant to this paragraph shall be settled pursuant to Section 2.6 not later than two and one-half months following the Participant’s Termination of Service; provided that if the period of time that the Participant has to satisfy any applicable vesting conditions in his or her employment agreement with the Company (including any period of time to consider and revoke any applicable release) spans two calendar years, settlement of such RSUs shall be made within the applicable two and one-half month period but in the second of such two calendar years.
2.6Issuance of Common Stock upon Vesting.
(a)As soon as administratively practicable following the vesting of any Restricted Stock Units pursuant to Section 2.3 hereof, but in no event later than thirty (30) days after such vesting date (for the avoidance of doubt, this deadline is intended to comply with the “short term deferral” exemption from Section 409A of the Code), or as to any RSUs that vest pursuant to the second paragraph of Section 2.5, the Company shall deliver to the Participant (or any transferee permitted under Section 3.2 hereof) a number of Shares equal to the number of RSUs subject to this Award that vest on the applicable vesting date. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 10.4 of the Plan, the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with such Section.
(b)As set forth in Section 10.2 of the Plan, the Company shall have the authority and the right to deduct or withhold, or to require the Participant to remit to the Company, an amount sufficient to satisfy all applicable federal, state and local taxes required by law to be withheld with respect to any taxable event arising in connection with the Restricted Stock Units. The Company shall not be obligated to deliver any Shares to the Participant or the Participant’s legal representative unless and until the Participant or the Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all federal, state and local taxes applicable to the taxable income of the Participant resulting from the grant or vesting of the Restricted Stock Units or the issuance of Shares.
2.7Conditions to Delivery of Shares. The Shares deliverable hereunder may be either previously authorized but unissued Shares, treasury Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue Shares deliverable hereunder prior to fulfillment of the conditions set forth in Section 10.4 of the Plan.
2.8Rights as Stockholder. The holder of the RSUs shall not be, nor have any of the rights or privileges of, a stockholder of the Company, including, without limitation, voting rights and rights to
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dividends, in respect of the RSUs and any Shares underlying the RSUs and deliverable hereunder unless and until such Shares shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 12.2 of the Plan.
ARTICLE III.
OTHER PROVISIONS
3.1Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Administrator or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the RSUs.
3.2RSUs Not Transferable. The RSUs shall be subject to the restrictions on transferability set forth in Section 10.3 of the Plan.
3.3Tax Consequences; No Advice. The Participant understands that the Participant may suffer adverse tax consequences in connection with the RSUs granted pursuant to this Agreement (and the Shares issuable with respect thereto). The Company is not providing any tax, legal or financial advice to the Participant, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or the Participant’s acquisition or sale of the underlying Shares. The Participant is hereby advised to consult with the Participant’s own personal tax, legal and financial advisors regarding the Participant’s participation in the Plan before taking any action related to the Plan or the RSUs.
3.4Binding Agreement. Subject to the limitation on the transferability of the RSUs contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
3.5Adjustments Upon Specified Events. The Participant acknowledges that the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and Section 12.2 of the Plan.
3.6Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office, and any notice to be given to the Participant shall be addressed to the Participant at the Participant’s last address reflected on the Company’s records. By a notice given pursuant to this Section 3.6, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
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3.7Participant’s Representations. In accepting the RSUs, the Participant acknowledges and agrees that:
(a)the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company, in its sole discretion, at any time (subject to any limitations set forth in the Plan);
(b)the grant of the RSUs is voluntary and occasional and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs or other awards have been granted in the past;
(c)all decisions with respect to future awards, if any, will be at the sole discretion of the Company;
(d)the Participant’s participation in the Plan is voluntary;
(e)the RSUs and the Participant’s participation in the Plan shall not create a right to employment or be interpreted as forming an employment contract with the Company or any of its Subsidiaries and shall not interfere with the ability of the Company or the Employer, as applicable, to terminate the Participant’s employment relationship (as otherwise may be permitted under local law);
(f)unless otherwise agreed with the Company, the RSUs and any Shares acquired upon settlement of the RSUs, and the income from and value of the same, are not granted as consideration for, or in connection with, any service the Participant may provide as a director of any Subsidiary;
(g)the RSUs and any Shares acquired under the Plan and the income and value of the same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, holiday pay, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services (prior to the Grant Date) for the Company, the Employer or any of their Affiliates;
(h)the future value of the Shares underlying the RSUs is unknown, indeterminable, and cannot be predicted with certainty;
(i)no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from Termination of Service (for any reason whatsoever and whether or not in breach of local labor laws or later found invalid) and, should RSUs terminate without payment in connection with a Termination of Service before the applicable vesting date, in no event shall any portion of such RSUs be considered to have been earned (for service after the Grant Date or otherwise);
(j)for purposes of the RSUs, will be considered to experience a Termination of Service as of the date the Participant is no longer actively providing services to the Company, the Employer or any of their Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant provides services or the terms of the Participant’s employment agreement, if any), and such date will not be extended by any notice period (e.g., any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Participant provides services or the terms of the Participant’s service agreement, if any); the Administrator shall have the exclusive discretion to determine when the Participant is no longer actively providing service for purposes of the RSUs (including whether the Participant may still be considered to be providing service while on a leave of absence); and
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(k)neither the Company nor any of its Subsidiaries shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the United States dollar that may affect the value of the RSUs or any amounts due to the Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement of the RSUs.
In addition, if the Shares issuable hereunder have not been registered under the Securities Act or any applicable state laws on an effective registration statement at the time of such issuance, the Participant shall, if required by the Company, concurrently with such issuance, make such written representations as are deemed necessary or appropriate by the Company and/or its counsel.
3.8Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
3.9Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
3.10Conformity to Applicable Laws. The grant of the RSUs and the issuance and delivery of Shares with respect to the RSUs are subject to all Applicable Laws, rules and regulations and to such approvals by any governmental agencies or securities exchange as may be required. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any other Applicable Law. To the extent permitted by Applicable Law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to Applicable Law, and the Company has no liability to deliver any Shares in respect of the RSUs or make any payment unless such delivery or payment would comply with all Applicable Laws and the applicable requirements of any governmental agency, securities exchange or similar entity, and unless and until the Participant shall have taken all actions that the Company reasonably and in good faith determines are necessary in connection with the RSUs in order to comply with all such Applicable Laws, rules, and requirements. The Company may impose such restrictions on any Shares issued under the Plan as the Company determines necessary or desirable to comply with all Applicable Laws, rules or requirements.
3.11Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board; provided, however, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the RSUs in any material way without the prior written consent of the Participant.
3.12Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 3.2 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.
3.13Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, then the Plan, the RSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
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3.14Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of the Company or any of its Subsidiaries or interfere with or restrict in any way with the right of the Company or any of its Subsidiaries, which rights are hereby expressly reserved, to discharge or to terminate for any reason whatsoever, with or without cause, the services of the Participant’s at any time.
3.15Section 409A. This Award is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A. This Award is intended to satisfy, and not result in any tax, penalty or interest under, Section 409A and shall be interpreted and construed consistent with such intent.
3.16Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Company and its Subsidiaries with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to RSUs, as and when payable hereunder
3.17Data Privacy. Without limiting the generality of any other provision of this Agreement, Section 10.8 (“Data Privacy”) of the Plan is hereby expressly incorporated into this Agreement as if first set forth herein.
3.18Additional Terms for Participants Providing Services Outside the United States. To the extent the Participant provides services to the Company in a country other than the United States, the RSUs shall be subject to such additional or substitute terms as shall be set forth for such country in Exhibit B. If the Participant relocates to one of the countries included in Exhibit B during the life of the RSUs, the special provisions for such country shall apply to the Participant, to the extent the Company determines that the application of such provisions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. In addition, the Company reserves the right to impose other requirements on the RSUs and the Shares issued upon vesting of the RSUs, to the extent the Company determines it is necessary or advisable in order to comply with local laws or facilitate the administration of the Plan, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
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EXHIBIT B
TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE
ADDITIONAL TERMS AND CONDITIONS BY COUNTRY
Certain capitalized terms used but not defined in this Exhibit B shall have the meanings set forth in the Plan and/or the Agreement.
TERMS AND CONDITIONS
This Exhibit B includes additional terms and conditions that govern any RSUs granted under the Plan if, under Applicable Law, you are a resident of, are deemed to be a resident of or are working in one of the countries listed below. Furthermore, the additional terms and conditions that govern any RSUs granted hereunder may apply to you if you transfer employment and/or residency to one of the countries listed below and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply to you.
NOTIFICATIONS
This Exhibit B also includes notifications relating to exchange control and other issues of which you should be aware with respect to your participation in the Plan. The information is based on the exchange control, securities and other laws in effect in the countries to which this Exhibit B refers as of March 2022. Such laws are often complex and change frequently. As a result, the Company strongly recommends that you not rely on the notifications herein as the only source of information relating to the consequences of your participation in the Plan because the information may be outdated when you vest in the RSUs and acquire Shares under the Plan, or when you subsequently sell Shares acquired under the Plan.
In addition, the notifications are general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of any particular result. Accordingly, you should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation. Finally, if you are a citizen or resident of a country other than the one in which you are currently residing and/or working or are considered a resident of another country for local law purposes, the information contained herein may not be applicable to you or you may be subject to the provisions of one or more jurisdictions.
ALL NON-U.S. JURISDICTIONS
NOTIFICATIONS
Insider Trading Restrictions/Market Abuse Laws. You may be subject to insider trading restrictions and/or market abuse laws based on the exchange on which the Shares are listed and in applicable jurisdictions including the United States and your country or your broker’s country, if different, which may affect your ability to accept, acquire, sell or otherwise dispose of Shares, rights to Shares (e.g., RSUs) or rights linked to the value of Shares during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you place before you possessed inside information. Furthermore you could be prohibited from (i) disclosing the inside information to any third party, which may include fellow employees (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. You are responsible for ensuring your compliance with any applicable restrictions and you should speak with your personal legal advisor on this matter.
Foreign Asset/Account, Tax Reporting Information. Your country of residence may have certain foreign asset and/or account reporting requirements which may affect your ability to acquire or hold Shares under the Plan or cash received from participating in the Plan (including from any dividends received, or sale proceeds arising from the sale of Shares) in a brokerage or bank account outside of your country. You may be required to report such accounts, assets or transactions to the tax or other authorities in your country. You also may be required to repatriate sale proceeds or other funds received as a result of participating in the Plan to your country within a certain time after receipt. You are responsible for ensuring your compliance with such regulations, and you should speak with your personal legal advisor on this matter.
Not a Public Offering. The grant of the RSUs is not intended to be a public offering of securities in your country of employment (or country of residence, if different). The Company has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law), and the grant of the RSUs is not subject to the supervision of the local securities authorities.
TERMS AND CONDITIONS
Language. If you are resident in a country where English is not an official language, you acknowledge and agree that it is your express intent that this Agreement and the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the RSUs be drawn up in English. Further, you acknowledge that you are sufficiently proficient in English to understand the terms and conditions of this Agreement and any documents related to the Plan or have had the ability to consult with an advisor who is sufficiently proficient in the English language. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
Repatriation; Compliance with Law. You agree to repatriate all payments attributable to the Shares and/or cash acquired under the Plan in accordance with applicable foreign exchange rules and regulations in your of employment (and country of residence, if different). In addition, you agree to take any and all actions, and consent to any and all actions taken by the Company and any of its Subsidiaries, as may be required to allow the Company and any of its Subsidiaries to comply with local laws, rules and/or regulations in your country of employment (and country of residence, if different). Finally, you agree to
take any and all actions as may be required to comply with your personal obligations under local laws, rules and/or regulations in your country of employment (and country of residence, if different).
Imposition of Other Requirements. The Company reserves the right to impose other requirements on your participation in the Plan, on the RSUs, and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
EUROPEAN UNION (“EU”) / EUROPEAN ECONOMIC AREA (“EEA”) AND THE UNITED KINGDOM
TERMS AND CONDITIONS
Data Privacy. If you reside and/or work in the EU/EEA or the United Kingdom, Section 3.17 of the Agreement shall be replaced with the following:
3.17 Data Privacy. The Company, with its principal executive offices located at 1300 W. 120th Avenue, Westminster, Colorado 80234, USA, is the controller responsible for the processing of your personal data by the Company and the third parties noted below.
(a)Data Collection, Processing and Usage. Pursuant to applicable data protection laws, you are hereby notified that the Company collects, processes and uses certain personal information about you for the legitimate purpose of implementing, administering and managing the Plan and generally administering the RSUs, specifically, your name, home address, email address and telephone number, details of all Shares or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in your favor (“Personal Data”). In granting RSUs under the Plan, the Company will collect, process, use, disclose and transfer (collectively, “Processing”) Personal Data for purposes of implementing, administering and managing the Plan. The Company’s legal basis for the Processing of Personal Data is the Company’s legitimate business interests of managing the Plan, administering RSUs and complying with its contractual and statutory obligations, as well as the necessity of the Processing for the Company to perform its contractual obligations under this Agreement and the Plan. Your refusal to provide Personal Data would make it impossible for the Company to perform its contractual obligations and may affect your ability to participate in the Plan. As such, by accepting the RSUs, you voluntarily acknowledge the Processing of your Personal Data as described herein.
(b)Stock Plan Administration Service Provider. The Company and the Employer may transfer Personal Data to E*TRADE, an independent service provider based, in relevant part, in the United States, which may assist the Company with the implementation, administration and management of the Plan (the “Stock Plan Administrator”). In the future, the Company may select a different Stock Plan Administrator and share Personal Data with another company that serves in a similar manner. The Processing of Personal Data will take place through both electronic and non-electronic means. Personal Data will only be accessible by those individuals requiring access to it for purposes of implementing, administering and operating the Plan. When receiving Participant’s Personal Data, if applicable, the Stock Plan Administrator provides appropriate safeguards in accordance with the Standard Contractual Clauses or other appropriate cross-border transfer solutions. By participating in the Plan, the Participant understands that the Stock Plan Administrator will Process the Participant’s Personal Data for the purposes of implementing, administering and managing the Participant’s participation in the Plan.
(c)International Personal Data Transfers. The Plan and the RSUs are administered in the United States, which means it will be necessary for Personal Data to be transferred to, and Processed in the United States. When transferring Personal Data to the United States, the Company provides appropriate
safeguards in accordance with the Standard Contractual Clauses or other appropriate cross-border transfer solutions. You may request a copy of the appropriate safeguards with the Stock Plan Administrator or the Company by contacting your human resources representative.
(d)Data Retention. The Company will use Personal Data only as long as is necessary to implement, administer and manage your participation in the Plan or as required to comply with legal or regulatory obligations, including tax and securities laws. When the Company no longer needs Personal Data related to the Plan, the Company will remove it from its systems. If the Company keeps Personal Data longer, it would be to satisfy legal or regulatory obligations and the Company’s legal basis would be for compliance with relevant laws or regulations.
(e)Data Subject Rights. To the extent provided by law, you have the right to (i) subject to certain exceptions, request access or copies of Personal Data the Company Processes, (ii) request rectification of incorrect Personal Data, (iii) request deletion of Personal Data, (iv) place restrictions on Processing of Personal Data, (v) lodge complaints with competent authorities in your country, and/or (vi) request a list with the names and addresses of any potential recipients of Personal Data. To receive clarification regarding your rights or to exercise your rights, you may contact your human resources representative. You also have the right to object, on grounds related to a particular situation, to the Processing of Personal Data, as well as opt-out of the Plan, in any case without cost, by contacting your human resources representative in writing. Your provision of Personal Data is a contractual requirement. You understand, however, that the only consequence of refusing to provide Personal Data is that the Company may not be able to administer the RSUs, or grant other awards or administer or maintain such awards. For more information on the consequences of the refusal to provide Personal Data, You may contact your human resources representative in writing.
AUSTRALIA
NOTIFICATIONS
Compliance with Laws. The offer of the RSUs is intended to comply with the provisions of the Corporations Act 2001, ASIC Regulatory Guide 49 and ASIC Class Order CO 14/1000.
Tax Information. Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) applies to the RSUs granted under the Plan, such that the RSUs are intended to be subject to deferred taxation.
Exchange Control Information. If you are an Australian resident, exchange control reporting is required for cash transactions exceeding AUD10,000 and for international fund transfers. If an Australian bank is assisting with the transaction, the bank will file the report on your behalf. If there is no Australian bank involved in the transfer, you will be required to file the report.
BRAZIL
TERMS AND CONDITIONS
Compliance with Law. By accepting the RSUs, you acknowledge that you agree to comply with applicable Brazilian laws and pay any and all applicable taxes associated with the vesting of the RSUs, the sale of Shares acquired under the Plan, the payment of any dividends on such Shares.
Acknowledgement of Nature of Plan and RSUs. In accepting this Agreement, you acknowledge (i) that you are making an investment decision, (ii) that the Shares will be issued to you only if the vesting conditions are met and any necessary services are rendered by you during the vesting period set forth in the
vesting schedule, and (iii) that the value of the underlying Shares is not fixed and may increase or decrease in value over the vesting period without compensation to you.
NOTIFICATIONS
Exchange Control Information. If you are resident or domiciled in Brazil, you will be required to submit annually a declaration of assets and rights held outside of Brazil to the Central Bank of Brazil if the aggregate value of such assets and rights exceeds US$1,000,000 on December 31 of each year. If the aggregate value exceeds US$100,000,000, at the end of each quarter, the declaration must be filed in the month following the end of each quarter.
CANADA
TERMS AND CONDITIONS
Vesting of RSUs. Notwithstanding any other provision of the Plan, Agreement or Grant Notice, in no event will the final vesting date of any RSUs granted hereunder be (and any subsequent payment and/or settlement thereof be made) later than December 31 of the third calendar year following the year of grant, and any RSUs that have not settled and/or been paid by such date will automatically expire or will accelerate and be settled and/or paid out by such date, at the sole discretion of the Company.
Language Consent. The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices, and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.
Les parties reconnaissent avoir exigé la rédaction en anglais de cette convention (« Agreement »), ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à, la présente convention.
Award Payable Only in Shares. The grant of the RSUs does not give you any right to receive a cash payment, and the RSUs are payable in Shares only.
GERMANY
NOTIFICATIONS
Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank (Bundesbank). In addition, you may be required to report the acquisition of securities if the securities acquired exceeds €12,500. In case of payments in connection with securities (including proceeds realized upon the sale of Shares or the receipt of dividends), the report must be made by the 5th day of the month following the month in which the payment was received and must be filed electronically. The form of report (Allgemeines Meldeportal Statistik) can be accessed via the Bundesbank’s website (www.bundesbank.de) and is available in both German and English. You are responsible for satisfying any applicable reporting obligation.
INDIA
NOTIFICATIONS
Exchange Control Information. You are required to repatriate the cash proceeds received upon the sale of Shares and receipt of any dividends and convert such proceeds into local currency within specified
timeframes as required under applicable regulations. You also are required to retain the foreign inward remittance certificate as evidence of repatriation. As exchange control regulations can change frequently and without notice, you should consult your personal tax or legal advisor before selling Shares to ensure compliance with current regulations.
Foreign Asset/Account Reporting Information. You are required to declare your foreign bank accounts and any foreign financial assets (including Shares held outside India) in your annual tax return. As the reporting rules are stringent, you should consult with your personal tax or legal advisor regarding this reporting obligation.
ITALY
TERMS AND CONDITIONS
Acknowledgement of Nature of Agreement. In accepting this Agreement, you acknowledge that (1) you have received a copy of the Plan, the Agreement and this Exhibit B; (2) you have reviewed the applicable documents in their entirety and fully understand the contents thereof; and (3) you accept all provisions of the Plan, the Agreement and this Exhibit B.
For any RSUs granted, you further acknowledge that you have read and specifically and explicitly approve the terms of the Agreement.
NOTIFICATIONS
Foreign Asset/Account Reporting Information. Italian residents who, at any time during the fiscal year, hold foreign financial assets (including cash and Shares) which may generate income taxable in Italy are required to report these assets on their annual tax returns (UNICO Form, RW Schedule) for the year during which the assets are held, or on a special form if no tax return is due. These reporting obligations will also apply to Italian residents who are the beneficial owners of foreign financial assets under Italian money laundering provisions.
Foreign Financial Assets Tax. The fair market value of any Shares held outside of Italy is subject to a foreign assets tax. The fair market value is considered to be the value of the Shares on the NYSE on December 31 of the applicable year in which you held the Shares (or when the Shares are acquired during the course of the year, the tax is levied in proportion to the actual days of holding over the calendar year). No tax payment duties arise if the amount of the foreign financial assets tax calculated on all financial assets held abroad does not exceed a certain threshold. You should consult with your personal tax advisor about the foreign financial assets tax.
JAPAN
NOTIFICATIONS
Foreign Asset/Account Reporting Information. You will be required to report to the Japanese tax authorities details of any assets held outside of Japan as of December 31st (including any Shares acquired under the Plan) to the extent such assets have a total net fair market value exceeding ¥50,000,000. Such report will be due by March 15 each year. You should consult with your personal tax advisor as to whether the reporting obligation applies to you and whether you will be required to include in the report details of any Shares or cash that you hold.
LUXEMBOURG
No country-specific provisions.
MEXICO
TERMS AND CONDITIONS
Acknowledgement of the Agreement. In accepting the Award granted hereunder, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Agreement, including this Appendix, in their entirety and fully understand and accept all provisions of the Plan and the Agreement, including this Exhibit B. You further acknowledge that you have read and specifically and expressly approve the following:
(1)Your participation in the Plan does not constitute an acquired right.
(2)The Plan and your participation in the Plan are offered by the Company on a wholly discretionary basis.
(3)Your participation in the Plan is voluntary.
(4)The Company and its Subsidiaries are not responsible for any decrease in the value of the RSUs granted and/or the Shares issued under the Plan.
SINGAPORE
TERMS AND CONDITIONS
Restriction on Sale and Transferability. You hereby agree that any Shares acquired pursuant to the RSUs will not be offered for sale in Singapore prior to the six (6)-month anniversary of the Grant Date, unless such sale or offer is made pursuant to one or more exemptions under Part XIII Division 1 Subdivision (4) (other than section 280) of the Securities and Futures Act (Chap. 289, 2006 Ed.) (“SFA”), or pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA.
NOTIFICATIONS
Securities Law Information. The grant of the RSUs is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the SFA, on which basis it is exempt from the prospectus and registration requirements under the SFA, and is not made with a view to the RSUs being subsequently offered for sale to any other party. The Plan has not been, and will not be, lodged or registered as a prospectus with the Monetary Authority of Singapore.
Chief Executive Officer and Director Notification Requirement. The Chief Executive Officer (“CEO”) and the directors (including alternate, substitute, associate and shadow directors) of a Singapore-incorporated company are subject to certain notification requirements under the Singapore Companies Act. Such CEO and directors must notify such Singapore Subsidiary in writing of an interest (e.g., RSUs, Shares, etc.) in the Company or any related company within two (2) business days of (i) its acquisition or disposal, (ii) any change in a previously disclosed interest (e.g., when the Shares are sold), or (iii) becoming the CEO or a director.
SPAIN
TERMS AND CONDITIONS
Labor Law Acknowledgement. By accepting the RSUs granted hereunder, you consent to participation in the Plan and acknowledge that you have received a copy of the Plan.
You understand that the Company has unilaterally, gratuitously and in its sole discretion decided to grant any RSUs under the Plan to individuals who may be members of the Board or employees of the Company or its Subsidiaries throughout the world. The decision is a limited decision, which is entered into upon the express assumption and condition that any RSUs granted will not economically or otherwise bind the Company or any of its Subsidiaries on an ongoing basis, other than as expressly set forth in the Agreement, including this Exhibit B. Consequently, you understand that the RSUs granted hereunder are given on the assumption and condition that they shall not become a part of any employment contract (either with the Company or any of its Subsidiaries) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. Further, you understand and freely accept that there is no guarantee that any benefit whatsoever shall arise from any gratuitous and discretionary grant of RSUs since the future value of the RSUs and the underlying Shares is unknown and unpredictable. In addition, you understand that any RSUs granted hereunder would not be made but for the assumptions and conditions referred to above; thus, you understand, acknowledge and freely accept that, should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any grant of RSUs or right to RSUs shall be null and void.
Further, the vesting of the RSUs is expressly conditioned on your continued and active rendering of service, such that if your employment terminates for any reason whatsoever, the RSUs may cease vesting immediately, in whole or in part, effective on the date of your Termination of Service. This will be the case, for example, even if (1) you are considered to be unfairly dismissed without good cause (i.e., subject to a “despido improcedente”); (2) you are dismissed for disciplinary or objective reasons or due to a collective dismissal; (3) you terminate service due to a change of work location, duties or any other employment or contractual condition; (4) you terminate service due to a unilateral breach of contract by the Company or a Subsidiary; or (5) your employment terminates for any other reason whatsoever. Consequently, upon your Termination of Service for any of the above reasons, you may automatically lose any rights to RSUs that were not vested on the date of your Termination of Service, as described in the Plan and the Agreement.
NOTIFICATIONS
Securities Law Information. No “offer of securities to the public,” as defined under Spanish law, has taken place or will take place in the Spanish territory. The Agreement (including this Appendix) has not been nor will it be registered with the Comisión Nacional del Mercado de Valores, and does not constitute a public offering prospectus.
Exchange Control Information. If you acquire Shares under the Plan, you must declare the acquisition to the Direccion General de Comercio e Inversiones (the “DGCI”). If you acquire the Shares through the use of a Spanish financial institution, that institution will automatically make the declaration to the DGCI for you; otherwise, you will be required to make the declaration by filing a D-6 form. You must declare ownership of any Shares with the DGCI each January while the Shares are owned and must also report, in January, any sale of Shares that occurred in the previous year for which the report is being made, unless the sale proceeds exceed the applicable threshold, in which case the report is due within one (1) month of the sale.
Foreign Asset/Account Reporting Information. You are required to declare electronically to the Bank of Spain any securities accounts (including brokerage accounts held abroad), as well as the Shares held in such accounts if the value of the transactions during the prior tax year or the balances in such accounts as of December 31 of the prior tax year exceed €1,000,000.
To the extent that you hold Shares and/or have bank accounts outside of Spain with a value in excess of €50,000 (for each type of asset) as of December 31 each year, you will be required to report information on such assets in your tax return (tax form 720) for such year. After such Shares and/or accounts are initially reported, the reporting obligation will apply for subsequent years only if the value of any previously-reported Shares or accounts increases by more than €20,000 or if you sell or otherwise dispose of previously-reported Shares or accounts. If the value of such Shares and/or accounts as of December 31 does not exceed €50,000, a summarized form of declaration may be presented.
SWEDEN
TERMS AND CONDITIONS
Tax Withholding. Without limiting any other provision of the Agreement, you agree and understand that, while the Company or your Employer may wholly or partly withhold any income tax related to your participation in the Plan from your salary, you are liable for any and all income tax related to your participation in the Plan and legally applicable to you and hereby covenant to pay all such income tax not previously withheld, by the Company or your Employer, as and when requested by the Company or your Employer or by the Swedish Tax Agency.
NOTIFICATIONS
Securities Law Information. The Agreement (including its appendices), any prospectus or other document relating to the Plan shall not be considered a prospectus for the purposes of Regulation (EU) 2017/1129 and has not been approved by the Swedish Financial Supervisory Authority (Sw. Finansinspektionen) or any other regulatory authority in any member state of the European Union.
UNITED ARAB EMIRATES
NOTIFICATIONS
Securities Law Information. RSUs under the Plan are granted only to select service providers of the Company and its Subsidiaries and are for the purpose of providing equity incentives. The Plan and the Agreement are intended for distribution only to such service providers and must not be delivered to, or relied on by, any other person. You should conduct your own due diligence on the RSUs offered pursuant to this Agreement. If you do not understand the contents of the Plan and/or the Agreement, you should consult an authorized financial adviser. The Emirates Securities and Commodities Authority and the Dubai Financial Services Authority have no responsibility for reviewing or verifying any documents in connection with the Plan. Further, the Ministry of the Economy and the Dubai Department of Economic Development have not approved the Plan or the Agreement nor taken steps to verify the information set out therein, and have no responsibility for such documents.
UNITED KINGDOM
TERMS AND CONDITIONS
Tax Withholding.
Without limiting any other provision of the Agreement, you agree that you are liable for all income tax (including federal, state and local taxes), social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you (the
“Tax Obligations”) and hereby covenant to pay all such Tax Obligations as and when requested by the Company or your Employer or by Her Majesty’s Revenue and Customs (“HMRC”) (or any other tax authority or any other relevant authority). You also agree to indemnify and keep indemnified the Company or your Employer against any taxes that they are required to pay or withhold or have paid or will pay to HMRC (or any other tax authority or any other relevant authority) on your behalf.
Notwithstanding the foregoing, if you are an executive officer or director (as within the meaning of Section 13(k) of the Exchange Act, as amended from time to time), you understand that you may not be able to indemnify the Company or your Employer for the amount of income tax not collected from or paid by you, as it may be considered a loan. In the event that you are an executive officer or director and income tax is not collected from you within ninety (90) days after the end of the tax year in which the taxable event occurs, the amount of any uncollected income tax may constitute an additional benefit to you on which additional income tax and national insurance contributions (“NICs”) may be payable. You acknowledge that you are responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing your Employer for the value of any NICs due on this additional benefit, which the Company or your Employer may recover from you.
If the maximum applicable withholding rate is used, any over-withheld amount may be credited to you by the Company or your Employer (with no entitlement to the Common Stock equivalent) or if not so credited, you may seek a refund from the local tax authorities.
Joint Election. As a condition of the RSUs granted hereunder, you agree to accept any liability for secondary Class 1 National Insurance Contributions (the “Employer NICs”), which may be payable by the Company or your Employer with respect to the RSUs and/or payment of the RSUs and issuance of Shares pursuant to the RSUs, the assignment or release of the RSUs for consideration, or the receipt of any other benefit in connection with the RSUs.
Without limitation to the foregoing, you agree to make an election (the “Election”), in the form specified and/or approved for such election by HMRC, that the liability for your Employer NICs payments on any such gains shall be transferred to you to the fullest extent permitted by law. You further agree to execute such other elections as may be required between you and any successor to the Company and/or your Employer. You hereby authorize the Company and your Employer to withhold such Employer NICs.
Failure by you to enter into an Election, withdrawal of approval of the Election by HMRC or a joint revocation of the Election by you and the Company or your Employer, as applicable, shall be grounds for the forfeiture and cancellation of the RSUs, without any liability to the Company or your Employer.
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Daniel L. Jablonsky, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 of Maxar Technologies Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 9, 2022
/s/ Daniel L. Jablonsky
Daniel L. Jablonsky
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Biggs C. Porter, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 of Maxar Technologies Inc. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 9, 2022
/s/ Biggs C. Porter
Biggs C. Porter
Executive Vice President and Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to § 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. § 1350)
In connection with the Quarterly Report of Maxar Technologies Inc., a Delaware corporation (“Company”), on Form 10-Q for the quarter ended March 31, 2022, as filed with the U.S. Securities and Exchange Commission (“Report”), the undersigned officer of the Company does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Maxar Technologies Inc.
/s/ Daniel L. Jablonsky
Daniel L. Jablonsky
President and Chief Executive Officer
Date: May 9, 2022
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to § 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. § 1350)
In connection with the Quarterly Report of Maxar Technologies Inc., a Delaware corporation (“Company”), on Form 10-Q for the quarter ended March 31, 2022, as filed with the U.S. Securities and Exchange Commission (“Report”), the undersigned officer of the Company does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
Maxar Technologies Inc.
/s/ Biggs C. Porter
Biggs C. Porter
Executive Vice President and Chief Financial Officer
Date: May 9, 2022