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.
There can be no assurance that we will pay dividends on our common stock.
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. On February 27, 2019, the Board of Directors declared a dividend of $0.01 per common share payable on March 29, 2019 to stockholders of record at the close of business on March 15, 2019. The elimination of our dividend payments and/or our dividend program could have a material negative effect on our stock price.
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 may be volatile and 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):
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| | general economic conditions;
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| | fluctuations in our operating results;
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| | variance in our financial performance from the expectations of equity and/or debt research analysts;
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| | conditions and trends in the markets we serve;
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| | additions of or changes to key employees;
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| | changes in market valuations or earnings of our competitors;
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| | trading volumes of our common stock;
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| | future sales of our equity securities and/or future issuances of indebtedness;
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| | changes in the estimation of the future sizes and growth rates of our markets; and
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| | legislation or regulatory policies, practices or actions.
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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. These market and industry factors may materially harm the market price of our common stock irrespective of our operating performance.
The market price of our common stock recently experienced a significant decline from which it has not fully recovered. 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 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 I, Item 3, “Legal Proceedings” in this Annual Report on Form 10-K for additional information.
Techniques employed by short sellers may drive down the market price of our common stock.
Short selling is the practice of selling securities that the seller does not own, but rather has borrowed from a third-party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s best interests for the price of the stock to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short. These short attacks have, in the past, led to selling of shares in the market. 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.
It is not clear what additional effects the negative publicity will have on us, if any, other than potentially affecting the market price of our common stock. If we continue to be the subject of unfavorable allegations, we may have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could be distracting for our management team. Additionally, such allegations against us could negatively impact our business operations and stockholders' equity, and the value of any investment in our stock could be reduced.
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 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:
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| | no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
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| | 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;
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| | 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;
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| | a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders;
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| | 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; and
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| | 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.
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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.
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 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 Annual Report on Form 10-K could result in the actual operating results being different than the guidance, and such differences may be adverse and materialmaterial.
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.
Earth Intelligence
Imagery
Maxar’s ImageryOur Earth Intelligence segment primarily operates out of our U.S. locations in Colorado, locations withVirginia, Michigan, Florida and Missouri, our Sweden location and small sales offices located internationally. We lease approximately 500,000 square feet of office and operations space in Westminster and Longmont, Colorado.
Services
Maxar’s Services segment primarily operates out of Virginia, Maryland, Michigan, Florida and Colorado locations. We lease approximately 450,000one million square feet of office and operations space.
We maintain our properties in good operating condition and believe that the productive capacity of our properties is adequate to meet our current requirements and those for the foreseeable future.
ITEM 3.LEGAL PROCEEDINGS
In November 2017, certain former holders of DigitalGlobe preferred stock (the “Preferred Stockholders”) and certain purported former holders of shares of DigitalGlobe common stock (the “Common Stockholders”) filed petitions for appraisal of the value of their purported holdings of DigitalGlobe common and preferred stock as of the date of the DigitalGlobe Transaction. DigitalGlobe was named as the respondent in the lawsuits, and filed answers See Note 10, “Leases”, to the lawsuitsConsolidated Financial Statements in December 2017. On June 15, 2018,Part II, Item 8, “Financial Statements and Supplementary Data” for additional information regarding our lease commitments.
ITEM 3.LEGAL PROCEEDINGS
Currently, we entered intoare involved in a settlement agreement with the Preferred Stockholders. Under the agreement, the Preferred Stockholders received (i) 2,206,464 common sharesnumber of Maxar;legal proceedings. For a discussion of material legal proceedings, see Note 23, “Commitments and (ii) a payment in cash for the interest that has accrued on the merger consideration from the closing of the DigitalGlobe Transaction. On January 11, 2019, we entered into a confidential settlement agreement with the Common Stockholders, and on January 23, 2019, the court approved the stipulation and order of dismissal and the case was dismissed with prejudice. The resolution of this matter did not have a material effect on our financial position, results of operations or cash flow.
In 2010, we entered into an agreement with a Ukrainian customer to provide a communication satellite system. In 2014, following the annexation of Crimea by the Russian Federation, we declared force majeure with respectContingencies” to the program. The Ukrainian customer accepted that an event of force majeure had occurred. Following various unsuccessful efforts to arrive at a new contractual framework to take account of the changed circumstances (including the force majeureConsolidated Financial Statements in Part II, Item 8, “Financial Statements and various financial issues), the contract with the Ukrainian customer was terminated by us. We completed workSupplementary Data” in this Annual Report on the spacecraft,Form 10-K, which is in storage. In July 2018, the Ukrainian customer issued a statement of claim in the arbitration it had commenced against us, challenging our right to terminate for force majeure, purporting to terminate the contract for defaulthereby incorporated by us, and seeking recovery from us in the amount of approximately $227 million. We filed our statement of defense and supporting evidence and will vigorously defend the claims made in the arbitration. The arbitration is not a public proceeding. At this early stage of the proceeding, we are not in a position to predict the outcome or a reasonable range of potential recoveries by the Ukrainian customer. While we believe that the claim against us is without merit and
that we have factual and legal defenses to the petitioner’s claim, in the event that the arbitration results in a finding against us, our business, results of operations and financial condition could be adversely affected.reference.
In January 2019, a Maxar stockholder filed a class action lawsuit in the District Court of Colorado, naming Maxar and members of management as defendants alleging, among other things, that our public disclosures were deficient in violation of the federal securities laws and seeking monetary damages. Also in January 2019, a Maxar stockholder resident in Canada issued a proposed class action lawsuit in the Ontario Superior Court of Justice against Maxar and members of management claiming misrepresentations in Maxar’s public disclosures and seeking monetary damages. We believe that these cases are without merit and we intend to vigorously defend our position.
We are a party to various other legal proceedings and claims that arise in the ordinary course of business as either a plaintiff or defendant. We analyze all legal proceedings and the allegations therein. The outcome of any of these other proceedings, either individually or in the aggregate, is not expected to have a material adverse effect on our financial position, results of operations or liquidity.
ITEM 4.MINE4.MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5.MARKET5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MaxarMaxar’s common stock trades on the NYSE and TSX under the ticker “MAXR”. As of February 22, 2019,16, 2022, there were approximately 1392 stockholders of record of our common stock. This stockholder figure does not include a substantially greater number of "street name" holders or beneficial holders of our common stock whose shares are held of record by banks, brokers and other financial institutions.
Dividends
Dividends are declared at the discretion of our board of directors and will depend on our financial position, results of operations, cash flows, capital requirements, credit facility and other indebtedness covenants (which include limits on distributions by us), applicable law and other factors as our board of directors deems relevant. Holders of our common stock receive dividends when and as declared by our board of directors. We may modify, suspend, or cancel our cash dividends in any manner and at any time.We declared and paid dividends of $1.14 and $1.14$0.04 per share of common stock during 20182021 and 2017, respectively.2020.
ITEM 6.[RESERVED]
Issuer Purchases of Equity Securities
None.
ITEM 6.SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to and should be read in conjunction with the Consolidated Financial Statements, including the notes thereto in Part II, Item 8, “Financial Statements and Supplementary Data” and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
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| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2015 | | 2014 |
($ millions, except per share amounts) | | | | | | | | | | | | | | | |
Total revenues | | $ | 2,141 | | $ | 1,631 | | $ | 1,558 | | $ | 1,657 | | $ | 1,900 |
Net (loss) income | | $ | (1,264) | | $ | 58 | | $ | 68 | | $ | 103 | | $ | 44 |
(Loss) earnings per common share, basic | | $ | (21.76) | | $ | 1.41 | | $ | 1.87 | | $ | 2.84 | | $ | 1.22 |
Total assets | | $ | 5,001 | | $ | 6,377 | | $ | 2,423 | | $ | 2,508 | | $ | 2,494 |
Long-term obligations | | $ | 3,047 | | $ | 2,961 | | $ | 601 | | $ | 713 | | $ | 650 |
Cash dividends declared per common share | | $ | 1.14 | | $ | 1.14 | | $ | 1.12 | | $ | 1.17 | | $ | 1.18 |
ITEM 7.MANAGEMENT’S7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a global leaderprovider of advancedcomprehensive space technology solutions and are atsecure, 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 nexususe of the new space economy, developingspace. Our approach combines decades of deep mission understanding and sustaining the infrastructure and delivering the information, services and systems that unlock the promise of space fora proven commercial and government markets. As a trusted partner, we provide vertically integrated capabilitiesdefense foundation to deploy solutions and expertise including satellites, Earth imagery, robotics, geospatial datadeliver insights with speed, scale and analytics to help customers anticipate and address their most complex mission-critical challenges with confidence. Maxar trades on the NYSE and TSX under the ticker “MAXR”.
cost effectiveness.Our businesses are organized and managed in threetwo reportable segments: Earth Intelligence and Space Systems, Imagery and Services,Infrastructure, as described below under “Segment“Segment Results”.
RECENT DEVELOPMENTS
Security Control AgreementCommon stock offering
On March 22, 2021, we completed an underwritten public offering of 10 million shares of our common stock at a public offering price of $40 per share (“Offering”). We received proceeds of $380 million, net of $20 million of transaction fees. The underwriters did not exercise the option to purchase an additional 1.5 million shares of our common stock prior to the expiration of the option.
On March 26, 2021, we redeemed $350 million aggregate principal amount of our 9.75% Senior Secured Notes due 2023 (“2023 Notes”) using a portion of the net proceeds from the Offering. Additionally, we paid premiums of approximately $34 million related to the early redemption.
COVID-19 operational posture and Facility Clearancecurrent 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. All our locations continue to operate through a combination of work from home and personnel working on-site, though in some cases capacity utilization and productivity are below normalized levels. We are observing stress in our 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 U.S. Domesticationproductivity 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 year ended December 31, 2021, were not materially impacted by COVID-19.
On
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. We have delayed transition of our employees back into Maxar worksites due to increases in COVID-19 cases in the broad population. 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. As of January 26, 2017, we, together with4, 2022, 99% of our U.S. based subsidiary, Maxar Holdings and the U.S. Department of Defense entered into a Security Control Agreement (“SCA”) and began operating under the agreement. The SCA allows our subsidiaries to hold facility clearances necessary to pursue and execute classified U.S. government space and defense contracts. In February 2017, we received facility security clearance for the offices of Maxar Holdings, and the proxy board at Radiant Geospatial Solutions LLCwas dissolved. On February 2, 2018, the Defense Security Service granted facility clearance for our satellite manufacturing facility in Palo Alto, California.
On January 1, 2019, we completed our previously announced U.S. Domestication. The domiciliation into the United States marked a major milestone in our long-term U.S. access plan, enhanced our ability to provide and support classified applications for U.S. government agencies and fulfilled a commitment made in acquiring DigitalGlobe, which was approved by our shareholders at that time. We will continue to operateemployees were in compliance with this policy and have either been vaccinated or received an accommodation.
WorldView Legion satellites update
We continue to make progress during the SCA until which timetest and integration phase. During January 2022, we experienced delays related to COVID-19 protocols and now, assuming no major issues arise, anticipate the U.S. Departmentfirst launch of Defense determines that such agreement is no longer necessary following the U.S. Domestication.
From our inception until September 30, 2018, we have reported to securities regulators in both Canada and the U.S. using IFRS financial statements. Upon the U.S. Domestication, and including this Annual Report on Form 10-K, we have retrospectively converted our Consolidated Financial Statements from IFRS to accounting principles generally acceptedWorldView Legion satellites in the U.S. (“U.S. GAAP”).
June to July, 2022 timeframe. We plan on having three launches in total and expect the second and third launches to be within three and six months, respectively, after the first launch.
Key Leadership ChangesSEGMENT RESULTS
On January 14, 2019, we announced the appointment of Daniel Jablonsky as President and Chief Executive Officer of Maxar, effective immediately. Mr. Jablonsky, who most recently served as President of DigitalGlobe, a wholly owned subsidiary of Maxar, also joined the Maxar Board of Directors. He succeeds Howard Lance, who resigned from his roles as President and Chief Executive Officer and as a Director of Maxar.
In December 2018, we announced that our Board of Directors elected retired U.S. Air Force Gen. Howell M. Estes III as Chair, effective January 1, 2019, coincident with the U.S. Domestication. Mr. Estes, who has served as a director of our Board since the acquisition of DigitalGlobe, succeeds Robert L. Phillips, who will continue to serve as a director.
In July 2018, we announced the appointment of Biggs Porter as Executive Vice President and Chief Financial Officer of Maxar, effective August 15, 2018. Anil Wirasekara, who previously served as Chief Financial Officer from 1994 to October 2017, assumed the duties of Interim Chief Financial Officer after William McCombe stepped down as Chief Financial Officer in February 2018.
WorldView-4 Satellite
During December 2018, our WorldView-4 satellite experienced a failure in its control moment gyros, preventing the satellite from collecting imagery. As a result, during December 2018, we recorded an impairment loss of $162 million for the remaining book value of the satellite, related assets and future premium payments. The WorldView-4 satellite is insured for $183 million, and we intend to seek full recovery for the loss of WorldView-4 under our insurance policies.
Contingency planning and mitigation efforts are underway to assess the use of our other satellites and outside resources to replace imagery collected by WorldView-4 and meet as much of the existing customer commitments and obligations as possible.
Acquisition of DigitalGlobe
On October 5, 2017, we completed the DigitalGlobe Transaction and renamed the combined company Maxar Technologies Ltd. The transaction created a global leader in Earth imaging and geospatial solutions by combining DigitalGlobe’s over 15-year lead in technology and image library development, as well as its high-resolution Earth imaging capabilities, with our existing position as a world leader in commercial communications satellites.
We are uniquely positioned to grow in the U.S., Canadian and global earth observation and geospatial services markets through our end-to-end space systems, Earth imagery and geospatial solutions. As a result of the DigitalGlobe Transaction, we increased our scale and we believe, credibility with U.S. government agencies and international government customers. The DigitalGlobe Transaction also added more predictable geospatial data and services revenue while diversifying our product and service offering. With a larger set of customers and end markets, we are better able to increase share in existing markets and grow in adjacent markets.
Our vision is to be the world’s leader in the new space economy. We aim to achieve this by integrating innovative technologies, unique capabilities and end-to-end offerings across our businesses to help our customers address their most complex mission-critical challenges with confidence.
Segment Results
Subsequent to the closing of the DigitalGlobe Transaction, in the fourth quarter of 2017, our reportable segments changed to better align with our product and service offerings. The changes to our segments provide investors with increased transparency and allow for easier comparisons with our industry peer group. Our Chief Operating Decision Maker (“CODM”) measures performance of our reportable segments based on revenue and adjustedAdjusted EBITDA. Our threeoperating and reportable segments areare: Earth Intelligence and Space Systems, Imagery and Services. In January 2019, with the appointment of Mr. Jablonsky as our President and Chief Executive Officer, our CODM changed. Our CODM may decide to evaluate our business differently in the future, which could result in changes to our reportable segments.Infrastructure.
Space SystemsEarth Intelligence
In the Space SystemsEarth Intelligence segment, we are a leading supplierglobal 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 space-based and ground-based infrastructure and information solutions. Our products include communication and imaging satellites, satellite payloads and antenna subsystems, space-based and airborne surveillance solutions, robotic systems and associated ground infrastructure and support services. Our offerings serve multiple markets, primarily for communications and surveillance and intelligence applications. Inimagery over our history (referred to as our “Image Library”) of the communications market, our solutions provide cost-efficient global delivery of a broad range of services, including television and radio distribution, broadband internet, and mobile communications. In the surveillance and intelligence market, we offer end-to-end solutions to monitor changes and activities around the globe to support the operational needs of government agencies, both military and civilian, and commercial customers. We also supply spacecraft and subsystems to the U.S. government, Canadian government and other customers for scientific research and development missions, as well as robotic systems for the space and terrestrial markets. Our principal customers in the Space Systems segment are government agencies worldwide as well as satellite operators and satellite manufacturers.
Imagery
In the Imagery segment, we are a leading supplier of high resolution Earth imagery and radar data sourced from our own advanced satellite constellation and third-party providers.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 uses,government and enterprise applications, including mission planning, mapping and analysis, environmental monitoring, disaster management, crop management, oil and gas exploration and infrastructure management. Our principal customersWe 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 Imageryhighest quality imagery basemaps for our customers. The high-quality satellite also enables us to provide advanced 3D modeling for augmented reality (“AR”), virtual reality (“VR”) 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, G-EGD and OWT programs and various classified and unclassified contract vehicles. In the commercial satellite Earth observation industry, we are a leader across U.S., Canadian and other government agencies, international government agencies (primarily defense and intelligence agencies), as well as a wide variety of commercial customers in multiple markets.enterprise customer verticals.
Services
In the Services segment, weWe also provide geospatial services that combine imagery, analytic expertise and innovative technology to deliver integrated intelligence solutions to customers. We provideOur approximately 1,700 cleared personnel support analytic solutions that accurately document change and enable geospatial modeling and analysis that help predict where events will occur to help customers protect lives and make resource allocation decisions.occur. Our primary customer in the Services segmentof geospatial services is the U.S. government, but we also support intelligence requirements for other internationalU.S. allied governments, global development organizations and enterprise customers.
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 customers.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
The following table provides selected annual financial information for fiscalthe years 2016, 2017ended December 31, 2021, 2020 and 2018.2019.
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| | | Year Ended December 31, | | $ Change | | | % Change | | $ Change | | | % Change | |
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| | Year ended December 31, | | Change | | Change | | |
| | 2018 | | 2017 | | 2016 | | 2017 to 2018 | | 2016 to 2017 | | |
| | | 2021 | | 2020 | | 2019 | | 2020 to 2021 | | 2019 to 2020 | |
($ millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product | | $ | 851 | | $ | 1,119 | | $ | 1,286 | | | (24) | % | | (13) | % | | $ | 678 | | $ | 633 | | $ | 560 | | $ | 45 | | | 7 | % | $ | 73 | | | 13 | % |
Service | | | 1,290 | | | 512 | | | 272 | | | * | | | 88 | | | | 1,092 | | | 1,090 | | | 1,106 | | | 2 | | | 0 | | | (16) | | | (1) | |
Total revenues | | $ | 2,141 | | $ | 1,631 | | $ | 1,558 | | 31 | % | | 5 | % | | $ | 1,770 | | $ | 1,723 | | $ | 1,666 | | $ | 47 | | | 3 | % | $ | 57 | | | 3 | % |
Costs and expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product costs, excluding depreciation and amortization | | $ | 872 | | $ | 986 | | $ | 1,064 | | (12) | % | | (7) | % | | | 601 | | | 615 | | | 593 | | | (14) | | | (2) | | | 22 | | | 4 | |
Service costs, excluding depreciation and amortization | | | 408 | | 141 | | 92 | | * | | 53 | | | | 383 | | | 378 | | | 382 | | | 5 | | | 1 | | | (4) | | | (1) | |
Selling, general and administrative | | | 507 | | 387 | | 223 | | 31 | | 74 | | | | 369 | | | 332 | | | 325 | | | 37 | | | 11 | | | 7 | | | 2 | |
Depreciation and amortization | | | 449 | | 161 | | 72 | | * | | * | | | | 290 | | | 348 | | | 376 | | | (58) | | | (17) | | | (28) | | | (7) | |
Impairment losses, net | | | 1,030 | | | — | | | — | | | — | | | — | | |
Operating (loss) income | | $ | (1,125) | | $ | (44) | | $ | 107 | | * | % | | * | % | |
(Gain) loss on orbital receivables allowance | | | | (49) | | | 14 | | | 14 | | | (63) | | | * | | | - | | | - | |
Impairment loss | | | | — | | | 33 | | | — | | | (33) | | | (100) | | | 33 | | | * | |
Satellite insurance recovery | | | | — | | | — | | | (183) | | | — | | | * | | | 183 | | | (100) | |
Loss (gain) on sale of assets | | | | — | | | 1 | | | (136) | | | (1) | | | (100) | | | 137 | | | (101) | |
Operating income | | | $ | 176 | | $ | 2 | | $ | 295 | | $ | 174 | | | * | % | $ | (293) | | | (99) | % |
Interest expense, net | | | 202 | | 99 | | 33 | | 104 | | * | | | | 151 | | | 175 | | | 219 | | | (24) | | | (14) | | | (44) | | | (20) | |
Other expense (income), net | | | 1 | | | (39) | | | 7 | | | * | | | * | | |
(Loss) income before taxes | | $ | (1,328) | | $ | (104) | | $ | 67 | | * | % | | * | % | |
Income tax benefit | | | (62) | | (162) | | (1) | | (62) | | * | | |
Other income, net | | | | (8) | | | (104) | | | (1) | | | 96 | | | (92) | | | (103) | | | * | |
Income (loss) before taxes | | | $ | 33 | | $ | (69) | | $ | 77 | | $ | 102 | | | (148) | % | $ | (146) | | | (190) | % |
Income tax (benefit) expense | | | | (13) | | | (22) | | | 5 | | | 9 | | | (41) | | | (27) | | | * | |
Equity in income from joint ventures, net of tax | | | (2) | | | — | | | — | | | * | | | * | | | | — | | | (1) | | | (11) | | | 1 | | | (100) | | | 10 | | | (91) | |
Net (loss) income | | $ | (1,264) | | $ | 58 | | $ | 68 | | | * | % | | (15) | % | |
Income (loss) from continuing operations | | | $ | 46 | | $ | (46) | | $ | 83 | | $ | 92 | | | (200) | % | $ | (129) | | | (155) | % |
Discontinued operations: | | | | | | | | | | | | | | | | | | | | | | | |
Income from operations of discontinued operations, net of tax | | | | — | | | 32 | | | 26 | | | (32) | | | (100) | | | 6 | | | 23 | |
Gain on disposal of discontinued operations, net of tax | | | | — | | | 317 | | | — | | | (317) | | | (100) | | | 317 | | | * | |
Income from discontinued operations, net of tax | | | | — | | | 349 | | | 26 | | | (349) | | | (100) | | | 323 | | | * | |
Net income | | | $ | 46 | | $ | 303 | | $ | 109 | | $ | (257) | | | (85) | % | $ | 194 | | | 178 | % |
*Not meaningful.
Product and service revenuerevenues
| | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | $ Change | | | % Change | | $ Change | | % Change | |
| | | | | | | | | | | | | | | |
| | Year ended December 31, | | Change | | Change | | |
| | 2018 | | 2017 | | 2016 | | 2017 to 2018 | | 2016 to 2017 | | |
| | | 2021 | | 2020 | | 2019 | | 2020 to 2021 | | 2019 to 2020 | |
($ millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Product revenues | | $ | 851 | | $ | 1,119 | | $ | 1,286 | | | (24) | % | | (13) | % | | $ | 678 | | $ | 633 | | $ | 560 | | $ | 45 | | | 7 | % | $ | 73 | | 13 | % |
Service revenues | | | 1,290 | | | 512 | | | 272 | | | * | | | 88 | | | | 1,092 | | | 1,090 | | | 1,106 | | | 2 | | | 0 | | | (16) | �� | | (1) | |
Total revenues | | $ | 2,141 | | $ | 1,631 | | $ | 1,558 | | | 31 | % | | 5 | % | | $ | 1,770 | | $ | 1,723 | | $ | 1,666 | | $ | 47 | | | 3 | % | $ | 57 | | 3 | % |
*Not meaningful.
Total revenuerevenues increased $510to $1,770 million in 2018from $1,723 million, or by $47 million, for the year ended December 31, 2021 compared to 2017.2020. The increase in revenue was primarily driven by an increase in revenues in our Space Infrastructure and Earth Intelligence segments.
Total revenues increased to $1,723 million from $1,666 million, or by $57 million, for the inclusion of a full year of revenue relatedended December 31, 2020 compared to DigitalGlobe’s imagery and services business as compared with only approximately three months of revenue in 2017.2019. The increase in service revenue iswas primarily driven by a $725 millionan increase in revenue related to DigitalGlobe’s imagery and services business as well as an increase of $50 million in service revenue in theour Space Systems segment. These increases wereInfrastructure segment partially offset by a decrease in product revenue in the Space Systemsour Earth Intelligence segment. The revenue decrease in our Earth Intelligence segment of $268 million which was primarily driven by the changesa $40 million decrease in the GeoComm market. recognition of deferred revenue related to the EnhancedView Contract. We recognized $120 million of deferred revenue from the EnhancedView Contract for the year ended December 31, 2019, compared to $80 million for the year ended December 31, 2020, as it was fully recognized as of August 31, 2020.
Further discussion of the drivers behind the decreaseincrease in revenue within the Space Systems segmentrevenues is included within the “Results by Segment” section below.
Total revenue increased $73 million in 2017 compared to 2016. The increase in revenue was primarily driven by the acquisition of DigitalGlobe’s imagery and services business which contributed $222 million to services revenue. This increase was partially offset by a decrease of product revenue of $166 million in the Space Systems segment compared to 2016. Further discussion of the drivers behind the decrease in revenue within the Space Systems segment is included within the “Results by Segment” section below.
See Note 16, “Segment Information”“Revenues” to the Consolidated Financial Statements in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” for product and service revenuerevenues by segment.
Product and service costs
| | | | | | | | | | | | | | | | |
| | Year ended December 31, | | | Change | | | Change | |
| | 2018 | | 2017 | | 2016 | | | 2017 to 2018 | | | 2016 to 2017 | |
($ millions) | | | | | | | | | | | | | | | | |
Product costs | | $ | 872 | | $ | 986 | | $ | 1,064 | | | (12) | % | | (7) | % |
Service costs | | | 408 | | | 141 | | | 92 | | | * | | | 53 | |
Total costs | | $ | 1,280 | | $ | 1,127 | | $ | 1,156 | | | 14 | % | | (3) | % |
*Not meaningful.
| | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | | $ Change | | | % Change | | $ Change | | | % Change | |
|
| | 2021 | | 2020 | | 2019 | | | 2020 to 2021 | | 2019 to 2020 | |
($ millions) | | | | | | | | | | | | | | | | | | | | | | | |
Product costs, excluding depreciation and amortization | | $ | 601 | | $ | 615 | | $ | 593 | | | $ | (14) | | | (2) | % | $ | 22 | | | 4 | % |
Service costs, excluding depreciation and amortization | | | 383 | | | 378 | | | 382 | | | | 5 | | | 1 | | | (4) | | | (1) | |
Total costs | | $ | 984 | | $ | 993 | | $ | 975 | | | $ | (9) | | | (1) | % | $ | 18 | | | 2 | % |
Total cost of product and services decreased to $984 million from $993 million, or by $9 million, for the year ended December 31, 2021 compared to 2020. The decrease in costs was driven by a decrease in product costs within our Space Infrastructure segment partially offset by an increase in service costs within our Earth Intelligence segment.
Total cost of product and services increased $153to $993 million in 2018from $975 million, or by $18 million, for the year ended December 31, 2020 compared to 2017.2019. The increase is primarily related to the inclusion of a full year of costs related to DigitalGlobe’s imagery and services business compared to only approximately three months in 2017 which drove an increase of $185 million in the year over year costs. This was partially offset by a net decrease in costs from the Space Systems segment. Further discussion is included within the “Results by Segment” section below.
Total cost of product and services decreased $29 million in 2017 compared to 2016. The decrease in costs was primarily driven by the lower volumesan increase in the Space Systemcosts within our Earth Intelligence segment which drovepartially offset by a decrease of productwithin our Space Infrastructure segment.
Selling, general and service. This decrease primarily was offset by an increase of $57 million related to the inclusion of approximately three months of results from DigitalGlobe’s imagery and services business compared to no costs in 2016. Further discussion is included within the “Results by Segment” section below. administrative
| | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | $ Change | | | % Change | | $ Change | | | % Change | |
|
| | 2021 | | 2020 | | 2019 | | 2020 to 2021 | | 2019 to 2020 | |
($ millions) | | | | | | | | | | | | | | | | | | | | | | |
Selling, general and administrative | | $ | 369 | | $ | 332 | | $ | 325 | | $ | 37 | | | 11 | % | $ | 7 | | | 2 | % |
Selling, general and administrative costs increased to $369 million from $332 million, or by $37 million, for the year ended December 31, 2021 compared to 2020. The increase was primarily due to an increase in labor related expenses of $28 million, an increase in research and development expenses within the Space Infrastructure segment of $11 million and an increase in other expenses of $4 million. The increase in labor related expenses was primarily driven by an increase in headcount, employee compensation and fringe benefits. These increases were partially offset by a $6 million decrease in transaction and integration related expenses.
| | | | | | | | | | | | | | | | |
| | Year ended December 31, | | | Change | | | Change | |
| | 2018 | | 2017 | | 2016 | | | 2017 to 2018 | | | 2016 to 2017 | |
($ millions) | | | | | | | | | | | | | | | | |
Selling, general and administrative | | $ | 507 | | $ | 387 | | $ | 223 | | | 31 | % | | 74 | % |
Selling, general and administrative expense was $507costs increased to $332 million in 2018from $325 million, or by $7 million, for the year ended December 31, 2020 compared to $387 million in 2017. The increase is primarily related to the inclusion of a full year of selling, general and administrative costs related to DigitalGlobe’s imagery and service business compared with only approximately three months in 2017 which drove an increase of $157 million. This increase was partially offset by a decrease in stock-based compensation which was primarily related to a one-time expense of $33 million in 2017 due to the accelerated vesting of certain DigitalGlobe stock-based compensation awards. The increase in selling, general and administrative was also partially offset by a decrease in acquisition and integration costs related to the DigitalGlobe Transaction of $26 million in 2017 which did not recur in 2018. This was partially offset by an increase in costs of $23 million in the Space Systems segment.
Selling, general and administrative expense was $387 million in 2017 compared to $223 million in 2016. The increase is primarily related to one-time costs of $60 million incurred in connection with the DigitalGlobe Transaction, including professional and legal fees, consulting fees, and increased company headcount. 2019. The increase was also driven byprimarily due to an increase in stock-based compensation expense relatedof $23 million. Stock-based compensation expense increased primarily due to a one-time expense of $33 million in 2017 whichhigher stock price. The increase was the result of the accelerated vesting of certain DigitalGlobe stock-based compensation awards which were recognized in our consolidated results. There was also due to an increase in selling, generallabor related expenses of $16 million driven primarily by an increase in headcount and administrative expense of $57employee compensation. These increases were partially offset by a $15 million due to the inclusion of approximately three months of selling, generaldecrease in restructuring expenses, a $9 million decrease in transaction and administrative costs from DigitalGlobe’s imageryintegration related expenses and services business.
a $7 million decrease in travel related expenses driven by our COVID-19 operating posture.
Depreciation and amortization
The following table shows depreciation and amortization expense for the fiscal years indicated.
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | $ Change | | | % Change | | $ Change | | | % Change | |
| | | | | | | | | | | | | | | |
| | Year ended December 31, | | Change | | Change | | |
| | 2018 | | 2017 | | | 2016 | | 2017 to 2018 | | 2016 to 2017 | | |
| | | 2021 | | 2020 | | 2019 | | 2020 to 2021 | | 2019 to 2020 | |
($ millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property, plant and equipment | | $ | 157 | | $ | 61 | | $ | 34 | | | * | % | | 79 | % | | $ | 86 | | $ | 93 | | $ | 107 | | $ | (7) | | | (8) | % | $ | (14) | | | (13) | % |
Intangible assets | | | 292 | | | 100 | | | 38 | | | * | | | * | | | | 204 | | | 255 | | | 269 | | | (51) | | | (20) | | | (14) | | | (5) | |
Depreciation and amortization expense | | $ | 449 | | $ | 161 | | $ | 72 | | | * | % | | * | % | | $ | 290 | | $ | 348 | | $ | 376 | | $ | (58) | | | (17) | % | $ | (28) | | | (7) | % |
*Not meaningful.
Depreciation and amortization expense increased $288decreased to $290 million in 2018from $348 million, or by $58 million, for the year ended December 31, 2021 compared to 2020. The decrease was primarily driven by a decrease in amortization expense for backlog acquired as part of the acquisition of DigitalGlobe, Inc. on October 5, 2017. We recognized ten months of amortization expense for the year ended December 30, 2020, compared to none for the year ended December 31, 2021, as all of the U.S. government acquired backlog was fully amortized as of October 2020. The increase is primarily duedecrease was also driven by a decrease in depreciation expense related to the extension of the useful lives of two satellites in the fourth quarter of 2020 and three satellites in the fourth quarter of 2021. These decreases were partially offset by the inclusion of a full year of depreciation and amortization expense relatedfrom property, plant and equipment and intangible assets acquired as part of the Vricon Acquisition on July 1, 2020, compared to two quarters of expense in 2020.
Depreciation and amortization expense decreased to $348 million from $376 million, or by $28 million, for the acquisitionyear ended December 31, 2020 compared to 2019. The decrease was primarily driven by a decrease in amortization expense for backlog acquired as part of the DigitalGlobe asacquisition. We recognized a full year of amortization expense for the year ended December 31, 2019, compared to approximately threenine months for the year ended December 31, 2020, as all of the U.S. government acquired backlog was fully amortized in October 2020. The decrease was also driven by a decrease in depreciation expense related to asset retirements made in the second half of 2019 and in the first quarter of 2020, the extension of the useful life of one satellite in the fourth quarter of 2019 and two satellites in the fourth quarter of 2020 and the sale of our owned properties in Palo Alto in December 2019. These decreases were partially offset due to the inclusion of depreciation and amortization expense in 2017.
Depreciationfrom property, plant and amortization expense increased $89 million in 2017 compared to 2016. The increase is primarily due toequipment and intangible assets acquired as part of the inclusion of approximately three months of depreciation and amortization expense related to the acquisition of DigitalGlobe asVricon Acquisition on July 1, 2020, compared to no such expense in 2016.2019.
Impairment losses
(Gain) loss on orbital receivables allowance
| | | | | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, | | $ Change | | | % Change | | $ Change | | | % Change | |
|
| | 2021 | | 2020 | | 2019 | | 2020 to 2021 | | 2019 to 2020 | |
($ millions) | | | | | | | | | | | | | | | | | | | | | | |
(Gain) loss on orbital receivables allowance | | $ | (49) | | $ | 14 | | $ | 14 | | $ | (63) | | | * | % | $ | — | | | — | % |
*Not meaningful.
During the year ended December 31, 2018,2021, as a result of an increased certainty of collections of the outstanding orbital receivables from our largest customer, due to their emergence from bankruptcy, we recognized $1.1 billiona $49 million reversal of our orbital receivables allowance.
During each of the years ended December 31, 2020 and 2019, we recognized a $14 million loss on our orbital receivables allowance within the Space Infrastructure segment. The losses were primarily due to a decrease in the credit rating associated with our largest orbital receivables customer.
program impacts revenue, as revenue is recognizedfor the year ended December 31, 2021. Revenues were negatively impacted by a $19 million decrease year over time under the cost-to-cost method. Revenue attributableyear related to our Legioncontract with Sirius XM Holdings Inc. (“Sirius XM”). The year ended December 31, 2021, included a $30 million cumulative adjustment to revenue primarily related to the loss of final milestone and expected orbital payments from Sirius XM due to the non-performance of the SXM-7 satellite constellation is eliminatedand other adjustments that were recorded in consolidation.
Space Systems segment revenue decreased $1512021. After exhausting efforts to fully recover the SXM-7 satellite and further discussions with Sirius XM, in April 2021, we made the determination to record the cumulative adjustment to revenue. In addition, there were $3 million of costs incurred in 2017 comparedthe first quarter of 2021 related to 2016.attempts to repair and fully recover the SXM-7 satellite. The aggregate impact for the year ended December 30, 2021, was $33 million. The $33 million decrease related primarily to a lower level of geostationary communications satellite construction activity in 2017was partially offset by higherthe non-reoccurrence of a $14 million adjustment to revenue from contracts withdue to the U.S. government and other customers to supply spacecraft and to performidentification of a design studiesanomaly on the commercial satellite program, which was recorded for scientific research and development missions.
Adjusted EBITDA margin percentagethe year ended December 31, 2020. In addition, the total increase in revenues from the Space SystemsInfrastructure segment decreasedwas partially offset by a $49 million decrease in 2018revenues from U.S. government contracts.
Revenues from the Space Infrastructure segment increased to $721 million from $706 million, or by $15 million, for the year ended December 31, 2020, compared to 2017 from 12% to 0%. The decrease from 2017 to 2018 is2019. Revenues increased primarily related to an increase in estimated costs to complete programs as a result of supplier performance issues and delays experienced during the second half of 2018, as well as unanticipated impacts of lower volume in our Palo Alto factory, which resulted in lower productivity and overhead absorption. In addition, we incurred $28 million of liquidated damages in 2018, compared to a recovery of liquidated damages during 2017, which also contributed to the decrease in Adjusted EBITDA.
Adjusted EBITDA margin percentage from the Space Systems segment for 2017 was 12% compared to 11% for 2016. In 2017, Adjusted EBITDA included a credit of $24 million relating to the curtailment of a postretirement benefit plan and a loss provision of $10 million relating to a financial guarantee contract. In 2016, Adjusted EBITDA included a contract loss provision of $8 million resulting from a change in the estimate of development and engineering costs to complete a firm fixed price program. The change in margin percentage was also impacted by cost containment and restructuring efforts, and the mix of construction contracts in progress.
Imagery
The following table provides selected financial information for the Imagery segment.
| | | | | | | | | | |
| | Year ended December 31, | |
| | 2018 | | 2017 | | 2016 | |
($ millions) | | | | | | | | | | |
Total revenue | | $ | 845 | | $ | 230 | | $ | 42 | |
| | | | | | | | | | |
Adjusted EBITDA | | $ | 518 | | $ | 143 | | $ | 23 | |
Adjusted EBITDA margin percentage | | | 61 | % | | 62 | % | | 55 | % |
| | | | | | | | | | |
Revenues from the Imagery segment increased $615 million in 2018 compared to 2017. The increase was primarily driven by the inclusion of DigitalGlobe’s imagery business for a full year compared to only one quarter of results in 2017. DigitalGlobe’s imagery business drove an increase in revenuesvolume related to U.S. government contracts of $613$137 million toduring the Imagery segment before intercompany eliminations. Excluding revenue from DigitalGlobe’s imagery business, revenue from the Imagery segment before intercompany eliminations increased $2 million period over period.
Revenues from the Imagery segment increased $188 million in 2017 compared to 2016 due to the inclusion of financial results from DigitalGlobe’s imagery business for the period October 5, 2017 toyear ended December 31, 2017. During this period, DigitalGlobe contributed revenues of $189 million to the Imagery segment before intercompany eliminations. Revenue from the Imagery segment before intercompany eliminations and excluding revenue from DigitalGlobe remained relatively consistent period over period.
Adjusted EBITDA margin percentage from the Imagery segment for 2018 was 61%, compared to 62% in 2017. The decrease in margin percentage reflected the blend of margins from DigitalGlobe’s imagery business for a full year as compared with only approximately three months in 2017.
Adjusted EBITDA margin percentage from the Imagery segment for 2017 was 62%, compared to 55% in 2016. The increase in margin percentage reflected the blend of margins from DigitalGlobe’s imagery business for the period October 5, 2017 to December 31, 2017 and our legacy radar imagery business.
Services
The following table provides selected financial information for the Services segment.
| | | | | | | | | | |
| | | | | | | | | | |
| | Year ended December 31, | |
| | 2018 | | 2017 | | 2016 | |
($ millions) | | | | | | | | | | |
Total revenue | | $ | 266 | | $ | 144 | | $ | 100 | |
| | | | | | | | | | |
Adjusted EBITDA | | $ | 25 | | $ | 23 | | $ | 19 | |
Adjusted EBITDA margin percentage | | | 9 | % | | 16 | % | | 19 | % |
Services segment revenue increased $122 million in 20182020, compared to the same period in 2017.2019. This increase in revenue was partially offset by the impact of reduced volumes on commercial programs of $122 million including a $9 million impact due to increases in estimated costs and an associated change in the EAC profit margin of a commercial satellite program due to the identification of a design anomaly in the final stage of a testing process. Revenues were also negatively impacted by $27 million of estimated COVID-19 related EAC growth during the period and are included in the above-mentioned results. The increases in the EACs are due to increases in estimated program costs associated with the COVID-19 operating posture and the estimated impact of certain items such as supplier delays and increased labor hours. These costs are considered incremental and separable from normal operations.
Adjusted EBITDA increased to $46 million from a loss of $3 million, or by $49 million, for the year ended December 31, 2021, compared to 2020. The increase in the Space Infrastructure segment was primarily related to a $92 million increase driven by increased volumes on commercial programs which resulted in increased margins and fewer negative EAC impacts during the year as compared to the year ended December 31, 2020, which included negative EAC impacts due to COVID-19. The increase in commercial program margins has been driven by a change in program mix related to the completion of less profitable programs offset by new, more profitable programs. These increases were partially offset by the $19 million reduction in revenue related to the above-mentioned SXM-7 satellite impacts and a $19 million increase in indirect costs and selling, general and administrative costs which was primarily driven by the inclusionan $11 million increase in research and development expenses.
Adjusted EBITDA was a loss of DigitalGlobe’s services business for a full year$3 million compared to only one quartera loss of results$17 million, or an increase of $14 million, for the year ended December 31, 2020, compared to 2019. The increase in 2017. The inclusionthe Space Infrastructure segment is primarily related to higher margins and favorable EACs outside of the DigitalGlobe’s services business drove an increase in revenuesestimated COVID-19 impacts discussed below, on commercial programs of $112 million year over year before intercompany eliminations. Excluding the revenue from DigitalGlobe’s services business, the Services segment revenue increased $10 million period over period, primarily$68 million. This has been driven by an increasea change in volumeprogram mix related to the completion of U.S. government sales.
Revenues fromless profitable programs offset by new, more profitable programs along with $8 million less of program losses on a developmental program for the Services segment increased $44 million in 2017year ended December 31, 2020, compared to the same period in 20162019. The increase in commercial programs are partially offset by an estimated $27 million negative impact related to our COVID-19 operating posture. The increase is also partially offset by a $16 million increase in costs due to a change in the inclusion of financial resultscompensation structure from DigitalGlobe’s services business for the period October 5, 2017retention payments to December 31, 2017. During this period, DigitalGlobe contributed revenues of $32 million to the Servicesbonuses which were not included in segment before intercompany eliminations. Excluding the revenue from the inclusion of DigitalGlobe’s services business, the Services segment revenue increased $12 million period over period, primarily driven by an increase in volume of U.S. government sales.
Adjusted EBITDA margin percentage fromin 2019, a $9 million negative impact on the Services segment for 2018above-mentioned commercial satellite program with a design anomaly and a recovery of a previously reserved amount of $7 million in 2019 which did not reoccur in 2020. The remainder of the change was 9%, comparedrelated to 16% in 2017. Thea decrease in margin percentage reflected the blendcost of margins from DigitalGlobe’sproduct and services business for a full year as compared with only approximately three months in 2017.and selling, general and administrative expenses.
Adjusted EBITDA margin percentage from the Services segment for 2017 was 16%, compared to 19% in 2016. The decrease in margin percentage reflected the blend of margins from DigitalGlobe’s services business for the period October 5, 2017 to December 31, 2017Corporate and our legacy services business.other expenses
Corporate expense
Corporateand other expenses include items such as corporate office costs, regulatory costs, executive and director compensation, certain stock-based compensationforeign exchange gains and losses, retention costs and fees for audit, legal and consulting services.
Corporate costs are not allocated to our segments.
Corporateand other expenses for the year ended December 31, 2018 was $542021 increased to $89 million from $61 million, or by $28 million, compared to $652020. The increase was primarily driven by a $14 million for the same period of 2017. This decrease of $11 million or 17% isincrease in selling, general and administrative costs primarily attributabledue to the non-recurrence of a one-time stock-based compensation expense of $33 millionan increase in 2017 which was the result of the accelerated vesting of certain DigitalGlobe stock-based compensation awards. This decrease was offsetlabor related expenses driven by an increase in employee compensation and fringe benefits. There was also an increase in stock-based compensation expense of corporate expenses$5 million primarily due to additional headcount as a resulthigher fair market value of the DigitalGlobe Transaction, and the expansion and ramp up of corporate functions to support our increased scale.
Corporate expenseequity awards granted. The increase was also driven by a $3 million foreign exchange loss for the year ended December 31, 2017 was $652021, compared to a $5 million foreign exchange gain for the year ended December 31, 2020.
Corporate and other expenses for the year ended December 31, 2020 decreased to $61 million from $86 million, or by $25 million, compared to $262019. The decrease was primarily driven by a $24 million decrease in retention costs related to a 2019 program within the Space Infrastructure segment. The decrease was also driven by a $5 million foreign exchange gain for the same period of 2016. Thisyear ended December 31, 2020, compared to a $2 million foreign exchange loss for the year ended December 31, 2019. These decreases were partially offset by a $13 million increase of $39 million isin stock-based compensation expense primarily attributabledriven by a higher stock price.
Intersegment eliminations
Intersegment eliminations are related to additional headcount asprojects between our segments, primarily WorldView Legion. Intersegment eliminations decreased for the year ended December 31, 2021 compared to 2020, primarily related to a result ofdecrease in satellite construction activity.
Intersegment eliminations decreased for the DigitalGlobe Transaction, and the expansion and ramp up of corporate functionsyear ended December 31, 2020 compared to support our increased scale.2019, primarily related to a decrease in satellite construction activity.
BACKLOG
Our backlog by segment from continuing operations is as follows:
| | | | | | | |
| | Year ended December 31, | |
| | 2018 | | 2017 | |
| | | | | | | |
| | | December 31, | | December 31, |
| | | 2021 | | 2020 |
($ millions) | | | | | | | | | | | | |
Space Systems | | $ | 935 | | $ | 1,548 | |
Imagery | | | 1,230 | | | 1,604 | |
Services | | | 246 | | | 169 | |
Earth Intelligence | | | $ | 1,028 | | $ | 880 |
Space Infrastructure | | | | 865 | | | 1,024 |
Total backlog | | | 2,411 | | | 3,321 | | | 1,893 | | | 1,904 |
Unfunded contract options | | | 1,000 | | | 119 | | | 650 | | | 856 |
Total | | $ | 3,411 | | $ | 3,440 | | $ | 2,543 | | $ | 2,760 |
Order backlog, representing the estimated dollar value of firm funded contracts for which work has not yet been performed (also known as the remaining performance obligations on a contract), was $2.4 billion$1,893 million as of December 31, 2018 (December2021 compared to $1,904 million as of December 31, 2017 - $3.3 billion).2020. Order backlog generally does not include unexercised contract options and potential orders under indefinite delivery/indefinite quantity contracts. Approximately 50%66% of the total $2.4 billion$1,893 million backlog as of December 31, 20182021 is expected to be converted into revenue in 2019.2022.
Backlog in the Space SystemsInfrastructure segment is primarily comprised of multi-year awards, such as satellite builds. Fluctuations in the backlog are driven primarily by the timing of large program wins. MostBacklog in the Earth Intelligence segment consists of the Imageryboth multi-year and Services segment contracts are 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.
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 contract option as of December 31, 2018 was primarily comprised of the option years in the EnhancedView Contract (September 1, 2020 through August 31, 2023). We believe it is the U.S. government’s intention to exercise all option years, subject only to annual congressional appropriation of funding and the federal budget process. As each option year is exercised, it will be added to backlog.
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 $650 million and $856 million as of December 31, 2021 and 2020, 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 contract options as of December 31, 2021 were primarily comprised of the option year in the EnhancedView Contract (September 1, 2022 through July 12, 2023) and other U.S. government and commercial customer contracts. In November 2021, the National Reconnaissance Office (“NRO”) announced the release of the Electro-Optical Commercial Layer (“EOCL”) contract Request for Proposal (“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 access to existing credit facilities 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.Facility (as defined below). Our primary short-term cash requirement isrequirements 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 legion satellite constellation.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 termlong-term construction contracts.
Our medium-term to long-term cash requirements are to service and repay debt and to invest,make investments, including in facilities, equipment, technologies and research and development for growth initiatives. These capital investments include investments in 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 termlong-term debt is not untilin the fourth quarter of 2020.2023 and relates to the 2023 Notes and Revolving Credit Facility. We had a significant partial debt redemption of the 2023 Notes in the first quarter of 2021 using proceeds from our Offering. 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. As of the year ended December 31, 2021, we had total short-term purchase obligations of $324 million and total long-term purchase obligations of $127 million. These amounts are based on volumes consistent with anticipated requirements to fulfill purchase orders or contracts for product deliveries received, or expected to be received, from customers.
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 December 2020, we prefunded $16 million related to our qualified pension plan. Due to the December 2020 prefunding, there were no required contributions for our qualified pension plan for the year ended December 31, 2021. In addition, the American Rescue Plan Act of 2021 includes provisions for pension funding relief in future periods. We have elected to take advantage of these provisions and anticipate lower required contributions for our qualified pension plan in the upcoming years. The Company has no further required contributions on its qualified pension plan for the year ended December 31, 2022.
Our ability to fund theseour 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
2023 (“Revolving Credit Facility”), and (ii) a senior secured first lien term AB facility (“Term Loan A”) in an aggregate principal amount of $500 million consisting of a $250 million tranche with a three-year maturity and a $250 million tranche with a four-year maturity, and (iii) a seven-year senior secured first lien term B facility (“Term Loan B”) in anoriginal aggregate principal amount of $2.0 billion.
Loans under the Revolving Credit Facility are available in U.S. dollars and, at our option, in Canadian dollars. Term Loan A and Term Loan B are repayable in U.S. dollars. Borrowings under the Revolving Credit Facility and Term Loan A bear interest at a rate equal to U.S. LIBOR (for U.S. dollar borrowings) and CDOR or Canadian Bankers’ Acceptances (for Canadian dollar borrowings), plus a margin of 120 – 350 basis points per annum, based on our total leverage ratio. Term Loan B bears interest at U.S. LIBOR plus 275 basis points per annum. On April 5, 2018, we entered into interest rate swaps at a notional value of $1.0 billion maturing in April 2021 or April 2022. As of December 31, 2018, we had hedged approximately 32.8% of our floating rate exposure on our outstanding debt at an average base rate of 2.56% (excluding the margin specified in the Syndicated Credit Facility).
The Revolving Credit Facility and October 2024 (“Term Loan A are payable at maturity. Term Loan B will amortize in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the loan, with the final balance payable at maturity. The Revolving Credit Facility, Term Loan A, and Term Loan B may be repaid by us, in whole or in part, together with accrued interest, without premium or penalty.
The Syndicated Credit Facility is guaranteed by us and certain of our designated subsidiaries. The security for the Syndicated Credit Facility, subject to customary exceptions, includes substantially all our tangible and intangible assets and our subsidiary guarantors. We are required to make mandatory prepayments of the outstanding principal and accrued interest upon the occurrence of certain events and to the extent of a specified percentage of annual excess cash flow that is not reinvested or used for other specified purposes. The Syndicated Credit Facility is subject to customary affirmative and negative covenants, default provisions, representations and warranties and other terms and conditions.
B”).The Revolving Credit Facility includes an aggregate $200 million sub limit under which letters of credit can be issued. As of December 31, 20182021 and 2017,December 31, 2020, we had $18$28 million and $26$31 million, respectively, of issued and undrawn letters of credit outstanding under the Revolving Credit Facility.
OnSenior Secured Notes due 2023
In December 21, 2018,2019, we amendedissued $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 are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility (the “Amended Agreement”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 Amended Agreement revised2027 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 financial covenants to increaserate of 7.54% per year, payable semi-annually in cash in arrears, for which interest payments commenced in December 2020. The 2027 Notes are guaranteed on a senior secured basis by each of the maximum consolidated debt leverage ratios permitted underCompany’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 a periodproceeds of time selected by us (the “Covenant Relief Period”) and increased$291 million. We determined that the interest rate incurred by us thereunder at certain consolidated debt leverage ratios. The Amended Agreement increased the maximum consolidated debt leverage ratio to 5.5x through the quarter ended December 31, 2018, 6.0x through the quarter ended September 30, 2020, and 5.5x thereafter. The interest coverage ratio remained the same at a minimum of 2.5x through the quarter ending June 30, 2019 and 2.75x thereafter. The Amended Agreement also adjusted the definition of EBITDAleaseback terms were off-market. In accordance with Accounting Standards Codification 842 – Leases, we accounted for the purposeexcess of calculating the financial ratios under U.S. GAAP. In additionleaseback 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.
See Note 12, “Long-term debt and interest expense, net” to increased flexibilitythe Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for further details on our financial covenants, during the Covenant Relief Period, the Amended Agreement restricts the use of certain asset sale proceeds, limits the type of new debt issuances, certain restricted payments and permitted acquisitions under the Syndicated Credit Facility. As of December 31, 2018, we were in compliance with our debt covenants.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.
In During the years ended December 31, 2021 and 2020, we did not sell or repurchase any orbital receivables. During the year ended December 31, 20182019, we solddid not sell any eligible receivables and repurchased $24 million of specifically identified orbital receivables. The orbital receivables for net proceedswere repurchased as a result of $18 million. There were no drawdowns executed inour customer transferring the year ended December 31, 2017. In 2016, we executed two drawdowns and sold orbital receivables with book valueobligation to another entity which did not meet the credit criteria of $112 million for net proceeds of $123 million.our lenders.
The orbital receivables that were securitized remain on our balance sheet becauseas the accounting criteria for surrendering control of the orbital receivables were not met. The net proceeds received have been recognized as a securitization liability that has been subsequently measured at amortized cost using the effective interest rate method. The securitized orbital receivables and the securitization liabilityliabilities are being drawn down as payments are received from the customers and passed on to the international financial institution. We continue to recognize orbital interest revenue on the orbital receivables that are subject to the securitization transactions and recognizesrecognize interest expense to accrete the securitization.
Cash requirements related to interest costs, income taxes, and pensions and other postretirement obligations
Refer to Consolidated Statements of Cash Flows in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” for cash payments for interest costs and income taxes, and Part II, Item 7A, “Quantitative and Qualitative Disclosure about Market Risk” for discussion of potential impacts of fluctuations in interest rates.
Funding of pension plans
Funding requirements under applicable laws and regulations are a major consideration in making contributions to our U.S. and Canadian 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 U.S. and Canadian qualified pension plans, we intend to contribute annually not less than the required minimum funding thresholds. The total estimated contributions expected to be paid to the plans for the year ended December 31, 2019 is $14 million.
securitization liability.
CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES
We enter into contractual obligations in the normal course of business. The following table provides a summary of our payment obligations in each of the next five years and thereafter specifically related to long-term debt, operating leases and other obligations.
| | | | | | | | | | | | | | | |
| | Payments due by period |
| | | | Less than | | 1-3 | | 3-5 | | More than |
| | Total | | 1 year | | years | | years | | 5 years |
($ millions) | | | | | | | | | | | | | | | |
Syndicated credit facility | | $ | 3,850 | | $ | 222 | | $ | 1,550 | | $ | 2,078 | | $ | — |
Capital leases | | | 13 | | | 7 | | | 6 | | | — | | | — |
Purchase obligations | | | 842 | | | 369 | | | 316 | | | 78 | | | 79 |
Securitization liability (excluding interest) | | | 109 | | | 20 | | | 38 | | | 35 | | | 16 |
Operating leases and other obligations1 | | | 216 | | | 28 | | | 49 | | | 40 | | | 99 |
Total | | $ | 5,030 | | $ | 646 | | $ | 1,959 | | $ | 2,231 | | $ | 194 |
1Our Operating leases are primarily related to the rental of office and manufacturing space. Other obligations relate to other financial liabilities reflected on our consolidated balance sheets as of December 31, 2018, which is primarily comprised of non-trade payables and deferred fair value losses on foreign exchange forward contracts.
We have significant purchase obligations for goods and services, under agreements with defined terms as to quantity, price and timing of delivery. Most of these conditional purchase obligations are for 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.Off-balance sheet arrangements
As of December 31, 2018, our banks have issued letters of credit for $81 million (December 31, 2017 - $108 million) in the normal course of business, of which $59 million (December 31, 2017 - $78 million) was guaranteed by Export Development Canada (“EDC”), a Canadian government corporation.
During the year,2021, we also provided an indemnity to EDC in partial support of selected satellite financings provided by EDC. The indemnity is not recognized on the balance sheet and if it were called upon, the maximum value of the indemnity as of December 31, 2018 was $48 million.
We have received, in aggregate, C$9 million of government grants under a non-refundable contribution agreement with Investissement Québec relating to the expansion of our satellite systems facility in Montreal. The government grants can become conditionally repayable if certain average employment targets to December 31, 2018 are not met.had no outstanding foreign exchange sales contracts. As of December 31, 2018, we have met the required employment targets.
In prior years, our Canadian operations have received funding under contract from the Government of Canada under several programs that support the development of new commercial technologies and products for delivery to customers of the Government of Canada. A portion of this funding is subject to possible repayment in the form of royalties, generally not exceeding 5% of future revenues, on commercialization of that intellectual property by us. For the years ended December 31, 2018 and 2017, we received $3 million and $13 million, respectively, of funding under the under these programs.
We are party to various legal proceedings and claims that arise in the ordinary course of business as either a plaintiff or defendant. We analyze all legal proceedings and the allegations therein. The outcome of any of these proceedings, either individually or in the aggregate, is not expected to have a material adverse effect on our financial position, results of operations or liquidity. Refer to Part I, Item 3, “Legal Proceedings” of this Annual Report on Form 10-K for further discussion of legal proceedings.
For further information on our contractual obligations, contingencies and commitments, see Note 21, “Commitments and contingencies” to the Consolidated Financial Statements in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data.
OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2018,2021, we had foreign exchange forward purchase contracts of $96 million, foreign exchange sales contracts of $253 million, operating leases for our premises and financial guarantee contracts to export credit agencies in the form of indemnities orcertain letters of credit.credit of $28 million 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
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements,Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statementsConsolidated Financial Statements and accompanying notes. For a summary of our significant accounting policies, see Note 2, “Summary of significant accounting policies” to the Consolidated Financial Statements in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data”.
We consider the following accounting policies to be critical to an understanding of our financial condition and results of operations because these policies require the most difficult, subjective or complex judgments on the part of management in their application. Actual results could differ from our estimates and assumptions, and any such differences could be material to our consolidated financial statements.Consolidated Financial Statements.
Revenue recognition
The recognition and measurement of revenue requires the use of judgments and estimates. Specifically, judgment is used in interpreting complex arrangements with nonstandard terms and conditions and determining when all criteria for revenue recognition have been met.
Space SystemsInfrastructure
RevenuesRevenue in the Space SystemsInfrastructure segment is primarily generated from long-term construction contracts. Due to the long-term nature of these contracts, we generally recognize revenue over time using the cost-to-cost method to measure progress. This requires usUnder the cost-to-cost method, revenue is recognized based on the proportion of total costs incurred to make estimatesEAC. 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 revenue andCompany’s cost associated with the design, manufacture and delivery of our products and services. Our long-term construction contracts generally consist ofservices are used in determining the EAC. Changes to an EAC or estimated contractual consideration are recorded as a single performance obligation duecumulative adjustment to the integrated nature of the contracts.revenue.
Our cost estimation process is based on the professional knowledge of our engineering, program management and financial professionals and draws on their significant experience and judgment. We prepare estimates at completionEACs for our contracts and calculate estimated revenues and costs ofover the life of our contracts. Since our contracts typically span a period of several years, estimation of revenue, cost and progress toward completion requires the use of judgment. JudgementsJudgments and estimates are re-assessed at least quarterly with most estimates being updated on a monthly basis. Adjustments in estimates could have a material impact on revenue recognition based on the significance of the adjustments. Factors considered in these estimates include our historical performance, the availability, productivity and cost of labor, the nature and complexity of work to be performed, availability and cost of materials, components and subcontracts, the risk and impact of delayed performance and the level of indirect cost allocations.
Earth Intelligence
Imagery
Revenue in the ImageryEarth Intelligence segment is generated from imagery and geospatial intelligence service contracts. Revenue from imagery service contracts in which revenue is recognized based on satellite capacity made available to the customer in a particular period, when imagery is delivered to the customer, or ratably over the subscription period. Many of our imagery service contracts relate to the transfer of a series of distinct goods or services over time for which management has determined are a single performance obligation. Revenue from our geospatial intelligence service contracts is recognized from the rendering of services that compensate us at a cost-plus-fixed-fee, firm fixed price, or on a time and materials basis.
Some of our contracts contain multiple performance obligations, which requires us to estimate the standalone selling pricesprice of each performance obligation in order to allocate consideration transferred from the customer. We have not historically been able to use third-party evidence for determining standalone selling price due to the unique nature of our products and services and lack of visibility into competitor pricing. Standalone selling prices are determined based on management estimates that involve significant judgment. Multiple factors are considered based on the nature of the deliverables included within the contract, which include market conditions, competitive landscape, geographic or regional specific factors, internal costs, profit margin objectives and pricing practices used by us.
Pension and other postretirement benefits
The determination of projected benefit obligations, the fair value of plan assets for our pension and other postretirement benefit plans (“OPEB”) and pension and OPEB expense requires the use of estimates and actuarial assumptions. We perform an annual review of our estimates and actuarial assumptions in consultation with our actuaries. We believe that the accounting estimates related to our pension and OPEB plans are critical accounting estimates because they are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes. The selection of assumptions is based on historical trends and known economic and market conditions at the time of valuation, as well as independent studies of trends performed by our actuaries. However, actual results may differ substantially from the estimates that were based on the critical assumptions.
The principal estimates and assumptions used in the measurement and recording of our pension and other postretirement benefit plans that have a significant effect on our consolidated financial statements are the discount rate and expected return on plan assets.
Discount rates for the U.S. SSL pension and other postretirement plans for are calculated by actuaries using the Standard FTSE Pension Discount Curve. A singular discount rate is then determined such that the resulting liability from discounting using the curve matches the liability resulting from discounting the same cash flows using the aforementioned singular discount rate. Discount rates for the Canadian MDA pension and other postretirement plans are determined by actuaries using a model that extrapolates the yields on high quality corporate bonds with longer maturities based on a spread adjustment to high quality provincial bonds as there is a limited market for high quality long-term corporate bonds in Canada. These rates are then reviewed by management.
The expected return on plan assets is intended to be our best estimate and is determined based on an approach combining expected long-term asset mix returns with expected alpha from active management, net of fees. A total expected return on plan assets is then calculated for each plan based on the two sources of returns.
For further information regarding our pension and other postretirement benefit plans see Note 2, “Summary of significant accounting policies” and Note 17, “Employee benefit plans” to the Consolidated Financial Statements in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data”.
Goodwill
Goodwill is tested annually for impairment as of October 1, or more frequently if events or circumstances indicate the carrying value may be impaired. We identify potential impairment by comparing the fair value of each of our reporting units with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Subsequent to October 1, and before we had completed our annual goodwill impairment test, we experienced triggering events suggesting that the fair value of our equity had decreased substantially since October 1. These triggering events required an additional goodwill impairment test, which was completed as of December 31. The triggering events included a sustained decline in our stock price, further declines in the GeoComm business, and the loss of the WorldView-4 satellite.
We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. Our reporting units as of December 31, 2018 were comprised of: Imagery, Services, MDA, SSL GeoComm, and the remainder of SSL (“SSL Other”).
When evaluating goodwill for impairment, we estimate the fair value of each reporting unit using an income approach. We evaluate the aggregate fair value of our reporting units against market data to support our fair value estimates. The income approach utilizes a discounted cash flow approach, which requires the use of significant judgments and estimates, including future cash flows, terminal growth rates, and discount rates. The projections for future cash flows are generated using our strategic growth plan and include assumptions about future revenue growth, operating margins, capital expenditures, income tax rates, and working capital requirements. The terminal growth rate is used to calculate the value of cash flows beyond the last projected period in our discounted cash flow analysis and reflects our best estimates for stable, perpetual growth of our reporting units. The discount rate is an estimate of the overall after-tax rate of return required by a market participant whose weighted average cost of capital includes both debt and equity, including a risk premium. The risk premium is a subjective adjustment that, by its very nature does not include market related data, but instead examines the prospects of the reporting unit relative to the broader industry to determine if there are specific factors, which may make it more “risky” relative to the industry.
Based on the significant decrease in our stock price as of December 31, 2018, our fair valuation was negatively impacted. The decrease in the stock price is reflective of a downturn in market participant expectations. We correlate our risk adjusted discount rates with market participant expectations. As a result of sustained declines in the price of our common stock, we applied higher risk adjusted discount rates to the projected cash flows of our reporting units. The higher discount rates, inclusive of increased risk premiums, reduced the fair values of each of our reporting units. In addition, pressures in the GeoComm business have negatively impacted our MDA and SSL Other reporting units.
We determined that goodwill was impaired as of December 31, 2018 for our MDA, Imagery and SSL Other reporting units and recorded non-cash impairment charges of $477 million, $142 million and $17 million, respectively. Goodwill for the Services reporting unit was not impaired because its fair value exceeded its carrying value. If the discount rate for the Services reporting unit were one percentage point higher, goodwill for the reporting unit would result in a small amount of impairment. There was no goodwill allocated to the SSL GeoComm reporting unit based on the relative fair value of SSL GeoComm compared to the relative fair value of the other reporting units in the Space Systems segment.
The discounted cash flow approach requires management to make certain assumptions based upon information available at the time the valuations are performed. Actual results could differ from these assumptions. Management believes the assumptions used are reflective of what a market participant would have used in calculating fair value considering current economic conditions.
Additional risks for goodwill across all reporting units include, but are not limited to, the risks discussed in Item 1A, “Risk Factors” contained within this Annual Report on Form 10-K, and:
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| | a decline in our stock price and resulting market capitalization, if we determine the decline is sustained and is indicative of a reduction in the fair value below the carrying value of our reporting units;
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| | our failure to reach our internal forecasts could impact our ability to achieve our forecasted levels of cash flows and reduce the estimated discounted value of our reporting units;
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| | adverse technological events that could impact our performance;
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| | volatility in equity and debt markets resulting in higher discount rates; and
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| | significant adverse changes in the regulatory environment or markets in which we operate.
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It is not possible at this time to determine if a further impairment charge would result from these factors. We will continue to monitor our goodwill for potential impairment indicators in future periods.
Impairment of Long-Lived Assets
We review the carrying amount of long-lived tangible and intangible assets to be held and used in the business for impairment if events or circumstances warrant such a review. Indicators of impairment include, but are not limited to: a significant change in the extent or manner in which an asset (or asset group) is used; a significant adverse change in the operations of our satellites; a change in government spending or customer demand that could affect the value of the asset group; a significant decline in the observable market value of an asset group; or a significant adverse change in legal factors or in the business climate that could affect the value of the asset group.
We identified triggering events for impairment during the third quarter of 2018 related to property, plant and equipment and intangible assets of our GeoComm business, a reporting unit in the Space Systems segment. At the beginning of the year, we forecasted the GeoComm business would be awarded three to four contracts for GeoComm satellites, or approximately thirty percent of the overall 2018 industry awards. During the second half of the year, it became clear that industry and macroeconomic factors had declined substantially from earlier forecasts. We were awarded one award during 2018, and industry awards were lower than expected. Due to the decline in the GeoComm market, and the uncertainty surrounding the future of our GeoComm business, an impairment loss was recognized on our intangible assets primarily due to future cash flows associated with the intangible assets not being sufficient to cover the total book value of those assets. During the fourth quarter of 2018 further degradation of the GeoComm business occurred primarily relating to specifically identified assets pegged for future usage by the business. In the fourth quarter, we determined that the businesses cash flows associated with GeoComm operations linked to the tangible and intangible assets were not sufficient to cover their book value. Those assets were further impaired. For the year ended December 31, 2018, we recognized impairment losses totaling $122 million and $121 million related to intangible assets and property plant and equipment, respectively. Impairment losses of property, plant and equipment related to obsolescence and reduced future use of equipment and buildings. Impairment loss for property, plant and equipment was based on fair value less cost of disposal for those assets in an orderly liquidation. Fair value was based on observable inputs where possible (Level 2), in which market data could be applied. However, due to the specialized nature of the majority of these assets, inputs for a portion of the valuation were unobservable (Level 3).
During December 2018, the WorldView-4 satellite experienced a failure in its control moment gyros, preventing the satellite from collecting imagery. As a result, during December 2018, we recorded an impairment loss of $162 million for the remaining book value of the satellite, related assets, and future premium payments.
There were no impairments of long-lived assets during the years ended December 31, 2017 and 2016.
Income Taxes
We are subject to income taxes in Canada, the United States, Luxembourg,Sweden and other foreign jurisdictions. We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured at the currently enacted tax rates that are expected to apply in years in which they are expected to be paid for or realized. All deferred income taxes are classified as non-current on our consolidated balance sheets.Consolidated Balance Sheets. Significant judgments are required in order to determine the realizability of tax assets. In assessing the need for a valuation allowance, we evaluate all significant available positive and negative evidence, including historical operating results, estimates of future sources of taxable income, carry-forward periods available, the existence of prudent and feasible tax planning strategies and other relevant factors.
The recognitionFor further information regarding our deferred tax assets and liabilities see Note 2, “Summary of uncertain tax positions is evaluated based on whether it is considered more likely than not that position taken, or expectedsignificant accounting policies” and Note 21, “Income taxes” to be taken, on a tax return will be sustained upon examination through litigation or appeal. For those positions that meet the recognition criteria, they are measured as the largest amount that is more than fifty percent likely to be realized upon ultimate settlement. We believe that the uncertain tax positions recognized are adequate to cover all open tax years based on our assessment. If the expected outcome of the matter changes, we will
adjust income tax expense accordinglyConsolidated Financial Statements in the period in which the expected outcome has changed. We classify interestPart II, Item 8, “Financial Statements and penalties related to income taxes as income tax expense.Supplementary Data.”
We earn investment and other tax credits with respect to its research and development expenses. The benefit of these tax credits is recorded as a reduction of income tax expense.
On December 22, 2017, the 2017 Tax Act was enacted. The 2017 Tax Act includes a broad range of tax reform proposals affecting businesses, including a reduction in the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, a one-time mandatory deemed repatriation tax on earnings of certain foreign subsidiaries that were previously tax deferred, limitations on interest expense deductions, a new base erosion focused minimum tax applicable to certain payments to foreign related parties, and the creation of new taxes on earnings of non-U.S. subsidiaries. The SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the 2017 Tax Act (“SAB 118”), which provides guidance on accounting for the tax effects of the 2017 Tax Act. In accordance with the guidance, we were required to determine a reasonable estimate of the effect of the tax law changes in the period of enactment. In addition, SAB 118 allowed us to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. Both the initial estimate of the impact of the tax law changes and the provisional amounts recognized in the measurement period were not material on a net basis.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 3, “New standards and interpretations not yet adopted” to the Consolidated Financial Statements in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” 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 AdjustedEBITDA. EBITDA margin.
We define EBITDA as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA as EBITDA adjusted for certain items affecting the comparability of our ongoing operating results as specified in the calculation.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, CEO severance, (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
ITEM 7A.QUANTITATIVE7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We are exposed to market risks from changes in interest ratesrate risk on our variable-rate borrowings under our Syndicated Credit Facility, which is comprised of the Revolving Credit Facility the Term Loan A, and the Term Loan B. As of December 31, 2018, thereWe use interest rate swap agreements to manage interest rate risk associated with cash outflows from long-term debt.
There was $3.03$1.44 billion outstanding under our Syndicated Credit Facility.
Facility as of December 31, 2021 and 2020, respectively. Term Loan borrowings bearB bears interest equal to, at anour option, either (i) U.S. dollar LIBOR plus 275 basis points per annum, or (ii) adjusted LIBORbase rate, plus a margin between 120 to 350of 175 basis points based on our leverage ratio. We also pay a commitment fee of between 24 to 70 basis points, payable quarterly, on the average daily unused amount of the Revolving Credit Facility based on our leverage ratio. per annum. In April 2018, the Companywe entered into several interest rate swap agreements in order to fix the base interest rate to be paid over an aggregate amount of $1 billion of the Company’sour variable rate long-term debt, at an average rate of 2.56% (excluding the margin specified in the Syndicated Credit Facility). We enter intoIn April 2021, $500 million of these interest rate swaps to mitigate our exposure tomatured and on June 15, 2021, we entered into new interest rate risks.swap agreements at a notional value of $500 million. As of December 31, 2021, an aggregate amount of $1 billion of our variable rate long-term debt is fixed at an average rate of 1.43% plus the applicable margin described below.
The Revolving Credit Facility bears interest at a rate equal to, at our option, either (i) U.S. dollar LIBOR, plus a margin of 120 - 425 basis points per annum, based on our total leverage ratio, or (ii) adjusted base rate, plus a margin of 20 - 325 basis points per annum, based on our total leverage ratio.
Based upon the amounts outstanding under the Syndicated Credit Facility, net of the interest rate swaps as of December 31, 2018 and assuming the amounts were outstanding for a full calendar year, a 50 basis point increase in interest rates would result in an increase in our annual interest expense under the Syndicated Credit Facility ofby approximately $12 million.$2 million for both the years ended December 31, 2021 and 2020. We may decide in future periods to engage in hedging transactions to further mitigate the interest rate risk under our Syndicated Credit Facility.
Foreign Currency Risk
WeAlthough the majority of our transactions are exposed to various market risks that arise fromdenominated in U.S. dollars, some of our transactions entered intoare denominated in the normal course of business.foreign currencies. Certain contractual relationships with customers and vendors mitigate risks from currency exchange rate changes that arise from normal purchasing and normal sales activities. As of December 31, 2018, we hedge a majority of our foreign currency exposure. Our revenue and purchase contracts are primarily denominated in U.S. dollars and the majority of our purchase contracts are denominated in U.S. dollars. However, fluctuations in the value of foreign currencies may make payments in U.S. dollars, as provided for under our existing contracts, more difficult for foreign customers. In addition, fluctuations in
foreign currencies could introduce volatility into our financial statements for contracts denominated in a foreign currency.
Based on a hypothetical decrease or increase of 10% in the value of the Canadian dollar against the U.S. dollar, the estimated fair value of our foreign currency forward contracts would change by approximately $16 million. However, any change in the value of the contracts would be significantly offset by a corresponding change in the value of the underlying hedged items.
ITEM 8.FINANCIAL8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Maxar Technologies Inc.:
Opinion on the ConsolidatedFinancial Statements
We have audited the accompanying consolidated balance sheetsheets of Maxar Technologies Inc. (formerly known as Maxar Technologies Ltd.; see Note 1) and subsidiaries (the Company) as of December 31, 2018,2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, cash flows, and changes in stockholders’ equity for each of the yearyears in the three-year period ended December 31, 2018,2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018,2021 and 2020, and the results of its operations and its cash flows for each of the yearyears in the three-year period ended December 31, 2018,2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 1, 2019February 22, 2022 expressed an adverseunqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Comprehensive Basis of Accounting Principle
As discussed in Note 42 to the consolidated financial statements, the Company changedhas elected to change its comprehensive basismethod of accounting from International Financial Reporting Standards as issued byfor income taxes due to the Internationaladoption of Accounting Standards Board to U.S. generally accepted accounting principles effective withUpdate No. 2019-12, Simplifying the preparation of the consolidated financial statements Accounting for Income Taxes (Topic 740) as of and for the year ended December 31, 2018.January 1, 2020.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue recognition for certain long-term fixed-price contracts in the Space Infrastructure segment
As discussed in Notes 2 and 16 to the consolidated financial statements, 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). 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 cost associated with the design, manufacture and delivery of products and services are used in determining the EAC. Changes to an EAC are recorded as a cumulative adjustment to revenue.
We identified the evaluation of revenue recognition for certain long-term fixed-price contracts in the Space Infrastructure segment as a critical audit matter. In particular, evaluating the Company’s estimated costs to complete, specifically estimated labor and subcontractor costs, required a high degree of subjective auditor judgment given the nature and complexity of the work to be performed. The determination of, and changes to, those estimates may have a significant impact on revenue recorded.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to estimate costs to complete for fixed-price, long-term contracts. This included controls over estimated labor and subcontractor costs. For certain contracts, we compared the Company’s original or prior period estimate of total contract costs to be incurred to changes in total actual and estimated future contract costs to be incurred to assess the Company’s ability to estimate costs. We inquired of financial and operational personnel of the Company and inspected supporting documents to identify factors that should be considered within the cost to complete estimates for indications of possible management bias. We evaluated the Company’s estimated costs to complete by:
| ● | reading the underlying contracts and related amendments to obtain an understanding of the contractual requirements and related performance obligations |
| ● | considering costs incurred to-date and the relative progress towards completion of the contracts |
| ● | considering, if relevant, the estimated costs to complete on similar or historical contracts |
| ● | considering, if relevant, the estimated reserves on specific contracts that include estimation uncertainty based on the nature of the contract |
| ● | inspecting correspondence, if any, between the Company and the customer regarding actual cost to date and expected performance remaining |
| ● | evaluating the Company’s assessment of contract performance risks included within the estimated costs to complete. |
/s/ KPMG LLP
We have served as the Company’s auditor since 2018.
Denver, Colorado
March 1, 2019February 22, 2022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
To the Stockholders and Board of Directors
Maxar Technologies Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Maxar Technologies Inc. (formerly known as Maxar Technologies Ltd.) and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established inInternal Control – Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheetsheets of the Company as of December 31, 2018,2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, cash flows, and changes in stockholders’ equity for each of the yearyears in the three-year period ended December 31, 2018,2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2019February 22, 2022 expressed an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses related to an insufficient complement of trained resources, ineffective continuous risk assessment, and ineffective control activities related to percentage-of-completion revenue and cost of sales, measurement and disclosure of income taxes, and commitment and contingency disclosures have been identified and included in management’s assessment. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Overover Financial Reporting included in Item 9A.Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
MAXAR TECHNOLOGIES INC.
Consolidated Statements of Comprehensive (Loss) IncomeCash Flows
(In millions)
| | | | | | | | | |
| | Year ended |
| | December 31, |
| | 2018 | | 2017 | | 2016 |
Net (loss) income | | $ | (1,264) | | $ | 58 | | $ | 68 |
Other comprehensive loss, net of tax: | | | | | | | | | |
Foreign currency translation adjustment | | | 4 | | | 7 | | | (2) |
Net (loss) gain on hedge of net investment in foreign operations | | | (23) | | | — | | | 5 |
Unrealized loss on derivatives designated as cash flow hedges | | | (7) | | | (3) | | | (8) |
Change in pension and other postretirement benefit plans | | | (5) | | | (14) | | | (8) |
Other comprehensive loss, net of tax | | | (31) | | | (10) | | | (13) |
Comprehensive (loss) income, net of tax | | $ | (1,295) | | $ | 48 | | $ | 55 |
| | | | | | | | | |
| | Year Ended |
| | December 31, |
| | 2021 | | 2020 | | 2019 |
Cash flows (used in) provided by: | | | | | | | | | |
Operating activities: | | | | | | | | | |
Net income | | $ | 46 | | $ | 303 | | $ | 109 |
Income from operations of discontinued operations, net of tax | | | — | | | (32) | | | (26) |
Gain on disposal of discontinued operations, net of tax | | | — | | | (317) | | | — |
Income (loss) from continuing operations | | | 46 | | | (46) | | | 83 |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | | | | | | | | | |
Depreciation and amortization | | | 290 | | | 348 | | | 376 |
Stock-based compensation expense | | | 45 | | | 43 | | | 20 |
Amortization of debt issuance costs and other non-cash interest expense | | | 15 | | | 16 | | | 11 |
Gain on remeasurement of Vricon equity interest | | | — | | | (85) | | | — |
Loss from early extinguishment of debt | | | 41 | | | 7 | | | 22 |
(Gain) loss on orbital receivables allowance | | | (49) | | | 14 | | | 14 |
Cumulative adjustment to SXM-7 revenue | | | 30 | | | — | | | — |
Impairment losses, including inventory | | | — | | | 33 | | | 3 |
Deferred income tax benefit | | | — | | | (17) | | | — |
Loss (gain) on sale of assets | | | — | | | 1 | | | (136) |
Other | | | 15 | | | 1 | | | (4) |
Changes in operating assets and liabilities: | | | | | | | | | |
Trade and other receivables, net | | | (20) | | | 33 | | | (20) |
Accounts payable and liabilities | | | (95) | | | (84) | | | 17 |
Contract liabilities | | | 10 | | | 5 | | | (117) |
Prepaid and other assets | | | (18) | | | (19) | | | (21) |
Other | | | (16) | | | (7) | | | 10 |
Cash provided by operating activities - continuing operations | | | 294 | | | 243 | | | 258 |
Cash (used in) provided by operating activities - discontinued operations | | | (13) | | | (54) | | | 59 |
Cash provided by operating activities | | | 281 | | | 189 | | | 317 |
Investing activities: | | | | | | | | | |
Purchase of property, plant and equipment and development or purchase of software | | | (234) | | | (308) | | | (314) |
Acquisition, net of cash acquired | | | — | | | (120) | | | — |
Return of capital from discontinued operations | | | — | | | 20 | | | 28 |
Sale of assets | | | — | | | — | | | 280 |
Other | | | — | | | 2 | | | — |
Cash used in investing activities - continuing operations | | | (234) | | | (406) | | | (6) |
Cash provided by (used in) investing activities - discontinued operations | | | — | | | 723 | | | (7) |
Cash (used in) provided by investing activities | | | (234) | | | 317 | | | (13) |
Financing activities: | | | | | | | | | |
Repurchase of 2023 Notes, including premium | | | (384) | | | (169) | | | — |
Net proceeds from issuance of common stock | | | 380 | | | — | | | — |
Net proceeds from issuance of 2027 Notes and 2023 Notes | | | — | | | 147 | | | 980 |
Net payment from Revolving Credit Facility | | | — | | | — | | | (595) |
Settlement of securitization liability | | | (13) | | | (11) | | | (20) |
Repurchase of orbital receivables | | | — | | | — | | | (24) |
Refinancing fees paid to creditors | | | — | | | — | | | (20) |
Repayments of long-term debt | | | (10) | | | (525) | | | (523) |
Other | | | (4) | | | 3 | | | (6) |
Cash used in financing activities - continuing operations | | | (31) | | | (555) | | | (208) |
Cash used in financing activities - discontinued operations | | | — | | | (24) | | | (30) |
Cash used in financing activities | | | (31) | | | (579) | | | (238) |
Increase (decrease) in cash, cash equivalents, and restricted cash | | | 16 | | | (73) | | | 66 |
Effect of foreign exchange on cash, cash equivalents, and restricted cash | | | — | | | (5) | | | — |
Cash, cash equivalents, and restricted cash, beginning of year | | | 31 | | | 109 | | | 43 |
Cash, cash equivalents, and restricted cash, end of period | | $ | 47 | | $ | 31 | | $ | 109 |
| | | | | | | | | |
Reconciliation of cash flow information: | | | | | | | | | |
Cash and cash equivalents | | $ | 47 | | $ | 27 | | $ | 105 |
Restricted cash included in prepaid and other current assets | | | — | | | 4 | | | 1 |
Restricted cash included in other non-current assets | | | — | | | — | | | 3 |
Total cash, cash equivalents, and restricted cash | | $ | 47 | | $ | 31 | | $ | 109 |
See accompanying notes to consolidated financial statements.the Consolidated Financial Statements.
MAXAR TECHNOLOGIES INC.
Consolidated Balance Sheets
(In millions)
| | | | | | |
| | December 31, | | December 31, |
| | 2018 | | 2017 |
Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 35 | | $ | 19 |
Trade and other receivables, net | | | 464 | | | 476 |
Inventory, net | | | 31 | | | 102 |
Advances to suppliers | | | 42 | | | 82 |
Income taxes receivable | | | 14 | | | 19 |
Prepaid and other current assets | | | 51 | | | 61 |
Total current assets | | | 637 | | | 759 |
Non-current assets: | | | | | | |
Orbital receivables | | | 407 | | | 424 |
Deferred tax assets | | | 103 | | | 63 |
Property, plant and equipment, net | | | 747 | | | 1,008 |
Intangible assets, net | | | 1,232 | | | 1,618 |
Goodwill | | | 1,751 | | | 2,374 |
Other assets | | | 124 | | | 131 |
Total assets | | $ | 5,001 | | $ | 6,377 |
Liabilities and Stockholders’ Equity | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | 248 | | $ | 222 |
Accrued liabilities | | | 77 | | | 21 |
Accrued compensation and benefits | | | 100 | | | 120 |
Contract liabilities | | | 361 | | | 404 |
Current portion of long-term debt | | | 17 | | | 18 |
Other current liabilities | | | 46 | | | 46 |
Total current liabilities | | | 849 | | | 831 |
Non-current liabilities: | | | | | | |
Pension and other postretirement benefits | | | 196 | | | 218 |
Contract liabilities | | | 60 | | | 196 |
Long-term debt | | | 3,030 | | | 2,943 |
Other non-current liabilities | | | 222 | | | 356 |
Total liabilities | | | 4,357 | | | 4,544 |
Commitments and contingencies (Note 21) | | | | | | |
Stockholders’ equity: | | | | | | |
Common stock (no par value, unlimited common shares authorized; 59.4 million and 56.2 million common shares issued and outstanding, respectively) | | | 1,713 | | | 1,550 |
Additional paid-in capital | | | 59 | | | 51 |
(Accumulated deficit) retained earnings | | | (1,211) | | | 118 |
Accumulated other comprehensive income | | | 82 | | | 113 |
Total Maxar stockholders' equity | | | 643 | | | 1,832 |
Noncontrolling interest | | | 1 | | | 1 |
Total stockholders' equity | | | 644 | | | 1,833 |
Total liabilities and stockholders' equity | | $ | 5,001 | | $ | 6,377 |
See accompanying notes to consolidated financial statements.
MAXAR TECHNOLOGIES INC.
Consolidated Statements of Cash Flows
(In millions)
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
Cash flows provided by (used in): | | | | | | | | | |
Operating activities: | | | | | | | | | |
Net (loss) income | | $ | (1,264) | | $ | 58 | | $ | 68 |
Adjustments to reconcile to net (loss) income to net cash provided by operating activities: | | | | | | | | | |
Impairment losses including inventory | | | 1,096 | | | — | | | — |
Depreciation of property, plant and equipment | | | 157 | | | 61 | | | 34 |
Amortization of intangible assets | | | 292 | | | 100 | | | 38 |
Stock-based compensation expense | | | 20 | | | 33 | | | 15 |
Amortization of debt issuance costs and other noncash interest expense | | | 9 | | | 3 | | | 1 |
Loss from early extinguishment of debt | | | — | | | 23 | | | — |
Foreign exchange loss (gain) | | | 3 | | | (12) | | | 7 |
Deferred income tax (benefit) expense | | | (64) | | | (176) | | | (28) |
Other | | | 17 | | | 1 | | | — |
Changes in operating assets and liabilities: | | | | | | | | | |
Trade and other receivables | | | 8 | | | 19 | | | 96 |
Income taxes receivable | | | (1) | | | 8 | | | 19 |
Accounts payables | | | (9) | | | 5 | | | 18 |
Accrued compensation and benefits | | | (13) | | | (35) | | | 1 |
Contract liabilities | | | (177) | | | (40) | | | (148) |
Other | | | 65 | | | 57 | | | (67) |
Cash provided by operating activities | | | 139 | | | 105 | | | 54 |
| | | | | | | | | |
Investing activities: | | | | | | | | | |
Purchase of property, plant and equipment | | | (156) | | | (49) | | | (40) |
Purchase/development of intangible assets | | | (62) | | | (23) | | | (16) |
Sale of property, plant and equipment | | | 68 | | | — | | | — |
Acquisitions, net of cash acquired | | | (6) | | | (2,273) | | | — |
Cash collected on note receivable | | | 5 | | | 4 | | | — |
Purchase of short-term investments | | | (3) | | | — | | | — |
Disposal of subsidiary | | | 4 | | | — | | | — |
Cash used in investing activities | | | (150) | | | (2,341) | | | (56) |
| | | | | | | | | |
Financing activities: | | | | | | | | | |
Proceeds from long-term debt | | | 104 | | | 3,160 | | | — |
Repayments of long-term debt | | | (27) | | | (782) | | | (115) |
Payment of debt issuance costs | | | (3) | | | (63) | | | — |
Proceeds from securitization of orbital receivables | | | 18 | | | — | | | 123 |
Settlement of securitization liability | | | (15) | | | (15) | | | (2) |
Payment of dividends | | | (65) | | | (47) | | | (41) |
Change in overdraft balance | | | — | | | (18) | | | 18 |
Other financing activities | | | 1 | | | — | | | 3 |
Cash (used in) provided by financing activities | | | 13 | | | 2,235 | | | (14) |
(Decrease) increase in cash, cash equivalents, and restricted cash | | | 2 | | | (1) | | | (16) |
Effect of foreign exchange on cash, cash equivalents, and restricted cash | | | (1) | | | 4 | | | (1) |
Cash, cash equivalents, and restricted cash, beginning of year | | | 42 | | | 39 | | | 56 |
Cash, cash equivalents, and restricted cash, end of year | | $ | 43 | | $ | 42 | | $ | 39 |
| | | | | | | | | |
Reconciliation of cash flow information: | | | | | | | | | |
Cash and cash equivalents | | | 35 | | | 19 | | | 14 |
Restricted cash included in prepaid and other current assets | | | 7 | | | 6 | | | 9 |
Restricted cash included in other assets | | | 1 | | | 17 | | | 16 |
Total cash, cash equivalents, and restricted cash | | $ | 43 | | $ | 42 | | $ | 39 |
See accompanying notes to consolidated financial statements
MAXAR TECHNOLOGIES INC.
Consolidated Statements of ChangeChanges in Stockholders’ Equity
(In millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Common Stock | | Additional | | Retained earnings | | Accumulated other | | Noncontrolling | | Total stockholders’ |
| | Shares | | Amount | | paid-in capital | | (Accumulated deficit) | | comprehensive income (loss) | | interest | | equity |
Balance as of December 31, 2015 | | 36,227,952 | | $ | 455 | | $ | 31 | | $ | 144 | | $ | 169 | | $ | 1 | | $ | 800 |
Cumulative-effect of IFRS to U.S. GAAP conversion | | | | | — | | | — | | | (64) | | | (33) | | | | | | (97) |
Common stock issued under employee stock purchase plan | | 66,466 | | | 4 | | | — | | | — | | | — | | | — | | | 4 |
Common stock issued upon vesting or exercise of stock-based compensation awards | | 83,860 | | | 7 | | | (7) | | | — | | | — | | | — | | | — |
Equity-classified stock-based compensation expense | | — | | | — | | | 7 | | | — | | | — | | | — | | | 7 |
Dividends ($1.12 per common share) | | — | | | — | | | — | | | (41) | | | — | | | — | | | (41) |
Comprehensive income (loss) | | — | | | — | | | — | | | 68 | | | (13) | | | — | | | 55 |
Balance as of December 31, 2016 | | 36,378,278 | | | 466 | | | 31 | | | 107 | | | 123 | | | 1 | | | 728 |
Common stock issued as part of acquisition of DigitalGlobe, net of stock issuance costs | | 19,644,240 | | | 1,071 | | | — | | | — | | | — | | | — | | | 1,071 |
Common stock issued under employee stock purchase plan | | 83,453 | | | 5 | | | — | | | — | | | — | | | — | | | 5 |
Common stock issued upon vesting or exercise of stock-based compensation awards | | 105,595 | | | 8 | | | (8) | | | — | | | — | | | — | | | — |
Issuance of replacement equity-classified awards pursuant to acquisition | | — | | | — | | | 16 | | | — | | | — | | | — | | | 16 |
Equity-classified stock-based compensation expense | | — | | | — | | | 12 | | | — | | | — | | | — | | | 12 |
Dividends ($1.14 per common share) | | — | | | — | | | — | | | (47) | | | — | | | — | | | (47) |
Comprehensive income (loss) | | — | | | — | | | — | | | 58 | | | (10) | | | — | | | 48 |
Balance as of December 31, 2017 | | 56,211,566 | | | 1,550 | | | 51 | | | 118 | | | 113 | | | 1 | | | 1,833 |
Common stock issued to dissenting stockholders | | 2,234,652 | | | 111 | | | — | | | — | | | — | | | — | | | 111 |
Common stock issued as part of acquisition of Neptec | | 488,097 | | | 25 | | | — | | | — | | | — | | | — | | | 25 |
Common stock issued under employee stock purchase plan | | 102,076 | | | 3 | | | — | | | — | | | — | | | — | | | 3 |
Common stock issued upon vesting or exercise of stock-based compensation awards | | 344,255 | | | 24 | | | (24) | | | — | | | — | | | — | | | — |
Reclassification of liability classified stock-based compensation awards to equity classified | | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 |
Equity classified stock-based compensation expense | | — | | | — | | | 31 | | | — | | | — | | | — | | | 31 |
Dividends ($1.14 per common share) | | — | | | — | | | — | | | (65) | | | — | | | — | | | (65) |
Comprehensive income (loss) | | — | | | — | | | — | | | (1,264) | | | (31) | | | — | | | (1,295) |
Balance as of December 31, 2018 | | 59,380,646 | | $ | 1,713 | | $ | 59 | | $ | (1,211) | | $ | 82 | | $ | 1 | | $ | 644 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated other | | | | | | |
| | Common stock | | Additional | | Accumulated | | comprehensive | | Noncontrolling | | Total stockholders’ |
| | Shares | | Amount | | paid-in capital | | deficit | | income (loss) | | interest | | equity |
Balance as of December 31, 2018 | | 59.4 | | $ | 1,713 | | $ | 59 | | $ | (1,170) | | $ | 64 | | $ | 1 | | $ | 667 |
Reclassification of APIC due to domestication | | — | | | (1,713) | | | 1,713 | | | — | | | — | | | — | | | — |
Common stock issued under employee stock purchase plan | | 0.2 | | | — | | | 1 | | | — | | | — | | | — | | | 1 |
Common stock issued upon vesting or exercise of stock-based compensation awards | | 0.3 | | | — | | | — | | | — | | | — | | | — | | | — |
Equity classified stock-based compensation expense | | — | | | — | | | 11 | | | — | | | — | | | — | | | 11 |
Dividends ($0.04 per common share) | | — | | | — | | | — | | | (3) | | | — | | | — | | | (3) |
Comprehensive income (loss) | | — | | | — | | | — | | | 109 | | | (23) | | | — | | | 86 |
Balance as of December 31, 2019 | | 59.9 | | $ | — | | $ | 1,784 | | $ | (1,064) | | $ | 41 | | $ | 1 | | $ | 762 |
Reclassification of stock-based compensation awards | | — | | | — | | | 4 | | | — | | | — | | | — | | | 4 |
Common stock issued under employee stock purchase plan | | 0.6 | | | — | | | 6 | | | — | | | — | | | — | | | 6 |
Common stock issued upon vesting or exercise of stock-based compensation | | 0.7 | | | — | | | — | | | — | | | — | | | — | | | — |
Equity classified stock-based compensation expense | | — | | | — | | | 24 | | | — | | | — | | | — | | | 24 |
Dividends ($0.04 per common share) | | — | | | — | | | — | | | (2) | | | — | | | — | | | (2) |
Comprehensive income (loss) | | — | | | — | | | — | | | 303 | | | (161) | | | — | | | 142 |
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 | | 0.3 | | | — | | | 8 | | | — | | | — | | | — | | | 8 |
Equity classified stock-based compensation expense | | 1.2 | | | — | | | 29 | | | — | | | — | | | — | | | 29 |
Dividends ($0.04 per common share) | | — | | | — | | | — | | | (3) | | | — | | | — | | | (3) |
Comprehensive income | | — | | | — | | | — | | | 46 | | | 67 | | | — | | | 113 |
Balance as of December 31, 2021 | | 72.7 | | $ | — | | $ | 2,235 | | $ | (720) | | $ | (53) | | $ | 1 | | $ | 1,463 |
See accompanying notes to consolidated financial statements.the Consolidated Financial Statements.
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MAXAR TECHNOLOGIES INC.
Notes to 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 global leaderprovider of advancedcomprehensive space technology solutions and is atsecure, 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 nexususe of the new space economy, developingspace. The Company’s approach combines decades of deep mission understanding and sustaining the infrastructure and delivering the information, services, and systems that unlock the promise of space fora proven commercial and government markets. As a trusted partner, the Company provides vertically integrated capabilitiesdefense foundation to deploy solutions and expertise including satellites, Earth imagery, robotics, geospatial datadeliver insights with speed, scale and analytics to help customers anticipate and address their most complex mission-critical challenges with confidence. Maxarcost effectiveness.Maxar’s stock trades on the New York Stock Exchange and Toronto Stock Exchange under the ticker MAXR.symbol “MAXR.”
Maxar’s businesses are organized and managed in three reportable segments: Space Systems, Imagery and Services.
The Company has, since its inception until September 30, 2018, reported to securities regulators in both Canada and the U.S., financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. On January 1, 2019, the Company completed a reorganization of its corporate structure pursuant to which the changeCompany directly acquired all of jurisdictionthe issued and outstanding shares of organization fromMaxar Technologies Ltd. (“Maxar Canada”), and the Company replaced Maxar Canada as the publicly-held parent company of the Maxar group (“U.S. Domestication”).
Completion of the sale of MDA
On April 8, 2020, the Company completed the sale of its former Canadian subsidiary (“MDA Business”), to Neptune Acquisition Inc. (“MDA Purchaser”), a corporation existing under the laws of the Province of British Columbia in Canada to the Stateand an affiliate of DelawareNorthern Private Capital Ltd. (“MDA Transaction”). This divestiture represented a strategic shift in the United States (“U.S. Domestication”). Upon completion of the U.S. Domestication,Company’s business and, including the report herein, the Company has prepared its financial statements in accordance with accounting principles generally acceptedU.S. GAAP, the MDA Business qualified as a discontinued operation. As a result, the operating results and cash flows related to the MDA Business have been reflected as discontinued operations in the U.S. (“U.S. GAAP”) effective withConsolidated Statements of Operations and the preparationConsolidated Statements of these financial statementsCash Flows. The assets and liabilities sold met the requirements to be classified within the Consolidated Balance Sheets under a held for sale designation as of and for the year ended December 31, 2018.2019. See Note 4 for additional details.
Acquisition of Vricon
On July 1, 2020, the Company closed the acquisition of Vricon, Inc. (“Vricon”) by purchasing the remaining 50% ownership interest in Vricon (“Vricon Acquisition”). See Note 5 for details.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The Consolidated Financial Statements include the accounts of Maxar Technologies Inc., and all consolidated subsidiary entities. The Company’s Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP,GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. Commission. All intercompany balances and transactions are eliminated on consolidation.
The Company’sCompany's 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.
Unless otherwise indicated, amounts provided in the Notes to the Consolidated Financial Statements pertain to continuing operations (See Note 4 for information on discontinued operations).
Use of estimates, assumptions and judgments
The preparation of the 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
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
period. Estimates have been prepared using the most current and best available information; however, actual results could differ materially from those estimates.
Leases
The Company has both operating and finance leases. The majority of the Company’s leases are operating leases related to buildings. The Company’s finance leases are primarily related to furniture and equipment.
The Company determines if a contract is or contains a lease at inception based on whether it conveys the right to control the use of an identified asset. The Company recognizes lease liabilities and right-of-use assets based on the present value of the future minimum lease payments over the lease term at the commencement date. Right-of-use assets are adjusted for any prepayments, lease incentives received and initial direct costs incurred. If the rate implicit in the lease is not readily determinable, the Company’s incremental borrowing rate with a similar term to the lease term is used to determine the present value of future payments and appropriate lease classification. The lease term includes renewal options that are reasonably certain to be exercised. The Company elected the practical expedient not to separate lease and non-lease components. The Company also elected to include in minimum lease payments any executory costs that are part of the fixed lease payment.
Some of the Company’s building lease agreements contain incentives for leasehold improvements. If the leasehold improvement has been determined to be owned by the lessee, the Company generally recognizes the incentive as a reduction to the right-of-use asset. The Company uses the date of initial possession as the commencement date, which is generally when the Company has been given rights to access the space.
Leases with an initial term of 12 months or less are not recorded on the Company’s Consolidated Balance Sheets and are recognized as lease expense on a straight-line basis in the Consolidated Statements of Operations. Certain leasing arrangements require variable payments, such as insurance and tax payments. Variable lease payments that do not depend on an index or rate are excluded from lease payments in the measurement of the right-of-use asset and lease liability and are recognized as expense in the period in which the payment occurs.
The Company does not have any material restrictions or covenants in our lease agreements, sale leaseback transactions or residual value guarantees. The Company recognizes fixed lease expense for operating leases on a straight-line basis over the lease term. The Company recognizes amortization expense on finance lease right-of-use assets and interest expense on finance lease liabilities over the lease term.
Business combinations and divestitures
Business combinations are accounted for using the acquisition method. The consideration for an acquisition is measured at the fair values of the assets transferred, the liabilities assumed and the equity interests issued at the acquisition date. The excess of the consideration over the fair value of the identifiable net assets acquired is recorded as goodwill. Transaction costs that are incurred in connection with a business combination, other than costs associated with the issuance of debt or equity securities, are expensed as incurred.
The Company reports the results of operations of a business as discontinued operations if a disposal represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results when the business is classified as held for sale. The results of discontinued operations are reported in Income from discontinued operations, net of tax in the Consolidated Statements of Operations for current and prior periods, including any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell. Assets and liabilities of a discontinued operation are reported separately in the Consolidated Balance Sheets as held for sale and classified as either current or non-current in the prior periods. If it is probable that the sale will occur and proceeds will be collected within
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
one year of meeting the held for sale criteria both assets and liabilities classified as held for sale are reported in the current period Consolidated Balance Sheet as current.
Foreign currency
Assets and liabilities of non-U.S. subsidiaries that operate in local currencies are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments, net of tax, recorded in Accumulated other comprehensive income (loss) within the Stockholders’ equity section of the Consolidated Balance Sheet.Sheets. Income and expense accounts are translated at average monthly exchange rates during the year.
Revenue recognition
Revenue is recognized in accordance with the five stepfive-step model set forth by ASCAccounting Standards Codification (“ASC”) 606, which involves identification of the contract(s), identification of performance obligations in the contract, determination of the transaction price, allocation of the transaction price to the previously identified performance obligations and recognition of revenue as the performance obligations are satisfied.
Revenue is measured at the fair value of consideration received or receivable, net of discounts and after eliminating intercompany sales.as of the date of the transaction. When consideration received from customers includes advance payments that contain a financing element, the Company imputes interest on such advance payments and recognizes such amounts as a component of revenue.
Contract costs generally include direct costs such as materials, labor and subcontract costs. Costs are expensed as incurred except for incremental costs incurred to obtain or fulfill a contract, which are capitalized and amortized on a straight-linesystematic basis overconsistent with the expected periodtransfer of performance.goods or services to the customer to which the capitalized costs relate. As of December 31, 2021 and 2020, current costs to obtain or fulfill a contract were $8 million and $6 million, respectively, and are included in Other current assets within the Consolidated Balance Sheets. As of December 31, 2021 and 2020, non-current costs to obtain or fulfill a contract were $47 million and $41 million, respectively, and are included in Other non-current assets within the Consolidated Balance Sheets.
Space Systems segmentInfrastructure
RevenuesRevenue in the Space SystemsInfrastructure 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 generally recognized over time utilizingbased 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 cost-to-cost approach, which requires the Company to make estimatesprogram or allocable based on program cost pooling arrangements. Estimates regarding the revenue andCompany’s cost associated with the design, manufacture and delivery of its products and services. The Company’s long-term construction contracts generally consist ofservices are used in determining the EAC. Changes to an EAC or estimated contractual consideration are recorded as a single performance obligation duecumulative adjustment to the integrated nature of the goods or services in contracts. Revenue from construction contracts includes initial contract amounts, variations in contract work, claims, incentive payments, shipping and handling costs and the fair value of customer furnished materials.revenue.
Satellite construction contracts may include performance incentives whereby payment for a portion of the purchase price is contingent upon in-orbit performance of the satellite. These performance incentives are structured in two forms. As a warranty payback, the customer pays the entire amount of the performance incentive during the period of the satellite construction and such incentives are subject to refund if satellite performance does not achieve certain predefined operating specifications. As an orbital receivable, the customer makes payment of performance incentives over the in-orbit life of the satellite. Performance incentives, whether warranty payback or orbital receivables, are included in revenue during the construction period based on amounts expected to be received. Orbital receivables are recorded at their fair value as of the launch date and the adjustments to the extent it is probable that a significant reversal in the amount receivable of cumulative revenue recognized will not occur when the discount duringuncertainty associated with the in-orbit period are recorded as orbital income.variable consideration is subsequently resolved. In addition to the in-orbit performance incentives, satellite construction contracts may includeliquidated damages clauses. Liquidated damages can be incurred on programs as a result of delays due to slippage or for programs
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
these contracts over time based on the stage of services completed to date as a percentage of total services to be performed, or on the basis of time plus reimbursable costs incurred during the period.
Cost-plus-fixed-fee contracts – The majority of this segment’s revenues is generated from contracts with the U.S. government, the predominance of which are structured as cost-plus-fixed-fee arrangements. A cost plus contract is primarily made up of three components: direct costs (labor costs, subcontractor labor, travel and/or other direct costs), indirect costs (fringe benefit costs, overhead and general and administrative costs) and an agreed upon fee. The fee for this type of contract is established at the onset of contract as negotiated with the customer. Pricing for the cost portion of the contract is established on the basis of, among other things, actual labor rates, projected average rates, and General Services Administration’s schedule pricing.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Time and materials – Contracts structured as time and materials are billed to As the customer as labor hours are incurred at contractually agreed upon rates, with such rates agreed upon by the Company and the Customer and inclusive of margin to the Company.
Firm fixed price – Contracts structured as firm fixed price bill the customer a fixed fee for a specified service with such amount typically billed as milestones are met by the Company.
Regardless of the contract structure noted above, revenue is recognized over time. Given the fact that in almost all cases, the customer controls the related work-in-progress, an input measure is the most appropriate basis with which to measure progress. Finally, as cost of labor is the predominant measure by which these contracts are structured, the Company recognizes revenue using a cost-incurred approach.
Contract balancesliabilities
Contract liabilities primarily consist of advance payments billings in excess of costs incurredfrom customers and deferred revenue. Changes in contract liabilities are primarily due to the timing difference between the Company’s performance of services and payments from customers. To determine revenue recognized from contract liabilities during the reporting periods, the Company allocates revenue to individual contract liability balances and applies revenue recognized during the reporting periods first to the beginning balances of contract liabilities until the revenue exceeds the balances.
EarningsNet income (loss) per common share
EarningsNet income (loss) per common share is computed by dividing net income (loss) income by the sum of the weighted average number of common shares outstanding during the period plus outstanding deferred share units awards (see Note 18) but excluding issued, but unvested, restricted shares.period.
Diluted income per common share is computed by adjusting the basic income per common share calculation, as described above, for the effects of all potentially dilutive share appreciation rights and restricted stock units (see Note 18).shares. The companyCompany calculates the effects of all potentially dilutive share appreciation rightsshares using the treasury stock method unless they are anti-dilutive. Share appreciation rights are dilutive only when the average market value of the Company’s shares during the period are greater than the exercise price of the share appreciation rights.
Research and development
Research and development costs are expensed in the period incurred. For the years ended December 31, 2018, 20172021, 2020 and 2016,2019, the Company expensed research and development costs of $93$27 million, $71$15 million, and $69$10 million, respectively, in Selling, general and administrative.administrative expense within the Consolidated Statements of Operations.
Implementation costs incurred in cloud computing arrangements
Deferred implementation costs for hosted cloud computing service arrangements are stated at historical cost and amortized on a straight-line basis over the term of the hosting arrangement to which the implementation costs relate to, including any probable renewals. Deferred implementation costs for these arrangements are included in Prepaid assets and Other non-current assets in the Consolidated Balance Sheets and amortized to the same line item as the related hosting fees in the Consolidated Statements of Operations. There was 0 amortization for the years ended December 31, 2021, 2020 or 2019. The cash flows for deferred implementation costs and fees for the associated hosting arrangements are reporting in the same line within operating activities in the Consolidated Statements of Cash Flows. As of December 31, 2021 and 2020, deferred implementation costs for cloud computing arrangements were $20 million and $2 million, respectively.
Interest expense, net
Interest expense,
Interest expense net is comprised of borrowing cost on debt, interest expense on advance payments from customers and other liabilities, interest expense on the orbital securitization liability interest expenseand losses incurred on dissenting stockholders liability, imputed interest on advance payments and other liabilities, and the costextinguishment of forward points from foreign exchange forward contracts. All interest costs are recognized in income using the effective interest method.debt, net of capitalized interest.
Debt issuance costs are amortized and recognized as interest expense on a straight-line basis over the expected term of the related debt, which approximates the effective interest rate method.Debt issuance costs related to the Company’s revolving line of credit are recorded in Prepaid and other current assets and in Other non-current assets in the Consolidated Balance Sheets. Debt issuance costs and debt discount related to the Company’s term loansloan and senior secured notes are recorded as a direct deduction from the carrying amount of the related debt.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Derivative financial instruments and hedging activities
Derivative financial instruments used by the Company consist of foreign currency forward contracts and interest rate swap agreements. The Company uses derivative financial instrumentsforeign currency forward contracts to manage foreign exchange risk associated with the cash flows from long-term construction contracts where some portion of the cash flows are denominated in foreign currencies as part of the normal course of business. The Company uses interest rate swap agreements to manage interest rate risk associated with cash outflows from long-term debt. Derivative financial instruments are measured at fair value.value and are included as components of Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets. When derivative financial instruments are designated in a qualifying hedging relationship and hedge accounting is applied, the effectiveness of the hedges is measured at the end of each reporting period and the effective portion of changes in fair value are deferred in accumulatedAccumulated other comprehensive income.income (loss). Amounts deferred in accumulatedAccumulated other comprehensive income (loss)are reclassified to income when the hedged transaction has occurred. The ineffective portion of the change in the fair value of the derivative is recorded in income in each period. Cash transactions related to the Company’s derivative contracts accounted for as hedges are classified in the same category as the item being hedged in the Consolidated Statements of Cash Flows. For foreign exchange contracts not in a qualifying hedging relationship, changes in fair value are recognized immediately in income as a foreign exchange gain or loss.loss in Other (income) expense, net within the Consolidated Statements of Operations.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. At that time, if the forecasted transaction within a cash flow hedge remains probable, any cumulative gain or loss on the hedging instrument recognized in Other comprehensive income (loss) is retained in equity until the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, the net cumulative gain or loss previously recognized in other comprehensive income is transferred to income.As of January 1, 2019, the Company has discontinued hedge accounting. The Company will continue to hedge ouraccounting on foreign exchange exposure for economic purposes.
The Company has embedded foreign currency derivatives in certain customerforward contracts related to its manufacturing and supplier contracts. These derivatives are accounted for as separate instruments and are measured at fair value at each reporting date. Changes in fair value are recognized in income as foreign exchange gains or losses.service programs.
The Company does not offset the fair value amounts recognized with derivative instruments against the change in fair value of assets, liabilities or firm commitments executed with the same counterparty under a master netting agreement.
The gross amount of derivative financial assets related to foreign exchange forward contracts within the Consolidated Balance Sheets as of December 31, 2018 and 2017 were $5 million and $13 million, respectively. The gross amount of derivative financial liabilities related to foreign exchange forward contracts within the Consolidated Balance Sheets as of December 31, 2018 and 2017 were $8 million and $9 million, respectively. The amounts subject to master netting agreements but not offset for December 31, 2018 and 2017 were $3 million and $7 million, respectively. Derivative financial assets are included within Prepaid and other assets and Other assets in the Consolidated Balance Sheets and derivative financial liabilities are included with Other current liabilities and Other non-current liabilities.
Cash, cash equivalents and restricted cash
Cash and cash equivalents is comprised of cash on hand, cash balances with banks and similar institutions and term deposits redeemable within three months or less from date of acquisition with banks and similar institutions. Restricted cash is excluded from cash and cash equivalents and is included in Prepaid and otherOther current assets or Other non-current assets within Non-current assets. Restricted cash is held primarily to secure outstanding letters of credit.in the Consolidated Balance Sheets.
Trade and other receivables, net
Trade and other receivables include amounts billed to customers, unbilled receivables in which the Company’s right to consideration is unconditional and current portion of orbital receivables, (see Note 6). The carrying amounts of current trade receivables is stated at cost, net of allowance for doubtful accounts.expected credit losses. The Company bills customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The Company maintains an allowance for doubtful accountsexpected credit losses for estimated losses resulting from the inability of its customers to make required payments, which results in bad debt expense. The Company periodically determines the adequacy of this allowance by evaluating the comprehensive risk profiles of all individual customer receivable balances including, but not limited to, the customer’s financial condition, credit agency reports, financial statements, credit limit and overall current economic conditions.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
financial information for Vricon for the year ended December 31, 2019. Equity method investments are included within other assets.insignificant for the years ended December 31, 2021 and 2020.
Inventory
Summarized Consolidated Statement of Operations
| | | | |
| | | December 31, |
| | | 2019 |
Revenues | | | $ | 54 |
Gross profit | | | $ | 51 |
Income from operations | | | $ | 32 |
Net income | | | $ | 24 |
Inventory
Inventories are measured at the lower of cost or net realizable value and consist primarily of parts and sub-assemblies used in the manufacturing of satellites. The cost of inventories is determined on a first-in-first-out basis or weighted average cost basis, depending on the nature of the inventory. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expense.Inventory is impaired when it is probable inventory values exceed their net realizable value.
Property, plant and equipment
Property, plant and equipment areis measured at cost less accumulated depreciation. Cost for satellite assets includes amounts related to design, construction, launch and commissioning. Cost for ground system assets includesinclude amounts related to construction and testing. Interest expense is capitalized on certain qualifying assets that take a substantial period of time to prepare for their intended use. When the costs of certain components of an item of property, plant and equipment are significant in relation to the total cost of the item and the components have different useful lives, they are accounted for and depreciated separately. Property, plant and equipment under construction are measured at cost less any impairment losses.
Depreciation expense is recognized in income on a straight-line basis over the estimated useful life of the related asset to its residual value. Expected useful lives are reviewed at least annually. Land is not depreciated.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The estimated useful lives are as follows:
| | | |
| | | |
| | Estimated useful life |
Land improvements | | | 20 years |
Buildings | | | 7 - 45 years |
Leasehold improvements | | | lesser of useful life or term of lease |
Equipment | | | 2 - 40 years |
Satellites 1 | | | 211.5 - 1016 years
|
Furniture and fixtures | | | 2 - 10 years |
Computer hardware | | | 2 - 13 years |
1 | The estimated useful life over which the Company depreciates its satellites is determined once a satellite has been placed into orbit. The initial determination of a satellites useful life involves an analysis that considers design life, random part failure probabilities, expected component degradation and cycle life, predicted fuel consumption and experience with satellite parts, vendors and similar assets. |
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1The estimated useful life over which the Company depreciates its satellites is determined once a satellite has been placed into orbit. The initial determinationMAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of a satellites useful life involves an analysis that considers design life, random part failure probabilities, expected component degradation and cycle life, predicted fuel consumption, experience with satellite parts, vendors and similar assets. The useful lives of the satellites were reassessed as part of the DigitalGlobe Transaction and are based on the remaining useful lives from the date of the acquisition.dollars, unless otherwise noted)
Leased assets
Leased assets for which the Company assumes substantially all the risks and rewards of ownership are classified as capital leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. The asset is depreciated over the shorter of the lease term or its estimated useful life. All other leases are considered operating leases and the payments, including lease incentives, are recognized in income on a straight-line basis over the term of the lease.
Intangible assets
Intangible assets consist of customer relationships, backlog, acquired technologies and software, image library, trade names, licenses and non-compete agreements. Intangible assets are generally amortized on a straight-line basis over their estimated useful lives and are recorded at fair value at the time of acquisition, or in the case of internally developed software, at cost. Image library intangibles assets are amortized using the double declining balance method. Intangible assets are currently amortized over the following estimated useful lives:
| | | |
| | | |
| | Estimated useful life |
Customer relationships | | | 9 - 21 years |
Backlog | | | 32 - 5 years
|
Technologies | | | 5 - 13 years |
Software | | | 32 - 10 years
|
Image library | | | 5 years |
Trade names and other | | | 51 - 20 years
|
Non-compete agreements | | | 2 years |
Impairment
Intangible assets and property, plant and equipment and other long-lived assets
IntangibleFinite-lived intangible assets, property, plant and equipment and other long-lived assets are tested for impairment at least annually on October 1, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Finite-lived intangible assets and property, plant and equipment and other long-lived assets are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) are less than the asset’s carrying value. Any required impairment loss is measured as the amount by which the asset’s carrying value exceeds its fair value and recorded as a reduction in the carrying value of the related asset.asset.
If aan owned satellite were to fail during launch or while in-orbit, the resulting loss would be charged to expense in the period it is determined the satellite is not recoverable. The amount of loss would be reduced to the extent of insurance proceeds received. The timing of the loss and the insurance recovery will likely differ, as an insurance recovery generally cannot be recognized until final settlement with the insurance company is reached.
In December 2018, the Company experienced a loss of the WorldView-4 satellite and in 2019, the Company received insurance recoveries of $183 million. The insurance proceeds are included in operating cash flows as they are considered business interruption insurance and represent the Company’s satellite’s loss of capacity to produce imagery for sale to the Company’s customers.
Goodwill
Goodwill is tested for impairment at least annually on October 1, or whenever events or changes in circumstances indicate that its carrying amount may be less than its recoverable amount.
Goodwill is tested for impairment at the reporting unit level. ManagementThe Company may use either a qualitative or quantitative approach when testing a reporting unit’s goodwill for impairment. Where a qualitative approach is used, an evaluation of events and circumstances impacting the reporting unit is performed to determine the likelihood of goodwill impairment.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Based on that qualitative evaluation if it is determined that it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary. Otherwise, a quantitative impairment test is performed.
Where a quantitative approach is used, management typically uses a discounted cash flowan income approach to estimate the fair value of a reporting unit. Management uses judgment to estimateunit, which requires the inputs to these assessmentsuse of significant judgments and estimates, including future cash flow projections, discountflows, terminal growth rates and tax rates, and anydiscount rates. Any changes to these inputs could have a material impact on the impairment calculation. An impairment loss is recognized to the extent that the carrying value of a reporting unit exceeds its fair value. Management assesses the reasonableness of the results by reconciling the sum of the estimated fair values of the reporting units, including the Company’s Corporate balance sheet, to the Company’s market capitalization and market value of invested capital as of the date of our annual impairment test.
The Company used a qualitative approach for its goodwill impairment assessment as of October 1, 2021 and 2020 and determined that no impairment existed.
Warranty and after-sale service costs
A liability for warranty and after-sale service costs is recognized when the underlying product or service is sold. Warranty and after-sale service provisions are based on management’s best estimate of the expected obligation using historical warranty data and experience. Warranty and after-sale service liabilities related to products and services delivered under construction contracts are included in the estimated total costs to complete when utilizing the cost-to-cost method to determine the percentage of completionEAC for revenue recognition. Warranty and after-sale service liabilities are presented in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets. Warranty and after-sale service costs are recognized within Product and Service costs, excluding depreciation and amortization in the Consolidated Statement of Operations.
Restructuring costs
A liability for restructuring costs is recognized when the Company has approved a detailed and formal restructuring plan and the restructuring either has commenced or has been announced publicly.Restructuring liabilities are presented in Other current liabilities and Other non-current liabilities on the Consolidated Balance Sheets. Restructuring costs are recognized within Selling, general and administrative expense and within Product costs and Service costs, excluding depreciation and amortization in the Consolidated Statements of Operations.
Employee benefits
Defined benefit pension and other postretirement benefit plans
The Company maintains defined benefit pension and other postretirement benefit plans for certain employees within the SSLits Space Infrastructure segment. The pension and MDA businesses. SSL pensionother postretirement plan benefits were frozen on January 1, 2014. MDA pension plans are still active. SSL and MDA both maintain certain other postretirement benefits.December 31, 2013.
The Company recognizes the funded status of each pension and other postretirement benefit plan in the Consolidated Balance sheets.Sheets. The calculation of pension and other postretirement benefit obligations is performed annually by qualified actuaries using the projected unit credit method, which takes into accountactuarial cost method. The projected benefit obligation is the expected salary increases assum of the basis for futureactuarial present value of all pension benefits attributed to benefit increases forservice completed to the plans.determination date.
Pension and other postretirement plan liabilities are revalued annually, or when an event occurs that requires remeasurement, based on updated assumptions and information about the individuals covered by the plan. The
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Company’s net obligation in respect of the pension and other postretirement benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of anyassociated plan assets.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The Company uses the net asset value (“NAV”) practical expedient to measure the fair value of the plan’s commingled fund investments. These commingled fund investments for which the fair value is measured using the NAV practical expedient are excluded from the fair value hierarchy.
The Company recognizes the amortization of prior service costs and administrative expenses for the majority of its defined benefit and other postretirement plans as a component of product cost, service cost or selling,Selling, general and administrative.administrative expense. All other costs are recognized outside of operating income within otherOther (income) expense, (income), net. The Company recognizes administrative expenses related to frozen plans outside of operatingOperating income (loss) within otherOther (income) expense, (income), net.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in the net benefit liability that relates to past service or the gain or loss on curtailment is recognized immediately in accumulatedAccumulated other comprehensive income.income (loss). The Company recognizes gains or losses on the settlement of a defined benefit plan when settlement occurs.
Under some of the Company’s Canadian defined benefit pension plans, the actuarial present value of benefits to which an employee is entitled if the employee terminates immediately may exceed the actuarial present value of benefits to which the employee is entitled at the expected date of separation based on service to date. In this situation, the Company has elected to calculate the actuarial present value of the vested benefits to which the employee is currently entitled but based on the employee's expected date of separation or retirement.
For the Company’s pension and other postretirement benefit plans, accumulated actuarial gains and losses in excess of a 10 percent corridor and the prior service cost are amortized on a straight-line basis from the date recognized over the average remaining service period of active participants or over the average life expectancy for plans with significant inactive participants.
Defined contribution plans
The Company also maintains defined contribution plans for some of its employees whereby the Company pays contributions based on a percentage of the employees’ annual salary. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in operatingOperating income (loss) as the services are provided.
Stock-based compensation plans
The Company maintains a number of stock-based compensation plans for certain employees and directors that may be settled with cash and/or equity. For certain stock-based compensation plans, the Company has the ability to mandate equity settlement by issuing shares from treasury.reserved shares. Stock-based compensation plans are measured at fair value using either the Black-Scholes option pricing model, the closing price of the Company’s common stock on the grant date or Monte Carlo simulation model and the fair value is expensed on a graded vesting schedule over the vesting period. Management uses judgment to determine the inputs to the Black-Scholes option pricing modelmodels including the expected plan lives, underlying stock price volatility and forfeiture rates. Volatility is estimated by considering the Company’s historic stock price volatility over similar periods to the expected life of the awards under consideration. Changes in these assumptions will impact the calculation of fair value and the amount of compensation expense recognized within Selling, general and administrative expense in income.the Consolidated Statements of Operations.
The fair value of liability classified awards is recognized as a liability within accruedAccrued compensation and benefits and Pension and other postretirement benefit liabilities in the Consolidated Balance Sheets. The Company classifies stock-based compensation awards as liability when the expectation is the awards will be settled in cash. The liability is re-measured and charged to income at each reporting date until the award is settled.
The fair value of equity-settled plans is recognized in additionalAdditional paid-in capital in the Consolidated Balance Sheets. Equity-settled plans are measured based on the grant date fair value of the award including the impact of estimated forfeitures and are not re-measured.
The Company classifies stock-based compensation awards as equity when the expectation is the awards will be settled in equity.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Income taxes
The Company is subject to income taxes in Canada, the United States, Luxembourg,Sweden and other foreign jurisdictions. The Company computes its provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are determined based on the temporary differences between the financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured at the currently enacted tax rates that are expected to apply in years in which they are expected to be paid for or realized. All deferred income taxes are classified as non-current onin the Company's Consolidated Balance Sheets. Significant judgments are required in order to determine the realizability of deferred tax assets. In assessing the need for a valuation allowance, the Company's management evaluates all significant available positive and negative evidence, including historical operating results, estimates of future sources of taxable income, carry-forward periods available, the existence of prudent and feasible tax planning strategies and other relevant factors.
The recognition of uncertain tax positions is evaluated based on whether it is considered more likely than not that the position taken, or expected to be taken, on a tax return will be sustained upon examination through litigation or appeal. For those positions that meet the recognition criteria, they are measured as the largest amount that is more than fifty50 percent likely to be realized upon ultimate settlement. The Company believes that the uncertainreserves for unrecognized tax positions recognizedbenefits are adequate to cover all open tax years based on its assessment. If the expected outcome of the matter changes, the Company will adjust income tax expense (benefit) or the deferred tax asset accordingly in the period in which the expected outcome has changed. The Company classifies interest and penalties related to income taxes as income tax expense.
The Company earns investment and other tax credits with respectReclassifications
Certain amounts in the prior year financial statements have been reclassified to its research and development expenses. The benefit of these tax credits is recorded as a reduction of income tax expense.conform to the current year presentation.
Recently Adopted Accounting Pronouncements
Employee benefitsFinancial Instruments
In August 2018,June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting StandardStandards Update (“ASU”) 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General2016-13, Financial Instruments-Credit Losses (Topic 715-20)326): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans. This update modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The Measurement of Credit Losses on Financial Instruments (“ASU is effective for fiscal years, ending after December 15, 2020 and requires a retrospective adoption to all periods presented. The Company early adopted this ASU on December 31, 2018 and has updated the employee benefits disclosure accordingly, see Note 17 for details.
Goodwill
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This update eliminates Step 2 from the goodwill impairment test by requiring an entity to recognize a goodwill impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted. This guidance must be applied on a prospective basis. The Company early adopted this update in the fourth quarter of 2018, and prospectively applied the guidance as required.
3. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-03”2016-13”) which together with subsequent amendments is included in ASC 842326 – Leases. This new standard requires that all leases with an initial term greater than one year be recorded on the balance sheet as a right-of-use asset and lease liability. Additional qualitative and
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
quantitative disclosures are also required. This update is effective in fiscal years, including interim periods, beginning after December 15, 2018.
The Company will adopt ASU 2016-02 using the modified retrospective approach with a cumulative-effect adjustment to the opening period of retained earnings on January 1, 2019. Upon adoption, the Company will recognize and measure leases without revising comparative period information or disclosure.
The Company has made significant progress in executing against its implementation plan. The Company is electing the package of practical expedients, which, among other things, allows for a carry forward of our prior lease classifications under ASC 840. The Company is not electing the hindsight practical expedient.
The Company is in the process of finalizing the impact that this standard update will have on its Consolidated Financial Statements, but anticipates a material impact on its assets and liabilities due to the addition of right-of-use assets and lease liabilities to the Consolidated Balance Sheets. The Company does not expect a material impact on the Consolidated Statements of Operations. ASU 2016-02 also requires expanded disclosure regarding the amounts, timing and uncertainties of cash flows related to a company’s lease portfolio. The Company is evaluating these disclosure requirements and are incorporating the collection of relevant data into our processes in preparation for disclosure in 2019.
In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220). The guidance in ASU 2018-02 allows an entity to elect to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") from accumulated other comprehensive income into retained earnings. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on the Company’s Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments -– Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13Losses. ASC 326, as amended, significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will requireASC 326, as amended, requires immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. This update isThese updates were effective for annual and interim financial statement periods beginning after December 15, 2019, with early adoption permitted for financial statement periods beginning after December 15, 2018. The Company adopted this standard and related amendments effective January 1, 2020, using the modified retrospective approach. The adoption of this standard resulted in additional disclosures related to the Company’s orbital receivables. Refer to Note 6 for details. There were no impacts to the Consolidated Financial Statements as a result of adoption.
Simplifying the Accounting for Income Taxes
In November 2018,December 2019, the FASB issued ASU 2018-19, Codification Improvements2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 326, Financial Instruments-Credit Losses. This740. ASU does not change2019-12 also simplifies aspects of accounting for franchise taxes and clarifies the core principleaccounting for transactions that result in a step-up in the tax basis of the guidance ingoodwill. ASU 2016-13, instead these amendments are intended to clarify2019-12 is effective for annual and improve operability of certain topics included within the credit losses standard. This ASU will have the same effective date and transition requirements as ASU 2016-13.interim financial statement periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact the adoption of this guidance may have on the Company’s Consolidated Financial Statements.
4. CONVERSION FROM IFRS TO U.S. GAAP
As part of the U.S. Domestication, the Company has retrospectively converted its Consolidated Financial Statements from IFRS to U.S. GAAP. Refer to Note 1 for additional details.
The significant differences between IFRS and U.S. GAAP as they relate to these financial statements are as follows:
(a)Development Costs
Under IFRS, in accordance with International Accounting Standard (“IAS”) 38 – Intangible Assets, development costs were capitalized and recorded as an intangible asset if technical feasibility had been established and it was considered probable that the Company would generate future economic benefits from the
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
asset createdearly adopted this standard and related amendments effective January 1, 2020 on completiona prospective basis, in order to utilize the simplifying provision that removes the exception to the incremental approach for intraperiod tax allocation when a loss is incurred from continuing operations and income or a gain results from another item such as discontinued operations. There were no additional material impacts to the Consolidated Financial Statements as a result of development. Mostadoption.
3. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Reference Rate Reform
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of these projects had not been placed into service asthe Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) 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 expected 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, 2018. Under U.S. GAAP,2022. The Company expects that it will elect to apply some of the expedients and exceptions in accordance with Accounting Standards Codification (“ASC”) 730 – ResearchASU 2020-04. However, the Company is still evaluating the guidance and Development, all development costs are expensed as incurred.the impact that adoption of ASU 2020-04 will have on the Company's financial statements.
4. DISCONTINUED OPERATIONS
During
On April 8, 2020, the Company completed the sale of the MDA Business to MDA Purchaser for an aggregate purchase price of $729 million ($1.0 billion Canadian dollars). The Company recognized an after-tax gain on disposal of discontinued operations of $317 million, net of $12 million in taxes, on the MDA Transaction for the year ended December 31, 2018,2020. The tax on the MDA Transaction was primarily due to the estimated U.S. federal Base Erosion and Anti-Abuse Tax and California legislation suspending the use of net operating loss (“NOL”) carryforwards. The gain on the MDA Transaction includes a reclassification primarily related to the foreign currency translation adjustment balance of $68 million from Accumulated other comprehensive (loss) income. See Note 12 for details on the use of proceeds from the MDA Transaction.
In addition, the Company recorded impairment losses under IFRSand the MDA Purchaser entered into a Transition Services Agreement pursuant to which the MDA Purchaser received certain services (“Services”). The Services were provided based on intangible assets related to development. Under U.S. GAAP, these costs would have been expensed as incurred.an agreed upon fee arrangement that ended on April 8, 2021.
(b)Investment Tax Credits
Under IFRS, the Company recorded investment tax credits in accordance with IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance, and recognized investment tax credits as a reduction in direct costs, selling, general and administration, as applicable. Under U.S. GAAP, theThe Company determined that investment tax credits are withinas of December 29, 2019, the scope of ASC 740 – Income Taxes (“ASC 740”), andMDA Business met the criteria to be classified as such are recognized asheld for sale. The MDA Business was a reduction of income tax expense.
(c)Investment Tax Credits – Classification
Under IFRS, in accordance with IAS 12 – Income Taxes (“IAS 12”), the Company had classified all investment tax credit balances as current tax assets. Under ASC 740, investment tax credits accounted for under the flow-through method result in either a reduction to income taxes payable in the year in which the credit arises, or as an increase in a deferred tax asset if the credit is carried forward to future years, subject to assessing the realization of such credits. The Company has determined that these credits will be realized and therefore the benefits relatedseparate reportable segment prior to the investment tax credits have been carried forwardannouncement of the MDA Transaction and constituted all the Company’s Canadian operations. As the MDA Transaction represented a strategic shift that had a major effect on the Company’s operations, the MDA Business results met the criteria to future years and recognizedbe reported as deferred tax assets.
(d)Deferred Taxes
Under IFRS, in accordance with IAS 12, deferred tax assets and liabilities were offset on a legal entity by entity basis. Under U.S. GAAP,discontinued operations in accordance with ASC 740, for each tax-paying component205-20 – Discontinued Operations.
The results of an entity within a particular jurisdiction, all deferred tax assets and liabilities shall be offset and presented as a single amount within a particular tax jurisdiction rather than on a legal entity by entity basis. Therefore, certain non-current deferred tax assets and liabilities will be offset and presented on a net basis on the balance sheet.
(e)Unrecognized Tax Benefits
Under IFRS, in accordance with IAS 12, tax exposure items are defined as current tax to the extent it affects the calculation of income in respect of both current and prior periods. Under U.S. GAAP, in accordance with ASC 740, uncertain tax positionsMDA are classified as a current liabilitydiscontinued operations in the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows for all periods presented. For the year ended December 31, 2020, the Company reported the operating results and cash flows related to the extent payment is expectedMDA Business through April 7, 2020. There was no activity within onediscontinued operations in the Consolidated Statements of Operations for the year an offset to deferred tax assets toended December 31, 2021. For the extentyear ended December 31, 2021, the related tax attributes are available to offset theCompany made $13 million in payments on a previously recorded liability and a non-current liability where payment is expected beyond one year.
(f)Investment Tax Credits – Interest and penalties
Under IFRS, in accordance with IAS 12, interest and penalties on amounts related to investment tax credits were classified as finance expense. Under U.S. GAAP, in accordance with ASC 740, interest and penalties on the liability for unrecognized tax benefits can be classified as either a component of income tax expense or interest expense. The Company has elected to classify the income or expense in respect of certain interest and penalties as an increase to income tax expense or benefit as these amounts relaterelation to the Company’s tax positions. This includes interest and penalties associateddispute with investment tax credits.a Ukrainian customer that is reflected within discontinued operations in the Consolidated Statements of Cash Flows.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Income from discontinued operations, net of tax for the MDA Business in the Consolidated Statements of Operations consists of the following:
| | | | | | |
| | Year Ended |
| | December 31, |
| | 2020 1 | | | 2019 |
Revenues: | | | | | | |
Product | | $ | 44 | | $ | 206 |
Service | | | 42 | | | 161 |
Total revenues | | | 86 | | | 367 |
Costs and expenses: | | | | | | |
Product costs, excluding depreciation and amortization | | | 38 | | | 149 |
Service costs, excluding depreciation and amortization | | | 24 | | | 84 |
Selling, general and administrative | | | 13 | | | 88 |
Depreciation and amortization | | | 4 | | | 11 |
Impairment loss | | | 12 | | | 12 |
Operating (loss) income | | | (5) | | | 23 |
Interest expense, net | | | 1 | | | 1 |
Other (income) expense, net2 | | | (34) | | | 3 |
Income before taxes | | | 28 | | | 19 |
Income tax benefit | | | (4) | | | (7) |
Income from operations of discontinued operations, net of tax | | | 32 | | | 26 |
Gain on disposal of discontinued operations, net of tax | | | 317 | | | — |
Income from discontinued operations, net of tax | | $ | 349 | | $ | 26 |
1For the year ended December 31, 2020, MDA Business results are presented through April 7, 2020.
2 | Other (income) expense, net includes the $39 million recovery of the previously recorded liability in relation to the Company’s dispute with the Ukrainian Customer for the year ended December 31, 2020. |
MDA held an investment in a privately held company in which it did not have significant influence and the fair value of which could not be reliably measured through external indicators. The investment was evaluated quarterly for impairment. In 2019, the Company noted an observable price change related to its investment and, as a result, recorded an impairment loss of $12 million. There were 0 investment impairment losses recognized for the year ended December 31, 2020.
5.BUSINESS COMBINATION
The Company did not close any transactions qualifying as a business combination during the years ended December 31, 2021 or 2019.
On July 1, 2020, the Company closed the acquisition of Vricon by purchasing the remaining 50% ownership interest in Vricon for $143 million or, excluding Vricon cash on hand of $23 million, for $120 million. Vricon is a global leader in satellite-derived 3D data for defense and intelligence markets, with software and products that enhance 3D mapping, Earth intelligence data, military simulation and training and precision-guided munitions. Vricon was formed as a joint venture between Maxar and Saab AB in 2015 to combine patented Saab AB intellectual property with the Company’s commercial satellite imagery to build highly accurate, immersive 3D products at scale. Prior to the closing of the Vricon Acquisition, Vricon was the Company’s most significant joint venture.
To fund the Vricon Acquisition, the Company issued $150 million in aggregate principal amount of 7.54% senior secured notes due 2027 (“2027 Notes”). See Note 12 for additional details on the issuance of the 2027 Notes. As part of
(g)Pension
Under IFRS, in accordance with IAS 19 – Employee Benefits, the Company had recognized re-measurement gains and losses, including actuarial gains and losses, immediately in other comprehensive income. Under U.S. GAAP, ASC 715 – Compensation – Retirement Benefits, actuarial gains and losses are recognized immediately in other comprehensive income and subsequently reversed and recognized in net income in future reporting periods using the corridor approach. Also under IFRS, net interest expense (income) on the net defined benefit liability (asset) was recognized as a component of interest expense using the discount rate for the underfunded pension obligations. Under U.S .GAAP, net interest expense (income) on the net defined benefit liability (asset) is recognized as a component of other defined benefit costs calculated as the net of interest from the discount rate on pension plan obligations less the expected long-term rate of return on plan assets rates on pension plan assets.
(h)Pension – Changes in Deferred Tax
Under IFRS, in accordance with IAS 12, the income tax effect of actuarial gains and losses on defined benefit pension plans and other retirement benefit plans were included in other comprehensive income. Under U.S. GAAP, in accordance with ASC 740, the income tax effect of actuarial gains and loss on defined benefit pension plans and other retirement benefit plans are included in income tax expense.
(i)Property, Plant and Equipment
Certain of the Company’s capitalized projects, such as satellites under construction, include the development of internal use software. Under IFRS, in accordance with IAS 38 – Intangible Assets, the Company capitalized certain overhead costs related to internally developed software as they were determined to be directly attributable to preparing the asset for use. Under U.S. GAAP, ASC 350-40 – Internal Use Software, overhead costs are required to be expensed as incurred, regardless of whether they are directly attributable to preparing the asset for use.
(j)Deferred Income Tax Valuation Allowance – recognition in Income and Other Comprehensive Income
Under IFRS, in accordance with IAS 12, the subsequent recognition of deferred tax assets are generally recorded in income or in other comprehensive income based on the source of the underlying items that originally gave rise to the deferred tax asset. Under U.S. GAAP, in accordance with ASC 740, the release of valuation allowances on deferred tax assets are generally recorded in income from continuing operations, subject to specific rules on the allocation of income tax expense between income from continuing operations and other comprehensive income, which may differ from IFRS.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
the Vricon Acquisition, Vricon’s stock-based awards vested upon the consummation of the Vricon Acquisition and were settled in cash for $26 million. The unvested awards were forfeited.
The significant differencesVricon Acquisition was achieved in stages, which required the Company to remeasure its previously held equity interest in Vricon at its acquisition date fair value. As no material control premium was determined to exist, the call option purchase price of $117 million paid in the Vricon Acquisition was used to estimate the fair value of the previously held equity interest. The Company performed a business enterprise valuation to corroborate the resulting total implied purchase consideration. This remeasurement resulted in a gain of approximately $85 million which was recorded in Other (income) expense within the Company’s Consolidated Statements of Operations were as follows:
| | | | | | | | | | |
| | | Year ended December 31, |
| Note | | 2018 | | 2017 | | | 2016 |
Net (loss) income - IFRS | | | $ | (1,381) | | $ | 100 | | $ | 106 |
Product and service costs 1 | (a), (b), (g), (i) | | | (88) | | | (105) | | | (71) |
Depreciation and amortization | (a) | | | 4 | | | 6 | | | 5 |
Interest expense, net | (a), (f), (g) | | | (4) | | | 6 | | | 7 |
Other expense (income), net | (g) | | | 7 | | | 25 | | | (4) |
Income tax benefit | (b), (f), (h), (j) | | | 28 | | | 26 | | | 25 |
Impairment losses, net | (a) | | | 170 | | | — | | | — |
Net (loss) income - U.S. GAAP | | | $ | (1,264) | | $ | 58 | | $ | 68 |
1 Excludes depreciation and amortization
The significant differences in the Consolidated Balance Sheets were as follows:
| | | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2018 | | 2017 |
| | IFRS | | Adjustments | | U.S. GAAP | | IFRS | | Adjustments | | U.S. GAAP |
Assets: | | | | | | | | | | | | | | | | | | |
Income taxes receivable 1 | | $ | 64 | | $ | (50) | | $ | 14 | | $ | 72 | | $ | (53) | | $ | 19 |
Deferred tax assets | | | 52 | | | 51 | | | 103 | | | 108 | | | (45) | | | 63 |
Property, plant and equipment, net 2 | | | 754 | | | (7) | | | 747 | | | 1,055 | | | (47) | | | 1,008 |
Intangible assets, net 2 | | | 1,304 | | | (72) | | | 1,232 | | | 1,753 | | | (135) | | | 1,618 |
Other assets | | | 2,905 | | | — | | | 2,905 | | | 3,669 | | | — | | | 3,669 |
Total assets | | $ | 5,079 | | $ | (78) | | $ | 5,001 | | $ | 6,657 | | $ | (280) | | $ | 6,377 |
| | | | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | | | |
Income taxes payable 1 | | $ | 15 | | $ | (11) | | $ | 4 | | $ | 49 | | $ | (46) | | $ | 3 |
Deferred tax liabilities | | | 15 | | | (9) | | | 6 | | | 104 | | | (99) | | | 5 |
Other liabilities | | | 4,326 | | | 21 | | | 4,347 | | | 4,489 | | | 47 | | | 4,536 |
Total liabilities | | $ | 4,356 | | $ | 1 | | $ | 4,357 | | $ | 4,642 | | $ | (98) | | $ | 4,544 |
| | | | | | | | | | | | | | | | | | |
(Accumulated deficit) retained earnings | | $ | (1,184) | | $ | (27) | | $ | (1,211) | | $ | 262 | | $ | (144) | | $ | 118 |
Accumulated other comprehensive income | | | 134 | | | (52) | | | 82 | | | 151 | | | (38) | | | 113 |
Other equity | | | 1,773 | | | — | | | 1,773 | | | 1,602 | | | — | | | 1,602 |
Total stockholders' equity | | | 723 | | | (79) | | | 644 | | | 2,015 | | | (182) | | | 1,833 |
Total liabilities and stockholders' equity | | $ | 5,079 | | $ | (78) | | $ | 5,001 | | $ | 6,657 | | $ | (280) | | $ | 6,377 |
1As a result of the conversion to U.S. GAAP, tax reclassifications of $11 million and $5 million were recorded as of December 31, 2018 and 2017, respectively.
2In 2017, the Company reclassified $47 million of construction in process, within property, plant and equipment, to intangibles to conform to the current year presentation.
5.BUSINESS COMBINATIONS
On July 16, 2018, the Company acquired Neptec Design Group Ltd. (“Neptec”), a leading electro-optical and electro-mechanical systems and high-performance intelligent Light Detection and Ranging company for $30 million, net of cash acquired, comprised of approximately $6 million in cash and the balance in common shares of Maxar. With Neptec, the
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Company will deliver end-to-end robotic systems and an expanded set of solutions in order to capture growth and accelerate advancement into new and expanding space segments. As a result of the transaction, the Company recognized $21 million of goodwill (not deductible for tax purposes), $11 million of intangible assets, and $2 million of net liabilities. Neptec’s operating results are included in the Company’s consolidated financial statements beginning from the date of acquisition and had an immaterial effect on the Company’s consolidated financial results for the year ended December 31, 2018, 2018. Direct transaction costs of the Neptec acquisition were not material and were expensed as incurred.2020.
On October 5, 2017, the Company completed the DigitalGlobe Transaction for a combination of equity and cash consideration totaling $2,328 million. Headquartered in Westminster, Colorado, DigitalGlobe is a global leading provider of high-resolution Earth imagery, data and analysis. Under the terms of the merger agreement with DigitalGlobe, each DigitalGlobe common share was exchanged for $17.50 in cash and 0.3132 common shares of the Company.
The fair valueoperating results of the common shares issued as consideration was based on the closing price of a Maxar share on the Toronto Stock Exchange on October 4, 2017 of $54.57 per share). Share issuance costs of $3 million which were directly attributable to the issue of the shares have been netted against equity.
In order to finance the acquisition, the Company entered into a $3.8 billion senior secured syndicated credit facility (the “Syndicated Credit Facility”). On October 5, 2017, the Company made an initial draw under the Syndicated Credit Facility of $3.1 billion, net of debt issuance costs of $63 million, and used this amount, along with DigitalGlobe cash on hand, to acquire DigitalGlobe’s equity and pay out DigitalGlobe’s equity award holders ($1.2 billion), to refinance DigitalGlobe’s debt ($1.3 billion), to refinance the Company’s debt ($742 million) and to pay transaction fees and expenses of both the Company and DigitalGlobe, fund working capital, and for general corporate purposes.
As part of the merger agreement, DigitalGlobe’s stock-based awards were converted into the right to receive a combination of cash and common shares of the Company, except for the stock component of certain unvested time-based awards that were replaced by equivalent stock-based awards of the Company. The fair value of the replacement awards attributable to the pre-acquisition and post-acquisition service periods were $16 million and $14 million, respectively. The pre-acquisition amount has beenVricon are included as part of the purchase consideration and the post-acquisition amount will be expensed over the remaining vesting period of the replacement awards.
In addition, certain unvested performance-based DigitalGlobe stock-based awards and the cash component of the unvested time-based awards became fully vested and were paid the merger consideration on the closing of the transaction. Since this accelerated vesting was triggered by the actions of the Company, the component of the fair value of the consideration attributable to the accelerated stock-based awards relating to post acquisition services of $33 million has been recognized in the Company’s Consolidated Statements of Operations. Operations beginning July 1, 2020. Vricon results are consolidated within the Earth Intelligence Segment. See Note 2 for summarized financial information for Vricon for periods prior to the date of acquisition.
The component relating to pre-acquisition services hasfollowing table presents unaudited pro forma financial information as if Vricon had been included as part of the purchase consideration.
The merger consideration paid out on the closing of the transaction excluded amounts due to 80,000 dissenting DigitalGlobe preferred stockholders and 352,225 dissenting common stockholders. On June 15, 2018, the Company entered into an agreement to settle all pending litigation with the preferred stockholders (the “Settlement Agreement”). Under the Settlement Agreement, the preferred stockholders received (i) 2,206,464 common shares of Maxar and (ii) a payment in cash for the interest that has accrued on the merger consideration from the closing of the DigitalGlobe Transaction. In January 2019, the Company settled with the remaining dissenting common stockholders.
In the period from October 5, 2017 to December 31, 2017, DigitalGlobe contributed revenue of $222 million and income before taxes of $8 million to the Company’s consolidatedfinancial results of operations. Assuming an acquisition dateas of January 1, 2017, the Company’s unaudited pro-forma revenue for2019, through the year ended December 31, 2017 was $2.3 billion.2020:
| | | | | | |
| | Year Ended |
| | December 31, |
| | 2020 | | 2019 |
Revenues | | $ | 1,734 | | $ | 1,706 |
Net income | | $ | 302 | | $ | 119 |
Table of ContentsPurchase Price Allocation
MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The following table summarizes the fair value of the consideration transferred and the estimated fair values of the major classes of assets acquired and liabilities assumed at the acquisition date. The fair value of satellite assets andthe intangible assets acquired has been determined using valuation techniques that require estimationsignificant judgment, including the amount and timing of replacement costs, future net cash flows and discount rates. During the three months ended March 31, 2021, the Company finalized the purchase price
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
| | | |
| | October 5, 2017 |
Cash paid | | $ | 1,131 |
Shares issued | | | 1,063 |
Merger consideration to be settled | | | 3 |
Liability to dissenting stockholders | | | 115 |
Issuance of replacement equity-settled awards | | | 16 |
Purchase consideration | | $ | 2,328 |
Assets | | | |
Cash and cash equivalents | | $ | 171 |
Trade and other receivables, net | | | 142 |
Property, plant and equipment, net | | | 696 |
Intangible assets, net | | | 1,440 |
Other assets | | | 106 |
| | $ | 2,555 |
Liabilities | | | |
Accounts payable | | | 83 |
Other current liabilities | | | 4 |
Pension and other postretirement benefit liabilities | | | 29 |
Long-term debt | | | 1,276 |
Other non-current liabilities | | | 504 |
| | $ | 1,896 |
Fair value of net identifiable assets acquired | | | 659 |
Goodwill | | $ | 1,669 |
allocation related to the Vricon Acquisition. There were no adjustments from the preliminary purchase price allocation determined as of December 31, 2020.
| | | |
| | July 1, 2020 |
Call option purchase price | | $ | 117 |
Fair value of existing equity interest | | | 117 |
Cash settlement of equity awards | | | 26 |
Purchase consideration | | $ | 260 |
Assets | | | |
Cash and cash equivalents | | $ | 23 |
Trade and other receivables, net | | | 9 |
Property, plant and equipment, net | | | 3 |
Intangible assets, net | | | 73 |
Other assets | | | 7 |
Total assets | | $ | 115 |
Liabilities | | | |
Accounts payable | | | 1 |
Accrued liabilities | | | 3 |
Deferred income tax liability | | | 17 |
Other current liabilities | | | 6 |
Total liabilities | | | 27 |
Fair value of net identifiable assets acquired | | | 88 |
Goodwill | | $ | 172 |
The following table summarizes the intangible assets acquired from the DigitalGlobe TransactionVricon Acquisition by class and useful life:
| | | | | | |
| | Carrying value | | Weighted average useful life |
Finite-lived intangible assets: | | | | | | |
Customer relationships | | $ | 608 | | | 14 years |
Backlog | | | 331 | | | 4 years |
Technologies | | | 318 | | | 5 years |
Software | | | 46 | | | 3 years |
Image library | | | 80 | | | 5 years |
Trade names and trademarks | | | 37 | | | 10 years |
Other | | | 20 | | | 2 years |
Total intangible assets | | $ | 1,440 | | | |
| | | | | | |
| | Carrying value | | Remaining useful life |
Finite-lived intangible assets: | | | | | | |
Backlog | | $ | 21 | | | 2 years |
Trademarks | | | 1 | | | 1 year |
Existing technology | | | 49 | | | 9 years |
Existing software | | | 2 | | | 2 - 3 years |
Total intangible assets | | $ | 73 | | | |
The goodwill of $172 million is attributable mainlyprimarily to the human capital of DigitalGlobe’s workforce, market presence and the synergies expected to be achieved from integrating DigitalGlobeVricon with the Company’s existing capabilities. NoDue to the nature of the Vricon Acquisition, the Company did not receive a step-up in tax basis on the fixed assets, intangible assets or goodwill is deductible for income tax purposes.recorded in the purchase price allocation.
6. TRADE AND OTHER RECEIVABLES, NET
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
| | | | | |
| December 31, | | December 31, |
| 2021 | | 2020 |
U.S. government receivables: | | | | | |
Billed | $ | 65 | | $ | 84 |
Unbilled | | 124 | | | 76 |
| | 189 | | | 160 |
Other governments and commercial receivables: | | | | | |
Billed | | 97 | | | 97 |
Unbilled | | 19 | | | 19 |
| | 116 | | | 116 |
Total trade receivables | | 305 | | | 276 |
Orbital receivables, current portion | | 49 | | | 49 |
Other | | 2 | | | 3 |
Allowance for doubtful accounts | | (1) | | | (1) |
Trade and other receivables, net | $ | 355 | | $ | 327 |
During the year ended December 31, 2017,2021, the Company incurred costs of $60 million for investment banking fees, legal, tax, consulting and other acquisition and integration costsreduced its outstanding receivables related to the DigitalGlobe Transaction. These costs have been recognized in Selling, general,SXM-7 satellite for the final milestone and administrative expense inexpected orbital payments by $15 million and $14 million, respectively. See Note 16 for additional details regarding the Company’s Consolidated Statements of Operations and in operating cash flows in the Consolidated Statements of Cash Flows.adjustment to revenue.
6. TRADE AND OTHER RECEIVABLES
Trade and other receivables, net consisted of the following:
| | | | | |
| Year ended December 31, |
| 2018 | | 2017 |
U.S. government receivables: | | | | | |
Billed | $ | 96 | | $ | 63 |
Unbilled | | 60 | | | 34 |
| | 156 | | | 97 |
Other governments and commercial receivables: | | | | | |
Billed | | 146 | | | 213 |
Unbilled | | 112 | | | 125 |
| | 258 | | | 338 |
Total trade receivables | | 414 | | | 435 |
Orbital receivables, current portion | | 34 | | | 30 |
Other | | 17 | | | 21 |
Allowance for doubtful accounts | | (1) | | | (10) |
Total trade and other receivables, net | $ | 464 | | $ | 476 |
Orbital receivables relate to performance incentives due under certain satellite construction contracts that are paid over the in-orbit life of the satellite. As of December 31, 20182021 and 2017, long-term2020, non-current orbital receivables, net of allowances were $407$368 million and $424$361 million, respectivelyrespectively.
The Company has orbital receivables from 13 customers for which the largest customer’s value represents 30% and are included in Non-current assets on19% of the Consolidated Balance Sheets. Orbital receivables are recognized as revenue when measuring progress under the cost-to-cost method during the construction periodstated current and are discounted to present value using discount rates ranging from 6% - 10%non-current balance sheet values for the years ended December 31, 20182021 and 2017. During2020, respectively.
For the year ended December 31, 2018,2021, as a result of an increased certainty of collections of the outstanding orbital receivables from the Company’s largest customer, due to their emergence from bankruptcy, the Company recognized a $22reversed its $49 million impairmentallowance for expected credit losses. The changes in allowance for expected credit losses related to the Company’s Space Systems segment’s long-termnon-current orbital receivables which is included in Impairment losses, net infor the Company’s Consolidated Statementsyears ended December 31, 2021 and 2020, consist of Operations.the following:
| | | |
| | Orbital Receivables Allowance |
Allowance as of December 31, 2019 | | $ | (35) |
Additions | | | (14) |
Allowance as of December 31, 2020 | | $ | (49) |
Reversals | | | 49 |
Allowance as of December 31, 2021 | | $ | — |
The expected timing of total contractual cash flows, including principal and interest payments for orbital receivables is as follows:
| | | | | | | | | | | | | | | | | | | | |
| 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | Thereafter | | Total |
Contractual cash flows from satellites | $ | 50 | | $ | 67 | | $ | 68 | | $ | 72 | | $ | 72 | | $ | 413 | | $ | 742 |
| | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
Contractual cash flows from orbital receivables | $ | 68 | | $ | 74 | | $ | 73 | | $ | 70 | | $ | 63 | | $ | 309 | | $ | 657 |
During 2018 the Company sold orbital receivables for net proceeds of $18 million. These orbital receivables were purchased in tranches that span multiple years ended December 31, 2021 and include longer-term maturities. The orbital receivables that were securitized remain recognized on the consolidated balance sheets as2020, the Company did not meet the accounting criteria for surrendering control of the0t sell any eligible orbital receivables or repurchase any orbital receivables. The net proceeds received on previously sold orbital receivables have been recognized as a securitization liability and are subsequently measured at amortized cost using the effective interest rate method. The securitized orbital receivables and the securitization liabilities are being drawn down as payments are received from the customers and passed on to the purchaser of the tranche. The Company continues to recognize orbital interest revenue on the orbital receivables that are subject to the securitization transactions and recognizes interest expense to accrete the securitization. The amount of securitization liabilities was $109 million and $106 million at December 31, 2018 and 2017, respectively,liabilities.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
of which $15 million and $16 million, respectively, was included in Other currentSecuritization liabilities on the Consolidated Balance Sheets.
7. INVENTORY
The significant decrease in the Company’s SSL geostationary communication satellite (“GeoComm”) business forecast and declining macroeconomic environment in which the GeoComm business operates caused a significant decrease in the forecasted usageas of inventory held by the Company. The Company was previously holding inventory on hand in anticipation of awards to be won during the second half of 2018 and for the AMOS 8 program. The impacts from the loss of AMOS 8 and inability to obtain the forecasted awards culminated during the third and fourth quarters of 2018. These factors compelled the Company to re-evaluate the carrying value of its inventory that was previously pegged to forecasted usage. All GeoComm inventory subject to future use based on forecasts was assessed for possible obsolescence. The result of the re-assessment of future usage of the on-hand inventory was inventory impairment of $66 million which is included in Product costs, excluding depreciation and amortization in the Consolidated Statements of Operations for the year ended December 31, 2018.2021 and 2020, are as follows:
| | | | | |
| December 31, | | December 31, |
| 2021 | | 2020 |
Current portion | $ | 16 | | $ | 14 |
Non-current portion | | 32 | | | 47 |
Total securitization liabilities | $ | 48 | | $ | 61 |
Inventory, net consisted of the following:
7. INVENTORY, NET
| | | | | | | |
| | Year ended December 31, | |
| | 2018 | | 2017 | |
| | | | | | | |
| | | December 31, | | December 31, |
| | | 2021 | | 2020 |
Raw materials | | $ | 21 | | $ | 99 | | $ | 34 | | $ | 22 |
Work in process | | | 10 | | | 14 | | | 6 | | | 9 |
Total | | | 31 | | | 113 | | $ | 40 | | $ | 31 |
Inventory reserve | | | — | | | (11) | | | (1) | | | — |
Total inventory, net | | $ | 31 | | $ | 102 | |
Inventory, net | | | $ | 39 | | $ | 31 |
8. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
| | | | | | |
| | December 31, | | December 31, |
| | 2021 | | 2020 |
Satellites | | $ | 397 | | $ | 397 |
Equipment | | | 221 | | | 207 |
Computer hardware | | | 95 | | | 78 |
Leasehold improvements | | | 83 | | | 81 |
Furniture and fixtures | | | 16 | | | 15 |
Construction in process1 | | | 668 | | | 572 |
Property, plant and equipment, at cost | | | 1,480 | | | 1,350 |
Accumulated depreciation | | | (540) | | | (467) |
Property, plant and equipment, net | | $ | 940 | | $ | 883 |
| | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 |
Satellites | | $ | 397 | | $ | 541 |
Equipment | | | 229 | | | 268 |
Leasehold improvements | | | 97 | | | 80 |
Computer hardware | | | 92 | | | 88 |
Land and Land improvements | | | 88 | | | 108 |
Buildings | | | 46 | | | 91 |
Furniture and fixtures | | | 19 | | | 11 |
Construction in process | | | 142 | | | 72 |
Property, plant and equipment, at cost | | | 1,110 | | | 1,259 |
Accumulated depreciation | | | (363) | | | (251) |
Property, plant and equipment, net | | $ | 747 | | $ | 1,008 |
1 | Construction in process is primarily related to the construction of the Company’s WorldView Legion satellites. |
Depreciation expense for property, plant and equipment was $157$86 million, $93 million and $61$107 million for the yearyears ended December 31, 20182021, 2020 and 2017,2019, respectively.
Sale leaseback
During the fourth quarter of 2019, the Company completed the sale and subsequent leaseback of Company owned properties in Palo Alto, California for net proceeds of $280 million. The Company recognized a gain on the sale of the properties of $136 million, which was adjusted for off-market leaseback terms, and is included in Loss (gain) on sale of assets in the Company’s Consolidated Statement of Operations. During 2020, the Company recognized a $4 million reduction in the gain due to the extension of the lease term on 1 of the properties, which is included in Loss (gain) on sale of assets in the Company’s Consolidated Statement of Operations.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Impairment
The Company recognized impairment loss of $271 million on its property, plant and equipment for the year ended December 31, 2018 (nil in 2017 and 2016). The impairment loss on property, plant and equipment was due to the loss of the WorldView-4 satellite in the Imagery segment, and obsolescence and reduced future use of equipment and buildings in the Space Systems segment. During December 2018, WorldView-4 experienced a failure in its control moment gyros, preventing the satellite from collecting imagery. As a result, the Company recorded impairment losses of $150 million for the remaining book value of the satellite, $5 million related to deferred contract cost assets, $3 million for future insurance premiums due, and $2 million related to prepaid insurance. Impairment loss in the Space Systems segment was based on fair value less cost of disposal for those assets in an orderly liquidation. Fair value was based on observable inputs where possible (Level 2), in which market data could be applied. However, due to the specialized nature of the majority of these assets, inputs for the valuation were unobservable (Level 3).
Sale of Building
During the fourth quarter of 2018, the Company completed the sale of one of its buildings in Palo Alto, California for net proceeds of $68 million. The building and surrounding parcel of land were a part of the SSL campus. The sale resulted in a gain of $33 million from the sale, which is included in Impairment losses, net in the Company’s Consolidated Statements of Operations.
9. INTANGIBLE ASSETS AND GOODWILL
Intangible assets are as follows:
| | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
| | Gross
carrying value | | Accumulated
amortization | | Net
carrying value | | Gross
carrying value | | Accumulated
amortization | | Net
carrying value |
Customer relationships | | $ | 615 | | $ | (190) | | $ | 425 | | $ | 615 | | $ | (146) | | $ | 469 |
Software | | | 379 | | | (152) | | | 227 | | | 298 | | | (125) | | | 173 |
Technologies | | | 367 | | | (278) | | | 89 | | | 369 | | | (211) | | | 158 |
Backlog | | | 107 | | | (89) | | | 18 | | | 129 | | | (79) | | | 50 |
Image library | | | 80 | | | (71) | | | 9 | | | 80 | | | (58) | | | 22 |
Trade names and other | | | 37 | | | (18) | | | 19 | | | 38 | | | (15) | | | 23 |
Intangible assets | | $ | 1,585 | | $ | (798) | | $ | 787 | | $ | 1,529 | | $ | (634) | | $ | 895 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | December 31, 2018 | | December 31, 2017 |
| | Gross carrying value | | Accumulated amortization | | Net carrying value | | Gross carrying value | | Accumulated amortization | | Net carrying value |
Customer relationships | | $ | 619 | | $ | (58) | | $ | 561 | | $ | 622 | | $ | (16) | | $ | 606 |
Backlog | | | 332 | | | (120) | | | 212 | | | 331 | | | (23) | | | 308 |
Technologies | | | 330 | | | (86) | | | 244 | | | 477 | | | (107) | | | 370 |
Software | | | 198 | | | (71) | | | 127 | | | 245 | | | (88) | | | 157 |
Image library | | | 80 | | | (32) | | | 48 | | | 80 | | | (8) | | | 72 |
Trade names and other | | | 41 | | | (9) | | | 32 | | | 114 | | | (27) | | | 87 |
Non-compete agreements | | | 21 | | | (13) | | | 8 | | | 20 | | | (2) | | | 18 |
Total intangible assets | | $ | 1,621 | | $ | (389) | | $ | 1,232 | | $ | 1,889 | | $ | (271) | | $ | 1,618 |
The Company identified triggering eventsgross carrying value and accumulated amortization balances for impairment duringfully amortized backlog were removed from the second halfConsolidated Balance Sheets and excluded from the table above as of 2018 related to intangible assets of its GeoComm business, a reporting unit in the Space Systems segment. At the beginning of the year, the Company forecasted it would be awarded three to four contracts for GeoComm satellites, or approximately thirty percent of the overall 2018 industry awards. During the second half of the year, it became clear that industry and macroeconomic factors had declined substantially from earlier forecasts. Due to the decline in the GeoComm market, and the uncertainty surrounding the future of the Company’s GeoComm business, an impairment loss was recognized, primarily due to future cash flows associated with the intangible assets not being sufficient to cover the total book value of those assets. For the year ended December 31, 2018, the Company recognized impairment losses of $53 million, $47 million, $20 million and $2 million related to the technology, trade name, software, and customer relationship intangible assets of the GeoComm business, respectively.
The Company also recognized an additional $2 million of impairment losses related to software intangible assets associated with the WorldView-4 satellite.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
2021. Amortization expense related to intangible assets was $292$204 million, $255 million and $100$269 million for the years ended December 31, 20182021, 2020 and 2017 respectfully. The increase is primarily due to the inclusion of a full year of expense related to the acquisition of DigitalGlobe.2019, respectively.
The estimated annual amortization expense related to finite-lived intangible assets as of December 31, 2018,2021, is as follows:
| | | | | | | | | | | | | | | | | | |
| | Year ended December 31, |
| | | 2019 | | | 2020 | | | 2021 | | | 2022 | | | 2023 | | | 2024 and thereafter |
Amortization expense | | $ | 276 | | $ | 240 | | $ | 168 | | $ | 129 | | $ | 56 | | $ | 363 |
| | | | | | | | | | | | | | | | | | |
| | | 2022 | | | 2023 | | | 2024 | | | 2025 | | | 2026 | | | 2027 and thereafter |
Amortization expense | | $ | 185 | | $ | 99 | | $ | 103 | | $ | 72 | | $ | 70 | | $ | 258 |
Goodwill as of December 31, 2018 isbalances for each reporting segment are as follows:
| | | | | | | | | | | | |
| | Space Systems | | Imagery | | Services | | Total |
Balance as of December 31, 2016 | | $ | 625 | | $ | 27 | | $ | 47 | | $ | 699 |
Acquisitions | | | 143 | | | 1,400 | | | 126 | | | 1,669 |
Foreign currency translation | | | 6 | | | — | | | — | | | 6 |
Balance as of December 31, 2017 | | | 774 | | | 1,427 | | | 173 | | | 2,374 |
Impairment losses | | | (494) | | | (142) | | | — | | | (636) |
Goodwill on acquisition of Neptec | | | 22 | | | — | | | — | | | 22 |
Disposal of immaterial subsidiary | | | — | | | — | | | (3) | | | (3) |
Foreign currency translation | | | (6) | | | — | | | — | | | (6) |
Balance as of December 31, 2018 | | $ | 296 | | $ | 1,285 | | $ | 170 | | $ | 1,751 |
| | | | | | | | | |
| | Earth Intelligence | | Space Infrastructure | | Total |
Balance as of December 31, 2019 | | | | | | | | | |
Goodwill | | $ | 1,597 | | $ | 17 | | $ | 1,614 |
Accumulated impairment losses | | | (142) | | | (17) | | | (159) |
| | | 1,455 | | | — | | | 1,455 |
Acquisition of Vricon | | | 172 | | | — | | | 172 |
Balance as of December 31, 2020 | | | | | | | | | |
Goodwill | | | 1,769 | | | 17 | | | 1,786 |
Accumulated impairment losses | | | (142) | | | (17) | | | (159) |
| | | 1,627 | | | — | | | 1,627 |
Balance as of December 31, 2021 | | | | | | | | | |
Goodwill | | | 1,769 | | | 17 | | | 1,786 |
Accumulated impairment losses | | | (142) | | | (17) | | | (159) |
| | $ | 1,627 | | $ | — | | $ | 1,627 |
Goodwill impairment
Subsequent to October 1, and before the Company had completed its annual goodwill impairment test, the Company experienced triggering events suggesting that the fair value of the Company had decreased substantially since October 1. These triggering events required an additional goodwill impairment test, which was completed as of December 31. The triggering events included a sustained decline in the Company’s stock price, further declines in the SSL GeoComm business, and the loss of the WorldView-4 satellite. The Company’s reporting units as of December 31, 2018 were comprised of: Imagery, Services, MDA, SSL GeoComm, and the remainder of SSL (“SSL Other”). MDA, SSL GeoComm and SSL Other are reporting units in the Space Systems segment. The Company estimated the fair value of each reporting unit using an income approach. The income approach utilizes a discounted cash flow approach, which requires the use of significant judgments and estimates, including future cash flows, terminal growth rates, and discount rates. The Company evaluated the aggregate fair value of its reporting units against market data to support its fair value estimates. The Company determined that goodwill was impaired as of December 31, 2018 for its MDA, Imagery and SSL Other reporting units and recorded non-cash impairment charges of $477 million, $142 million and $17 million, respectively.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
10. LEASES
10. WARRANTY COSTS
The Company’s leases have remaining lease terms up to 13 years, some of which include options to extend the lease anywhere from six months to ten years.
Sale Leaseback
During the fourth quarter of 2019, the Company completed the sale and subsequent leaseback of Company owned properties in Palo Alto, California. The Company determined the leaseback of both properties to be operating leases, as the criteria to be classified as financing leases were not met. The Company recorded operating lease assets and liabilities of $63 million, representing the fair value of the minimum lease payments associated with the agreements to lease the assets back over a period of two to ten years. The Company also recorded a deferred financing liability representing the off-market terms of the lease. See Note 12 for warranty and after-sale service are included asadditional details. During the third quarter of 2020, the Company recognized a componentreduction in the gain due to the extension of Otherthe lease term on 1 of the properties.
The Company recorded the current portions of the operating lease liabilities and Other non-currentthe deferred financing liability in Current lease liabilities and Current portion of long-term debt, respectively, in the Consolidated Balance Sheets. Changes to theseThe non-current portions of the operating lease assets, the operating lease liabilities during fiscal 2018 and 2017, werethe deferred financing liability have been recorded in Non-current operating lease assets, Non-current operating lease liabilities and Long-term debt, respectively, in the Consolidated Balance Sheets. Interest expense on the financial liability has been recorded in Interest expense, net in the Consolidated Statements of Operations.
Finance lease expense, variable lease expense, short-term lease expense and sublease income are not material. The components of operating lease expense are as follows:
| | | |
| Warranty and after-sale services | |
Balance as of December 31, 2016 | $ | 34 | |
Obligations incurred | | 7 | |
Payments/uses | | (2) | |
Others, net | | — | |
Balance as of December 31, 2017 | $ | 39 | |
Obligations incurred | | 5 | |
Payments/uses | | (4) | |
Others, net | | — | |
Balance as of December 31, 2018 | $ | 40 | |
| | | | | | | | | | | | |
| | | | | Year ended December 31, |
| | Classification | | 2021 | | 2020 | | 2019 |
Operating lease expense | | | Selling, general, and administrative expense, Product costs, and Service costs1 | | $ | 44 | | $ | 47 | | $ | 27 |
1Excluding depreciation and amortization
Supplemental lease balance sheet information consists of the following:
| | | | | | | | | |
| | | | | December 31, | | December 31, |
| | Classification | | 2021 | | 2020 |
Assets: | | | | | | | | | |
Operating | | | Non-current operating lease assets | | $ | 145 | | $ | 163 |
Finance | | | Property, plant, and equipment, net | | | 5 | | | 4 |
Total lease assets | | | | | $ | 150 | | $ | 167 |
Liabilities: | | | | | | | | | |
Current | | | | | | | | | |
Operating | | | Current operating lease liabilities | | $ | 42 | | $ | 41 |
Finance | | | Current portion long-term debt | | | 3 | | | 2 |
Non-current | | | | | | | | | |
Operating | | | Operating lease liabilities | | | 138 | | | 158 |
Finance | | | Long-term debt | | | 2 | | | 1 |
Total lease liabilities | | | | | $ | 185 | | $ | 202 |
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
12. LONG-TERM DEBT AND INTEREST EXPENSE,
| | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 |
Syndicated credit facility: | | | | | | |
Revolving loan payable | | $ | 595 | | $ | 454 |
Operating loan payable in Canadian dollars (December 31, 2018 - C$0 million; December 31, 2017 - C$51 million) | | | — | | | 40 |
Term Loan A | | | 500 | | | 500 |
Term Loan B | | | 1,980 | | | 2,000 |
Debt issuance costs | | | (41) | | | (52) |
Obligations under capital leases | | | 13 | | | 19 |
Total long-term debt | | | 3,047 | | | 2,961 |
Current portion | | | (17) | | | (18) |
Non-current portion | | $ | 3,030 | | $ | 2,943 |
NET
| | | | | | |
| | December 31, | | December 31, |
| | 2021 | | 2020 |
Syndicated Credit Facility: | | | | | | |
Term Loan B | | $ | 1,444 | | | 1,444 |
2023 Notes | | | 500 | | | 850 |
2027 Notes | | | 150 | | | 150 |
Deferred financing | | | 26 | | | 32 |
Debt discount and issuance costs | | | (39) | | | (57) |
Obligations under finance leases and other | | | 5 | | | 3 |
Total long-term debt | | | 2,086 | | | 2,422 |
Current portion of long-term debt | | | (24) | | | (8) |
Non-current portion of long-term debt | | $ | 2,062 | | $ | 2,414 |
Syndicated Credit Facility
As of December 31, 2021, 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”).
In October 2017, in connection with the acquisition of DigitalGlobe, the Company entered into the senior secured syndicated credit facility (the “Syndicated Credit Facility”). The Syndicated Credit Facility isin the aggregate principal amount of $3.75 billion, which was comprised of: (i) a four-year senior secured first lien revolving credit facility, and(ii) a four-year senior secured first lien operating facility, (collectively, the “Revolving Credit Facility”), (ii)(iii) a senior secured first lien term A facility (“Term Loan A”) and (iii) a seven-year senior secured first lien term B facility(“(iv) the Term Loan B”) in an aggregate principal amount of $3.75 billion.B. The net proceeds of the Syndicated Credit Facility were used, along with cash on hand, to consummate the acquisition of DigitalGlobe, to refinance all amounts outstanding under the Company’s existing Syndicated Credit Facilitysyndicated credit facility and senior term loans, to repay DigitalGlobe’s outstanding indebtedness, to pay transaction fees and expenses, to fund working capital and for general corporate purposes. The
In December 2018, the Company incurred a loss from early extinguishment of debt of $23 million. The loss was comprised of a make-whole premium to terminate the 2024 Term Notes of $20 million and a write-off of the unamortized balance of capitalized debt issuance costs of $3 million relating to bothamended the Syndicated Credit Facility (“Second Amending Agreement”). The Second Amending Agreement provided that, so long as certain conditions were satisfied (the period during which such conditions are satisfied, the “Covenant Relief Period”) the maximum consolidated debt leverage ratios permitted under the Syndicated Credit Facility were increased and the 2024 Term Notes.
Loansinterest rate incurred by the Company thereunder at certain consolidated debt leverage ratios were increased. The Second Amending Agreement also adjusted the definition of EBITDA for the purpose of calculating the financial ratios under U.S. GAAP. In addition to the above, during the Covenant Relief Period, the Second Amending Agreement restricted the use of certain asset sale proceeds, limited the type of new debt issuances and limited certain restricted payments and permitted acquisitions under the RevolvingSyndicated Credit Facility.
In November 2019, the Company further amended the Syndicated Credit Facility are available(“Third Amending Agreement”), certain portions of which became effective immediately and certain portions of which became effective in U.S. dollars and, in respectDecember 2019 upon the issuance of the operating facility,2023 Notes. The Third Amending Agreement, during the Covenant Relief Period, (i) modified the priority of the application of certain voluntary prepayments resulting from certain asset sales (but which did not affect the prepayments owed to the Term Loan B), and (ii) restricted use of proceeds of future borrowings. In addition, the Third Amending Agreement increased the maximum consolidated debt leverage ratios permitted under the Syndicated Credit Facility to 7.25x at the optionend of the Company, in Canadian dollars. Term Loan Afiscal quarter ended December 31, 2019, 7.50x at the end of the fiscal quarter ending March 31, 2020, 7.75x at the end of each fiscal quarter thereafter until the fiscal quarter ending September 30, 2021, 7.50x at the end of each fiscal quarter thereafter until the quarter ending September 30, 2022, 6.50x at the end of each fiscal quarter thereafter until the fiscal quarter ending March 31, 2023, and Term Loan B are repayable in U.S. dollars. Borrowings under the Revolving Credit Facility and Term Loan A bear interest at a rate equal to U.S. LIBOR (for U.S. dollar5.75x for each fiscal
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
borrowings)quarter thereafter (subject to a 0.25x reduction in each maximum level upon a disposition of a business line for greater than $500 million). The Third Amending Agreement also extended the maturity of the Revolving Credit Facility by two years to December 2023, updated the Interest Coverage Ratio to be less than 2.0x at the end of each fiscal quarter, restricted investment capacity in certain permitted investments, restricted future increases in quarterly dividend payment levels and CDORmodified certain margin and standby fee terms. In addition, the Company canceled the operating credit facility and reduced committed borrowing capacity under the Revolving Credit Facility from $1.25 billion to $500 million. As of December 31, 2021 and 2020, the Company was in compliance with its debt covenants.
The Syndicated Credit Facility is guaranteed by the Company and certain designated subsidiaries (“Subsidiary Guarantors”) of the Company. The security for the Syndicated Credit Facility, subject to customary exceptions, includes substantially all the tangible and intangible assets of the Company and its Subsidiary Guarantors. The Company is required to make mandatory prepayments of the outstanding principal and accrued interest of the Syndicated Credit Facility (i) upon the occurrence of certain events and (ii) to the extent of a specified percentage of annual excess cash flow that is not reinvested or Canadian Bankers’ Acceptances (for Canadian dollar borrowings), plusused for other specified purposes. The Syndicated Credit Facility is subject to customary affirmative and negative covenants, default provisions, representations and warranties and other terms and conditions.
Term Loan A
The Company used the proceeds from the 2023 Notes and the previously announced closing of its Palo Alto real estate sale leaseback transaction to repay the Syndicated Credit Facility borrowings under Term Loan A that were outstanding as of September 30, 2019. This resulted in a marginloss on debt extinguishment of 120 to 350 basis points per annum, based on$22 million for the Company’s total leverage ratio.year ended December 31, 2019, which is included as part of Interest expense, net within the Consolidated Statements of Operations.
Term Loan B
The Term Loan B bears interest at the Company’s option, either (i) U.S. dollar LIBOR plus 275 basis points per annum. The Revolving Credit Facility and one halfannum or (ii) adjusted base rate, plus a margin of Term Loan A are payable at maturity on October 5, 2021. The other half of Term Loan A matures on October 5, 2020.175 basis points per annum. The Company must make equal quarterly installment payments in aggregate annual amounts equal to 1%0.25% of the original principal amount of the Term Loan B, after giving effect to any Term Loan B prepayments under the Syndicated Credit Facility, with the final balance payable at maturity on October 5, 2024. The Revolving Credit Facility, Term Loan A, and Term Loan B may be repaid by the Company, in whole or in part, together with accrued interest, without premium or penalty.
The Syndicated Credit Facility is guaranteed byDuring the Company and certain designated subsidiaries of the Company. The security for the Syndicated Credit Facility, subject to customary exceptions, will include substantially all the tangible and intangible assets of the Company and its subsidiary guarantors. The Company is required to make mandatory prepayments of the outstanding principal and accrued interest upon the occurrence of certain events and to the extent of a specified percentage of annual excess cash flow that is not reinvested or used for other specified purposes.
On December 21, 2018, the Company amended its $3.75 billion Syndicated Credit Facility (the “Amended Agreement”). The Amended Agreement revised the financial covenants to increase the maximum consolidated debt leverage ratios permitted under the Syndicated Credit Facility for a period of time selected by Maxar (the “Covenant Relief Period”) and increased the interest rate incurred by Maxar thereunder at certain consolidated debt leverage ratios. The Amended Agreement increased the maximum consolidated debt leverage ratio to 5.5x through the quarteryear ended December 31, 2018, 6.0x through2020, the quarter ended September 30, 2020, and 5.5x thereafter.Company repaid $511 million of borrowings under Term Loan B using proceeds from the MDA Transaction. The interest coverage ratio remainedCompany expensed $7 million of unamortized debt issuance costs attributed to the same at a minimumpartial pay down, which is included in Interest expense, net in the Consolidated Statements of 2.5x through the quarter ending June 30, 2019 and 2.75x thereafter. The Amended Agreement also adjusted the definition of EBITDA for the purpose of calculating the financial ratios under U.S. GAAP. In addition to increased flexibility on the financial covenant, during the Covenant Relief Period, the Amended Agreement restricts the use of certain asset sale proceeds, limits the type of new debt issuances, certain restricted payments and permitted acquisitions under the SyndicatedOperations.
Revolving Credit Facility.Facility
The Revolving Credit Facility includes an aggregate $200 million sub limit under which letters of credit can be issued. As of DecemberDecember 31, 20182021 and 2017,December 31, 2020, the Company also had $18$28 million and $26$31 million respectively, of issued and undrawn letters of credit outstanding under the Revolving Credit Facility.
Interest expenseBorrowings under the Revolving Credit Facility bear interest at a rate equal to, at the Company’s option, either (i) U.S. dollar LIBOR, plus a margin of 120 - 425 basis points per annum, based on long-term debt and other obligations are as follows:
| | | | | | | | | |
| | Year ended December 31, |
| | | 2018 | | | 2017 | | | 2016 |
Interest on long-term debt | | $ | 171 | | $ | 57 | | $ | 26 |
Interest expense on advance payments from customers | | | 26 | | | 8 | | | — |
Interest on orbital securitization liability | | | 7 | | | 8 | | | 2 |
Imputed interest and other | | | 2 | | | 3 | | | 3 |
Capitalization of borrowing costs | | | (7) | | | — | | | — |
Loss on debt extinguishment | | | — | | | 23 | | | 2 |
Interest expense on dissenting stockholder liability | | | 3 | | | — | | | — |
Total interest expense | | $ | 202 | | $ | 99 | | $ | 33 |
the Company’s total leverage ratio, or (ii) adjusted base rate, plus a margin of 20 - 325 basis points per annum, based on the Company’s total leverage ratio. The Revolving Credit Facility is payable at maturity on December 10, 2023. The Revolving Credit Facility may be repaid by the Company, in whole or in part, together with accrued interest, without premium or penalty.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
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.
On June 25, 2020, the Company repurchased $150 million aggregate principal amount of its 2023 Notes using proceeds from the MDA Transaction. 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 Consolidated Statements of Operations for the year ended December 31, 2021.
The 2023 Notes are guaranteed (“Guarantees”) on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantees the Syndicated Credit Facility (“2023 Guarantors”). The 2023 Notes are secured, equally and ratably with the Syndicated Credit Facility and any future first lien debt, by liens on the same assets that secure the Revolving Credit Facility and the Term Loan B.
The 2023 Notes and the Guarantees are the Company’s general senior secured obligations and rank equally in right of payment with all of the Company’s and the 2023 Guarantors’ existing and future unsubordinated debt (including the Syndicated Credit Facility). The 2023 Notes and the Guarantees are effectively senior to all of the Company’s and the 2023 Guarantors’ existing and future unsecured debt as well as to all of any permitted junior lien debt that may be incurred in the future, in each case to the extent of the value of the assets securing the 2023 Notes and the Guarantees. The 2023 Notes and the Guarantees are effectively subordinated to any obligations that are secured by liens on assets that do not constitute a part of the collateral securing the 2023 Notes or the Guarantees, are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that do not guarantee the 2023 Notes, and are senior in right of payment to all of the Company’s and the 2023 Guarantors’ existing and future subordinated indebtedness.
The indenture governing the 2023 Notes limits, among other things, the Company and the Company’s restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of the Company’s assets to, another person. The 2023 Notes are also subject to compliance with a financial maintenance covenant in respect of the Company’s Consolidated Total Debt Ratio which was 7.25x at the end of the fiscal quarter ended December 31, 2019, 7.50x at the end of the fiscal quarter ending March 31, 2020, 7.75x at the end of each fiscal quarter thereafter until the fiscal quarter ending September 30, 2021, 7.50x at the end of each fiscal quarter thereafter until the quarter ending September 30, 2022, 6.50x at the end of each fiscal quarter thereafter until the fiscal quarter ending March 31, 2023, and 5.75x 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).
The 2023 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on December 15, 2021 at a redemption price of 107.313%, during the 12 months beginning on December 15, 2022 at a redemption price
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Annual contractualMAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
of 103.656%, and at any time on or after December 15, 2023 at a redemption price of 100%, in each case plus accrued and unpaid interest, if any, thereon to the redemption date.
In the event a change of control occurs (as defined in the indenture governing the 2023 Notes), each holder will have the right to require us to repurchase all or any part of such holder’s 2023 Notes at a purchase price in cash equal to 101% of the aggregate principal repaymentsamount of the 2023 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).
Senior Secured Notes due 2027
On June 25, 2020, the Company issued $150 million in aggregate principal amount of the 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 in December 2020.
The Company accounted for the issuance of the 2027 Notes and 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.
The 2027 Notes are guaranteed (“2027 Guarantees”) on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantees the 2023 Notes and the Syndicated Credit Facility (“2027 Guarantors”). The 2027 Notes are secured, equally and ratably with the 2023 Notes, the Syndicated Credit Facility and any future first lien debt, by liens on the same assets that secure the Revolving Credit Facility and Term Loan B.
The 2027 Notes and the 2027 Guarantees are the Company’s general senior secured obligations and rank equally in right of payment with all of the Company’s and the 2027 Guarantors’ existing and future unsubordinated debt (including the 2023 Notes and the Syndicated Credit Facility). The 2027 Notes and the 2027 Guarantees are effectively senior to all of the Company’s and the 2027 Guarantors’ existing and future unsecured debt as well as to all of any permitted junior lien debt that may be incurred in the future, in each case to the extent of the value of the assets securing the 2027 Notes and the 2027 Guarantees. The 2027 Notes and the 2027 Guarantees are effectively subordinated to any obligations that are secured by liens on assets that do not constitute a part of the collateral securing the 2027 Notes or the 2027 Guarantees, are structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries that do not guarantee the 2027 Notes, and are senior in right of payment to all of the Company’s and the Guarantors’ existing and future subordinated indebtedness.
The indenture governing the 2027 Notes limits, among other things, the Company’s and the Company’s restricted subsidiaries’ ability to: incur, assume or guarantee additional debt; issue redeemable stock and preferred stock; pay dividends, make distributions or redeem or repurchase capital stock; prepay, redeem or repurchase subordinated debt; make loans and investments; grant or incur liens; restrict dividends, loans or asset transfers from restricted subsidiaries; sell or otherwise dispose of assets; enter into transactions with affiliates; reduce the Company’s satellite insurance; and consolidate or merge with, or sell substantially all of the Company’s assets to, another person.
The 2027 Notes may be redeemed, in whole or in part, at any time during the 12 months beginning on June 25, 2024, at a redemption price of 105.655%, during the 12 months beginning on June 25, 2025, at a redemption price of 103.770%, and at any time on or after June 25, 2026, at a redemption price of 101.885%, in each case plus accrued and unpaid interest, if any, thereon to the redemption date. The Company may also redeem the 2027 Notes, in whole or in part, at
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
the Company’s option at any time prior to June 25, 2024, at a price equal to 100% of the principal amount of such 2027 Notes plus a “make-whole” premium, together with accrued but unpaid interest, if any, to, but excluding, the date of redemption. In addition, the Company may redeem up to 40% of the aggregate principal amount of the 2027 Notes at any time before June 25, 2024, with the net cash proceeds from certain equity offerings at a specified redemption price, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
In the event a change of control occurs (as defined in the indenture governing the 2027 Notes), each holder will have the right to require us to repurchase all or any part of such holder’s 2027 Notes at a purchase price in cash equal to 101% of the aggregate principal amount of the 2027 Notes repurchased, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).
Leaseback Deferred Financing
In December 2019, the Company completed the sale and subsequent leaseback of company owned properties in Palo Alto, California for proceeds of $291 million. The Company determined that the leaseback terms were off-market. In accordance with ASC 842 – Leases, the Company 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. This liability was calculated using a weighted average discount rate of 4.62%. The deferred financing liability is recorded as part of Current portion of long-term debt and Long-term debt within the Consolidated Balance Sheets. Refer to Note 8 and 10 for additional information.
Interest expense, net on long-term debt net of amortization of debt issuance costs, as of December 31, 2018and other obligations are as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | 2019 | | | 2020 | | | 2021 | | | 2022 | | | 2023 | | | Thereafter | | | Total |
Syndicated credit facility | | $ | 11 | | $ | 262 | | $ | 858 | | $ | 14 | | $ | 14 | | $ | 1,875 | | $ | 3,034 |
Capital leases | | | 7 | | | 4 | | | 2 | | | — | | | — | | | — | | | 13 |
Total | | $ | 18 | | $ | 266 | | $ | 860 | | $ | 14 | | $ | 14 | | $ | 1,875 | | $ | 3,047 |
| | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Interest on long-term debt | | $ | 144 | | $ | 191 | | $ | 194 |
Loss on debt extinguishment | | | 41 | | | 7 | | | 22 |
Interest on orbital securitization liability | | | 4 | | | 5 | | | 7 |
Imputed interest and other | | | 2 | | | 2 | | | — |
Interest expense on advance payments from customers | | | — | | | 3 | | | 15 |
Capitalized interest | | | (40) | | | (33) | | | (19) |
Interest expense, net | | $ | 151 | | $ | 175 | | $ | 219 |
Scheduled minimum debt repayments for the year ended December 31, 2021 are as follows:
12.
| | | | | | | | | | | | | | | | | | | | | |
| | | 2022 | | | 2023 | | | 2024 | | | 2025 | | | 2026 | | | Thereafter | | | Total |
Syndicated Credit Facility | | $ | 15 | | $ | 20 | | $ | 1,409 | | $ | — | | $ | — | | $ | — | | $ | 1,444 |
2023 Notes | | | — | | | 500 | | | — | | | — | | | — | | | — | | | 500 |
2027 Notes | | | — | | | — | | | — | | | — | | | — | | | 150 | | | 150 |
Deferred financing | | | 7 | | | 2 | | | 2 | | | 2 | | | 3 | | | 10 | | | 26 |
Finance leases and other | | | 3 | | | 2 | | | — | | | — | | | — | | | — | | | 5 |
Debt discount and issuance costs | | | (11) | | | (11) | | | (7) | | | (3) | | | (3) | | | (4) | | | (39) |
| | $ | 14 | | $ | 513 | | $ | 1,404 | | $ | (1) | | $ | — | | $ | 156 | | $ | 2,086 |
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
13. FINANCIAL INSTRUMENTS AND FAIR VALUE DISCLOSURES
Fair value is determined based onFactors used in determining the assumptions that market participants would use in pricing the asset or liability. The Company utilizes the following fair value hierarchyof financial assets and liabilities are summarized into three categories in determining fair value:accordance with ASC 820 - Fair Value Measurements:
Level 1: QuotedUnadjusted quoted prices (unadjusted) 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 not based on observable market data (unobservable inputs)unobservable inputs
The following tables present assets and liabilities that are measured at fair value on a recurring basis and are categorized using(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. These
| | | | | | | | | | | | | |
| | | 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 |
| | | | | | | | | | | | |
| | Recurring Fair Value Measurements as of December 31, 2020 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | | | | | | |
Orbital receivables 1 | | $ | — | | $ | 410 | | $ | — | | $ | 410 |
| | $ | — | | $ | 410 | | $ | — | | $ | 410 |
Liabilities | | | | | | | | | | | | |
Interest rate swaps | | $ | — | | $ | 20 | | $ | — | | $ | 20 |
Long-term debt 2 | | | — | | | 2,556 | | | — | | | 2,556 |
| | $ | — | | $ | 2,576 | | $ | — | | $ | 2,576 |
1 | The carrying value of orbital receivables was $417 million and $410 million at December 31, 2021 and December 31, 2020, respectively. See Note 6 regarding the (Gain) loss on orbital receivables allowance. |
2 | Long-term debt excludes finance leases, deferred financing and other and is carried at amortized cost. The outstanding carrying value was $2,055 million and $2,387 million at December 31, 2021 and 2020, respectively. The carrying value of borrowings under the Revolving Credit Facility approximates their fair value. |
The Company determines the fair values are included as componentsvalue of Other current liabilities, Other non-current liabilities, Prepaidits orbital receivables using a discounted cash flow model, based on stated interest rates and other current assets, and Other assets inobservable market yield curves associated with the Consolidated Balance Sheets.instruments.
| | | | | | | | | | | | |
| | Recurring Fair Value Measurements of as of December 31, 2018 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | | | | | | |
Short-term investments | | $ | 3 | | $ | — | | $ | — | | $ | 3 |
Derivative financial instruments | | | | | | | | | | | | |
Foreign exchange forward contracts & embedded derivatives | | | — | | | 5 | | | — | | | 5 |
| | $ | 3 | | $ | 5 | | $ | — | | $ | 8 |
| | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | |
Derivative financial instruments | | | | | | | | | | | | |
Foreign exchange forward contracts & embedded derivatives | | | — | | | 8 | | | — | | | 8 |
Interest rate swaps | | | — | | | 4 | | | — | | | 4 |
| | $ | — | | $ | 12 | | $ | — | | $ | 12 |
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
| | | | | | | | | | | | |
| | Recurring Fair Value Measurements of as of December 31, 2017 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | | | | | | |
Short-term investments | | $ | 1 | | $ | — | | $ | — | | $ | 1 |
Derivative financial instruments | | | | | | | | | | | | |
Foreign exchange forward contracts & embedded derivatives | | | — | | | 13 | | | — | | | 13 |
| | $ | 1 | | $ | 13 | | $ | — | | $ | 14 |
| | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | |
Derivative financial instruments | | | | | | | | | | | | |
Foreign exchange forward contracts & embedded derivatives | | $ | — | | $ | 9 | | $ | — | | $ | 9 |
| | $ | — | | $ | 9 | | $ | — | | $ | 9 |
The Company determines fair value of its derivative financial instruments based on internal valuation models, such as 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
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
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. The following tables provide additional fair value information related to the Company’s financial instruments:
| | | | | | | | |
| | As of December 31, 2018 |
| | Carrying value | | Fair value | | Fair value hierarchy |
Long-term debt, excluding capital leases | | $ | 3,034 | | $ | 2,925 | | Level 2 |
Orbital receivables | | $ | 441 | | $ | 441 | | Level 2 |
| | | | | | | | |
| | As of December 31, 2017 |
| | Carrying value | | Fair value | | Fair value hierarchy |
Long-term debt, excluding capital leases | | $ | 2,943 | | $ | 3,176 | | Level 2 |
Orbital receivables | | $ | 454 | | $ | 507 | | Level 2 |
There were no0 transfers into or out of each of the levels of the fair value hierarchy during the yearyears ended December 31, 2017 and2021 or December 31, 2016.2020.
13.14. DERIVATIVES AND HEDGING
Cash Flow Hedges
The Company is exposed to fluctuations in interest rates under the Syndicated Credit Facility. On April 5, 2018, the Company entered in tointo several interest rate swap agreements in order to fix the base interest rate to be paid over an aggregate amount of the Company’s variable rate long-term debt. On April 30, 2021, $500 million of the Company’s interest rate swaps matured. On June 15, 2021, the Company entered into interest rate swaps at a notional value of $500 million. In total, an aggregate amount of $1.0 billion of the Company’s variable rate long-term debt is fixed at an average rate of 2.56%1.43% (excluding the margin specified in the Syndicated Credit Facility). In both April 2022 and June 2023, the Company will have interest rate swap maturities of $500 million.
The Company is also exposed to foreign exchange risks on certain sales contracts,and purchase contracts, debt denominated in foreign currencies, and net investments in foreign operations.contracts. The Company enters into foreign exchange forward contracts to hedge the exposure arising from expected foreign currency denominated cash flows on these sales and purchase contracts. As of January 1, 2019, the Company discontinued hedge accounting related to these sales and purchase contracts. The Company continued to hedge foreign exchange exposure on sales and purchase contracts for economic purposes. The Company had no foreign exchange forward contracts at December 31, 2021 or 2020.
| | | | | |
| | | December 31, 2021 |
| | | Notional amount | | Maximum Contract term |
Derivatives designated as hedging instruments | | | | | |
Interest rate swaps | | $ | 1,000 | | 1.5 years |
| | | | | |
| | | December 31, 2020 |
| | | Notional amount | | Maximum Contract term |
Derivatives designated as hedging instruments | | | | | |
Interest rate swaps | | $ | 1,000 | | 1.3 years |
The effective portion of gains included in Other comprehensive income (loss), net of tax related to the Company’s interest rate swaps was $19 million for the year ended December 31, 2021. The effective portion of losses included in Other comprehensive income (loss), net of tax related to the Company’s interest rate swaps was $3 million and $13 million for the years ended December 31, 2020 and 2019, respectively. The gain (loss) from foreign exchange forward contracts was not material for the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, the estimated loss included in Accumulated other comprehensive income (loss) expected to be recognized in Net income (loss) in the next twelve months is $3 million.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
contracts to hedge the significant majority of the exposure arising from expected foreign currency denominated cash flows.
| | | |
| As of December 31, 2018
|
Derivative instrument
| Notional amount
| | Maximum Contract term
|
Interest rate swaps
| 1,000
| | 3.3 years
|
Foreign exchange forward contracts
| —
| | —
|
Purchase contracts settled in Canadian dollars:
| | | |
U.S. dollar
| 70
| | 1.8 years
|
Euro
| 10
| | 2.3 years
|
GBP
| 3
| | 0.5 years
|
Sales contracts settled in Canadian dollars:
| | | |
Euro
| 194
| | 3.8 years
|
Japanese Yen
| 35
| | 2.6 years
|
GBP
| 1
| | 0.6 years
|
Purchase contracts settled in U.S. dollars:
| | | |
Euro
| 10
| | 0.3 years
|
Japanese Yen
| 177
| | 0.2 years
|
Sales contracts settled in Canadian dollars:
| | | |
Euro
| 20 | | 0.5 years
|
Japanese Yen
| 177 | | 0.2 years
|
| | | |
| As of December 31, 2017
|
Derivative instrument
| Notional amount
| | Maximum Contract term
|
Interest rate swaps
| —
| | —
|
Foreign exchange forward contracts
| —
| | —
|
Purchase contracts settled in Canadian dollars:
| | | |
U.S. dollar
| 165
| | 2.8 years
|
Euro
| 16
| | 2.7 years
|
GBP
| 2
| | 1.0 years
|
Sales contracts settled in Canadian dollars:
| | | |
Euro
| 312
| | 3.0 years
|
Japanese Yen
| 26
| | 3.1 years
|
GBP
| 2
| | 1.0 years
|
Purchase contracts settled in U.S. dollars:
| | | |
Euro
| 32
| | 1.3 years
|
Japanese Yen
| 2,231
| | 1.2 years
|
Sales contracts settled in Canadian dollars:
| | | |
Euro
| 58
| | 1.3 years
|
Japanese Yen
| 1,116
| | 1.2 years
|
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The effect of derivative instruments on earnings and other comprehensive income are as follows:
| | | | | | | | | | | |
| | For the year ended December 31, 2018 |
| | Effective portion of gains and losses included in other comprehensive income | | Effective portion of gains and losses reclassified to earnings | | | Gains and loss included in earnings1 | |
Cash flow hedges: | | | | | | | | | | | |
Foreign exchange forward contracts | | $ | (6) | | $ | — | | | $ | (2) | |
Interest rate swaps | | | (4) | | | — | | | | — | |
Embedded derivatives | | | — | | | — | | | | — | |
| | | | | | | | | | | |
Derivatives not qualified for hedging accounting: | | | | | | | | | | | |
Foreign exchange forward contracts | | | — | | | — | | | | — | |
Interest rate swaps | | | — | | | — | | | | — | |
Embedded derivatives | | | — | | | — | | | | 1 | |
| | | | | | | | | | | |
| | For the year ended December 31, 2017 |
| | Effective portion of gains and losses included in other comprehensive income | | Effective portion of gains and losses reclassified to earnings | | | Gains and loss included in earnings1 | |
Cash flow hedges: | | | | | | | | | | | |
Foreign exchange forward contracts | | $ | (3) | | $ | — | | | $ | (1) | |
Interest rate swaps | | | — | | | — | | | | — | |
Embedded derivatives | | | — | | | — | | | | — | |
| | | | | | | | | | | |
Derivatives not qualified for hedging accounting: | | | | | | | | | | | |
Foreign exchange forward contracts | | | — | | | — | | | | 5 | |
Interest rate swaps | | | — | | | — | | | | — | |
Embedded derivatives | | | — | | | — | | | | (2) | |
| | | | | | | | | | | |
| | For the year ended December 31, 2016 |
| | Effective portion of gains and losses included in other comprehensive income | | Effective portion of gains and losses reclassified to earnings | | | Gains and loss included in earnings1 | |
Cash flow hedges: | | | | | | | | | | | |
Foreign exchange forward contracts | | $ | (8) | | $ | (1) | | | $ | (5) | |
Interest rate swaps | | | — | | | — | | | | — | |
Embedded derivatives | | | — | | | — | | | | — | |
| | | | | | | | | | | |
Derivatives not qualified for hedging accounting: | | | | | | | | | | | |
Foreign exchange forward contracts | | | — | | | — | | | | 1 | |
Interest rate swaps | | | — | | | — | | | | — | |
Embedded derivatives | | | — | | | — | | | | (3) | |
1Includes gains and losses related to the ineffective portion of the Company’s cash flow hedges, and derivatives not qualified for hedge accounting.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
In implementing all its derivative financial instruments, the Company deals with counterparties and is therefore exposed to credit related losses in the event of non-performance by these counterparties. However, the Company deals with counterparties that are major financial institutions and does not expect any of the counterparties to fail to meet their obligations.
Net Investment Hedge
As ofAt December 31, 2018, and 2017, the Company had designated $271 million of its $2.0 billion Term Loan B as a hedge of its investment in certain U.S. subsidiaries. Foreign exchange gains and losses arising from the translation of the designated portion of the Term Loan B arewere recognized in otherOther comprehensive income (loss), net of tax to the extent that the hedges arewere effective and arewere recognized in the Consolidated Statements of Operations to the extent that the hedges arewere ineffective. The fair value of the designated portion of Term Loan B was $256 million and $298 million as of December 31, 2018 and 2017, respectively.2018. As a result of the Company’s U.S. Domestication on January 1, 2019, and the associated change from a Canadian parent company to a U.S. parent company, the Company’s Syndicated Credit Facility is now inwas changed to a USDU.S. dollar functional currency entity. Due to this change, the net investment hedge iswas no longer necessary from the domestication date onwards.
15. STOCKHOLDERS’ EQUITY
14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)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.
As of December 31, 2020, the Company had 2.4 million shares authorized and 0 shares outstanding of the Series A Preferred Stock. On May 17, 2021, the Company filed a Certificate of Elimination of Series A Junior Participating Preferred Stock with the Delaware Secretary of State, thereby removing the Certificate of Designations of the Series A Preferred Stock from the Company’s Amended and Restated Certificate of Incorporation. Therefore, as of December 31, 2021, the Company had 0 shares authorized and 0 shares outstanding of the Series A Preferred Stock.
Changes in the components of Accumulated other comprehensive income (loss) are as follows:
| | | | | | | | | | | | |
| | Foreign Currency Translation Adjustments1 | | Unrealized Loss on Interest Rate Swaps2 | | Loss on Pension and Other Postretirement Plans | | Total Accumulated Other Comprehensive Income (Loss) |
Balance as of December 31, 2018 | | $ | 111 | | $ | — | | $ | (47) | | $ | 64 |
Other comprehensive income (loss) | | | 14 | | | (12) | | | (26) | | | (24) |
Tax benefit | | | 1 | | | — | | | — | | | 1 |
Balance as of December 31, 2019 | | $ | 126 | | $ | (12) | | $ | (73) | | $ | 41 |
Other comprehensive loss | | | (47) | | | (3) | | | (43) | | | (93) |
Reclassification to gain on disposal of discontinued operations3 | | | (78) | | | (5) | | | 15 | | | (68) |
Tax benefit (expense) | | | — | | | — | | | — | | | — |
Balance as of December 31, 2020 | | $ | 1 | | $ | (20) | | $ | (101) | | $ | (120) |
Other comprehensive (loss) income | | | (2) | | | 19 | | | 50 | | | 67 |
Tax benefit (expense) | | | — | | | — | | | — | | | — |
Balance as of December 31, 2021 | | $ | (1) | | $ | (1) | | $ | (51) | | $ | (53) |
1 | As a result of the Company’s U.S. Domestication on January 1, 2019, and the associated change from a Canadian parent company to a U.S. parent company, the Company’s net investment hedge was no longer necessary from the domestication date onwards. As |
| | | | | | | | | | | | | | | |
| | Foreign | | Net (Loss) Income | | Unrecognized | | | | | Total |
| | Currency | | on Hedge | | (Loss) Gain on | | | | Accumulated Other |
| | Translation | | Investments in | | Derivative | | Pension | | Comprehensive |
| | Adjustments | | Foreign Operations | | Instruments | | Adjustments | | Income (Loss) |
Balance as of December 31, 2015 | | $ | 154 | | $ | (33) | | $ | 18 | | $ | 30 | | $ | 169 |
Cumulative-effect of IFRS to U.S. GAAP conversion | | | (1) | | | — | | | — | | | (32) | | | (33) |
Other comprehensive (loss) income | | | (2) | | | 5 | | | (9) | | | (9) | | | (15) |
Tax benefit | | | — | | | — | | | 1 | | | 1 | | | 2 |
Balance as of December 31, 2016 | | | 151 | | | (28) | | | 10 | | | (10) | | | 123 |
Other comprehensive (loss) income | | | 7 | | | — | | | (3) | | | (8) | | | (4) |
Tax expense | | | — | | | — | | | — | | | (6) | | | (6) |
Balance as of December 31, 2017 | | | 158 | | | (28) | | | 7 | | | (24) | | | 113 |
Other comprehensive (loss) income | | | 4 | | | (23) | | | (10) | | | (4) | | | (33) |
Tax benefit (expense) | | | — | | | — | | | 3 | | | (1) | | | 2 |
Balance as of December 31, 2018 | | $ | 162 | | $ | (51) | | $ | — | | $ | (29) | | $ | 82 |
102
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MAXAR TECHNOLOGIES INC.
15. REVENUENotes to Consolidated Financial Statements Continued
On(Tabular amounts in millions of dollars, unless otherwise noted)
of December 31, 2018, there was a $51 million net loss on hedge investments in foreign operations which is included in Foreign Currency Translation Adjustments.
2 | As of January 1, 2019, the Company discontinued hedge accounting related to the Company’s foreign exchange contracts. The Company still applies hedge accounting to the interest rate swaps related to long-term debt. As of December 31, 2020 and 2021, the balance consisted of unrecognized loss on the Company’s interest rate swaps. |
3Relates to the reclassification of foreign currency translation from Accumulated other comprehensive (loss) income to the gain on disposal of discontinued operations due to the completion of the MDA Transaction. See Note 4 for details.
16. REVENUES
As of December 31, 2021, the Company had $2.4$1.9 billion of remaining performance obligations, which represents the transaction price of firm orders less inception to date salesrevenues recognized. Remaining performance obligations generally exclude unexercised contract options and indefinite delivery/indefinite quantity contracts. The Company expects to recognize salesrevenues relating to existing performance obligations of approximately $1.3 billion $0.4 , $0.5 billion, and $0.7 $0.1 billion in for the fiscal years 2019, 20202022, 2023 and thereafter, respectfully.respectively.
Contract liabilities by segment are as follows:
| | | | | | | | | |
As of December 31, 2021 | | Earth Intelligence | | Space Infrastructure | | Total |
Contract liabilities | | $ | 32 | | $ | 257 | | $ | 289 |
| | | | | | | | | |
As of December 31, 2020 | | Earth Intelligence | | Space Infrastructure | | Total |
Contract liabilities | | $ | 45 | | $ | 234 | | $ | 279 |
| | | | | | | | | |
Contract liabilities increased to $289 million as of December 31, 2021 from $279 million as of December 31, 2020. The increase in contract liabilities is primarily due to cash received on commercial contracts in the Space Infrastructure segment in advance of services performed. The increase is partially offset by revenues recognized based upon the satisfaction of performance obligations within the Earth Intelligence segment. The Company had an immaterial balance of non-current contract liabilities as of December 31, 2021. The Company had $1 million of non-current contract liabilities as of December 31, 2020. Non-current contract liabilities are included in Other non-current liabilities on the Consolidated Balance Sheets.
Table of Contents
MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Contract liabilities by segment are as follows:
| | | | | | | | | | | | |
| | Space | | | | | | |
As of December 31, 2018 | | Systems | | Imagery1 | | Services | | Total |
Contract liabilities | | $ | 172 | | $ | 247 | | $ | 2 | | $ | 421 |
| | | | | | | | | | | | |
| | Space | | | | | | | |
As of December 31, 2017 | | Systems | | | Imagery1 | | Services | | Total |
Contract liabilities | | $ | 266 | | $ | 330 | | $ | 4 | | $ | 600 |
| | | | | | | | | | | | |
1 The contract liability balance associated with the Company’s EnhancedView Contract was $184 million and $278 million as of December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, imputed interest on advanced payments increased the contract liability balance by $26 million, and $120 million in revenue was recognized, decreasing the contract liability balance. The contract liability balance associated with the Company’s EnhancedView Contract is expected to be recognized as revenue through August 31, 2020. There were no deferred contract costs on the Consolidated Balance Sheets associated with this contract as of December 31, 2018 or December 31, 2017.
The decrease in total contract liabilities was primarily due to revenue recognized.
The Company’s primary sources of revenuerevenues are as follows:
| | | | | | | | | | | |
| | | | | | | | | | | |
Year ended December 31, 2018 | | Space Systems | | Imagery | | Services | | Eliminations | | Total | |
| | | | | | | | | | | | | |
Year Ended December 31, 2021 | | | Earth Intelligence | | Space Infrastructure | | Eliminations | | Total |
Product revenues | | $ | 851 | | $ | — | | $ | — | | $ | — | | $ | 851 | | $ | — | | $ | 678 | | $ | — | | $ | 678 |
Service revenues | | 191 | | 841 | | 258 | | | — | | 1,290 | | | 1,092 | | | — | | | — | | | 1,092 |
Intersegment eliminations | | | 87 | | | 4 | | | 8 | | | (99) | | | — | |
| | $ | 1,129 | | $ | 845 | | $ | 266 | | $ | (99) | | $ | 2,141 | |
| | | | | | | | | | | | |
Year ended December 31, 2017 | | Space Systems | | Imagery | | Services | | Eliminations | | Total | |
Intersegment | | | | 1 | | | 62 | | | (63) | | | — |
| | | $ | 1,093 | | $ | 740 | | $ | (63) | | $ | 1,770 |
| | | | | | | | | | | | | |
Year Ended December 31, 2020 | | | Earth Intelligence | | Space Infrastructure | | Eliminations | | Total |
Product revenues | | $ | 1,119 | | $ | — | | $ | — | | $ | — | | $ | 1,119 | | $ | — | | $ | 633 | | $ | — | | $ | 633 |
Service revenues | | 141 | | 228 | | 143 | | | — | | 512 | | | 1,081 | | | 9 | | | — | | | 1,090 |
Intersegment eliminations | | | 10 | | | 2 | | | 1 | | | (13) | | | — | |
| | $ | 1,270 | | $ | 230 | | $ | 144 | | $ | (13) | | $ | 1,631 | |
| | | | | | | | | | | |
Year ended December 31, 2016 | | Space Systems | | Imagery | | Services | | Eliminations | | Total | |
Intersegment | | | | — | | | 79 | | | (79) | | | — |
| | | $ | 1,081 | | $ | 721 | | $ | (79) | | $ | 1,723 |
| | | | | | | | | | | | | |
Year Ended December 31, 2019 | | | Earth Intelligence | | Space Infrastructure | | Eliminations | | Total |
Product revenues | | $ | 1,285 | | $ | — | | $ | — | | $ | — | | $ | 1,285 | | $ | — | | $ | 560 | | $ | — | | $ | 560 |
Service revenues | | 132 | | 41 | | 100 | | | — | | 273 | | | 1,085 | | | 21 | | | — | | | 1,106 |
Intersegment eliminations | | | 4 | | | 1 | | | — | | | (5) | | | — | |
| | $ | 1,421 | | $ | 42 | | $ | 100 | | $ | (5) | | $ | 1,558 | |
Intersegment | | | | — | | | 125 | | | (125) | | | — |
| | | $ | 1,085 | | $ | 706 | | $ | (125) | | $ | 1,666 |
Certain of the Company’s contracts with customers in the Space SystemsInfrastructure 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 $32$27 million, $35$30 million and $31 million for the years ended December 31, 2021, 2020 and 2019, respectively, which is included in product revenues.
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 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 cost 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 $30 million for the year ended December 31, 2018, 2017 and 2016,2021, respectively, related to thesethe Sirius XM contract with Sirius XM Holdings Inc. (“Sirius XM”). This 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. In addition to the cumulative adjustment recognized for the year ended December 31, 2021, incremental costs of $3 million were incurred related to the SXM-7 recovery efforts during the first quarter of 2021. See Note 6 for additional details regarding the adjustment to trade and other receivables.
The Company did 0t incur COVID-19 related EAC growth for the year ended December 31, 2021. The Company incurred estimated COVID-19 related EAC growth of $27 million for the year ended December 31, 2020.
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 $32 million in EAC adjustments on loss contracts which is included in revenue from construction contracts.
for the year ended December 31,
Table of Contents
MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
2021. The Company recorded $42 million in EAC adjustments on a commercial satellite loss contract which included significant development efforts further delayed by COVID-19 for the year ended December 31, 2020.
The approximate revenue based on geographic location of customers is as follows:
| | | | | | | |
| | Year ended December 31, | |
| | | 2018 | | | 2017 | | | 2016 | |
| | | | | | | | | |
| | Year Ended December 31, |
| | | 2021 | | | 2020 | | 2019 |
United States | | $ | 1,371 | | $ | 744 | | $ | 447 | $ | 1,431 | | $ | 1,406 | | $ | 1,240 |
Canada | | 152 | | 330 | | 424 | |
Asia | | 334 | | 295 | | 312 | | 97 | | | 96 | | | 161 |
Europe | | 118 | | 207 | | 285 | | 80 | | | 84 | | | 69 |
Australia | | 18 | | 29 | | 30 | | 70 | | | 37 | | | 22 |
Middle East | | | 54 | | | 54 | | | 57 |
South America | | 134 | | 17 | | 58 | | 17 | | | 25 | | | 97 |
Canada | | | 10 | | | 10 | | | 10 |
Other | | | 14 | | | 9 | | | 2 | | 11 | | | 11 | | | 10 |
| | $ | 2,141 | | $ | 1,631 | | $ | 1,558 | |
Total revenues | | $ | 1,770 | | $ | 1,723 | | $ | 1,666 |
RevenueRevenues from significant customers is as follows:
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
Government: | | | | | | | | | |
U.S. Federal Government and agencies | | $ | 890 | | $ | 294 | | $ | 98 |
Canadian Federal Government and agencies | | | 96 | | | 194 | | | 212 |
Commercial and other | | | 1,155 | | | 1,143 | | | 1,248 |
Total revenue | | $ | 2,141 | | $ | 1,631 | | $ | 1,558 |
| | | | | | | | | | | | |
Year Ended December 31, 2021 | | Earth Intelligence | | Space Infrastructure | | Eliminations | | Total |
U.S. federal government and agencies | | $ | 701 | | $ | 235 | | $ | — | | $ | 936 |
Commercial and other | | | 392 | | | 505 | | | (63) | | | 834 |
Total revenues | | $ | 1,093 | | $ | 740 | | $ | (63) | | $ | 1,770 |
| | | | | | | | | | | | |
Year Ended December 31, 2020 | | Earth Intelligence | | Space Infrastructure | | Eliminations | | Total |
U.S. federal government and agencies | | $ | 774 | | $ | 288 | | $ | — | | $ | 1,062 |
Commercial and other | | | 307 | | | 433 | | | (79) | | | 661 |
Total revenues | | $ | 1,081 | | $ | 721 | | $ | (79) | | $ | 1,723 |
| | | | | | | | | | | | |
Year Ended December 31, 2019 | | Earth Intelligence | | Space Infrastructure | | Eliminations | | Total |
U.S. federal government and agencies | | $ | 790 | | $ | 151 | | $ | (1) | | $ | 940 |
Commercial and other | | | 295 | | | 555 | | | (124) | | | 726 |
Total revenues | | $ | 1,085 | | $ | 706 | | $ | (125) | | $ | 1,666 |
The Company had revenues from a commercial customer in the Space Infrastructure segment that represented 19% and 11% of total revenues for the years ended December 31, 2021 and 2020, respectively. The revenues from this commercial customer in the Space Infrastructure segment were less than 10% of the Company’s total revenues for the year ended December 31, 2019.
16.
17. SEGMENT INFORMATION
The Company’s business is organized into market sectors based on its products and services and has three2 reportable segments: (i)Earth Intelligence and Space Systems; (ii) Imagery; and (iii) Services.Infrastructure. The Company organizes itsEarth Intelligence reportable segments based on the nature of the products and services offered. The Space Systems reportable segment supplies space-based and ground-based infrastructure and information solutions including communication and imaging satellites, satellite payloads and antenna subsystems, space-based and airborne surveillance solutions, robotic systems and associated ground infrastructure and support services. The Imagery segment is a supplier of high-resolution, high resolutionaccuracy Earth imagery and radarother geospatial data sourced from the Company ownedCompany’s advanced satellite constellationsconstellation and third-party providers.providers, as well as a provider of advanced geospatial information applications and analytic services for national security and commercial solutions. The ServicesSpace Infrastructure reportable segment combines imagery, analytic expertiseis a supplier of space-based infrastructure, robotics, subsystems and innovative technology to deliver integrated intelligenceinformation solutions to customers.satellite operators and government agencies.
Transactions between segments are generally negotiated and accounted for under terms and conditions similar to other government and commercial contracts. The reconciling item “corporate expense” includes the portion of corporate costs not considered allocable to the segments, such as legal, management and administration, and other corporate unallocable costs.
The Company’s Chief Operating Decision Maker (“CODM”) measures the performance of each segment based on revenue and adjustedAdjusted EBITDA. Adjusted EBITDA is defined as EBITDA adjusted for certain items affectingearnings before interest, tax, depreciation and amortization
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
(“EBITDA”) adjusted for certain items affecting comparability of our 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, CEO severance, (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.
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:
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
Revenues: | | | | | | | | | |
Space Systems | | $ | 1,129 | | $ | 1,270 | | $ | 1,421 |
Imagery | | | 845 | | | 230 | | | 42 |
Services | | | 266 | | | 144 | | | 100 |
Intersegment eliminations | | | (99) | | | (13) | | | (5) |
Total Revenue | | $ | 2,141 | | $ | 1,631 | | $ | 1,558 |
| | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Revenues: | | | | | | | | | |
Earth Intelligence | | $ | 1,093 | | $ | 1,081 | | $ | 1,085 |
Space Infrastructure | | | 740 | | | 721 | | | 706 |
Intersegment eliminations | | | (63) | | | (79) | | | (125) |
Total revenues | | $ | 1,770 | | $ | 1,723 | | $ | 1,666 |
| | | | | | | | | |
Adjusted EBITDA: | | | | | | | | | |
Space Systems | | $ | 5 | | $ | 151 | | $ | 160 |
Imagery | | | 518 | | | 143 | | | 23 |
Services | | | 25 | | | 23 | | | 19 |
Intersegment eliminations | | | (22) | | | (1) | | | — |
Depreciation and amortization | | | (449) | | | (161) | | | (72) |
Corporate expense | | | (54) | | | (65) | | | (26) |
Restructuring | | | (18) | | | (36) | | | (4) |
Acquisition and integration related expense | | | (34) | | | (60) | | | — |
Impairment losses, including inventory | | | (1,096) | | | — | | | — |
Interest expense, net | | | (202) | | | (99) | | | (33) |
Interest Income 1 | | | 1 | | | 1 | | | — |
Equity (income) loss from joint ventures, net of tax | | | (2) | | | — | | | — |
Net (loss) earnings before income taxes | | $ | (1,328) | | $ | (104) | | $ | 67 |
| | | | | | | | | |
Adjusted EBITDA: | | | | | | | | | |
Earth Intelligence | | $ | 492 | | $ | 513 | | $ | 548 |
Space Infrastructure | | | 46 | | | (3) | | | (17) |
Intersegment eliminations | | | (25) | | | (27) | | | (29) |
Corporate and other expenses | | | (89) | | | (61) | | | (86) |
Restructuring | | | (2) | | | — | | | (18) |
Transaction and integration related expense | | | (1) | | | (7) | | | (16) |
Gain (loss) on orbital receivables allowance | | | 49 | | | (14) | | | (14) |
Impairment losses, including inventory | | | — | | | (33) | | | (3) |
Insurance recoveries 1 | | | 1 | | | — | | | 183 |
(Loss) gain on sale of assets | | | — | | | (1) | | | 136 |
CEO severance | | | — | | | — | | | (3) |
Gain on remeasurement of Vricon equity interest 2 | | | — | | | 85 | | | — |
Depreciation and amortization | | | (290) | | | (348) | | | (376) |
Interest expense, net | | | (151) | | | (175) | | | (219) |
Interest income 3 | | | 3 | | | 3 | | | 2 |
Equity in income from joint ventures, net of tax | | | — | | | (1) | | | (11) |
Income (loss) from continuing operations before taxes | | $ | 33 | | $ | (69) | | $ | 77 |
1 | Insurance recoveries for the year ended December 31, 2021 are included in Other income, net on the Consolidated Statement of Operations. |
2 | As a result of the Vricon Acquisition, the Company was required to remeasure its previously held equity interest in Vricon at its acquisition date fair value which resulted in a gain of $85 million. The gain is included in Other (income) expense, net on the Consolidated Statements of Operations. |
3 | Included in Other (income) expense, net on the Consolidated Statements of Operations. |
1Included in Other expense (income), net on the Consolidated Statements of Operations.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The Company’s capital expenditures are as follows:
| | | | | | | | | | | |
| | Space | | | | | | Corporate and | | | |
Year ended December 31, 2018 | | Systems | | Imagery | | Services | | eliminations | | Total | |
| | | | | | | | | | | | | |
Year Ended December 31, 2021 | | | Earth Intelligence | | Space Infrastructure | | Corporate and eliminations | | Total |
Capital expenditures: | | | | | | | | | | | | | | | | | | | | | | |
Property, plant and equipment | | $ | 28 | | $ | 156 | | $ | 2 | | $ | (30) | | $ | 156 | | $ | 79 | | $ | 16 | | $ | 40 | | $ | 135 |
Intangible assets | | | 6 | | | 55 | | | 1 | | | — | | | 62 | | | 87 | | | — | | | 12 | | | 99 |
| | $ | 34 | | $ | 211 | | $ | 3 | | $ | (30) | | $ | 218 | |
| | | | | | | | | | | | | |
| | Space | | | | | | Corporate and | | | |
Year ended December 31, 2017 | | Systems | | Imagery | | Services | | eliminations | | Total | |
| | | $ | 166 | | $ | 16 | | $ | 52 | | $ | 234 |
| | | | | | | | | | | | |
Year Ended December 31, 2020 | | | Earth Intelligence | | Space Infrastructure | | Corporate and eliminations | | Total |
Capital expenditures: | | | | | | | | | | | | | | | | | | | | | | | |
Property, plant and equipment | | $ | 43 | | $ | 14 | | $ | 2 | | $ | (10) | | $ | 49 | | $ | 147 | | $ | 21 | | $ | 53 | | $ | 221 |
Intangible assets | | | 11 | | | 12 | | | — | | | — | | | 23 | | | 79 | | | 1 | | | 7 | | | 87 |
| | $ | 54 | | $ | 26 | | $ | 2 | | $ | (10) | | $ | 72 | |
| | | | | | | | | | | |
| | Space | | | | | | Corporate and | | | |
Year ended December 31, 2016 | | Systems | | Imagery | | Services | | eliminations | | Total | |
| | | $ | 226 | | $ | 22 | | $ | 60 | | $ | 308 |
| | | | | | | | | | | | | |
Year Ended December 31, 2019 | | | Earth Intelligence | | Space Infrastructure | | Corporate and eliminations | | Total |
Capital expenditures: | | | | | | | | | | | | | | | | | | | | | | | |
Property, plant and equipment | | $ | 38 | | $ | — | | $ | 1 | | $ | 1 | | $ | 40 | | $ | 237 | | $ | 16 | | $ | 4 | | $ | 257 |
Intangible assets | | | 14 | | | — | | | 1 | | | 1 | | | 16 | | | 56 | | | 3 | | | (2) | | | 57 |
| | $ | 52 | | $ | — | | $ | 2 | | $ | 2 | | $ | 56 | |
| | | $ | 293 | | $ | 19 | | $ | 2 | | $ | 314 |
Substantially all of the Company’s long-lived tangible assets were in the United States as of December 31, 20182021, 2020 and 2017, respectively.2019.
17.18. IMPAIRMENT LOSSES
Inventory impairment
There were 0 inventory impairment losses recognized for the years ended December 31, 2021 or 2020.
For the year ended December 31, 2019, the Company recognized inventory impairment losses of $3 million, which are included in Product costs, excluding depreciation and amortization on the Consolidated Statements of Operations.
Other impairment
There were 0 impairment losses recognized for the year ended December 31, 2021.
For the year ended December 31, 2020, the Company recognized an impairment loss of $33 million within the Earth Intelligence segment related to the write-off of a prepaid asset with a commercial provider of ground station services under a contract which was above current market value. In December 2020, the Company executed a new multi-year contract with the provider for services at reduced cost. As a result of the prior contract being terminated and the new contract being at market value, the Company concluded the remaining prepaid asset from the prior contract with the provider had no continuing value.
For each of the years ended December 31, 2020 and 2019, the Company recognized orbital receivable impairment losses of $14 million, within the Space Infrastructure segment primarily due to a decrease in customer credit ratings. See Note 6 for details related to the reversal of the orbital receivables allowance.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
19. EMPLOYEE BENEFIT PLANS
Defined contribution plansplan
The Company maintains a defined contribution plansplan for some of its employees in the U.S and Canada,U.S., whereby the Company pays contributions based on a percentage of the employees’ annual salary. For the years ended December 31, 2018, 20172021, 2020 and 2016,2019, the Company recorded expense of $17$19 million, $15$16 million and $14$16 million, respectively, related to these plans.the plan.
Pension and other postretirement benefit plans
The Company maintains variousa defined benefit pension plansplan covering a portion of its employees inwithin the U.S.Space Infrastructure segment. The pension and Canada.other postretirement plan benefits were frozen on December 31, 2013. The defined benefit plans provideplan provides pension benefits based on various factors including prior earnings and length of service. The defined benefit plans areplan is funded and the Company’s funding requirements are based on each of the plans’ actuarial measurement framework as established by the plan agreements or applicable laws. Employees are required to contribute to some of the funded plans. The funded plans’ assets are legally separated from the Company and are held by an independent trustees.trustee. The trustees aretrustee is responsible for ensuring that the funds are protected as per applicable laws.
The Company also provides for other postretirement benefits, comprised of extended health benefits, dental care and life insurance covering a portion of its employees inwithin the U.S. and Canada.Space Infrastructure segment. The cost of these benefits is primarily funded primarily out of general revenues.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Operating income.
The table below summarizes changes in the benefit obligations,obligation, the fair value of plan assets and funded status for all of the Company’s pension and other postretirement benefit plans, as well as the aggregate balance sheetssheet impact.
| | | | | | | | | | | | |
| | Pension | | Other Postretirement |
| | 2021 | | 2020 | | 2021 | | 2020 |
Change in benefit obligation: | | | | | | | | | | | | |
Benefit obligation at beginning of year | | $ | 624 | | $ | 583 | | $ | 14 | | $ | 14 |
Service cost | | | 3 | | | 2 | | | — | | | — |
Interest cost | | | 14 | | | 17 | | | — | | | — |
Actuarial (gains) losses | | | (23) | | | 55 | | | (1) | | | — |
Benefits paid | | | (33) | | | (33) | | | — | | | — |
Benefit obligation at end of year | | $ | 585 | | $ | 624 | | $ | 13 | | $ | 14 |
| | | | | | | | | | | | |
Change in fair value of plan assets: | | | | | | | | | | | | |
Fair value of plan assets at beginning of year | | $ | 444 | | $ | 404 | | $ | — | | $ | — |
Actual return on assets | | | 51 | | | 40 | | | — | | | — |
Employer contributions | | | 1 | | | 34 | | | — | | | — |
Benefits paid | | | (31) | | | (31) | | | — | | | — |
Expenses paid | | | (3) | | | (3) | | | — | | | — |
Fair value of plan assets at end of year | | | 462 | | | 444 | | | — | | | — |
Unfunded status at end of year | | $ | (123) | | $ | (180) | | $ | (13) | | $ | (14) |
| | | | | | | | | | | | |
Liabilities recognized in the Consolidated Balance Sheets: | | | | | | | | | | | | |
Accrued compensation and benefits | | $ | (1) | | $ | (1) | | $ | (1) | | $ | (1) |
Pension and other postretirement benefits | | | (122) | | | (179) | | | (12) | | | (13) |
| | $ | (123) | | $ | (180) | | $ | (13) | | $ | (14) |
| | | | | | | | | | | | |
| | Pension | | Other Postretirement |
| | 2018 | | 2017 | | 2018 | | 2017 |
Change in benefit obligation: | | | | | | | | | | | | |
Benefit obligation at beginning of year | | $ | 654 | | $ | 614 | | $ | 39 | | $ | 64 |
Valuation effect at beginning of year | | | — | | | — | | | — | | | (2) |
Service cost | | | 6 | | | 5 | | | — | | | — |
Interest cost | | | 22 | | | 24 | | | 2 | | | 2 |
Actuarial (gains) losses | | | (43) | | | 38 | | | (4) | | | 1 |
Prior service credit | | | — | | | — | | | — | | | (1) |
Benefits paid | | | (37) | | | (32) | | | (2) | | | (2) |
Curtailments 1 | | | — | | | — | | | — | | | (24) |
Foreign exchange | | | (7) | | | 5 | | | (3) | | | 1 |
Benefit obligation at end of year | | $ | 595 | | $ | 654 | | $ | 32 | | $ | 39 |
| | | | | | | | | | | | |
Change in fair value of plan assets: | | | | | | | | | | | | |
Fair value of plan assets at beginning of year | | $ | 478 | | $ | 437 | | $ | — | | $ | — |
Actual (loss) return on plan assets | | | (20) | | | 59 | | | — | | | — |
Employer contributions | | | 16 | | | 9 | | | 3 | | | 2 |
Benefits paid | | | (35) | | | (30) | | | (3) | | | (2) |
Expenses paid | | | (3) | | | (3) | | | — | | | — |
Foreign exchange | | | (7) | | | 6 | | | — | | | — |
Fair value of plan assets at end of year | | | 429 | | | 478 | | | — | | | — |
Unfunded status at end of year | | $ | (166) | | $ | (176) | | $ | (32) | | $ | (39) |
| | | | | | | | | | | | |
Assets and (liabilities) recognized in the Consolidated Balance Sheets: | | | | | | | | | | | | |
Other assets | | $ | 4 | | $ | 4 | | $ | — | | $ | — |
Accrued compensation and benefits | | | — | | | — | | | (1) | | | (2) |
Pension and other postretirement benefits | | | (170) | | | (180) | | | (31) | | | (37) |
| | $ | (166) | | $ | (176) | | $ | (32) | | $ | (39) |
108
The $59$39 million decrease in the pension benefit obligation from 20172020 to 20182021 was primarily due to the increase in the discount rate. The $49$18 million decreaseincrease in the fair value of plan assets from 20172020 to 20182021 was primarily due to benefit payments and negativethe return on assets.
Table of ContentsThe accumulated benefit obligation for the defined pension benefit plans was $585 million and $624 million at December 31, 2021 and 2020, respectively.
MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The following table summarizesprovides the net actuarial (loss) gain and prior service credits for the year ended December 31, in accumulated other comprehensive loss (income), before related tax effects, for all of the Company’s pension and other postretirement benefit plans:
| | | | | | | | | | | | | | | | | | | |
| | Pension | | Other Postretirement | |
| | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 | |
Net actuarial (loss) gain | | $ | (63) | | $ | (54) | | $ | (89) | | $ | 17 | | $ | 12 | | $ | 3 | |
Prior service credit | | | — | | | — | | | — | | | 1 | | | 1 | | | 3 | |
Total recognized in accumulated other comprehensive loss (income) | | $ | (63) | | $ | (54) | | $ | (89) | | $ | 18 | | $ | 13 | | $ | 6 | |
The aggregate accumulated benefit obligation (“ABO”) for the Company’s pension plans was $593 million at December 31, 2018 and $652 million at December 31, 2017. The following table presents information only for the pension plans with an ABObenefits recognized in excess of the fair value of plan assetsAccumulated other comprehensive (loss) income at December 31:
| | | | | | |
| | Pension |
| | 2018 | | 2017 |
Accumulated benefit obligation | | $ | 536 | | $ | 587 |
Fair value of plan assets | | $ | 367 | | $ | 407 |
| | | | | | | | | | | | |
| | Pension | | Other Postretirement |
| | 2021 | | 2020 | | 2021 | | 2020 |
Net (loss) gain | | $ | (60) | | $ | (110) | | $ | 9 | | $ | 9 |
The following table presents information for the Company’s pension plans with a projected benefit obligation in excess of plan assets at December 31:
| | | | | | |
| | Pension |
| | 2018 | | 2017 |
Projected benefit obligation | | $ | 553 | | $ | 605 |
Fair value of plan assets | | $ | 383 | | $ | 425 |
The ABO for the Company’s other postretirement benefit plans with an accumulated postretirement benefit obligation in excess of the fair value of plan assets was $32 million and $39 million at December 31, 2018 and 2017, respectively.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The following table summarizes the weighted average assumptions used to determine the benefit obligations for the Company’s pension and other postretirement plans at December 31:
| | | | | | | | | | | | | | |
| | Pension | | | Other Postretirement | |
| | 2018 | | 2017 | | 2018 | | 2017 | |
| | | | | | | | | | | | | | |
| | | Pension | | | Other Postretirement |
| | | 2021 | | 2020 | | 2021 | | 2020 |
Discount rate | | | 4.1 | % | | 3.4 | % | | 3.8 | % | | 3.4 | % | | | 2.6 | % | | 2.2 | % | | 2.6 | % | | 2.2 | % |
Rate of future compensation increase | | | 3.5 | % | | 3.5 | % | | 3.6 | % | | 3.6 | % | |
The following table summarizes the components of net periodic benefit (credits) costs(credit) cost for the Company’s pension and other postretirement benefit plans for the years ended December 31:
| | | | | | | | | | | | | | | | | | | |
| | Pension | | Other Postretirement | |
| | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 | |
Service cost | | $ | 4 | | $ | 3 | | $ | 2 | | $ | — | | $ | — | | $ | 1 | |
Interest cost | | | 22 | | | 24 | | | 26 | | | 2 | | | 2 | | | 2 | |
Expected return on plan assets | | | (32) | | | (29) | | | (31) | | | — | | | — | | | — | |
Amortization of prior service credit | | | — | | | — | | | — | | | — | | | (2) | | | (2) | |
Amortization of net loss (gain) | | | 1 | | | 1 | | | 2 | | | (1) | | | — | | | — | |
Curtailment gain | | | — | | | — | | | — | | | — | | | (26) | | | — | |
Settlement loss recognized | | | — | | | — | | | 3 | | | — | | | — | | | — | |
Expenses paid | | | 2 | | | 3 | | | 4 | | | — | | | — | | | — | |
Net periodic benefit (credit) cost | | $ | (3) | | $ | 2 | | $ | 6 | | $ | 1 | | $ | (26) | | $ | 1 | |
| | | | | | | | | | | | | | | | | | | |
| | Pension | | | Other Postretirement |
| | 2021 | | 2020 | | 2019 | | | 2021 | | 2020 | | 2019 |
Interest cost | | $ | 14 | | $ | 17 | | $ | 21 | | | $ | 1 | | $ | — | | $ | 1 |
Expected return on plan assets | | | (29) | | | (24) | | | (24) | | | | — | | | — | | | — |
Amortization of net loss (gain) | | �� | 6 | | | 1 | | | — | | | | (1) | | | — | | | (1) |
Settlement gain | | | — | | | — | | | — | | | | — | | | (4) | | | — |
Expenses paid | | | 3 | | | 2 | | | 2 | | | | — | | | — | | | — |
Net periodic benefit credit | | $ | (6) | | $ | (4) | | $ | (1) | | | $ | — | | $ | (4) | | $ | — |
The following table summarizes the components recognized in otherOther comprehensive (income) loss (income) for the Company’s pension and other postretirement benefit plans for the years ended December 31:
| | | | | | | | | | | | | | | | | | | |
| | Pension | | | Other Postretirement |
| | 2021 | | 2020 | | 2019 | | | 2021 | | 2020 | | 2019 |
Net (gain) loss | | $ | (44) | | $ | 40 | | $ | 25 | | | $ | (1) | | $ | 4 | | $ | — |
Amortization of net (loss) gain | | | (6) | | | (1) | | | — | | | | 1 | | | — | | | 1 |
Total recognized in other comprehensive (income) loss | | $ | (50) | | $ | 39 | | $ | 25 | | | $ | — | | $ | 4 | | $ | 1 |
Total recognized in net periodic benefit credit and other comprehensive (income) loss | | $ | (56) | | $ | 35 | | $ | 24 | | | $ | — | | $ | — | | $ | 1 |
| | | | | | | | | | | | | | | | | | | |
| | Pension | | Other Postretirement | |
| | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 | |
Net loss (gain) | | $ | 10 | | $ | 8 | | $ | 11 | | $ | (6) | | $ | — | | $ | (4) | |
Prior service credit | | | — | | | — | | | — | | | — | | | (1) | | | — | |
Amortization of prior service (cost) credit | | | — | | | — | | | — | | | — | | | 2 | | | — | |
Amortization of net (loss) gain | | | (1) | | | (1) | | | (4) | | | 1 | | | 1 | | | — | |
Curtailment loss | | | — | | | — | | | — | | | — | | | 1 | | | 2 | |
Total recognized in other comprehensive loss (income) | | $ | 9 | | $ | 7 | | $ | 7 | | $ | (5) | | $ | 3 | | $ | (2) | |
Total recognized in net periodic benefit (credit) cost and other comprehensive loss (income) | | $ | 6 | | $ | 9 | | $ | 13 | | $ | (4) | | $ | (23) | | $ | (1) | |
109
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The following table summarizes the weighted average assumptions used to determine the net periodic benefit (credit) cost for the Company’s pension and other postretirement benefit plans for the years ended December 31:
| | | | | | | | | | | | | | | | | | | | |
| | Pension | | Other Postretirement | |
| | 2018 | | 2017 | | 2016 | | 2018 | | 2017 | | 2016 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Pension | | Other Postretirement |
| | | 2021 | | 2020 | | | 2019 | | 2021 | | 2020 | | 2019 |
Discount rate | | | 3.4 | % | | 3.9 | % | | 4.3 | % | | 3.4 | % | | 3.8 | % | | 4.1 | % | | | 2.2 | % | | 3.0 | % | | 4.1 | % | | | 2.2 | % | | 3.0 | % | | 4.1 | % |
Rate of future compensation increase | | | 3.5 | % | | 3.5 | % | | 3.5 | % | | 3.6 | % | | 3.6 | % | | 3.5 | % | |
Expected long-term return on plan assets | | | 6.9 | % | | 6.8 | % | | 6.8 | % | | N/A | | | N/A | | | N/A | | | | 6.5 | % | | 6.5 | % | | 7.0 | % | | | N/A | | | N/A | | | N/A | |
The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company’s benefit plans, including those from dividends, interest income and capital appreciation. The Company utilizes a third-party consultant to assist in the development of the expected long-term return on plan assets, which is based on expectations regarding future long-term rates of return for the plans
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
plans’ investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class.
The annual increase in the cost of benefits (health care cost trend rate) for the Company’s other postretirement benefit plans is assumed to be an average of 6.5% in 2019 and is assumed to decline to a rate of 4.5% in 2026 and thereafter. Health care cost trend assumptions are based primarily on industry and plan experience expectations as well as current market conditions. Assumed health care cost trend rates can have a significant effect on amounts reported for postretirement medical benefit plans.
Plan Assets. The Company’s Pension Committees (“Committees”Committee (the “Committee”) havehas the responsibility to formulate the investment policies and strategies for the plan assets. The Committees structureCommittee structures the investment of plan assets to maximize the plans long-term rate of return for an acceptable level of risk and limit the volatility of investment returns. In the pursuit of these goals, the Committees haveCommittee has formulated the following investment policies and objectives: (1) preserve the plan assets; (2) maintain sufficient liquidity to fund benefit payments and pay plan expenses; and (3) achieve a minimum total rate of return equal to the established benchmarks for each asset category.
The Committees haveCommittee has established the allowable rangea target allocation that the plan assets may be invested in for each major asset category. In addition, the Committees havecategory and has established guidelines regarding diversification within asset categories to limit risk and exposure to a single or limited number of securities. The investment manager is required to rebalance the portfolio within 2 percentage points for any individual asset or combination of assets defined within policy targets. Asset allocation targets are re-balanced quarterly and re-assessed annually for the upcoming year. The investments of the plansplan include a diversified portfolio of both equity and fixed income investments. Equity investments are further diversified across U.S. and international stocks, small to large capitalization stocks and growth and value stocks. Fixed income assets are diversified across U.S. and international issuers, corporate and governmental issuers and credit quality.
The following table presents the allowable rangea summary of target asset allocations for each major category of the plan assets at December 31, 2018 as well as the Company’s pension plan and other postretirement benefit plan weighted averageactual asset allocations at December 31, 2018:2021:
| | | | | | | |
| | Asset Allocation
| | | | |
Asset Allocation
| | Range
| | 2018
| |
Cash and cash equivalents
| | | 0 - 16
| %
| | 1
| %
|
U.S. equity securities
| | | 15 - 50
| %
| | 29
| %
|
International equity securities
| | | 9 - 33
| %
| | 31
| %
|
Fixed income
| | | 30 - 52
| %
| | 37
| %
|
Other
| | | 0 - 14
| %
| | 2
| %
|
| | | | | | 100
| %
|
| | | | | | | |
| | | | | |
Asset Allocation | | Target | | Actual | |
Cash and cash equivalents | | | - | % | | 1 | % |
U.S. and global equity securities | | | 71 | % | | 71 | % |
Fixed income | | | 29 | % | | 28 | % |
| | | 100 | % | | 100 | % |
Cash and cash equivalents consist of cash amounts in both U.S. and Canadian dollars and short-term investments. U.S. and international securities consist primarily of investments in common stock of U.S. and Canadian companies. The fair value ofglobal equity securities, is based on quoted market prices available in active marketsfixed income and other investment assets are primarily commingled fund investments. The pension plans’ commingled fund investments are managed by several fund managers and are valued at the close of trading. Fixed income securities consist primarily of U.S. and Canadian corporate and government fixed-income securities. The fair valuesnet asset value per share for of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market.
The Committees regularly monitoreach fund. Although the investmentmajority of the planunderlying assets in the funds consist of actively traded equity securities and bonds, the unit of account is considered to ensure thatbe at the actual investment allocation remains withinfund level. These funds are traded daily and settled the established range. The Committees also regularly measure and monitor investment risk through ongoing performance reporting and investment manager reviews.
following day at the net asset value per share.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
The Committee regularly monitors the investment of plan assets to ensure that the actual asset allocation remains in proximity to the target. The Committee also regularly measures and monitors investment risk through ongoing performance reporting and investment manager reviews.
The following table presents the fair value of the Company’s pension plan assets by asset category segregated by level within the fair value hierarchy, as described below:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2018 | | December 31, 2017 |
Asset Category | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 |
Cash and cash equivalents | | $ | 5 | | $ | 5 | | $ | — | | $ | — | | $ | 6 | | $ | 6 | | $ | — | | $ | — |
U.S. equity securities | | | 126 | | | 11 | | | 115 | | | — | | | 147 | | | 14 | | | 133 | | | — |
International equity securities | | | 133 | | | 19 | | | 113 | | | 1 | | | 150 | | | 20 | | | 129 | | | 1 |
Fixed income | | | 158 | | | — | | | 158 | | | — | | | 167 | | | — | | | 167 | | | — |
Other | | | 7 | | | — | | | 7 | | | — | | | 8 | | | — | | | 8 | | | — |
Total assets at fair value | | $ | 429 | | $ | 35 | | $ | 393 | | $ | 1 | | $ | 478 | | $ | 40 | | $ | 437 | | $ | 1 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 |
Asset Category | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
Cash and cash equivalents | | $ | 3 | | $ | — | | $ | — | | $ | 3 | | $ | 3 | | $ | — | | $ | — | | $ | 3 |
Commingled funds 1 | | | | | | | | | | | | 459 | | | | | | | | | | | | 441 |
Total assets at fair value | | $ | 3 | | $ | — | | $ | — | | $ | 462 | | $ | 3 | | $ | — | | $ | — | | $ | 444 |
1 | Investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not required to be classified in the fair value hierarchy table. The total fair value of these amounts are presented in this table to permit reconciliation of the fair value hierarchy to the amounts presented for total defined benefit pension plan assets. |
Contributions. The funding policy for the Company’s pension and postretirement benefit plans is to contribute at least the minimum required by applicable laws and regulations or to directly make benefit payments where appropriate. At December 31, 2018,2021, all legal funding requirements had been met.
The American Rescue Plan Act of 2021 (“ARPA Act”) was enacted on March 11, 2021 in the United States. The ARPA Act includes provisions for pension funding relief in future periods. The Company expectshas elected to contribute approximately $14 milliontake advantage of these provisions and anticipates lower required contributions for the qualified pension plan in the upcoming fiscal years. Due to itsthe Company’s election, there are no required contributions for the Company’s qualified pension plans, and approximately $2 million to its other postretirement benefit plansplan for the year ending December 31, 2019.2022.
Estimated Future Benefit Payments. The following table presents expected pension and other postretirement benefit payments which reflect expected future service, as appropriate.
| | | | | | |
| | | | | | |
| | Pension | | Other Postretirement |
2019 | | $ | 34 | | $ | 2 |
2020 | | | 34 | | | 2 |
2021 | | | 34 | | | 2 |
2022 | | | 35 | | | 2 |
2023 | | | 35 | | | 2 |
Years 2024 - 2028 | | | 182 | | | 10 |
| | | | | | | | | | | | | | | | | | | |
| | | 2022 | | | 2023 | | | 2024 | | | 2025 | | | 2026 | | | 2027 through 2031 | |
Pension | | $ | 32 | | $ | 32 | | $ | 32 | | $ | 32 | | $ | 32 | | $ | 159 | |
Other postretirement | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | | 4 | |
| | $ | 33 | | $ | 33 | | $ | 33 | | $ | 33 | | $ | 33 | | $ | 163 | |
18.20. STOCK-BASED COMPENSATION PLANS
The Company’s stock-based compensation plans were established to attract and retain key personnel by providing them the opportunity to acquire an equity interest in the Company or other incentive compensation measured by reference to the value of shares or other performance objectives and align the interests of key personnel with those of stockholders.
Long-Term Incentive Plans – The Company’s long-term incentive plans (“LTIP Plans”) include long-term incentive plans initiated before 2017 (“Pre-2017 Plans”) and the 2017 Long-Term Incentive Plan (‘‘(“2017 Plan’’Plan”) pursuant to which shares may be issued by the Company from treasury. Under the LTIP Plans, awards of stock appreciation rights (“SARs”) may be granted to employees of the Company and its subsidiaries; however, no0 LTIP award may be issued to any director of a subsidiary of the Company who is not an employee. An aggregate of 6,820,000 LTIP awards were authorized under the Pre-2017 Plans and an aggregate of 1,900,000 LTIP awards were authorized under the 2017 Plan. NoNaN further awards shall be granted under the LTIP Plans.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Omnibus Equity Incentive Plan – The Company adopted the Omnibus Equity Incentive Plan (“Omnibus Plan”) in February 2017 and the stockholders approved the Omnibus Plan in July 2017. The Omnibus Plan provides for grants to eligible employees, officers, consultants or advisors of the Company and its subsidiaries of stock options, long-term incentive units, restricted stock units (‘‘(“RSUs”), SARs and performance stock units (“PSUs”) in order to provide a long-term incentive compensation to such persons. NoNaN awards will be made under the Omnibus Plan to non-employee directors.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
1,100,000 shares were reserved for issuance under the Omnibus Plan. The Omnibus Plan has a term of ten years and shares may be issued by the Company from treasury. As of December 31, 2019, 0 further awards shall be granted under the Omnibus Plan.
2019 Incentive Award Plan – The Company adopted the 2019 Incentive Award Plan (“2019 Plan”) in March 2019 and the stockholders approved the 2019 Plan in May 2019. The 2019 Plan provides for grants to eligible employees, officers, consultants, directors or advisors of the Company and its subsidiaries of stock options, SARs, restricted stock award, RSUs, deferred stock award and PSUs in order to provide a long-term incentive compensation to such persons. 2,525,000 shares were reserved for issuance under the 2019 Plan. In addition, any shares subject to a prior plan that are forfeited, cancelled, or expired shall be available for future grants under the 2019 Plan. Only awards settled in equity count against the share reserve. Awards are actively being granted out of the 2019 Plan as of December 31, 2021.
Deferred Stock UnitPlan – The On October 1, 2003, the Company established a Deferred Share Unit (“DSU”) Plan (“DSU Plan”) whereby the Company’s independent directors receivereceived some or all of their annual retainers in DSUs. DSUs are granted at a price equal to the closing price of the common shares on the day before the date of grant. The DSUs are settled in equitycash at retirement at the closing price of the common shares of the Company on the retirement date of the director. Under the DSU plan,Plan, 100,000 DSUs were reserved for issuance.
Legacy Employee Stock Purchase Plan – On October 1, 2001, the Company implemented an employee stock purchase plan. Under this plan, the Company maycould issue 1,500,000 common shares to certain eligible employees. The maximum number of common shares that maycould be issued under the plan in any one year iswas 300,000. Under the terms of the plan, employees could purchase shares of the Company at 85% of the market value of the shares. Employees could allocate a maximum of 10% of their salary to the plan to a maximum of $20,000 Canadian dollars per annum. During the year ended December 31, 2019, 22,541 common shares were issued at an average price of $6.20 Canadian dollars under the legacy employee stock purchase plan. As of December 31, 2019, the Legacy Employee Stock Purchase Plan was discontinued.
Maxar Technologies Inc. Employee Stock Purchase Plan – On March 27, 2019, the Company implemented an employee stock purchase plan. Under this plan, the Company may issue 5,000,000 common shares to certain eligible employees. Under the terms of the plan, employees can purchase shares of the Company at 85% of the market value of the shares.shares on the lower closing price of either the first or last day of the purchase period. Employees can allocate a maximum of 10% of their salary to the plan to a maximum of C$20,000$25,000 per annum. During the years ended December 31, 2018, 20172021, 2020 and 2016, 102,076, 83,4532019, 308,554, 543,184 and 66,46689,398 common shares were issued, respectively, at an average price of C$47.77, C$59.58, C$70.56$27.71, $9.75 and $6.09, respectively, under the employee stock purchase plan.
DigitalGlobe Equity Plan– The Employee Stock Option Plan (‘‘(“DigitalGlobe Equity Plan’’Plan”) was assumed as a result of the DigitalGlobe Transaction,acquisition, effective as of October 5, 2017. As of December 31, 2017, no0 further awards shall be granted under the DigitalGlobe Equity Plan.
Stock Appreciation Rights
The Company awards SARs to certain employees under its 2017 Plan and Omnibus Plan.
Certain awards issued under the Pre-2017 Plans, the 2017 Plan and Omnibus Plan remain outstanding as of December 31, 2018.2021. The SARs issued under the Pre-2017 Plans vest over a period of three years, in the amount of one-third each year, and expire five years from their grant date. The SARs issued under the 2017 Plan and Omnibus Plan vest over a period of four years, in the amount of one-quarterone-quarter each year, and expire ten years from their grant date.
SARs Accounted for as Liability Classified Awards
A summary of the SARs accounted for as liability classified awards for the year ended December 31, 2018 is presented below:
| | | | | | | | | | | |
| | | | | | | | | | | |
| | Number of Awards | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (in years) | | Aggregate Intrinsic Value |
SARs outstanding at December 31, 2017 | | 2,638,857 | | C$ | 81.56 | | | | | | |
Exercised | | (23,604) | | | 57.99 | | | | | | |
Cancelled or expired | | (1,283,592) | | | 82.67 | | | | | | |
SARs outstanding at December 31, 2018 | | 1,331,661 | | | 84.32 | | | 2.7 | | C$ | — |
SARs vested and expected to vest at December 31, 2018 | | 1,319,781 | | | 84.43 | | | 2.7 | | C$ | — |
SARs exercisable at December 31, 2018 | | 1,071,358 | | C$ | 86.01 | | | 2.3 | | C$ | — |
The weighted average grant-date estimated fair value of SARs accounted for as liability classified awards granted during the years ended December 31, 2017 and 2016 was C$65.38 and C$78.75, respectively. No SARs accounted for as liability classified awards were granted during 2018. The total intrinsic value of SARs exercised during the years ended December 31, 2018, 2017 and 2016 was $1 million, $6 million and $8 million, respectively. The SARs that vested
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
during the years ended December 31, 2018, 2017 and 2016 had a total estimated fair value of $3 million, $4 million and $2 million, respectively.
As of December 31, 2018, total unrecognized compensation expense related to nonvested SARs accounted for as liability classified awards was not significant.
SARs Accounted for as Liability and Equity Classified Awards
A summary of the SARs accounted for as liability and equity classified awards for the year ended December 31, 20182021 is presented below:
| | | | | | | | | | | |
| | Number of Awards | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (in years) | | Aggregate Intrinsic Value |
SARs outstanding at December 31, 2020 | | 1,192,747 | | $ | 53.93 | | | | | | |
Exercised | | (20,450) | | | 48.91 | | | | | | |
Cancelled or expired | | (251,161) | | | 61.29 | | | | | | |
SARs outstanding at December 31, 2021 | | 921,136 | | | 51.13 | | | 5.28 | | $ | — |
SARs vested and expected to vest at December 31, 2021 | | 921,136 | | | 51.13 | | | 5.28 | | $ | — |
SARs exercisable at December 31, 2021 | | 918,559 | | $ | 51.18 | | | 5.28 | | $ | 76,246 |
| | | | | | | | | | | |
| | Number of Awards | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (in years) | | Aggregate Intrinsic Value |
SARs outstanding at December 31, 2017 | | 3,338,148 | | C$ | 78.61 | | | | | | |
Granted | | 10,307 | | | 49.71 | | | | | | |
Exercised | | (19,837) | | | 66.72 | | | | | | |
Cancelled or expired | | (689,150) | | | 80.65 | | | | | | |
SARs outstanding at December 31, 2018 | | 2,639,468 | | | 76.49 | | | 5.4 | | C$ | — |
SARs vested and expected to vest at December 31, 2018 | | 2,543,453 | | | 76.71 | | | 5.3 | | C$ | — |
SARs exercisable at December 31, 2018 | | 1,715,148 | | C$ | 79.98 | | | 3.9 | | C$ | — |
The weighted average grant-date estimated fair value ofNaN SARs accounted for as equity classified awards were granted during the years ended December 31, 2018, 2017 and 2016 was C$10.37, C$75.04 and C$67.75, respectively. The total intrinsic value of2021 or 2020. There were 20,450 SARs exercised during the yearsyear ended December 31, 2018, 2017 and 2016 was immaterial. The2021. There were 0 SARs accounted for as equity-settled awards, that vestedexercised during the yearsyear ended December 31, 2018, 20172020. There were 44,370 liability and 2016 had a total estimated fair value876,766 equity classified awards outstanding as of $6 million, $8 million and $8 million, respectively.December 31, 2021.
As of December 31, 2018,2021, total unrecognized compensation expense related to nonvested SARs accounted for as equity classified was $4 million and is expected to be recognized over a weighted average remaining period of 1.7 years.not significant.
Restricted Share Units
In 2017, theThe Company issuedissues RSUs to certain employees under the Omnibus2019 Plan. The RSUs vest over a period of either three years, in the amount of one-thirdone-third each year, or one year, and are equity-settledsettled either in cash or equity on the vesting date.
RSUs Accounted for as Liability Classified Awards
There were 0 RSU liability classified awards granted during the year ended December 31, 2021. During the fourth quarter of 2020, the Company modified its outstanding 532,365 RSUs accounted for as liability classified awards to be equity settled on the vesting date. This modification resulted in an incremental share-based compensation expense of $3 million on the modification date and affected 37 employees. As a result of the modification, there were 0 remaining outstanding nonvested RSU liability classified awards as of December 31, 2020.
For the year ended December 31, 2020, the Company paid $4 million for the vesting of RSUs accounted for as liability classified awards. NaN liability classified RSU awards vested for the year ended December 31, 2019.
RSUs Accounted for as Equity Classified Awards
As part of the acquisition of DigitalGlobe, the Company provided replacement RSUs for a certain portion of the unvested RSU’sRSUs previously granted to DigitalGlobe employees.employees under the DigitalGlobe Equity Plan. The remaining replacement RSUs will continue to vest over the next three years, based on the terms of the original plan.
fully vested in 2021.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
A summary of the status of the Company’s nonvested RSU awards under both the 2019 Plan, Omnibus Plan and the DigitalGlobe Equity Plans Plan as of December 31, 20182021 and changes duringfor the year then ended December 31, 2021 is presented below:
| | | | | | | | | | | |
| | | | Weighted Average | | | | Weighted Average | |
| | Number of | | Grant Date | | Number of | | Grant Date | |
| | Awards 1 | | Fair Value 1 | | Awards 2 | | Fair Value 2 | |
Nonvested RSUs at December 31, 2017 | | 590,663 | | C$ | 79.68 | | 470,101 | | $ | 54.57 | |
| | | | | | | | | | | | | | | | | | |
| | | | | Weighted Average | | | | | Weighted Average | | | | Weighted Average |
| | | Number of | | Grant Date | | Number of | | Grant Date | | Number of | | Grant Date |
| | | Awards 1 | | Fair Value 1 | | Awards 2 | | Fair Value 2 | | Awards 3 | | Fair Value 3 |
Nonvested RSUs at December 31, 2020 | | | 2,949,969 | | $ | 15.33 | | | 70,373 | | $ | 12.41 | | | 26,316 | | $ | 54.57 |
Granted | | 161,748 | | | 52.03 | | — | | | — | | 807,628 | | | 43.53 | | | — | | | — | | | — | | | — |
Vested | | (174,825) | | | 79.24 | | (168,432) | | | 54.52 | | (1,129,781) | | | 15.90 | | | (44,717) | | | 16.98 | | | (26,151) | | | 54.57 |
Cancelled or expired | | (73,174) | | | 79.35 | | (27,808) | | | 54.57 | | (328,683) | | | 21.03 | | | (718) | | | 23.10 | | | (165) | | | 54.57 |
Nonvested RSUs at December 31, 2018 | | 504,412 | | C$ | 70.80 | | 273,861 | | $ | 54.57 | |
Nonvested RSUs at December 31, 2021 | | | 2,299,133 | | $ | 24.15 | | | 24,938 | | $ | 3.99 | | | - | | $ | — |
1RSUs under the 2019 Plan
2RSUs under the Omnibus planPlan
23RSUs under the DigitalGlobe Equity Plan
During the years ended December 31, 20182021, 2020, and 2017,2019, the total fair value of RSUs that vested was $13$20 million, $14 million and $6$14 million, respectively. No RSUS vested during fiscal 2016.During the year ended December 31, 2021, there were 1,200,649 RSU awards that vested.
As of December 31, 2018,2021, total unrecognized compensation expense related to nonvested RSUs was $18 million and is expected to be recognized over a weighted average remaining period of 1.40.8 years.
Performance Share Units
The Company issues PSUs to certain employees under the Omnibus Plan and 2019 Plan. The PSUs vest over a period of three years from the beginning date of a pre-determined performance period to the extent the Company has met its adjusted cash leverage (“ACL”) and total shareholder return (“TSR”) performance criteria during the performance period. Each unit has the ability to earn up to 2 common shares and the total number of shares earned is based upon both the ACL and TSR, which compares the Company's relative TSR performance against the total shareholder return of the Russell 2000 index over the term of the award. Performance related to both the ACL and TSR can be 0-200%. The total payout is the average of the ACL and TSR and the maximum payout percentage for all PSUs granted by the Company is 200%. For PSUs granted in 2019, the payout for performance up to 100% will be in equity and any performance greater than 100% will be paid in cash. For PSUs granted in 2020 and 2021, the payout for performance is settled completely in equity.
A summary of the PSU awards for the year ended December 31, 2021 is presented below:
| | | | | |
| | | | Weighted Average |
| | Number of | | Grant Date |
| | Awards | | Fair Value |
Nonvested PSUs at December 31, 2020 | | 1,040,680 | | $ | 11.76 |
Granted | | 155,902 | | | 61.93 |
Vested | | (223,053) | | | 4.73 |
Cancelled or expired | | (69,964) | | | 14.88 |
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Nonvested PSUs at December 31, 2021 | | 903,565 | | $ | 20.42 |
The Company paid $8 million and $3 million from the vesting of PSUs for the years ended December 31, 2021 and 2020, respectively. There were 0 vesting of PSU awards for the year ended December 31, 2019.
As of December 31, 2021, total unrecognized compensation expense related to nonvested PSUs was $7 million and is expected to be recognized over a weighted average remaining period of 0.8 years.
Deferred Share Units
A summary of the DSU awards for the year ended December 31, 20182021 is presented below:
| | | | | |
| | Number of Awards | | Weighted Average Issuance Price |
DSUs outstanding at December 31, 2020 | | 32,895 | | C$ | 56.01 |
Issued | | 0 | | | — |
Redeemed | | 0 | | | — |
DSUs outstanding at December 31, 2021 | | 32,895 | | C$ | 56.01 |
| | | | | |
| | | | | |
| | Number of Awards | | Weighted Average Issuance Price |
DSUs outstanding at December 31, 2017 | | 79,460 | | C$ | 50.13 |
Issued | | 28,143 | | | 55.43 |
DSUs outstanding at December 31, 2018 | | 107,603 | | C$ | 51.52 |
During1References to “C$” refer to Canadian currency.
There were 0 DSUs redeemed for the yearsyear ended December 31, 2017 and 2016, the2021. The total intrinsic value of redeemed DSUs was not material. No DSUs were redeemedmaterial during the year ended December 31, 2018.2020. There were 32,715 DSUs and 41,993 DSUs redeemed for the years ended December 31, 2020 and 2019, respectively.
Expense related to DSUs is recognized fully as stock-based compensation expense at the time they are issued. There were 0 DSUs issued for the years ended December 31, 2021 or 2020.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Stock-Based Compensation ExpenseStock-based compensation expense
The following table presents stock-based compensation expense (benefit) from continuing operations included in the Company’s Consolidated Statements of Operation:Operations:
| | | | | | | | | | | | |
| | | | | Year Ended December 31, |
| | Classification | | 2021 | | 2020 | | 2019 |
Stock-based compensation expense | | | Selling, general, and administrative expense, Product costs, and Service costs | | $ | 45 | | $ | 43 | | $ | 20 |
| | | | | | | | |
| Year ended December 31, |
| 2018 | | 2017 | | 2016 |
Product costs, excluding depreciation and amortization | $ | (1) | | $ | 6 | | $ | (1) |
Service costs, excluding depreciation and amortization | | 2 | | | 2 | | | (1) |
Selling, general and administrative | | 19 | | | 50 | | | 17 |
Stock-based compensation expense before taxes | | 20 | | | 58 | | | 15 |
Income taxes | | — | | | — | | | — |
Stock-based compensation expense, net of tax | $ | 20 | | $ | 58 | | $ | 15 |
115
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Valuation of Stock-Based Compensation Awardsstock-based compensation awards
Valuation of Liability Classified SARs
The fair value of the SARs were estimated at each reporting period using the Black-Scholes option pricing model with the following weighted average assumptions:
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | | 2016 |
Risk-free interest rate | | 1.7 - 1.9 | % | | 1.7 - 1.9 | % | | 0.7 - 1.4 | % |
Dividend yield | | 1.8 | % | | 1.8 | % | | 2.2 | % |
Expected lives (in years) | | 0.3 - 5.4 | | | 1.0 - 6.5 | | | 1.0 - 7.0 | |
Volatility | | 14 - 23 | % | | 14 - 25 | % | | 20 - 26 | % |
| | | | | | | | | |
| | Year Ended December 31, |
| | 2021 1 | | 2020 1 | | 2019 |
Risk-free interest rate | | — | % | | — | % | | 1.7 - 1.9 | % |
Dividend yield | | — | % | | — | % | | 0.5 | % |
Volatility | | — | % | | — | % | | 57 - 130 | % |
Expected lives (in years) | | — | | | — | | | 0.2 - 4.6 | |
1NaN liability classified SARs were granted in 2021 or 2020.
Valuation of Equity Classified SARs RSUs and DSUs
The fair value of equity classified SARs RSUs and DSUs wereare estimated on the date of the grant or the date of accounting reclassification using the Black-Scholes option pricing model. There were 0 equity classified SARs or DSUs granted for the years ended December 31, 2021, 2020 and 2019.
Valuation of PSUs and RSUs
The fair value of PSUs not subject to a market condition (ACL) and equity classified RSUs is determined based on the closing price of the Company’s common stock on the grant date.
PSUs that are subject to the market condition (TSR) are valued using a Monte Carlo simulation model, which requires certain assumptions, including the risk-free interest rate, expected volatility and the expected term of the award. The risk-free interest rate used in the Monte Carlo simulation model is based on zero-coupon yields implied by U.S. Treasury issues with remaining terms similar to the following weighted average assumptions:performance period on the PSUs. The performance period of the PSUs represents the period of time between the PSU grant date and the end of the performance period. Expected volatility is based on historical data of the Company and peer companies over the most recent time period equal to the performance period.
For PSU grants during the years ended December 31, 2021, 2020 and 2019 the assumptions used in the Monte Carlo simulation are as follows:
| | | | | | | | | |
| | Year ended December 31, | |
| | 2018 | | 2017 | | | 2016 | |
| | | | | | | | | | |
| | | Year Ended December 31, |
| | | 2021 | | 2020 | | 2019 | |
Risk-free interest rate | | 1.9 - 2.3 | % | | 0.6 - 1.9 | % | | 0.6 - 1.3 | % | | 0.3 | % | | 0.9 | % | | 2.2 - 2.3 | % |
Dividend yield | | 2.2 - 9.1 | % | | 1.5 - 2.2 | % | | 1.5 - 2.2 | % | | 0.1 | % | | 0.3 | % | | 0.5 - 0.9 | % |
Volatility | | | 98 - 104 | % | | 79 | % | | 63 - 67 | % |
Expected lives (in years) | | 3.0 - 7.0 | | | 0.4 - 7.0 | | | 0.4 - 7.0 | | | 2.6 - 2.8 | | | 2.8 | | | 2.9 - 3.0 | |
Volatility | | 22 - 41 | % | | 17 - 25 | % | | 17 - 25 | % | |
The risk-free interest rate for 2021, 2020 and 2019 is based upon Canadian bond rateson the U.S. Treasury yield with the remaining term equal to the expected life assumed at the date of the grant. The dividend yield is based on the expected annual dividend yield at date of grant. The expected lives are based on the Company’s actual historical exercise experience. Volatility is calculated using a rate based upon the historical volatility of the Company’s common stock.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
Forfeitures are estimated at the time of grant based upon historical information. Forfeitures will be revised, if necessary, in subsequent periods if actual forfeitures differ from estimates.
21. INCOME TAXES
The amounts disclosed within the income tax footnote represent those attributable to continuing operations.
The components of income (loss) before income taxes were:
| | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
U.S. | | $ | 25 | | $ | (69) | | $ | 77 |
Non-U.S. | | | 8 | | | — | | | — |
Income (loss) before taxes | | $ | 33 | | $ | (69) | | $ | 77 |
Income tax (benefit) expense is comprised of the following:
| | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Current tax (benefit) expense | | | | | | | | | |
Federal | | $ | (12) | | $ | (5) | | $ | 5 |
State | | | (1) | | | — | | | — |
Non-U.S. | | | 1 | | | — | | | — |
| | | (12) | | | (5) | | | 5 |
Deferred tax benefit | | | | | | | | | |
Federal | | | (1) | | | (17) | | | — |
State | | | — | | | — | | | — |
Non-U.S. | | | — | | | — | | | — |
| | | (1) | | | (17) | | | — |
Income tax (benefit) expense | | $ | (13) | | $ | (22) | | $ | 5 |
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
19. INCOME TAXES
The components of income before income taxes were:
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
Canadian | | $ | (97) | | $ | 25 | | $ | 60 |
Non-Canadian | | | (1,231) | | | (129) | | | 7 |
(Loss) income before taxes | | $ | (1,328) | | $ | (104) | | $ | 67 |
Income tax expense (benefit) is comprised of the following:
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
Current tax (benefit) expense: | | | | | | | | | |
Canadian | | $ | (5) | | $ | 1 | | $ | 2 |
Non-Canadian | | | — | | | 1 | | | — |
Total | | $ | (5) | | $ | 2 | | $ | 2 |
Deferred tax benefit: | | | | | | | | | |
Canadian | | | (54) | | | (22) | | | (3) |
Non-Canadian | | | (3) | | | (142) | | | — |
Total | | | (57) | | | (164) | | | (3) |
Income tax benefit | | $ | (62) | | $ | (162) | | $ | (1) |
For the year ended December 31, 2018, the applicable statutory tax rate was the Canadian statutory income tax rate. Following the U.S. Domestication, the applicable statutory tax rate will be the U.S. federal income tax rate. A reconciliation of the Canadian statutory incomeU.S. federal tax rate to ourthe Company’s effective income tax rate is as follows:
| | | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
Statutory Federal and Provincial tax rate in Canada | | | 27 | % | | 26 | % | | 26 | % |
Expected income tax expense (benefit) at statutory rate | | $ | (358) | | $ | (27) | | $ | 17 | |
Impact of Tax Cuts and Jobs Act of 2017 | | | — | | | 26 | | | — | |
Change in statutory tax rates | | | 23 | | | (1) | | | — | |
Non-deductible expenses | | | 1 | | | 10 | | | 2 | |
Foreign exchange differences | | | (44) | | | (1) | | | 1 | |
Change in valuation allowance | | | 207 | | | (123) | | | 13 | |
Changes in uncertain tax positions | | | (20) | | | (14) | | | (4) | |
Foreign earnings subject to different tax rates | | | (27) | | | (13) | | | (10) | |
Research and development tax credits | | | (18) | | | (19) | | | (20) | |
Non-deductible goodwill impairment | | | 172 | | | — | | | — | |
Other | | | 2 | | | — | | | — | |
Income tax | | $ | (62) | | $ | (162) | | $ | (1) | |
Effective income tax rate | | | 4.7 | % | | 155.8 | % | | (1.5) | % |
| | | | | | | | | | |
| | Year Ended December 31, | |
| | 2021 | | 2020 | | 2019 | |
U.S. statutory income tax rate | | | 21 | % | | 21 | % | | 21 | % |
Expected income tax (benefit) expense at statutory rate | | $ | 7 | | $ | (14) | | $ | 16 | |
State tax (net of federal benefit) | | | (1) | | | — | | | — | |
Non-deductible expenses | | | 2 | | | 2 | | | 12 | |
Tax on international operations | | | — | | | — | | | (1) | |
Change in valuation allowance | | | (10) | | | 49 | | | (108) | |
Base Erosion and Anti-Abuse Tax | | | (13) | | | (5) | | | 5 | |
Outside basis difference in assets held for sale | | | — | | | (39) | | | 78 | |
Tax credits | | | 1 | | | (3) | | | (1) | |
Stock-based compensation | | | 1 | | | 6 | | | 3 | |
Remeasurement of Vricon equity interest | | | — | | | (18) | | | — | |
Other | | | — | | | — | | | 1 | |
Income tax (benefit) expense | | $ | (13) | | $ | (22) | | $ | 5 | |
Effective income tax rate | | | (39) | % | | 32 | % | | 6 | % |
The Tax Cuts and Jobs Act ("2017 Tax Act") was enacted on December 22, 2017. The 2017 Tax Act includes a broad range of tax reform proposals affecting businesses, including a reduction in the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018, a one-time mandatory deemed repatriation tax on earnings of certain foreign subsidiaries that were previously tax deferred, limitations on interest expense deductions, a new base erosion focused
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
minimum tax applicable to certain payments to foreign related parties, and the creation of new taxes on earnings of non-U.S. subsidiaries. In the fourth quarter of 2017, the Company made a reasonable estimate of the impact of the 2017 Tax Act on the existing deferred tax balances and the one-time mandatory deemed repatriation tax. The re-measurement of the deferred tax assets and liabilities, net of valuation allowance, and the estimate of the one-time mandatory deemed repatriation tax was not material.
Significant components of deferred tax assets and liabilities are as follows:
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
Tax benefit of losses carried forward | | $ | 323 | | $ | 247 | | $ | 94 |
Research and development tax credits | | | 175 | | | 121 | | | 45 |
Construction contract assets and liabilities | | | 79 | | | 71 | | | 3 |
Property and equipment | | | 15 | | | 5 | | | — |
Goodwill and intangibles | | | 1 | | | — | | | 1 |
Trade and other payables | | | 39 | | | 27 | | | 22 |
Employee benefits | | | 55 | | | 58 | | | 85 |
Unrealized foreign exchange gains and losses | | | 39 | | | 10 | | | 12 |
Other | | | 2 | | | — | | | 1 |
Sub-total | | | 728 | | | 539 | | | 263 |
Less: Valuation allowance | | | (366) | | | (157) | | | (200) |
Deferred tax assets, net of valuation allowance | | $ | 362 | | $ | 382 | | $ | 63 |
| | | | | | | | | |
Construction contract assets and liabilities | | | (6) | | | (3) | | | (3) |
Property and equipment | | | (3) | | | (1) | | | (12) |
Goodwill and intangibles | | | (253) | | | (303) | | | — |
Research and development tax credits | | | — | | | — | | | (6) |
Unrealized foreign exchange gains and losses | | | — | | | (11) | | | (8) |
Debt issuance costs | | | (3) | | | (3) | | | — |
Other | | | — | | | (3) | | | — |
Total net deferred tax liabilities | | | (265) | | | (324) | | | (29) |
Deferred tax assets, net | | $ | 97 | | $ | 58 | | $ | 34 |
| | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Tax benefit of losses carried forward | | $ | 153 | | $ | 209 | | $ | 219 |
Interest expense carried forward | | | 32 | | | — | | | 27 |
Tax credits | | | 81 | | | 84 | | | 75 |
Construction contract liabilities | | | — | | | — | | | 94 |
Trade and other payables | | | 41 | | | 35 | | | 9 |
Employee benefits | | | 41 | | | 52 | | | 41 |
Unrealized gains and losses | | | 3 | | | 20 | | | 6 |
Leasing transactions | | | 51 | | | 55 | | | 61 |
Other | | | — | | | 1 | | | 18 |
Deferred tax assets | | | 402 | | | 456 | | | 550 |
Valuation allowance | | | (215) | | | (228) | | | (231) |
Deferred tax assets, net of valuation allowance | | | 187 | | | 228 | | | 319 |
| | | | | | | | | |
Construction contract liabilities | | | (5) | | | (10) | | | — |
Property, plant and equipment | | | (64) | | | (72) | | | (66) |
Goodwill and intangibles | | | (81) | | | (106) | | | (124) |
Outside basis difference in assets held for sale | | | — | | | — | | | (78) |
Leasing transactions | | | (35) | | | (38) | | | (43) |
Other | | | — | | | — | | | (9) |
Deferred tax liabilities | | | (185) | | | (226) | | | (320) |
Deferred tax assets, net | | $ | 2 | | $ | 2 | | $ | (1) |
The deferred tax assets are reduced by a valuation allowance if, upon available evidence, it is more likely than not that some or all ofCompany assesses the deferred tax assets will not be realized. The Company relies on existing deferred tax liabilitiesfor recoverability and, forecasted taxable income in each applicable taxable jurisdiction in determining whetherbased upon all available evidence, establishes a valuation allowance to reduce netthe deferred tax assets by ato the amount that is more-likely-than-not realizable. The valuation allowance.
The 2017 Tax Act one-time repatriation tax liability effectively taxed the undistributed earnings previously deferredallowance decreased $13 million from U.S. income taxes. We have not provided for foreign withholding tax on the undistributed earnings from our non-U.S. subsidiaries because such earnings are considered to be indefinitely reinvested. If such earnings were to be distributed, any foreign withholding tax would not be significant.
Net operating losses carried forward as of December 31, 2018 were $1,083 million. Of these, $191 million2020 to December 31, 2021. This decrease was primarily due to the impact of current year operations and $731 million relateadjustments to Canadian and foreign losses, respectively, set to expire between 2026 and 2038, $158 million relate to U.S. losses which have no expiry and are subject to an annual limitation of 80% of taxable income, and $3 million related to other foreign losses which have no future expiry. The U.S. Domestication does not impact the availability of the Canadian and foreign losses carried forward to future years.
prior year deferred taxes.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
During 2019, in connection with the MDA Transaction, the Company re-evaluated its prior permanent reinvestment assertion and concluded that it could no longer assert that the basis difference related to its investment was permanently reinvested. Accordingly, the Company established a deferred tax liability of approximately $78 million on the taxable temporary difference associated with its investment. In connection with the completion of the MDA Transaction, taxable gain was recognized in 2020 resulting in a release of the taxable temporary difference associated with its investment.
Net capital losses carried forward asAs of December 31, 2018 were $106 million related to Canada. The benefit of these losses has not been recognized, as2021, the Company is not likely to generate sufficient capital gains to utilizehas approximately $520 million, $874 million, and $12 million of federal, state and non-U.S. net operating loss (“NOL”) carryforwards.
The following table summarizes the losses. The net capital losses in Canada have no expiry.NOL carryforwards by jurisdiction:
| | | | | | | | | |
| | | Expiration Period | | | | | | Year Ended December 31, 2021 |
Federal | | | 2036 - 2037 | | | | | $ | 273 |
| | | None | | | | | | 247 |
State | | | 2025 - 2040 | | | | | | 713 |
| | | None | | | | | | 161 |
Non-U.S. | | | None | | | | | | 12 |
The Company also has U.S. federal and state tax credits, net of unrecognized tax benefits, carried forward of $71 million and $9 million as of December 31, 2021, relating to research and development expenditures set to expire between 2022 and 2041 and state research credits with no expiration. Additionally, the Company has U.S. foreign tax credits carried forward of $214$3 million at December 31, 2018, related to research and development expenditures. Of these tax credits, $137 million relate to Canadian operations, set to expire between 20192022 and 2023,2026.
The Company has evaluated its tax positions and $77 million relatehas determined that it has certain unrecognized tax benefits. Accordingly, the Company has reduced certain tax attributes to U.S. operations setthe extent they would be utilized to expire between 2019 and 2038.offset an unrecognized tax benefit. The following table summarizes the changes in unrecognized tax benefits:
| | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | 2019 |
Balance, beginning of year | | $ | 9 | | $ | 7 | | $ | — |
Gross increases related to prior period tax positions | | | 7 | | | 2 | | | 6 |
Gross increases related to current period tax positions | | | 1 | | | 1 | | | 1 |
Gross decreases related to prior period tax positions | | | — | | | (1) | | | — |
Balance, end of year | | $ | 17 | | $ | 9 | | $ | 7 |
As of December 31, 2018, 2017 and 2016,2021, there were $94 million, $132 million on and $133$17 million of unrecognized tax benefits that, if recognized, would be recognized as a component of income tax expense (benefit).
The following table summarizes theoffset by changes in unrecognizedthe deferred tax benefits:
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | 2016 |
Balance, beginning of year | | $ | 132 | | $ | 133 | | $ | 119 |
Gross increases related to prior period tax positions | | | 9 | | | 5 | | | 7 |
Gross increases related to current period tax positions | | | 13 | | | 6 | | | 10 |
Decrease related to resolution of audits with tax authorities | | | (28) | | | — | | | — |
Expiration of the statute of limitations | | | (22) | | | (21) | | | (6) |
Foreign currency translation | | | (10) | | | 9 | | | 3 |
Balance, end of year | | $ | 94 | | $ | 132 | | $ | 133 |
The Company and its subsidiaries file income tax returns in Canada, the United States, and various foreign jurisdictions. With some exceptions, the Company remains subject to income tax examination in Canada for years after 2012, and in the United States for years after 1999.
The Canada Revenue Agency (“CRA”) commenced its examination of the 2014 income tax returns in February 2017, which is anticipated to be completed by the end of 2019. The CRA is also examining research and development expenditures claimed in years from 2009 to 2016. There are no significant audits underway in any of the foreign jurisdictions. While it is difficult to predict the outcome or timing of a particular tax matter, the Company believes it has adequately provided reserves for reasonably foreseeable outcomes related to these matters.
assets. It is reasonably possiblenot anticipated that a material increase or reduction of up to $8 million of unrecognized tax benefit and related interest and penaltiesbenefits will occur within the next twelve months because of the expiration of certain statutes of limitation.months.
The Company records interest and penalties accrued or recovered in relation to unrecognized tax benefits in income tax expense. During the years ended December 31, 2018, 2017 and 2016, theThe Company has not recognized increases/(decreases) inany interest and penalties of ($7) million, $4 million and $1 million, respectively.in the three-year comparative period due to available tax attributes.
The amount of interestCompany and penalties recognizedits subsidiaries file income tax returns in the Consolidated Balance Sheet was $7 million, $15 million,United States and $11 million at December 31, 2018, 2017various foreign jurisdictions. We are not currently under any income tax examinations. The Company is open to federal and 2016, respectively.state income tax examinations until the applicable statute of limitations expires, generally three years after tax return filing; however, the ability for the taxing authority to adjust tax attribute carryforwards will continue until generally three years after tax attribute utilization.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
20. EARNINGS22. NET INCOME (LOSS) PER COMMON SHARE
The following table includes the calculation of basic and diluted EPS:net income (loss) per common share:
| | | | | | | | | |
| | Year ended December 31, |
| | 2018 | | 2017 | | | 2016 |
| | | | | | | | | |
Net (loss) income | | $ | (1,264) | | $ | 58 | | $ | 68 |
Weighted average number of common shares outstanding - basic | | | 58.1 | | | 41.2 | | | 36.4 |
Weighted dilutive effect of equity awards | | | — | | | 0.1 | | | 0.1 |
Weighted average number of common shares outstanding - diluted | | | 58.1 | | | 41.3 | | | 36.5 |
Earnings per common share: | | | | | | | | | |
Basic | | $ | (21.76) | | $ | 1.41 | | $ | 1.87 |
Dilutive | | $ | (21.76) | | $ | 1.40 | | $ | 1.86 |
| | | | | | | | | |
| | Year Ended December 31, |
| | 2021 | | 2020 | | | 2019 |
| | | | | | | | | |
Income (loss) from continuing operations | | $ | 46 | | $ | (46) | | $ | 83 |
Income from discontinued operations, net of tax | | | — | | | 349 | | | 26 |
Net income | | $ | 46 | | $ | 303 | | $ | 109 |
| | | | | | | | | |
Weighted average number of common shares outstanding-basic | | | 70.6 | | | 60.7 | | | 59.6 |
Weighted dilutive effect of equity awards | | | 2.6 | | | — | | | 0.6 |
Weighted average number of common shares outstanding-diluted | | | 73.2 | | | 60.7 | | | 60.2 |
| | | | | | | | | |
Basic net income per common share: | | | | | | | | | |
Income (loss) from continuing operations | | $ | 0.65 | | $ | (0.76) | | $ | 1.39 |
Income from discontinued operations, net of tax | | | — | | | 5.75 | | | 0.44 |
Basic net income per common share | | $ | 0.65 | | $ | 4.99 | | $ | 1.83 |
| | | | | | | | | |
Diluted net income per common share: | | | | | | | | | |
Income (loss) from continuing operations | | $ | 0.63 | | $ | (0.76) | | $ | 1.38 |
Income from discontinued operations, net of tax | | | — | | | 5.75 | | | 0.43 |
Diluted net income per common share | | $ | 0.63 | | $ | 4.99 | | $ | 1.81 |
The weighted average number of common shares outstanding for the year ended December 31, 2021 includes 10 million shares of the Company’s common stock issued in connection with the Offering completed on March 22, 2021. See Note 15 for further details.
For each of the years ended December 31, 20172021, 2020 and 2016,2019 approximately 1 million, 4 million and 2 million awards, respectively, were excluded from the diluted weighted average number of ordinary common shares outstanding calculation because their effect would have been anti-dilutive.
21.23. COMMITMENTS AND CONTINGENCIES
Lease Obligations
As of December 31, 2018, the Company is committed under legally enforceable agreements for purchase and rental payments for amounts as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | 2019 | | 2020 | | 2021 | | 2022 | | 2023 | | Thereafter | | Total |
Operating lease obligations | | $ | 25 | | $ | 22 | | $ | 22 | | $ | 20 | | $ | 20 | | $ | 99 | | $ | 208 |
Capital lease commitments | | | 7 | | | 4 | | | 2 | | | — | | | — | | | — | | | 13 |
For the years ended December 31, 2018, 2017 and 2016, the Company has recorded total lease expenses of $36 million, $37 million and $33 million, respectively.
Capital leases are a component of property, plant and equipment in the Company’s Consolidated Balance Sheets for the periods ended December 31, 2018 and 2017. The capital lease net balance was $10 million and $12 million for the years ended December 31, 2018 and 2017, respectively.
Contingencies in the Normal Course of Business
As discussed in Note 6, satelliteSatellite 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.
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
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 recognition.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 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. To date, theThe 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 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 current 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.
In many instances, COVID-19 represents a force majeure event and as such, the Company has notified certain customers that it will be exercising its legal rights, and in some instances the Company has made claims exercising such rights, given the uncertain nature of the current pandemic and the near and long-term impacts on the cost and schedule of the numerous programs in the existing backlog.
Legal Proceedingsproceedings
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
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MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
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. Also, 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 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, which motion is currently pending. By order dated September 23, 2021, the action against KPMG LLP was discontinued. The Company intends to vigorously defend against these cases.
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,
Table of Contents
MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
as well as to evaluate and consider all reasonable settlement opportunities. The Company analyzes all legal proceedingsestablishes accrued liabilities for these matters where losses are deemed probable and the allegations therein.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 we maintain 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.
22.
24. SUPPLEMENTAL CASH FLOW
Selected cash payments and non-cash activities wereare as follows:
| | | | | | | | | | |
| | Year ended December 31, | |
| | 2018 | | 2017 | | 2016 | |
| | | | | | | | | | |
| | | Year Ended December 31, |
| | | 2021 | | 2020 | | | 2019 |
Supplemental cash flow information: | | | | | | | | | | | | | | | | | | |
Cash paid for interest | | $ | (152) | | $ | (41) | | $ | (30) | | $ | 133 | | $ | 205 | | $ | 193 |
Income tax refunds (payments) | | | 1 | | | 1 | | | (7) | |
Income tax payments, net of (refunds) | | | | (14) | | | 1 | | | 1 |
Supplemental non-cash investing and financing activities: | | | | | | | | | | | | | | | | | | |
Accrued capital expenditures | | $ | 22 | | $ | 18 | | $ | 2 | | $ | 14 | | $ | 13 | | $ | 19 |
Acquisitions | | | 24 | | | 1,197 | | | — | |
Table of Contents
MAXAR TECHNOLOGIES INC.
Notes to Consolidated Financial Statements Continued
(Tabular amounts in millions of dollars, unless otherwise noted)
23. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial data (unaudited) for the periods presented was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 | | | 2017 |
| | Q1 | | Q2 | | Q3 | | Q4 | | | Q1 | | Q2 | | Q3 | | Q4 |
Total revenues | | $ | 557 | | $ | 579 | | $ | 509 | | $ | 496 | | | $ | 374 | | $ | 375 | | $ | 337 | | $ | 545 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net (loss) income - IFRS | | | 31 | | | (18) | | | (433) | | | (961) | | | | 4 | | | 19 | | | 13 | | | 64 |
Net (loss) income - U.S. GAAP Adjustments | | | (16) | | | (22) | | | 144 | | | 11 | | | | (15) | | | (7) | | | (11) | | | (9) |
Net (loss) income | | $ | 15 | | $ | (40) | | $ | (289) | | $ | (950) | | | $ | (11) | | $ | 12 | | $ | 2 | | $ | 55 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings per share, basic | | $ | 0.27 | | $ | (0.70) | | $ | (4.90) | | $ | (16.10) | | | $ | (0.31) | | $ | 0.33 | | $ | 0.05 | | $ | 1.00 |
Earnings per share, diluted | | $ | 0.26 | | $ | (0.70) | | $ | (4.90) | | $ | (16.10) | | | $ | (0.31) | | $ | 0.32 | | $ | 0.05 | | $ | 0.98 |
24. SUBSEQUENT EVENTS
On January 1, 2019 the Company completed the previously announced U.S. Domestication which marks a major milestone in the Company’s long-term U.S. Access Plan, enhances the Company’s ability to provide and support classified applications for U.S. Government agencies and fulfills a commitment made in acquiring DigitalGlobe, which was approved by the Company’s stockholders at that time.
On February 27, 2019, the Company announced a restructuring plan to implement cost-saving measures, including a reduction in the Company’s workforce. As a part of these efforts, the Company will reduce its overall workforce headcount by approximately 250 employees. This reduction in the Company’s workforce is expected to be substantially completed in the first quarter of 2019. The Company estimates that it will incur approximately $15 to $22 million of one-time pre-tax charges related to the restructuring.
ITEM 9.CHANGES9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We performed an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2018.2021. 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 not effective because of the material weaknesses in internal control over financial reporting described below.
Management, including our CEO and CFO, believes the consolidated financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our financial condition, results of operations, and cash flows at and for the periods presented in accordance with U.S. GAAP.
The Company experienced many significant events and challenges during the reporting period including: (i) acceleration of U.S. domestication resulting in IFRS to U.S. GAAP conversion as of December 31,st 2018, (ii) implementation of multiple critical financial reporting systems and the embedded user access configurations, (iii) significant, complex, non-routine transactions, (iv) unexpected high turnover of critical accounting and finance roles, and (v) an accelerated timeline (of less than a year from planning to effective execution) to become compliant with Section 404(a) of Sarbanes-Oxley for a significant portion of reporting units representing approximately 60% of total revenue. 2021.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). InternalOur internal control over financial reporting is a process designed under the supervision of the CEO and CFO, and effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our Consolidated Financial Statementsfinancial statements for external purposes in accordance with United States generally accepted accounting principlesprinciples.
Under the supervision and includes those policieswith the participation of our management, including our Chief Executive Officer and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Management, under the oversight of the principal executive and principle financial officers, and Board of Directors,Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting usingbased on the criteria set by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our interim or annual financial statements will not be prevented or detectedBased on a timely basis. Based up that evaluation,this assessment, management identified the following material weaknesses in the Company’s internal control over financial reporting as of December 31, 2018.
Insufficient Complement of Personnel. Management did not maintain a sufficient complement of trained resources to fully support the significant business changes and the related impacts on the internal control over financial reporting.
Insufficient Identification and Assessment of Changes. Management did not have an effective continuous risk assessment process that was responsive to the rapid rate of change.
As a consequence of the underlying root causes related to personnel and risk assessment, the Company did not have effective control activities related to the design, operation, and documentation of process-level controls over: (i) the cost-to-cost method used to determine the percentage-of-completion method affecting revenue and cost of sales (ii) the measurement and disclosures of current and deferred income taxes and related valuation allowance and (iii) commitment and contingency disclosures.
No material errors were identified in the financial statements as a result of the material weaknesses. As a result of the material weaknesses, the Company concluded that our internal control over financial reporting was not effective as of December 31, 2018.
2021.
Our independent registered public accounting firm has issued an adversea report on the effectiveness of our internal control over financial reporting, which appears on page 56 ofis included in this Annual Report on Form 10-K.
Remediation of Material Weakness in Internal Control Over Financial Reporting
Management has initiated, and will continue to implement, remediation measures related to analyzing changes in the business and assessing key controls that are responsive to those changes. Additionally, management will provide more comprehensive training to ensure process owners and control operators have robust understanding of the documentation requirements in advance of the control operation.
In addition, management is in the process of automating and reducing the complexity of the underlying processes and disaggregating the review of the key inputs utilized in developing the underlying estimates for revenue and cost of sales under the percentage-of-completion method, improving our evidentiary documentation over the review of key inputs, criteria for investigation, level of precision, and management’s expectations and judgments, and ensuring sufficient time is allowed for an effective documentation of the review to occur.
We believe these measures, and others that may be implemented, will remediate the material weaknesses in internal control over financial reporting described above.
Changes in Internal Control over Financial Reporting
DueThere were no changes to the acquisition of DigitalGlobe in the fourth quarter of 2017 and becoming a Securities and Exchange Commission (“SEC”) registrant in 2017, we had until the year ended December 31, 2018 to ensure that our internal control over financial reporting is in compliance with the requirements of Section 404(a) of Sarbanes-Oxley, and the related rules of the SEC. Otherwise, except for the material weaknesses described above which were identified in the fourth quarter, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d‑15(d) of the Exchange Act that occurred during the fourth quarter of the year ended December 31, 20182021, 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.Consolidated Financial Statements. Additionally, management is required to use judgment in evaluating controls and procedures.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
RestructuringNone.
On February 27, 2019, the Company announced a restructuring plan to implement cost-saving measures, including a reduction in the Company’s workforce. As a part of these efforts, the Company will reduce its overall workforce headcount by approximately 250 employees. This reduction in the Company’s workforce is expected to be substantially completed in the first quarter of 2019.
The Company estimates that it will incur approximately $15 to $22 million of one-time pre-tax charges related to the restructuring. These cash charges are expected to be incurred primarily during the first half of 2019.
The charges that the Company expects to incur in connection with the workforce reduction are estimates and subject to a matter of assumptions, and actual results may differ materially. The Company may incur additional costs not currently contemplated due to events associated with or resulting from the workforce reduction.
Employment Agreement
On February 27, 2019, we entered into an employment agreement with Mr. Jablonsky.The agreement provides that Mr. Jablonsky’s employment with us is at-will, and that during his employment he will be paid an initial annual base salary of $700,000 and be eligible to receive an annual performance bonus targeted at 100% of his base salary, as determined by our Board of Directors or our Compensation Committee. The agreement provides that Mr. Jablonsky will be granted equity awards in 2019 with an aggregate grant value of $2,000,000, and that such awards will be delivered in the form of service- and/or performance-vesting restricted stock units or other equity-linked awards, with terms determined by our Board of Directors and/or our Compensation Committee. The target grant value is subject to reduction if the 2019 equity award target grant value for other of our executives is reduced due to insufficient share reserves under our equity plan, and if such a reduction occurs, Mr. Jablonsky and other of our executives may be eligible to receive a cash award or future equity award to offset the reduction in the discretion of our Board of Directors and/or our Compensation Committee.
Mr. Jablonsky will be entitled to severance if he is terminated by us without “cause” or for “good reason” (each as defined in the agreement) (in either case a “covered termination”). If he experiences a covered termination that is not in connection with a change in control of Maxar, then he will be entitled to the following: (i) 18 months of salary continuation; (ii) an amount equal to 1.5 times his target annual bonus, payable in installments over the 18-month salary continuation period; (iii) a prorated annual bonus for the year of termination, paid at the same time annual bonuses are paid to our other executives; (iv) continued vesting of his outstanding equity awards over the 12-month period following his termination; and (v) up to 18 months of continued coverage under our group health plan (or reimbursement for such costs).
If Mr. Jablonsky experiences a covered termination that occurs during the period beginning three months before and ending 12 months after a change in control of Maxar, then he will be entitled to the following: (i) a payment equal to 2.5 times the sum of his then-current base salary plus his target annual bonus for the year of termination, generally payable in a lump sum unless the covered termination occurs before the change in control; (ii) full vesting acceleration of his outstanding equity awards, with any performance conditions calculated based on the higher of actual achievement and prorated target achievement; and (iii) up to 24 months of continued coverage under our group health plan (or reimbursement for such costs).
Additionally, if Mr. Jablonsky’s employment with us terminates due to his death or disability, he (or his estate) will be entitled to a prorated annual bonus for the year of termination, paid at the same time annual bonuses are paid to our other executives and continued vesting of his outstanding equity awards over the 12-month period following his termination.
Mr. Jablonsky’s (or his estate’s) receipt of any severance benefits under the agreement is subject to Mr. Jablonsky (or his estate) signing a release of claims in our favor. As required by the employment agreement, Mr. Jablonsky also entered
into our employee proprietary information, invention and non-competition agreement, which includes standard confidentiality and inventions assignment provisions, and non-competition and non-solicitation restrictions.
The foregoing summary of the employment agreement is subject to, and qualified in its entirety by, the complete text of the employment agreement, which is attached hereto as Exhibit 10.3.2 and incorporated herein by reference.
ITEM 10.DIRECTORS,10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
DIRECTORS
Information about our Directorsrequired under Item 10 will be included in the Proxy Statement for the 20192022 Annual Meeting of Stockholders and is incorporated herein by reference.
CODE OF ETHICS
Our Board of Directors has adopted a Code of Ethics and Business Conduct that governs our Board of Directors, senior officers (including our Chief Executive Officer and Chief Financial Officer), and employees. Copies of our Code of Ethics and Business Conduct can be found on the Company Information page of our website under Investors, Corporate Governance, Governance Documents at http://investor.maxar.com. We will post to our website any amendments and waivers to the Code of Ethics and Business Conduct that are required to be disclosed by the rules of either the SEC, the NYSE, or the TSX.
ITEM 11.EXECUTIVE OFFICERSCOMPENSATION
The Executive Officer information required by Item 11 will be included in the Proxy Statement for the 20192022 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
AUDIT COMMITTEE FINANCIAL EXPERT
The information as to the Audit Committee and the Audit Committee Financial Expertrequired by Item 12 will be included in the Proxy Statement for the 20192022 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
CODE OF ETHICS
Information about our Code of EthicsThe information required by Item 13 will be included in the Proxy Statement for the 20192022 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES
OTHER DISCLOSURES
Other disclosuresThe information required by this Item 14 will be included in the Proxy Statement for the 20192022 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 11.EXECUTIVE COMPENSATION
Information concerning Executive Compensation will be included in the Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information as to Securities Authorized for Issuance Under Equity Compensation Plans and Security Ownership of Certain Beneficial Owners and Management will be included in the Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information as to Certain Relationships and Related Transactions and Director Independence will be included in the Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information as to Principal Accountant Fees and Services and Audit Committee Pre-Approval will be included in the Proxy Statement for the 2019 Annual Meeting of Shareholders and is incorporated herein by reference.
ITEM 15.EXHIBITS15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | | Documents filed as part of this Annual Report on Form 10-K: |
| 1) | | All financial statements: |
| | |
| | Page |
Report of Independent Registered Public Accounting Firm | | 5565
|
Consolidated Statements of Operations for the twelve monthsyears ended December 31, 2018, 20172021, 2020 and 20162019 | | 5969
|
Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 20172021, 2020 and 20162019 | | 6070
|
Consolidated Balance Sheets as of December 31, 20182021 and 20172020 | | 6171
|
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 20172021, 2020 and 20162019 | | 6272
|
Consolidated Statements of ChangedChanges in Stockholders Equity for the years ended December 31, 2018, 20172021, 2020 and 20162019 | | 6373
|
| 2) | | Financial statement schedules: |
Financial statement schedules are omitted because they are not applicable or the required information is shown in our consolidated financial statementsConsolidated Financial Statements or the notes thereto.
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| | | | Incorporated by Reference | | Filed | | | | Incorporated by Reference | | Filed or Furnished |
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Exhibit No | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date | | Herewith | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date | | Herewith |
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2.1 | | | Stock Purchase Agreement by and Among Maxar Technologies Inc., Maxar Technologies Holdings Inc. and Neptune Acquisition Inc., dated as of December 29, 2019 | | 8-K | | 001-38228 | | 2.1 | | 12/30/2019 | | |
3.1 | | Amended and Restated Certificate of Incorporation of Maxar Technologies Inc., as filed with the Secretary of the State of Delaware. | | 8-K | | 001-38228 | | 3.1 | | 1/2/19 | | | | Amended and Restated Certificate of Incorporation of Maxar Technologies Inc., as filed with the Secretary of the State of Delaware. | | 8-K | | 001-38228 | | 3.1 | | 1/2/19 | | |
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3.2 | | Amended and Restated Bylaws of Maxar Technologies Inc. | | 8-K | | 001-38228 | | 3.2 | | 1/2/19 | | | | Second Amended and Restated Bylaws of Maxar Technologies Inc. | | 8-K | | 001-38228 | | 3.1 | | 10/29/20 | | |
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4(vi)1 | | | Description of Securities Registered Pursuant to Section 12 of the Exchange Act | | 10-K | | 001-38228 | | 4.1 | | 2/24/2021 | | |
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4.1 | | Restated Credit Agreement by and among Maxar Technologies Ltd., Royal Bank of Canada and the Lenders named therein, dated as of October 5, 2017. | | 6-K | | 001-38228 | | 10.1 | | 10/16/17 | | | | Restated Credit Agreement by and among Maxar Technologies Ltd., Royal Bank of Canada and the Lenders named therein, dated as of October 5, 2017. | | 6-K | | 001-38228 | | 10.1 | | 10/16/17 | | |
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4.2 | | | First Amending Agreement dated as of December 21, 2018 to the Restated Credit Agreement dated as of October 5, 2017. | | 10-K | | 001-38228 | | 4.2 | | 3/1/19 | | |
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4.3 | | | Second Amending Agreement dated as of December 21, 2018 to the Restated Credit Agreement dated as of October 5, 2017. | | 6-K | | 001-38228 | | 99.2 | | 12/21/18 | | |
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4.4 | | | Third Amending Agreement dated as of November 4, 2019 to the Restated Credit Agreement dated as of October 5, 2017. | | 8-K | | 001-38228 | | 4.2 | | 12/11/19 | | |
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4.5 | | | Fourth Amending Agreement dated as of December 11, 2019 to the Restated Credit Agreement dated as of October 5, 2017. | | 10-K | | 001-38226 | | 4.5 | | 3/2/20 | | |
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4.6 | | | Fifth Amending Agreement dated as of December 19, 2019 to the Restated Credit Agreement dated as of October 5, 2017. | | 10-K | | 001-38228 | | 4.6 | | 3/2/20 | | |
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| | | | Incorporated by Reference | | Filed or Furnished |
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Exhibit No | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date | | Herewith |
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4.7 | | Sixth Amending Agreement dated as of April 1, 2020 to the Restated Credit Agreement dated as of October 5, 2017. | | 10-Q | | 001-38228 | | 4.2 | | 8/5/20 | | |
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4.8 | | Indenture, dated as of December 2, 2019 (Notes due 2023). | | 8-K | | 001-38228 | | 4.1 | | 12/2/19 | | |
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4.9 | | Supplemental Indenture No. 1, dated as of December 11, 2019 (Notes due 2023). | | 8-K | | 001-38228 | | 4.1 | | 12/11/19 | | |
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4.10 | | Supplemental Indenture No. 2, dated as of May 21, 2020 (Notes due 2023). | | 10-Q | | 001-38228 | | 4.1 | | 8/5/20 | | |
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4.11 | | Indenture, dated as of June 25, 2020 (Notes due 2027). | | 8-K | | 001-38228 | | 4.1 | | 6/26/20 | | |
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10.1* | | Form of Executive Change in Control and Severance Agreement | | 10-Q | | 001-38228 | | 10.2 | | 5/11/20 | | |
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10.2* | | Form of Indemnification Agreement. | | 8-K | | 001-38228 | | | 10.12 | 1/2/19 | | |
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10.3.1* | | Biggs Porter Employee Term Sheet. | | 10-K | | 001-38228 | | | 10.3.1 | 3/1/19 | | |
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10.3.2* | | Amended and Restated Employment Agreement of Daniel Jablonsky. | | 10-Q | | 001-38228 | | 10.1 | | 5/11/20 | | |
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10.4* | | Maxar Technologies Ltd. Omnibus Equity Incentive Plan. | | S-8 | | 333-220853 | | 4.3 | | 10/6/17 | | |
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10.4.1* | | Amendment to the Maxar Technologies Ltd. Omnibus Equity Incentive Plan. | | S-8 | | 001-38228 | | 4.3 | | 5/15/18 | | |
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10.4.2* | | Amendment to the Maxar Technologies Ltd. Omnibus Equity Incentive Plan. | | S-8 | | 333-219296 333-220853 333-224934 | | 4.13 | | 1/2/19 | | |
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10.4.3* | | Form of LTIP Award Omnibus Equity Incentive Plan (U.S. Employees). | | 10-K | | 001-38228 | | 10.4.3 | | 3/1/19 | | |
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10.4.4* | | Form of LTIP Award Omnibus Equity Incentive Plan (Canadian Employees). | | 10-K | | 00138228 | | 10.4.4 | | 3/1/19 | | |
| | | | | | | | | | | | |
10.4.5* | | Form of RSU Award Omnibus Equity Incentive Plan (U.S. Employees). | | 10-K | | 001-38228 | | 10.4.5 | | 3/1/19 | | |
| | | | | | | | | | | | |
10.4.6* | | Form of RSU Award Omnibus Equity Incentive Plan (Canadian Employees). | | 10-K | | 001-38228 | | 10.4.6 | | 3/1/19 | | |
| | | | | | | | | | | | |
10.5* | | Maxar Technologies Ltd. Employee Stock Option Plan. | | S-8 | | 333-220853 | | 4.2 | | 10/6/17 | | |
| | | | | | | | | | | | |
| | | | Incorporated by Reference | | Filed |
Exhibit No | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date | | Herewith |
4.2 | | First Amending Agreement dated as of December 21, 2018 to the Restated Credit Agreement dated as of October 5, 2017 | | | | | | | | | | X |
| | | | | | | | | | | | |
4.3 | | Second Amending Agreement dated as of December 21, 2018 to the Restated Credit Agreement dated as of October 5, 2017 | | 6-K | | 001-38228 | | 99.2 | | 12/21/2018 | | |
| | | | | | | | | | | | |
10.1.1# | | EnhancedView Imagery Acquisition Contract #HM021010C0002, dated August 6, 2010, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency. | | 10-Q/A | | 001-34299 | | 10.1 | | 5/24/11 | | |
| | | | | | | | | | | | |
10.1.2# | | Amendment to EnhancedView Imagery Acquisition Contract #HM021010C0002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency, dated July 25, 2011. | | 10-Q/A | | 001-34299 | | 10.1 | | 2/24/12 | | |
| | | | | | | | | | | | |
10.1.3# | | Amendment to EnhancedView Imagery Acquisition Contract #HM021010C0002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency, dated October 31, 2011. | | 10-K | | 001-34299 | | 10.4 | | 2/29/12 | | |
| | | | | | | | | | | | |
10.1.4# | | Amendment to EnhancedView Imagery Acquisition Contract #HM021010C0002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency, dated February 15, 2012. | | 10-Q | | 001-34299 | | 10.46 | | 5/1/12 | | |
| | | | | | | | | | | | |
10.1.5# | | Modification P00024 to Contract #HM021010C0002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency, dated as of July 24, 2012. | | 10-Q | | 001-34299 | | 10.52 | | 10/31/12 | | |
| | | | | | | | | | | | |
10.1.6# | | Modification P00032 to Contract #HM021010C0002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency, dated as of December 26, 2012. | | 10-K | | 001-34299 | | 10.53 | | 2/26/13 | | |
| | | | | | | | | | | | |
10.1.7# | | Modifications Nos. P00033 and P00034 to Contract #HM021010C0002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency. | | 10-Q | | 001-34299 | | 10.56 | | 5/7/13 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | |
|---|
| | | | | | | | | | | | |
|---|
| | | | | | | | | | | | | | | |
|---|
| | | | | Incorporated by Reference | | | | Filed or Furnished |
|---|
| Exhibit No | | | | Exhibit Description | | | | Form | | | | SEC File No. | | | | Exhibit | | | | Filing Date | | Herewith |
|---|
| Herewith
|
10.1.8#
| | Modification Nos. P00035-38 to Contract #HM021010C002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.60
| | 8/6/13
| | |
| | | | | | | | | | | | |
10.1.9#
| | EnhancedView Imagery Acquisition Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency, dated September 1, 2013 and Modification P00001
| | 10-Q
| | 001-34299
| | 10.2
| | 10/31/13
| | |
| | | | | | | | | | | | |
10.1.10#
| | Modification P00002 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.10
| | 2/26/14
| | |
| | | | | | | | | | | | |
10.1.11#
| | Modification P00003 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.11
| | 2/26/14
| | |
| | | | | | | | | | | | |
10.1.12#
| | Modification P00004 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 5/1/14
| | |
| | | | | | | | | | | | |
10.1.13#
| | Modification P00005 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.2
| | 5/1/14
| | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | Incorporated by Reference
| | Filed
|
Exhibit No
| | Exhibit Description
| | Form
| | SEC File No.
| | Exhibit
| | Filing Date
| | Herewith
|
10.1.14#
| | Modification P00006 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.3
| | 5/1/14
| | |
| | | | | | | | | | | | |
10.1.15#
| | Modification P0007 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.4
| | 5/1/14
| | |
| | | | | | | | | | | | |
10.1.16#
| | Modification P00008 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 7/31/14
| | |
| | | | | | | | | | | | |
10.1.17#
| | Modification P00009 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.2
| | 7/31/14
| | |
| | | | | | | | | | | | |
10.1.18#
| | Modification P00010 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.3
| | 7/31/14
| | |
| | | | | | | | | | | | |
10.1.19#
| | Modification P00011 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.4
| | 7/31/14
| | |
| | | | | | | | | | | | |
10.1.20#
| | Modification P00012 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 10/30/14
| | |
| | | | | | | | | | | | |
10.1.21#
| | Modification P00013 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.21
| | 2/26/15
| | |
| | | | | | | | | | | | |
10.1.22#
| | Modification P00014 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.22
| | 2/26/15
| | |
| | | | | | | | | | | | |
10.1.23#
| | Modification P00015 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.23
| | 2/26/15
| | |
| | | | | | | | | | | | |
| | | | Incorporated by Reference
| | Filed
|
Exhibit No
| | Exhibit Description
| | Form
| | SEC File No.
| | Exhibit
| | Filing Date
| | Herewith
|
| | | | | | | | | | | | |
10.1.24#
| | Modification P00016 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.24
| | 2/26/15
| | |
| | | | | | | | | | | | |
10.1.25#
| | Modification P00017 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 4/30/15
| | |
| | | | | | | | | | | | |
10.1.26#
| | Modification P00018 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.2
| | 4/30/15
| | |
| | | | | | | | | | | | |
10.1.27#
| | Modification P00019 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.3
| | 4/30/15
| | |
| | | | | | | | | | | | |
10.1.28#
| | Modification P00020 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 10/29/15
| | |
| | | | | | | | | | | | |
10.1.29#
| | Modification P00021 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.29
| | 2/25/16
| | |
| | | | | | | | | | | | |
10.1.30#
| | Modification P00022 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.30
| | 2/25/16
| | |
| | | | | | | | | | | | |
10.1.31#
| | Modification P00023 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.31
| | 2/25/16
| | |
10.1.32#
| | Modification P00024 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.32
| | 2/25/16
| | |
| | | | | | | | | | | | |
10.1.33#
| | Modification P00025 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 4/27/16
| | |
| | | | | | | | | | | | |
| | | | Incorporated by Reference
| | Filed
|
Exhibit No
| | Exhibit Description
| | Form
| | SEC File No.
| | Exhibit
| | Filing Date
| | Herewith
|
| | | | | | | | | | | | |
10.1.34#
| | Modification P00026 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.2
| | 4/27/16
| | |
| | | | | | | | | | | | |
10.1.35#
| | Modification P00027 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.3
| | 4/27/16
| | |
| | | | | | | | | | | | |
10.1.36#
| | Modification P00029 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.4
| | 4/27/16
| | |
| | | | | | | | | | | | |
10.1.37#
| | Modification P00030 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 7/28/16
| | |
| | | | | | | | | | | | |
10.1.38#
| | Modification P00031 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 10/25/16
| | |
| | | | | | | | | | | | |
10.1.39#
| | Modification P00032 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.2
| | 10/25/16
| | |
| | | | | | | | | | | | |
10.1.40#
| | Modification P00033 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.3
| | 10/25/16
| | |
| | | | | | | | | | | | |
10.1.41#
| | Modification P00034 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.4
| | 10/25/16
| | |
| | | | | | | | | | | | |
10.1.42#
| | Modification P00035 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.43
| | 2/27/17
| | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | Incorporated by Reference
| | Filed
|
Exhibit No
| | Exhibit Description
| | Form
| | SEC File No.
| | Exhibit
| | Filing Date
| | Herewith
|
10.1.43#
| | Modification P00036 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.44
| | 2/27/17
| | |
| | | | | | | | | | | | |
10.1.44#
| | Modification P00028 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-K
| | 001-34299
| | 10.1.42
| | 2/27/17
| | |
| | | | | | | | | | | | |
10.1.45#
| | Modification P00037 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 5/2/17
| | |
| | | | | | | | | | | | |
10.1.46#
| | Modification P00038 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.2
| | 5/2/17
| | |
| | | | | | | | | | | | |
10.1.47#
| | Modification P00039 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.3
| | 5/2/17
| | |
| | | | | | | | | | | | |
10.1.48#
| | Modification P00040 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.4
| | 5/2/17
| | |
| | | | | | | | | | | | |
10.1.49#
| | Modification P00041 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.1
| | 7/26/17
| | |
| | | | | | | | | | | | |
10.1.50#
| | Modification P00042 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.2
| | 7/26/17
| | |
| | | | | | | | | | | | |
10.1.51#
| | Modification P00043 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.3
| | 7/26/17
| | |
| | | | | | | | | | | | |
10.1.52#
| | Modification P00044 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.4
| | 7/26/17
| | |
| | | | | | | | | | | | |
| | | | Incorporated by Reference
| | Filed
|
Exhibit No
| | Exhibit Description
| | Form
| | SEC File No.
| | Exhibit
| | Filing Date
| | Herewith
|
| | | | | | | | | | | | |
10.1.53#
| | Modification P00045 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | 10-Q
| | 001-34299
| | 10.5
| | 7/26/17
| | |
| | | | | | | | | | | | |
10.1.54#
| | Modification P00046 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.55#
| | Modification P00047 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.56#
| | Modification P00048 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.57#
| | Modification P00049 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.58#
| | Modification P00050 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.59#
| | Modification P00051 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.60#
| | Modification P00052 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.61#
| | Modification P00053 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | Incorporated by Reference
| | Filed
|
Exhibit No
| | Exhibit Description
| | Form
| | SEC File No.
| | Exhibit
| | Filing Date
| | Herewith
|
10.1.62#
| | Modification P00054 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.63#
| | Modification P00055 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.64#
| | Modification P00056 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.65#
| | Modification P00057 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.66#
| | Modification P00058 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.67#
| | Modification P00059 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.68#
| | Modification P00060 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.1.69#
| | Modification P00061 to Contract #HM021010CN002, by and between DigitalGlobe, Inc. and National Geospatial-Intelligence Agency.
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.2*
| | Form of Indemnification Agreement.
| | 8-K
| | | | 10.12
| | 1/2/19
| | |
| | | | | | | | | | | | |
10.3.1*
| | Biggs Porter Employee Term Sheet
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.3.2*
| | Daniel Jablonsky Employee Agreement
| | | | | | | | | | X
|
| | | | | | | | | | | | |
10.4*
| | Maxar Technologies Ltd. Omnibus Equity Incentive Plan
| | S-8
| | 001-38228
| | 4.3
| | 10/6/17
| | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | Incorporated by Reference | | Filed |
Exhibit No | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date | | Herewith |
| | | | | | | | | | | | |
10.7.2* | | Form Award Agreement – 2015 Long-Term Incentive Plan (Canadian Employees) | | S-8 | | 001-38228 | | 4.12 | | 7/14/17 | | |
| | | | | | | | | | | | |
10.7.3* | | Form Award Agreement – 2015 Long-Term Incentive Plan (U.S. Employees) | | S-8 | | 001-38228 | | 4.13 | | 7/14/17 | | |
| | | | | | | | | | | | |
10.8* | | MacDonald, Dettwiler and Associates Ltd. 2016 Long-Term Incentive Plan | | S-8 | | 001-38228 | | 4.8 | | 7/14/17 | | |
| | | | | | | | | | | | |
10.8.1* | | Amendment to MacDonald, Dettwiler and Associates Ltd. 2016 Long-Term Incentive Plan | | S-8 | | 001-38228 | | 4.12 | | 1/2/19 | | |
| | | | | | | | | | | | |
10.8.2* | | Form Award Agreement – 2016 Long-Term Incentive Plan (Canadian Employees) | | S-8 | | 001-38228 | | 4.14 | | 7/14/17 | | |
| | | | | | | | | | | | |
10.8.3* | | Form Award Agreement – 2016 Long-Term Incentive Plan (U.S. Employees) | | S-8 | | 001-38228 | | 4.15 | | 7/14/17 | | |
| | | | | | | | | | | | |
10.9* | | MacDonald, Dettwiler and Associates Ltd. 2017 Long-Term Incentive Plan | | S-8 | | 001-38228 | | 4.4 | | 10/6/17 | | |
| | | | | | | | | | | | |
10.9.1* | | Amendment to MacDonald, Dettwiler and Associates Ltd. 2017 Long-Term Incentive Plan | | S-8 | | 001-38228 | | 4.14 | | 1/2/19 | | |
| | | | | | | | | | | | |
10.10* | | Form of Restricted Share Unit Award Agreement for Non-U.S. Grantees. | | 10-Q | | 001-34299 | | 10.5 | | 5/2/17 | | |
| | | | | | | | | | | | |
10.11 | | 2012 Credit Agreement by and among MacDonald, Dettwiler and Associates Ltd., Royal Bank of Canada and the Lenders named therein, dated as of November 2, 2012. | | F-4 | | 001-38228 | | 10.1 | | 4/27/17 | | |
| | | | | | | | | | | | |
10.12 | | Note Purchase Agreement, dated as of November 2, 2012 | | F-4 | | 001-38228 | | 10.2 | | 4/27/17 | | |
| | | | | | | | | | | | |
10.13# | | Limited Recourse Receivables Purchase Agreement dated September 16, 2016 among Space Systems/Loral, LLC, MacDonald, Dettwiler and Associates Ltd., and ING Bank N.V. | | F-4/A | | 001-38228 | | 10.4 | | 6/2/17 | | |
| | | | | | | | | | | | |
10.14 | | Security Control Agreement | | F-4 | | 001-38228 | | 10.3 | | 4/27/17 | | |
| | | | | | | | | | | | |
21.1 | | Subsidiaries of the Registrant. | | | | | | | | | | X |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
|---|
| | | | | | | | | | | | |
|---|
| | | | Incorporated by Reference | | Filed or Furnished |
|---|
Exhibit No | | Exhibit Description | | Form | | SEC File No. | | Exhibit | | Filing Date | | Herewith |
|---|
| | | | | | | | | | | | |
104 | | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) | | | | | | | | | | |
#Certain portions of this exhibit have been omitted by redacting a portion of the text. This exhibit has been filed separately with the U.S. Securities and Exchange Commission pursuant to a request for confidential treatment.
*Management contract or compensatory plan arrangement.
†Furnished herewith
+XBRLXBRL (eXtensible Business Reporting Language) Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
ITEM 16.FORM 10-K SUMMARY
ITEM 16.FORM 10-K SUMMARY
None.
SIGNATURES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
March 1, 2019Maxar Technologies Inc.
By: /s/ Biggs C. Porter
Biggs C. Porter
| |
February 22, 2022 | Maxar Technologies Inc. |
| |
| By: | /s/ Biggs C. Porter |
| | Biggs C. Porter |
| | Executive Vice President and Chief Financial Officer |
| | (Principal Financial Officer and Duly Authorized Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
| | | | Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities
|
Signature |
| Title |
| Date |
| | | | |
/s/ Daniel L. Jablonsky | | President and on the dates indicated.Chief Executive Officer | | | | | | February 22, 2022 | Daniel L. Jablonsky | | (Principal Executive Officer), | | | | | Director | | | | | | | | /s/ Biggs C. Porter | | Executive Vice President and Chief Financial Officer | | February 22, 2022 | Biggs C. Porter | | (Principal Financial Officer) | | | | | | | | /s/ Carolyn K. Pittman | | Senior Vice President and Chief Accounting Officer | | February 22, 2022 | Carolyn K. Pittman | | (Principal Accounting Officer) | | | | | | | | /s/ General Howell M. Estes III | | Director | | February 22, 2022 | General Howell M. Estes III | | | | | | | | | | /s/ Nick S. Cyprus | | Director | | February 22, 2022 | Nick S. Cyprus | | | | | | | | | | /s/ Roxanne J. Decyk | | Director | | February 22, 2022 | Roxanne J. Decyk | | | | | | | | | | /s/ Joanne O. Isham | | Director | | February 22, 2022 | Joanne O. Isham | | | | | | | | | | /s/ General C. Robert Kehler | | Director | | February 22, 2022 | General C. Robert Kehler | | | | | | | | | | /s/ Gilman Louie | | Director | | February 22, 2022 | Gilman Louie | | | | | | | | | | /s/ Dr. L. Roger Mason, Jr. | | Director | | February 22, 2022 | Dr. L. Roger Mason, Jr. | | | | | | | | | | /s/ Dr. Heather A. Wilson | | Director | | February 22, 2022 | Dr. Heather A. Wilson | | | | | | | | | | /s/ Eric J. Zahler | | Director | | February 22, 2022 | Eric J. Zahler | | | | | | | | | | /s/ Eddy Zervigon | | Director | | February 22, 2022 | Eddy Zervigon | | | | | Signature
| | Title
| | Date
| | | | | | /s/ Daniel L. Jablonsky
| | President and Chief Executive Officer
| | March 1, 2019
| Daniel L. Jablonsky
| | (Principal Executive Officer),
Director
| | | | | | | | /s/ Biggs C. Porter
| | Executive Vice President and Chief Financial Officer
| | March 1, 2019
| Biggs C. Porter
| | (Principal Financial Officer, and Duly Authorized Officer)
| | | | | | | | /s/ Jose A. Torres, Jr.
| | Senior Vice President and Chief Accounting Officer
| | March 1, 2019
| Jose A. Torres, Jr.
| | (Principal Accounting Officer)
| | | | | | | | /s/ General Howell M. Estes III
| | Director
| | March 1, 2019
| General Howell M. Estes III
| | | | | | | | | | /s/ Dennis Chookaszian
| | Director
| | March 1, 2019
| Dennis Chookaszian
| | | | | | | | | | /s/ Nick S. Cyprus
| | Director
| | March 1, 2019
| Nick S. Cyprus
| | | | | | | | | | /s/ Lori B. Garver
| | Director
| | March 1, 2019
| Lori B. Garver
| | | | | | | | | | /s/ Joanne O. Isham
| | Director
| | March 1, 2019
| Joanne O. Isham
| | | | | | | | | | /s/ C. Robert Kehler
| | Director
| | March 1, 2019
| C. Robert Kehler
| | | | | | | | | | /s/ Brian Kenning
| | Director
| | March 1, 2019
| Brian Kenning
| | | | | | | | | | /s/ L. Roger Mason, Jr.
| | Director
| | March 1, 2019
| L. Roger Mason, Jr.
| | | | | /s/ Robert L. Phillips
| | Director
| | March 1, 2019
| Robert L. Phillips
| | | | | | | | | | /s/ Eric J. Zahler
| | Director
| | March 1, 2019
| Eric J. Zahler
| | | | |
|
