GERMANTOWN, Md., March 26 /PRNewswire-FirstCall/ -- Hughes Communications, Inc. ("Hughes"), the global leader in broadband satellite network solutions and services, today announced financial results for the fourth quarter and year ended December 31, 2006. Hughes' consolidated operations are classified into three reportable segments: VSAT; Telecom Systems; and Other. The VSAT and Telecom Systems segments represent all the operations of Hughes Network Systems, LLC ("HNS"), Hughes' principal operating subsidiary. The Other segment includes the financial results of Hughes Corporate, Electronic System Products, Inc., and investments in the other companies that were contributed from SkyTerra Communications, Inc. ("SkyTerra"), Hughes' predecessor, prior to the separation of SkyTerra and Hughes in February 2006.
Hughes Network Systems, LLC (HNS)
"HNS had strong financial performance in 2006," said Pradman Kaul, president and chief executive officer. "Revenues increased by 6% over 2005 to $858 million and our profitability in 2006 was also very strong. Operating Income for the year was $58 million, a growth of 27% over 2005; EBITDA increased by 24% to $108 million in 2006 over 2005; and Adjusted EBITDA grew by 9% to $126 million in the same period. We generated $92 million of cash from operations in 2006, which is more than double what we generated in 2005. The major contributors to revenue growth were our consumer/SMB and mobile satellite businesses. Consumer/SMB subscribers grew 19% from 274,400 at the end of 2005 to 327,500 at the end of 2006. Revenue in the consumer/SMB business also grew by 18% over FY 2005 to $292 million. Revenue from our mobile satellite business grew 47% in 2006 over 2005, primarily through revenue from Thuraya, Terrestar, and ICO. Our North American and International enterprise businesses continued to be a steady revenue base contributing over half of HNS' total revenue in 2006, with significant orders from Exxon Mobil, Walgreens, Saudi MOFA, Enlaces Integra, Rite Aid, GTECH, Federal Express, Telmex, Galaxy Broadband, Murphy Oil, Jack in the Box, Sonic, Real Time, Yum Brands, and others. Overall, we are pleased that we have delivered on our business plan both financially and strategically in 2006."
"These impressive full-year results were a result of sustained quarterly performance, including a strong fourth quarter," continued Kaul. "We grew fourth quarter 2006 revenue by 7% and EBITDA by 13% over the fourth quarter of 2005. Adjusted EBITDA for fourth quarter 2006 grew 11% over the same period in 2005. The growth engines in the fourth quarter were once again the consumer/SMB and mobile satellite businesses; the consumer/SMB revenue grew by 19% in the fourth quarter of 2006 over the fourth quarter of 2005, and the mobile satellite revenue more than doubled in the fourth quarter of 2006 over the fourth quarter of 2005."
Set forth below is a table highlighting certain of HNS' results for the three months and twelve months ended December 31, 2006 and December 31, 2005.
Hughes Network Systems, LLC
Three Months Twelve Months
Ended December 31, Ended December 31,
(Dollars in thousands) 2006 2005 2006 2005
Revenue
VSAT $215,465 $212,398 $767,237 $738,320
Telecom Systems 27,850 15,733 90,988 68,589
Total $243,315 $228,131 $858,225 $806,909
Operating income
VSAT $19,609 $27,607 $38,803 $33,289
Telecom Systems 5,342 2,580 18,871 12,240
Total $24,951 $30,187 $57,674 $45,529
Net income $11,194 $21,943 $19,102 $24,048
EBITDA $44,700 $39,533 $108,003 $87,324
Adjusted EBITDA $45,455 $41,040 $125,619 $114,763
a) For the definitions of EBITDA and Adjusted EBITDA, see
"Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures" below.
Commenting on the financial performance, Grant Barber, executive vice president and chief financial officer said, "As you can see from the table above, our revenue, EBITDA, and Adjusted EBITDA have shown steady improvement in the year ended December 2006 over the same period in 2005. Our ongoing focus on working capital management resulted in a net generation of $92 million of cash from operations in the year ended December 2006, a significant improvement over year ended December 2005. HNS ended full-year 2006 with a strong balance sheet including $203 million of cash and marketable securities for HNS. The consolidated cash and marketable securities balance for Hughes as of the year ended December 31, 2006 was $214 million. I am also pleased to report that in February 2007, we closed a $115 million senior unsecured credit facility with a syndicate of banks, further improving our liquidity."
Selected Highlights
-- Mobile Satellite Ventures, LP (MSV) and HNS announced the signing of a
contract under which HNS will develop and supply MSV's Satellite Base
Transceiver Sub-System (S-BTS). The contract value is over $43 million.
The S-BTS is the central element of the base station, which will
facilitate communication between MSV's satellites and terrestrial
communications network.
-- HNS announced that the European Telecommunications Standards Institute
(ETSI) has approved the Internet Protocol over Satellite.v2 (IPoS.v2)
air interface standard, which incorporates the DVB-S2 industry standard
with ACM (Adaptive Coding and Modulation). IPoS is the most widely
deployed satellite broadband standard in the world.
-- Pilot sites in the US and UK have been chosen for the introduction of
BPTV, an innovative digital signage media service with advertising and
unique BP programming content shown on screens placed at gasoline
stations, as well as in-store. The HughesNet(TM) Digital Media Solution
that delivers BPTV programming encompasses the planning, installation,
and remote operation of the screens, speakers and supporting broadband
network infrastructure. Content broadcasting is delivered over Hughes'
cost-effective, highly-scalable HughesNet broadband service platform.
In addition, Hughes provides program scheduling, management, and
independent certification of advertisements -- a critical issue for
advertisers.
-- The number of HughesNet consumer/SMB subscribers reached 327,500 at the
end of the fourth quarter of 2006, a 19% growth over the same period in
2005.
-- HNS announced that it was named North American Space & Communications
Company of the Year by global growth consulting company Frost &
Sullivan. The prestigious award is presented only to companies that
demonstrate and exemplify the criteria set forth by Frost & Sullivan,
such as technology innovation, market potential, proof of success,
strategic marketing, revenue growth, new market penetration,
visibility, and leadership.
To summarize, Kaul said, "Our fundamental message is the same today as it was twelve months ago -- a strong enterprise segment that provides the core revenue with loyal customers who commit to long-term contracts, with growth being fueled by the consumer/SMB and mobile satellite markets. Looking ahead, we expect to commence commercial service on SPACEWAY(TM) 3, our next- generation satellite, in early 2008. We expect that SPACEWAY 3 will substantially reduce our costs and open up new revenue opportunities going forward in the enterprise and consumer/SMB markets. We believe that all the above, combined with the strong financial performance in 2006, have positioned HNS very well for 2007 and beyond."
Hughes Communications, Inc. (Hughes)
On January 1, 2006, Hughes consummated the purchase (the "January 2006 Acquisition") from DTV Network Systems, Inc. of the remaining 50% of HNS. As a result of the January 2006 Acquisition, Hughes' business has changed materially. For periods following the closing of the January 2006 Acquisition, the financial position and operating results of HNS are included in Hughes' consolidated financial statements. From April 22, 2005 (the date of the acquisition of the initial 50% interest in HNS) through December 31, 2005, Hughes' investment in HNS is recorded using the equity method of accounting.
Certain financial information for Hughes is shown below. The financial information for the three and twelve months ended December 31, 2006 is a combination of HNS and Other Businesses.
Hughes Communications, Inc.
Three Months Twelve Months
Ended December 31, Ended December 31,
(Dollars in thousands) 2006 2005 2006 2005
Revenue
VSAT $215,465 $- $767,237 $-
Telecom Systems 27,850 - 90,988 -
Other 89 172 474 615
Total $243,404 $172 $858,699 $615
Operating income (loss)
VSAT $19,609 $- $38,803 $-
Telecom Systems 5,342 - 18,871 -
Other (1,756) (3,705) (5,032) (9,299)
Total $23,195 $(3,705) $52,642 $(9,299)
Net income (loss) $9,457 $57,669 $(39,113) $59,325
EBITDA $42,802 $7,104 $101,607 $7,582
a) For the definition of EBITDA, see "Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures" below.
The net loss for the twelve months ended December 31, 2006 includes a tax charge of approximately $51.3 million in connection with the SkyTerra/Hughes separation. As Hughes is the accounting successor to SkyTerra, the taxes associated with the separation are included in Hughes' results for the quarter ended March 31, 2006 and a portion of the deferred tax assets were utilized to satisfy the tax expense resulting from the taxable gain. This expense did not have an impact on Hughes' cash flows from operations.
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
The following table reconciles the differences between HNS' net income as determined under United States of America generally accepted accounting principles (GAAP), EBITDA and Adjusted EBITDA.
Hughes Network Systems, LLC
Three Months Twelve Months
Ended December 31, Ended December 31,
(Dollars in thousands) 2006 2005 2006 2005
Net income $11,194 $21,943 $19,102 $24,048
Add:
Interest expense 15,143 8,588 46,041 24,375
Foreign income tax expense 1,221 383 3,276 873
Depreciation and amortization 19,723 9,858 48,459 40,943
Less:
Interest income (2,581) (1,239) (8,875) (2,915)
EBITDA $44,700 $39,533 $108,003 $87,324
Add:
Inventory provision related to
shift to Broadband focus - - 11,879 -
HughesNet branding costs - - 1,454 -
Facilities costs - - - 2,363
Transaction costs related to
the April 2005 Acquisition - 489 - 1,468
Elimination of payroll and
benefits reflective -
of headcount reductions - - - 5,418
Assumed net reduction of
SPACEWAY operating
costs - - - 4,542
Restructuring charge - - - 3,068
Benefits/insurance programs
sponsored by DIRECTV 425 653 2,385 7,597
Legal expenses related to non-
acquired business - - - 2,178
Legal settlement and related
fees - pre-April 2005
Acquisition - - 586 -
Equity incentive plan
compensation 80 115 312 115
Management fee to Hughes
Communications, Inc. 250 250 1,000 690
Adjusted EBITDA $45,455 $41,040 $125,619 $114,763
The following table reconciles the differences between Hughes' net income as determined under GAAP and EBITDA:
Hughes Communications, Inc.
Three Months Twelve Months
Ended December 31, Ended December 31,
(Dollars in thousands) 2006 2005 2006 2005
Net income (loss) $9,457 $57,669 $(39,113) $59,325
Add:
Interest expense 15,143 - 47,791 -
Income tax expense (benefit) 1,221 (50,334) 54,110 (50,334)
Depreciation and amortization 19,723 7 48,459 27
Less:
Interest income (2,742) (238) (9,640) (1,436)
EBITDA $42,802 $7,104 $101,607 $7,582
The financial statements of Hughes and HNS for the twelve months ended December 31, 2006 are attached to this press release.
Note:
EBITDA is defined as earnings (loss) before interest, income taxes, depreciation and amortization. Adjusted EBITDA is used in calculating covenant compliance under HNS' credit agreement and the indenture governing HNS' 91/2% Senior Notes due 2014. Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain adjustments, including the net costs of SPACEWAY for the first quarter of 2005 to reflect the effects of the implementation of the SPACEWAY services agreement with DIRECTV, Inc. as if it had occurred on January 1, 2005. EBITDA and Adjusted EBITDA are not recognized terms under GAAP. EBITDA and Adjusted EBITDA do not represent net income or cash flows from operations, as these terms are defined under GAAP, and should not be considered as alternatives to net income as an indicator of operating performance or to cash flows as a measure of liquidity. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of cash flow available to management for discretionary use, as such measures do not consider certain cash requirements such as capital expenditures (including expenditures on VSAT operating lease hardware and capitalized software development costs), tax payments, and debt service requirements (including VSAT operating lease hardware). EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures reported by other companies. EBITDA and Adjusted EBITDA are presented herein because HNS and Hughes use such information in their review of the performance of management and in the performance of their business. In addition, information concerning Adjusted EBITDA is being presented because it reflects important components included in the financial covenants under the senior note indenture and HNS' credit agreement.
About Hughes Communications, Inc.
Hughes Communications, Inc. is the 100 percent owner of Hughes Network Systems, LLC. Hughes is the global leader in providing broadband satellite networks and services for enterprises, governments, small businesses, and consumers. HughesNet encompasses all broadband solutions and managed services from Hughes, bridging the best of satellite and terrestrial technologies. Its broadband satellite products are based on the IPoS (IP over Satellite) global standard, approved by the TIA, ETSI, and ITU standards organizations. To date, Hughes has shipped more than 1.2 million systems to customers in over 100 countries.
Headquartered outside Washington, D.C., in Germantown, Maryland, USA, Hughes maintains sales and support offices worldwide. For more information, please visit http://www.hughes.com/.
Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995
This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, discussions regarding industry outlook and Hughes' expectations regarding the performance of its business, its future liquidity and capital resource needs, its strategic plans and objectives and the ability to launch and deploy SPACEWAY 3. These forward- looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. When used in this release, the words "believe," "anticipate," "estimate," "expect," "intend," "project," "plans" and similar expressions and the use of future dates are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements are subject to certain risks, uncertainties and assumptions, including, but not limited to, the following: risks related to Hughes' substantial leverage and restrictions contained in its debt agreements, technological developments, its reliance on providers of satellite transponder capacity, changes in demand for Hughes' services and products, competition, industry trends, regulatory changes, foreign currency exchange rate fluctuations and other risks identified and discussed under the caption "Risk Factors" in Hughes' Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission on March 26, 2007 and in the other documents Hughes files with the Securities and Exchange Commission from time to time.
Hughes, HughesNet, IPoS, and SPACEWAY are trademarks of Hughes Network Systems, LLC. DIRECTV and DIRECWAY are registered trademarks of The DIRECTV Group, Inc.
Attachments
Hughes Communications, Inc.
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Hughes Network Systems, LLC
Balance Sheets
Statements of Operations
Statements of Cash Flows
HUGHES COMMUNICATIONS, INC.
Consolidated Balance Sheets
(Dollars in thousands)
December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $106,933 $21,964
Marketable securities 107,320 6,000
Receivables, net 180,955 47
Inventories 61,280 -
Prepaid expenses and other 38,683 3,330
Deferred income taxes 1,264 23,378
Assets held-for-sale - 468
Total current assets 496,435 55,187
Property, net 312,497 18
Capitalized software costs, net 41,159 -
Intangible assets, net 30,663 -
Investment in Mobile Satellite
Ventures LP - 42,761
Investment in Hughes Network Systems,
LLC - 75,282
Deferred income taxes 2,440 26,956
Other assets 48,450 5,133
Total assets $931,644 $205,337
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $59,391 $2,380
Short term borrowings and current
portion of long-term debt 27,210 -
Accrued liabilities 124,586 2,473
Due to affiliates 13,119 -
Liabilities held-for-sale - 525
Total current liabilities 224,306 5,378
Long-term debt 469,190 -
Other long-term liabilities 18,079 -
Total liabilities 711,575 5,378
Commitments and contingencies
Minority interests 4,680 8,474
Series A Redeemable Convertible
Preferred Stock, $0.01 par value,
net of amortized discount of $28,194
at December 31, 2005 93,100
Stockholders' Equity:
Preferred stock, $0.001 par value;
1,000,000 shares authorized and no
shares issued and outstanding at
December 31, outstanding as of
December 31, 2005
Preferred stock, $0.01 par value; no
shares authorized, issued or
outstanding of December 31, 2006;
10,000,000 shares authorized and
1,199,077 shares Series A Redeemable
Convertible Preferred Stock issued
and outstanding as of December 31, 2005 -
Common stock, $0.001 par value;
64,000,000 shares authorized;
19,000,622 shares and 4,365,988
shares issued and outstanding
as of December 31, 2006 and 2005,
respectively 19 4
Non-voting common stock, $0.01 par
value; no shares authorized, issued
or outstanding as of December 31, 2006;
50,000,000 shares authorized, and
4,495,106 shares issued and outstanding
as of December 31, 2005 45
Additional paid in capital 626,927 473,737
Accumulated deficit (410,408) (371,295)
Accumulated other comprehensive loss (1,149) (4,106)
Total stockholders' equity 215,389 98,385
Total liabilities and stockholders'
equity $931,644 $205,337
HUGHES COMMUNICATIONS, INC.
Consolidated Statements of Operations
(Dollars in thousands, except share and per share amounts)
Year Ended December 31,
2006 2005 2004
Revenues:
Services $440,450 $615 $2,117
Hardware sales 418,249 - -
Total revenues 858,699 615 2,117
Operating costs and expenses:
Cost of services 309,698 326 2,036
Cost of hardware products sold 327,708 - -
Selling, general and administrative 139,449 9,588 9,367
Research and development 23,058 - -
Amortization of intangibles 6,144 - -
Total operating costs and expenses 806,057 9,914 11,403
Operating income (loss) 52,642 (9,299) (9,286)
Other income (expense):
Interest expense (47,791) - -
Interest income 9,640 1,436 10,548
Other income, net 2,323 877 21,030
Income before income tax (expense)
benefit; minority interests in net
(earnings) losses of subsidiaries;
equity in (losses) earnings of
unconsolidated affiliates; and
discontinued operations 16,814 (6,986) 22,292
Income tax (expense) benefit (54,110) 50,334 -
Minority interests in net (earnings)
losses of subsidiaries 118 1,925 (810)
Equity in (losses) earnings of
unconsolidated affiliates (2,132) 13,947 (2,356)
(Loss) income from continuing
operations (39,310) 59,220 19,126
Discontinued operations:
Loss from discontinued operations (43) (956) (1,960)
Gain on sale of discontinued
operations 240 1,061 -
Net (loss) income (39,113) 59,325 17,166
Cumulative dividends and accretion of
convertible preferred stock to
liquidation value (1,454) (9,969) (9,918)
Net (loss) income attributable to
common stockholders $(40,567) $49,356 $7,248
Basic net (loss) earnings per common
share:
Continuing operations $(2.44) $5.59 $1.22
Discontinued operations 0.01 0.01 (0.26)
Basic net (loss) earnings per common
share $(2.43) $5.60 $0.96
Diluted net (loss) earnings per
common share:
Continuing operations $(2.44) $5.33 $1.16
Discontinued operations 0.01 0.01 (0.25)
Diluted net (loss) earnings per
common share $(2.43) $5.34 $0.91
Basic weighted average common shares
outstanding 16,668,591 8,807,237 7,557,948
Diluted weighted average common
shares outstanding 16,668,591 9,244,011 7,918,685
HUGHES COMMUNICATIONS, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
Year Ended December 31,
2006 2005 2004
Cash flows from operating activities:
Net (loss) income $(39,113) $59,325 $17,166
Adjustments to reconcile net (loss)
income to cash flows from operating
activities:
Gain on Motient note - - (22,516)
Loss (gain) on discontinued
operations 43 (105) 1,960
Depreciation and amortization 48,459 27 44
Amortization of debt issuance costs 1,056 - -
Equity plan compensation expense 3,720 965 3,095
Equity in earnings of Hughes Network
Systems, LLC - (24,054) -
Equity in losses of unconsolidated
affiliates 2,132 9,469 1,020
Loss on investments in affiliates - 638 1,336
Minority interests (118) (1,925) 810
Gain on disposal of assets (222) (49) -
Gain on receipt of investment from
unconsolidated affiliates (1,788) - -
Compensation expense for issuance of
warrants by consolidated subsidiary - - 296
Change in other operating assets and
liabilities, net of acquisitions:
Receivables, net 24,599 (18) 208
Inventories 11,894 - -
Deferred income taxes 46,630 (50,334) -
Prepaid expenses and other 9,979 4,863 10,314
Deferred revenue - (20) (138)
Accounts payable (11,675) (4,153) 4,114
Accrued liabilities and other (5,413) - -
Net cash provided by (used in)
continuing operations 90,183 (5,371) 17,709
Net cash used in discontinued
operations (10) (1,093) (1,565)
Net cash provided by (used in)
operating activities 90,173 (6,464) 16,144
Cash flows from investing activities:
Acquisition of Hughes Network
Systems, LLC, net of cash received 12,753 (50,000) -
Repayments of notes receivable - - 21,500
Change in restricted cash (2,883) (3,060) -
Purchase of marketable investments,
net (90,112) (12,228) (68,602)
Cash paid for investments in
affiliates - (3,562) (1,928)
Net sales of short-term investments - 65,977 30,649
Expenditures for property (77,191) (3) (11)
Proceeds from sale of property and
intangibles 521 62 -
Sales of investment in affiliates - 1,923 -
Expenditures for capitalized software (16,416) - -
Other, net - - 19
Net cash used in continuing
operations (173,328) (891) (18,373)
Net cash used in discontinued
operations - (63) (952)
Net cash used in investing activities (173,328) (954) (19,325)
HUGHES COMMUNICATIONS, INC.
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
Year Ended December 31,
2006 2005 2004
Cash flows from financing activities:
Net decrease in notes and loans
payable (1,609) - -
Distributions to minority interest of
consolidated subsidiary - - (3,361)
Debt borrowings from Apollo 100,000 - -
Debt repayments to Apollo (100,000) - -
Proceeds from rights offering 100,000 - -
Distribution to SkyTerra (9,314) - -
Proceeds from issuance of common
stock, net of costs - - 35,044
Payment of dividends on preferred
stock (1,394) (5,575) (1,394)
Proceeds from exercise of stock
options and warrants 2,206 140 284
Repurchase of common stock of
consolidated subsidiary - (4) (2)
Long-term debt borrowings 455,330 - -
Repayment of long-term debt (364,872) - -
Debt issuance costs (11,668) - -
Net cash provided by (used in)
continuing operations 168,679 (5,439) 30,571
Net cash provided by discontinued
operations - 76 450
Net cash provided by (used in)
financing activities 168,679 (5,363) 31,021
Effect of exchange rate changes on
cash and cash equivalents (555) 11 (3)
Net increase (decrease) in cash and
cash equivalents 84,969 (12,770) 27,837
Cash and cash equivalents at
beginning of the period 21,964 34,734 6,897
Cash and cash equivalents at end of
the period $106,933 $21,964 $34,734
Supplemental cash flow information:
Cash paid for interest $41,464 $- $-
Cash paid for income taxes $6,578 $- $-
Noncash financing activities:
Conversion of notes receivable to
partnership interest in Mobile
Satellite Ventures LP $51,118
Common stock issued in connection
with purchase of interest in Hughes
Network Systems, LLC $5,160
Supplemental non-cash disclosure due
to acquisition by Hughes
Communications, Inc.:
Increase in assets $51,471
Increase in liabilities 40,118
Increase in net assets $11,353
HUGHES NETWORK SYSTEMS
Balance Sheets
(Dollars in thousands)
Consolidated Consolidated
Successor Predecessor
December 31,
2006 2005
ASSETS
Current assets:
Cash and cash equivalents $99,098 $113,267
Marketable securities 103,466 13,511
Receivables, net 180,694 200,982
Inventories 61,280 73,526
Prepaid expenses and other 39,175 48,672
Total current assets 483,713 449,958
Property, net 312,497 259,578
Capitalized software costs, net 41,159 16,664
Intangible assets, net 30,663 -
Other assets 44,358 30,324
Total assets $912,390 $756,524
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $57,781 $51,294
Short term borrowings and current
portion of long-term debt 27,210 29,616
Accrued liabilities 123,576 130,601
Due to affiliates 13,592 18,960
Total current liabilities 222,159 230,471
Long-term debt 469,190 342,406
Due to affiliates - 8,967
Other long-term liabilities 18,079 3,494
Total liabilities 709,428 585,338
Commitments and contingencies
Minority interests 4,659 6,594
Equity:
Class A membership interests 180,346 125,768
Class B membership interests - -
Retained earnings 19,102 46,571
Accumulated other comprehensive loss (1,145) (7,747)
Total equity 198,303 164,592
Total liabilities and equity $912,390 $756,524
HUGHES NETWORK SYSTEMS
Statements of Operations
(Dollars in thousands)
Consoli- Consoli-
dated dated Combined Consolidated
Successor Predecessor Prior Predecessor
Year Ended April 23 - January 1 - Year Ended
December 31, December 31, April 22, December 31,
2006 2005 2005 2004
Revenues:
Services $439,976 $303,467 $121,917 $383,519
Hardware sales 418,249 280,001 101,524 405,831
Total revenues 858,225 583,468 223,441 789,350
Operating costs and
expenses:
Cost of services 309,583 209,226 88,092 290,365
Cost of hardware products
sold 327,708 206,431 86,467 338,650
Selling, general and
administrative 134,058 80,658 50,142 158,102
Research and development 23,058 19,102 18,194 55,694
Amortization of intangibles 6,144 - -
Restructuring costs - 1,443 1,625 10,993
SPACEWAY impairment
provision - - - 1,217,745
Asset impairment provision - - - 150,300
Total operating costs and
expenses 800,551 516,860 244,520 2,221,849
Operating income (loss) 57,674 66,608 (21,079) (1,432,499)
Other income (expense):
Interest expense (46,041) (22,744) (1,631) (7,466)
Interest income 8,875 2,813 102 772
Other income, net 2,033 198 - 5,805
Income (loss) before
income tax expense,
minority interest in net
(earnings) losses of
subsidiaries and equity
in earnings of
unconsolidated affiliates 22,541 46,875 (22,608) (1,433,388)
Income tax expense (3,276) (693) (180) (32)
Minority interests in net
(earnings) loss of
subsidiaries (163) 366 231 (64)
Equity in earnings of
unconsolidated affiliates - 23 34 -
Net income (loss) $19,102 $46,571 $(22,523)$(1,433,484)
HUGHES NETWORK SYSTEMS
Statements of Cash Flows
(Dollars in thousands)
Consolida- Consolida-
ted ted Combined Consolidated
Successor Predecessor Prior Predecessor
Year Ended April 23- January 1- Year Ended
December December April December
31, 31, 22, 31,
2006 2005 2005 2004
Cash flows from operating
activities:
Net income (loss) $19,102 $46,571 $(22,523) $(1,433,484)
Adjustments to reconcile net
income (loss) to cash flows
from operating activities:
Depreciation and
amortization 48,459 27,209 13,734 96,973
Amortization of debt issuance
costs 1,056 970 60 -
Gain on receipt of investment
by subsidiary (1,788) - - -
Equity plan compensation
expense 296 115 - -
Minority interest 163
Equity in losses from
unconsolidated affiliates - (26) - -
Gain on disposal of assets - - - (5,804)
SPACEWAY impairment provision - - - 1,217,745
Asset impairment provision - - - 150,300
Other - (198) - -
Change in other operating
assets and liabilities,
excluding the effect of the HCI
Transaction:
Receivables, net 24,839 (37,886) 5,438 41,471
Inventories, net 11,894 22,987 2,738 22,863
Prepaid expenses and
other 3,335 (1,681) (3,965) 8,197
Accounts payable (11,286) 11,093 (31,721) 9,920
Accrued liabilities
and other (4,337) 24,298 (16,457) (20,445)
Net cash provided by (used in)
operating activities 91,733 93,452 (52,696) 87,736
Cash flows from investing
activities:
Change in restricted cash (294) (4,860) 1,978 (1,152)
Purchase of short-term
investments, net (89,254) (13,544) - -
Expenditures for property (77,191) (53,694) (22,912) (122,158)
Expenditures for capitalized
software (16,416) (12,871) (3,273) (16,673)
Proceeds from sale of property
and intangibles 521 1,263 - 17,016
Other, net - 224 (958) 148
Net cash used in investing
activities (182,634) (83,482) (25,165) (122,819)
Cash flows from financing
activities:
Net (decrease) increase in
notes and loans payable (1,609) (3,309) 871 (7,955)
(Distributions to)
contributions from former
owners, net - - (108,868) 52,429
Long-term debt borrowings 455,330 18,882 327,775 33,245
Repayment of long-term debt (364,872) (31,222) (30,141) (70,659)
Debt issuance costs (11,668) - (10,482) -
Net cash provided by (used in)
financing activities 77,181 (15,649) 179,155 7,060
Effect of exchange rate changes
on cash and cash equivalents (449) (2,824) 5,669 865
Net (decrease) increase in cash
and cash equivalents (14,169) (8,503) 106,963 (27,158)
Cash and cash equivalents at
beginning of the period 113,267 121,770 14,807 41,965
Cash and cash equivalents at
end of the period $99,098 $113,267 $121,770 $14,807
Supplemental cash flow
information:
Cash paid for interest $39,714 $22,138 $1,496 $10,422
Cash paid for income taxes $3,615 $1,121 $208 $732
Supplemental disclosure of non-
cash financing activities:
Property transferred to Parent $308,000
Supplemental non-cash
disclosure due to acquisition
by Hughes Communications,
Inc.:
Increase in assets $51,471
Increase in liabilities 40,118
Increase in net assets $11,353
