-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wtj5pD8c2bhoRvKm2lkzbtw04cFPcf6hY/M+jHRIy95B+xqYzL6c+hWq0qRdSnh7 9qh1gSh4oh+rY3P6f4qsiw== 0000921530-06-000352.txt : 20060814 0000921530-06-000352.hdr.sgml : 20060814 20060814094934 ACCESSION NUMBER: 0000921530-06-000352 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050811 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060814 DATE AS OF CHANGE: 20060814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Hughes Communications, Inc. CENTRAL INDEX KEY: 0001345840 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 133871202 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-51784 FILM NUMBER: 061027200 BUSINESS ADDRESS: STREET 1: 11717 EXPLORATION LANE CITY: GERMANTOWN STATE: MD ZIP: 20876 BUSINESS PHONE: 301-428-5500 MAIL ADDRESS: STREET 1: 11717 EXPLORATION LANE CITY: GERMANTOWN STATE: MD ZIP: 20876 FORMER COMPANY: FORMER CONFORMED NAME: SkyTerra Holdings, Inc. DATE OF NAME CHANGE: 20051202 8-K 1 hughes_8k-081106.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): August 14, 2006 (August 11, 2006) Hughes Communications, Inc. (Exact Name of Registrant as Specified in Charter) Delaware 000-51784 13-3871202 (State or Other Jurisdiction (Commission File Number) IRS Employer of Incorporation) Identification No.) 11717 Exploration Lane 20876 Germantown, Maryland ( Zip Code) (Address of Principal Executive Offices) Registrant's telephone number, including area code: (301) 428-5500 N/A (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ Section 2 - Financial Information Item 2.02 Results of Operations and Financial Condition. On August 11, 2006, Hughes Communications, Inc. (the "Company") issued a press release announcing certain financial results for the quarter and six months ended June 30, 2006. A copy of the Company's press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein. Section 9 - Financial Statements and Exhibits Item 9.01. Financial Statements and Exhibits. (d) Exhibits. The exhibit to this Current Report on Form 8-K is listed on the Exhibit Index on page 3 hereof, which is incorporated by reference in this Item 9.01(d). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Hughes Communications, Inc. Date: August 14, 2006 By:/s/ Dean A. Manson ------------------------------------ Name: Dean A. Manson Title: Vice President, General Counsel and Secretary EXHIBIT INDEX Exhibit Number Description - ---------- ----------------------------------------------------------------- 99.1 Press release dated August 11, 2006 issued by Hughes Communications, Inc. regarding financial results for the quarter and six months ended June 30, 2006. EX-99 2 hughes_pr-081106.txt EXHIBIT 99.1 FOR IMMEDIATE RELEASE Hughes Communications, Inc. Announces Second Quarter 2006 Results Hughes Network Systems, LLC Second Quarter Revenues Up 4% over Q2 2005; Adjusted EBITDA Increases 9% to $28.5 Million; Revenue Growth Seen in North America Segment; Significant Improvement in Cash Position; New Orders of $237 million, up 22%. Germantown, Md., August 11, 2006--Hughes Communications, Inc. (OTCBB:HGCM) ("Hughes"), the global leader in broadband satellite network solutions and services, today announced financial results for the quarter ended June 30, 2006, its second quarter as a publicly traded company. Hughes' consolidated operations are classified into three reportable segments: VSAT, Telecom Systems, and Other. The VSAT and Telecom Systems represent all of 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 the minority interest 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) Revenue in Hughes' wholly owned subsidiary, HNS, was $208.5 million in the second quarter of 2006, an increase of 4% over revenue of $199.9 million in the same period in 2005. For the six month period ended June 30, 2006, HNS revenue was $405.3 million, an increase of 7% over revenue of $378.2 million in the same period in 2005. In June 2006, HNS made a decision to shift its primary focus to the broadband market. As a result of this decision, HNS evaluated the narrowband products in its inventory and recorded an addition to its provision for excess or obsolete inventories of $11.9 million to reduce the net book value of its narrowband products to their net realizable value. This charge was included in cost of hardware products sold and primarily relates to the VSAT segment. Net loss for the second quarter ended June 30, 2006 which includes the $11.9 million inventory charge was $4.4 million compared to net income of $4.1 million in the same period in 2005. For the six month period ended June 30, 2006, net loss which includes the inventory charge improved $6.0 million to $4.2 million from a net loss of $10.2 million in the same period in 2005. EBITDA for the quarter ended June 30, 2006 including the inventory charge was $14.2 million compared to $19.9 million in the same period in 2005. For the six month period ended June 30, 2006, EBITDA improved to $30.4 million from $17.8 million in the same period in 2005. Adjusted EBITDA, for the quarter ended June 30, 2006, which excludes the inventory charge and other smaller adjustments, improved to $28.5 million compared to $26.3 million in the same period in 2005. For the six month period ended June 30, 2006, Adjusted EBITDA improved to $46.2 million from $42.8 million in the same period in 2005. Cash from operating activities improved to a net generation of $21.5 million in the six month period ended June 30, 2006 compared to net usage of $37.6 million in the same period in 2005. HNS' cash, cash equivalents and short-term investments position improved to $201.3 million as of June 30, 2006 from $126.8 million as of December 31, 2005. Commenting on the second quarter performance, Pradman Kaul, President and Chief Executive Officer, said, "We are pleased with our continued progress as a public company. Our Consumer/SMB business is growing rapidly with gross subscriber acquisition continuing at a robust 10,000 additions per month. The enterprise business continues to provide a stable base and new opportunities in the Mobile Satellite systems area offer potential for more growth. In the International segment, our Indian and Brazilian subsidiaries had revenue growth of 19% and 66%, respectively in the second quarter of 2006 over the same period in 2005. The aggressive cost reduction initiatives from last year are producing good results and we expect this trend to continue in the next two quarters." Grant Barber, Executive Vice President and Chief Financial Officer, said, "Our revenue and Adjusted EBITDA in the second quarter of 2006 increased $11.7 million or 6% and $10.8 million or 61% respectively over the first quarter of 2006. These solid operating results combined with on-going working capital focus have enabled us to end the quarter with a strong balance sheet including $201 million of cash and marketable securities." Set forth below is a table highlighting certain of HNS' results for the three months and six months ended June 30, 2006 and June 30, 2005:
Hughes Network Systems, LLC Three Months Six Months Ended June 30, Ended June 30, ----------------------------- --------------------------------- (Dollars in thousands) 2006 2005 2006 2005 ------------- ------------ -------------- --------------- Revenue VSAT $ 183,856 $ 177,721 $ 365,164 $ 338,606 Telecom Systems 24,647 22,208 40,131 39,554 ------------- ------------ -------------- --------------- Total HNS $ 208,503 $ 199,929 $ 405,295 $ 378,160 Operating income (loss) VSAT $ (1,778) $ 5,756 $ 5,454 $ (9,898) Telecom Systems 5,466 3,983 7,217 5,886 ------------- ------------ -------------- --------------- Total HNS $ 3,688 $ 9,739 $ 12,671 $ (4,012) Net income (loss) $ (4,428) $ 4,135 $ (4,234) $ (10,228) EBITDA (a) $ 14,163 $ 19,897 $ 30,367 $ 17,812 Adjusted EBITDA (a) $ 28,526 $ 26,255 $ 46,244 $ 42,841
(a) For the definition of Adjusted EBITDA, see "Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures" below. Select Second Quarter Highlights o New orders of $237 million in the second quarter of 2006, up 22% over the same period in 2005: significant international orders from Telkom South Africa, World Bank, Enlaces Mexico, Telmex, Copel Brazil, Delta Telecom Azerbaijan, Telefonica Spain, Telespazio Italy, Reliance India; North America orders include AG Edwards, Jack in the Box, GTECH, TJMax, Rack Room Shoes and PA Emergency Management Agency. o Signed a contract with BP Corporation North America Inc. to provide HughesNetTM Managed Network Services connecting BP's retail locations nationwide. The four-year contract includes the installation and management of both DSL and satellite broadband technologies at over 10,000 retail locations. o Completed delivery of an additional 12,000 broadband satellite terminals to GTECH Corporation, the world's leading provider of lottery, gaming and transaction processing solutions under a contract valued at $17 million. This brings the total number of terminals provided by Hughes to more than 50,000, making this the largest private satellite enterprise network in the world. o Approximately 30,000 gross additions to the Consumer/SMB subscriber base in the second quarter of 2006; churn of approximately 2% and ARPU growth of 5% over second quarter of 2005 o Signed multiple contracts with Thuraya Satellite Telecommunications, a leading mobile satellite voice and data service provider with coverage reaching nearly one-third of the world's population. The contracts, worth nearly $60 million, call for the development and supply of a high-speed mobile data system, a secondary gateway and additional circuits to increase the network capacity. o Applied to list Hughes common stock on the NASDAQ Global Market (formerly known as the NASDAQ National Market). Hughes' common stock has been quoted on the Over-the-Counter ("OTC") Bulletin Board market under the symbol "HGCM"since it became a publicly traded company in February 2006. o Announced the introduction of a new broadband satellite platform, the HX System, a cost-effective solution for smaller networks that provides high Quality of Service (QoS) and employs the most efficient implementation of the DVB-S2 industry standard with Adaptive Coding and Modulation (ACM). o Introduced a new version of the advanced AB9000 LMDS system designed for the most cost-effective backhaul of high-density 3G cellular traffic, eliminating the need for a stand-alone ATM switch at the base station. 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 six months ended June 30, 2006 is a combination of the HNS and Other Businesses.
Hughes Communications, Inc. Three Months Six Months Ended June 30, Ended June 30, ------------------------------ ------------------------------ (Dollars in thousands) 2006 2005 2006 2005 -------------- ------------- ------------- -------------- Revenue VSAT $ 183,856 $ - $ 365,164 $ - Telecom Systems 24,647 - 40,131 - Other 158 112 240 247 -------------- ------------- ------------- -------------- Total $ 208,661 $ 112 $ 405,535 $ 247 Operating income (loss) VSAT $ (1,778) $ - $ 5,454 $ - Telecom Systems 5,466 - 7,217 - Other (310) (1,939) (2,534) (4,094) -------------- ------------- ------------- -------------- Total $ 3,378 $ (1,939) $ 10,137 $ (4,094) Net income (loss) $ (4,396) $ 3,273 $(59,940) $ (3,902) EBITDA (a) $ 13,979 $ 2,939 $ 26,802 $ (4,784)
(a) For the definition of EBITDA, see "Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures" below. The net loss for the six months ended June 30, 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. Accordingly, Hughes does not expect this expense to have a significant impact on its cash 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) and Adjusted EBITDA.
Hughes Network Systems, LLC Three Months Six Months Ended June 30, Ended June 30, ------------------------------ ----------------------------- (Dollars in thousands) 2006 2005 2006 2005 ------------- ------------- -------------- ------------ Net income (loss) $ (4,428) $ 4,135 $ (4,234) $ (10,228) Add: Interest expense 10,346 5,591 19,740 6,605 Foreign income tax expense (benefit) 500 515 987 434 Depreciation and amortization 10,086 10,386 17,216 21,650 Less: Interest income (2,341) (730) (3,342) (649) ------------- ----------- ------------ ------------ EBITDA $ 14,163 $ 19,897 $ 30,367 $ 17,812 Add: Inventory provision related to shift to Broadband focus 11,879 - 11,879 - HughesNet branding costs 902 - 1,454 - Facilities costs - 901 - 2,363 Transaction costs related to the April 2005 Acquisition - 941 - 979 Elimination of payroll and benefits reflective of headcount reductions - - - 5,418 Assumed net reduction of SPACEWAY operating costs - - - 4,542 Restructuring charge - 3,068 - 3,068 Benefits/insurance programs 653 929 1,306 6,291 Legal expenses related to non-acquired business - 329 - 2,178 Legal settlement and related fees - pre-April 2005 Acquisition 586 - 586 - Equity incentive plan compensation 93 - 152 - Management fee to Hughes Communications, Inc. 250 190 500 190 ------------- ------------- -------------- ------------ Adjusted EBITDA $ 28,526 $ 26,255 $ 46,244 $ 42,841
The following table reconciles the differences between Hughes' net income as determined under United States of America generally accepted accounting principles (GAAP) and EBITDA:
Hughes Communications, Inc. Three Months Six Months Ended June 30, Ended June 30, -------------------------------- --------------------------------- (Dollars in thousands) 2006 2005 2006 2005 ---------------- --------------- ---------------- --------------- Net income (loss) $ (4,396) $ 3,273 $ (59,940) $ (3,902) Add: Interest expense 10,388 - 21,489 - Income tax expense 500 - 51,821 - Depreciation and amortization 10,086 7 17,216 14 Less: Interest income (2,599) (341) (3,784) (896) ---------------- --------------- ---------------- --------------- EBITDA $ 13,979 $ 2,939 $ 26,802 $ (4,784)
The condensed financial statements of Hughes and HNS as of June 30, 2006 and for the three and six months ended June 30, 2006 are attached to this press release. Note: EBITDA is defined as HNS' 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' 9 1/2% 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 HNS' 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. (OTCBB:HGCM) 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 one 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 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, 2005 filed with the Securities and Exchange Commission on April 17, 2006 and in the other documents Hughes files with the Securities and Exchange Commission from time to time. ### (C)Hughes Communications, Inc. All rights reserved. HUGHES, HUGHESNET, and SPACEWAY are trademarks of Hughes Network Systems, LLC. DIRECTV and DIRECWAY are registered trademarks of The DIRECTV Group, Inc. Contact Information Attachments Investor Relations Contact: Deepak Dutt, Hughes Communications, Inc. Vice President, Treasurer and Investor Relations Officer Condensed Consolidated Balance Sheets Email: ddutt@hns.com Condensed Consolidated Statements of Operations Phone: 301-428-7010 Condensed Consolidated Statements of Cash Flows Media Contact: Judy Blake, Director of Marketing Communications Hughes Network Systems, LLC Email: jblake@hns.com Condensed Balance Sheets Phone: 301-601-7330 Condensed Statements of Operations Condensed Statements of Cash Flows HUGHES COMMUNICATIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) (Unaudited)
June 30, December 31, 2006 2005 ------------------ ----------------- ASSETS Current Assets Cash and cash equivalents $ 150,382 $ 21,964 Short-term investments 60,591 6,000 Receivables, net 176,356 47 Inventories, net 56,510 - Prepaid expenses and other 50,552 2,773 Deferred income taxes 1,033 23,378 Asset held for sale - 468 ------------------ ----------------- Total current assets 495,424 54,630 ------------------ ----------------- Property, net 277,768 18 Capitalized software costs, net 29,937 - Intangible assets, net 32,343 - Investment in Hughes Network Systems, LLC - 75,282 Investment in Mobile Satellite Ventures LP. - 42,761 Deferred income taxes 954 26,956 Other assets 40,065 5,690 ------------------ ----------------- Total Assets $ 876,491 $ 205,337 ================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 53,005 $ 2,380 Short term borrowings 25,998 - Accrued liabilities 117,183 2,473 Due to affiliates 55 - Liabilities held for sale - 525 ------------------ ----------------- Total current liabilities 196,241 5,378 ------------------ ----------------- Long-term debt 468,637 - Other long-term liabilities 11,076 - ------------------ ----------------- Total liabilities 675,954 5,378 ------------------ ----------------- Commitments and contingencies Minority interests 6,648 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. Authorized 1,000,000 shares, no shares issued and outstanding - - Preferred stock, $0.01 par value. Authorized 10,000,000 shares, issued 1,199,077 shares as Series A Redeemable Convertible Preferred Stock at December 31, 2005 - - Common stock, $0.001 par value. Authorized 64,000,000 shares; issued and outstanding 18,811,455 shares at June 30, 2006 and 4,365,988 shares at December 31, 2005 19 4 Non-voting common stock, $0.01 par value. Authorized 50,000,000 shares; issued and outstanding 4,495,106 shares at December 31, 2005 - 45 Additional paid in capital 624,987 473,737 Accumulated deficit (431,235) (371,295) Accumulated other comprehensive income (loss) 118 (4,106) ------------------ ----------------- Total Stockholders' Equity 193,889 98,385 ------------------ ----------------- Total Liabilities and Stockholders' Equity $ 876,491 $ 205,337 ================== =================
HUGHES COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share data) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ------------------------ 2006 2005 2006 2005 -------------- ------------- ------------ ----------- Revenues Services $ 107,726 $ 112 $ 213,042 $ 247 Hardware sales 100,935 - 192,493 - -------------- ------------- ------------ ----------- Total Revenues 208,661 112 405,535 247 -------------- ------------- ------------ ----------- Operating Costs and Expenses Cost of services 75,071 95 147,353 232 Cost of hardware products sold 89,159 - 163,018 - Research and development 6,309 - 14,246 - Sales and marketing 20,133 - General and administrative 13,413 1,956 28,678 4,109 Amortization of intangibles 1,198 2,265 - -------------- ------------- ------------ ----------- Total Operating Costs and Expenses 205,283 2,051 395,398 4,341 -------------- ------------- ------------ ----------- Operating income (loss) 3,378 (1,939) 10,137 (4,094) Interest expense (10,388) - (21,489) - Equity in earnings of Hughes Network Systems, LLC - 6,523 - 6,523 Equity in loss of Mobile Satellite Ventures LP - (1,367) (1,521) (5,956) Other income, net 3,114 772 4,556 857 -------------- ------------- ------------ ----------- (Loss) income before discontinued operations and taxes (3,896) 3,989 (8,317) (2,670) Income tax expense (500) - (51,821) - -------------- ------------- ------------ ----------- (Loss) income before discontinued operations (4,396) 3,989 (60,138) (2,670) Loss from discontinued operations - (716) (42) (1,232) Gain on sale of discontinued operations - - 240 - -------------- ------------- ------------ ----------- Net (Loss) Income (4,396) 3,273 (59,940) (3,902) Cumulative dividends and accretion of convertible preferred stock to liquidation value - (2,492) (1,454) (4,985) -------------- ------------- ------------ ----------- Net (loss) income attributable to common stockholders $ (4,396) $ 781 $(61,394) $(8,887) ============== ============= ============ =========== Basic (loss) earnings per common share: Continuing operations $ (0.23) $ 0.17 $ (4.25) $ (0.87) Discontinued operations - (0.08) 0.01 (0.14) -------------- ------------- ------------ ----------- Net (loss) income per share $ (0.23) $ 0.09 $ (4.24) $ (1.01) ============== ============= ============ =========== Diluted (loss) earnings per common share: Continuing operations $ (0.23) $ 0.16 $ (4.25) $ (0.87) Discontinued operations - (0.08) 0.01 (0.14) -------------- ------------- ------------ ----------- Net (loss) income per share $ (0.23) $ 0.08 $ (4.24) $ (1.01) ============== ============= ============ =========== Basic weighted average common shares outstanding 18,795,289 8,817,227 14,483,198 8,759,357 ============== ============= ============ =========== Diluted weighted average common shares outstanding 18,795,289 9,378,624 14,483,198 8,759,357 ============== ============= ============ ===========
HUGHES COMMUNICATIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Six Months Ended June 30, ----------------------------------- 2006 2005 --------------- --------------- Cash Flows from Operating Activities Net loss $ (59,940) $ (3,902) Adjustments to reconcile net loss to cash flows from operating activities: Loss on discontinued operations 42 1,232 Depreciation and amortization 17,216 14 Amortization of debt issuance cost 348 - Equity plan compensation expense 1,510 726 Equity in earnings of Hughes Network Systems, LLC - (6,523) Equity in losses of unconsolidated affiliates 1,806 5,956 Loss on investments in affiliates - 1,642 Gain on disposal of assets (222) (49) Deferred income taxes 48,347 - Minority interest (193) (1,215) Compensation for issuance of warrants by consolidated subsidiary - 20 Change in other operating assets and liabilities, net of acquisitions: Receivables, net 26,412 - Inventories, net 17,241 - Prepaid expenses and other 1,081 5,401 Deferred revenue - (21) Accounts payable (16,878) (5,406) Accrued liabilities and other (21,711) - --------------- --------------- Net cash provided by (used in) continuing operations 15,059 (2,125) Net cash used in discontinued operations (9) (748) --------------- --------------- Net cash provided by (used in) Operating Activities 15,050 (2,873) --------------- --------------- Cash Flows from Investing Activities Purchase interest in HNS, LLC - (50,000) Cash paid for investments in affiliates - (562) Change in restricted cash (506) (3,060) Net (purchases) sales of short-term investments (44,091) 32,628 Expenditures for property (37,950) - Proceeds from sale of property. 155 74 Expenditures for capitalized software (8,768) - Acquisitions/divestitures, net of cash received 12,870 Other, net (54) - --------------- --------------- Net cash used in continuing operations (78,344) (20,920) Net cash used in discontinued operations - (9) --------------- --------------- Net cash used in Investing Activities (78,344) (20,929) --------------- --------------- Cash Flows from Financing Activities Net decrease in notes and loans payable (1,261) - Debt borrowing from Apollo 100,000 - Debt repayment to Apollo (100,000) - Proceeds from rights offering 100,000 - Distribution to SkyTerra (8,911) Payment of dividends on preferred stock (1,394) (2,788) Proceeds from exercise of stock options and warrants 1,966 77 Long-term debt borrowings 453,944 Repayment of long-term debt (341,603) Debt issuance cost (11,136) --------------- --------------- Net cash provided by (used in) continuing operations 191,605 (2,711) Net cash provided by (used in) discontinued operations - - --------------- --------------- Net cash provided by (used in) Financing Activities 191,605 (2,711) --------------- --------------- Effect of exchange rate changes on cash and cash equivalents 107 46 --------------- --------------- Net increase in cash and cash equivalents 128,418 (26,467) Cash and cash equivalents at beginning of the period 21,964 34,759 --------------- --------------- Cash and cash equivalents at end of the period $150,382 $8,292 =============== =============== Supplemental Cash Flow Information Cash paid for interest 16,215 - Cash paid for income taxes 3,213 - Supplemental Non-Cash Disclosure Net liability distributed to SkyTerra, net of cash 48,113 -
HUGHES NETWORK SYSTEMS CONDENSED BALANCE SHEETS (Dollars in Thousands) (Unaudited) Consolidated Successor --------------------------------------- June 30, 2006 December 31, 2005 ----------------- -------------------- ASSETS Current Assets Cash and cash equivalents $ 141,171 $ 113,267 Short-term investments 60,094 13,511 Receivables, net 176,106 203,425 Inventories, net 56,510 73,526 Prepaid expenses and other 47,312 48,672 ----------------- -------------------- Total Current Assets 481,193 452,401 ----------------- -------------------- Property, net 277,768 259,578 Capitalized software costs, net 29,937 16,664 Intangible assets, net 32,343 - Other assets 34,815 30,324 ----------------- -------------------- Total Assets $ 856,056 $ 758,967 ================= ==================== LIABILITIES AND EQUITY Current Liabilities Accounts payable $ 51,773 $ 51,294 Short term borrowings 25,998 29,616 Accrued liabilities 115,345 130,601 Due to affiliates 610 18,960 ----------------- -------------------- Total Current Liabilities 193,726 230,471 ----------------- -------------------- Long-term debt 468,637 344,849 Due to affiliates - long term - 8,967 Other long-term liabilities 11,076 3,494 ----------------- -------------------- Total Liabilities 673,439 587,781 ----------------- -------------------- Commitments and contingencies Minority interests 6,648 6,594 Equity Class A membership units 175,981 125,768 Class B membership units. - - (Accumulated deficit) retained earnings (4,234) 46,571 Accumulated other comprehensive income (loss) 4,222 (7,747) ------------------ ------------------- Total Equity 175,969 164,592 ------------------ ------------------- Total Liabilities and Equity $ 856,056 $ 758,967 ================== =================== HUGHES NETWORK SYSTEMS CONDENSED STATEMENTS OF OPERATIONS (Dollars in Thousands) (Unaudited)
Combined Consolidated Consolidated Successor Predecessor -------------------------------------------------- ----------------------- Three Months Ended April 23 to June 30, April 1 to April 22, June 30, 2006 2005 2005 ------------------------- ----------------------- ----------------------- Revenues Services $ 107,568 $ 81,632 $ 25,077 Hardware sales 100,935 73,087 20,133 ------------------------- ----------------------- ----------------------- Total Revenues 208,503 154,719 45,210 ------------------------- ----------------------- ----------------------- Operating Costs and Expenses Cost of services 75,060 56,016 18,138 Cost of hardware products sold 89,159 53,163 19,284 Research and development 6,309 6,057 2,730 Sales and marketing 20,132 12,437 6,280 General and administrative 12,957 9,979 4,481 Restructuring costs - - 1,625 Amortization of intangibles 1,198 - - ------------------------- ----------------------- ----------------------- Total Operating Costs and Expenses 204,815 137,652 52,538 ------------------------- ----------------------- ----------------------- Operating income (loss) 3,688 17,067 (7,328) Interest expense (10,346) (4,974) (617) Other income, net 2,730 456 46 ------------------------- ----------------------- ----------------------- (Loss) income before income taxes 3,928) 12,549 (7,899) Income tax expense (500) (254) (261) ------------------------- ----------------------- ----------------------- Net (Loss) Income $ (4,428) $ 12,295 $ (8,160) ========================= ======================= =======================
Combined Consolidated Consolidated Successor Predecessor -------------------------------------------------- ----------------------- Six Months Ended April 23 to June 30, January 1, to April 22, June 30, 2006 2005 2005 ------------------------- ----------------------- ----------------------- Revenues Services $ 212,802 $ 81,632 $ 121,917 Hardware sales 192,493 73,087 101,524 ------------------------- ----------------------- ----------------------- Total Revenues 405,295 154,719 223,441 ------------------------- ----------------------- ----------------------- Operating Costs and Expenses Cost of services 147,324 56,016 88,092 Cost of hardware products sold 163,018 53,163 86,467 Research and development 14,246 6,057 18,194 Sales and marketing 39,837 12,437 27,108 General and administrative 25,934 9,979 23,034 Restructuring costs - - 1,625 Amortization of intangibles 2,265 - - ------------------------- ----------------------- ----------------------- Total Operating Costs and Expenses 392,624 137,652 244,520 ------------------------- ----------------------- ----------------------- Operating income (loss) 12,671 17,067 (21,079) Interest expense (19,740) (4,974) (1,631) Other income, net 3,822 456 367 ------------------------- ----------------------- ---------------------- (Loss) income before income taxes (3,247) 12,549 (22,343) Income tax expense (987) (254) (180) ------------------------- ----------------------- ---------------------- Net (Loss) Income $ (4,234) $ 12,295 $ (22,523) ========================= ======================= =====================
HUGHES NETWORK SYSTEMS CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
Combined Consolidated Consolidated Successor Predecessor -------------------------------------- ------------------ Six Months Ended April 23 January 1 to June 30, to June 30, April 22 2006 2005 2005 -------------------- -------------- ------------------ Cash Flows from Operating Activities Net (loss) income $ (4,234) $ 12,295 $ (22,523) Adjustments to reconcile net (loss) income to cash flows from operating activities: Depreciation and amortization 17,216 7,916 3,734 Amortization of debt issuance cost 348 243 60 Equity plan compensation expense 152 - - Change in other operating assets and liabilities: Receivables, net 26,640 (20,760) 5,438 Inventories, net 17,241 2,332 2,738 Prepaid expenses and other 1,590 2,072 (3,965) Accounts payable (16,115) 5,100 (31,721) Accrued liabilities and other (21,374) 5,903 (16,457) -------------------- -------------- ------------------ Net Cash Provided by (Used in) Operating Activities 21,464 15,101 (52,696) -------------------- -------------- ------------------ Cash Flows from Investing Activities Change in restricted cash (506) (21) 1,978 Purchase of short-term investments, net (46,594) - - Expenditures for property (37,950) (5,243) (22,912) Proceeds from sale of property 155 - - Expenditures for capitalized software (8,768) (2,479) (3,273) Other, net 54 275 (958) -------------------- -------------- ------------------ Net Cash Used in Investing Activities (93,609) (7,468) (25,165) -------------------- -------------- ------------------ Cash Flows from Financing Activities Net (decrease) increase in notes and loans payable (1,261) (77) 871 Contributions from prior parent, net - 2,036 (108,868) Long-term debt borrowings 453,944 16,539 327,775 Repayment of long-term debt (341,602) (8,678) (30,141) Debt issuance costs (11,136) - (10,482) -------------------- -------------- ------------------ Net Cash Provided by Financing Activities 99,945 9,820 179,155 -------------------- -------------- ------------------ Effect of exchange rate changes on cash and cash equivalents 104 (8,716) 5,669 -------------------- -------------- ------------------ Net increase in cash and cash equivalents 27,904 8,737 106,963 Cash and cash equivalents at beginning of the period 113,267 121,770 14,807 -------------------- -------------- ------------------ Cash and cash equivalents at end of the period $ 141,171 $ 130,507 $ 121,770 ==================== ============== ================== Supplemental Cash Flow Information Cash paid for interest $ 14,465 $ 5,016 $ 1,496 Cash paid for income taxes $ 1,412 $ 133 $ 208 Supplemental Non-Cash disclosure due to acquisition by Hughes Communications, Inc Increase in assets acquired $ 24,817 Increase in liabilities assumed (13,580) -------------------- Increase in net assets acquired $ 11,237 ====================
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