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SATS 8-K 8-5-11


 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
June 8, 2011

ECHOSTAR CORPORATION
(Exact name of registrant as specified in its charter)
 
 
 
 
 
NEVADA
 
001-33807
 
26-1232727
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
 
100 INVERNESS TERRACE E.
ENGLEWOOD, COLORADO
80112
(Address of principal executive offices)
(Zip Code)
(303) 706-4000
(Registrant's telephone number, including area code)
Not applicable
(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))


 
 






Item 2.01    Completion of Acquisition or Disposition of Assets.
On June 9, 2011, EchoStar Corporation, a Nevada corporation (“EchoStar”) filed a Current Report on Form 8-K to report, among other things, the completion on June 8, 2011 of EchoStar's previously announced acquisition of Hughes Communications, Inc., a Delaware corporation (“Hughes”), pursuant to that certain Agreement and Plan of Merger, dated as of February 13, 2011, by and among Hughes, EchoStar, EchoStar Satellite Services L.L.C., a Colorado limited liability company, and Broadband Acquisition Corporation, a Delaware corporation. This Current Report on Form 8-K/A is being filed to provide the required pro forma financial information and related information in connection with the completion of that acquisition, as required by Item 9.01 of Form 8-K.

Item 9.01    Financial Statements and Exhibits.
(b) Pro Forma Financial Information
The unaudited pro forma condensed combined balance sheet as of March 31, 2011 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2011 and for the year ended December 31, 2010, are attached hereto as Exhibit 99.1.
(d) Exhibits.
Exhibit No.
 
Description
 
 
 
99.1
 
Unaudited pro forma condensed combined balance sheet as of March 31, 2011 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2011 and for the year ended December 31, 2010.





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

ECHOSTAR CORPORATION
 
By:
/s/ David J. Rayner
 
 
 
David J. Rayner
 
 
Chief Financial Officer
 


Dated:    August 5, 2011




EXHIBIT INDEX
 
Number
Description
 
 
99.1
Unaudited pro forma condensed combined balance sheet as of March 31, 2011 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2011 and for the year ended December 31, 2010.
 
 





Exhibit 99.1


Exhibit 99.1

The pro forma information has been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. The following unaudited pro forma condensed combined balance sheet gives effect to the acquisition (the “Acquisition”) by EchoStar Corporation (“EchoStar”) of Hughes Communications, Inc. (“Hughes Communications”), as well as the other transactions contemplated by the merger agreement governing the Acquisition and the issuance by EH Holding Corporation of $1.1 billion of its 6 1/2% Senior Secured Notes due 2019 (the “Secured Notes”) and $900 million of its 7 5/8% Senior Notes due 2021 (the “Unsecured Notes” and together with the Secured Notes, the “Related Financing Transactions”), including a repayment of the debt under the COFACE facility of Hughes Network Systems, LLC, as of March 31, 2011. The unaudited pro forma condensed combined statements of operations give effect to the Acquisition and Related Financing Transactions, as if the Acquisition and Related Financing Transactions had been completed January 1, 2010.

The unaudited pro forma adjustments are based on currently available information and certain assumptions that we believe are reasonable. The unaudited pro forma condensed combined financial information is for informational purposes only and does not purport to reflect the financial position or results of operations that would have occurred if the Acquisition and Related Financing Transactions had been consummated on the dates indicated above; nor does it purport to represent or be indicative of the financial position or results of operations of EchoStar for any future dates or periods.

The allocation of the Acquisition's purchase price used in the unaudited pro forma condensed combined financial information is based on a preliminary estimate derived from an independent appraisal. The assumptions and estimates used to determine the preliminary fair values will be revised as additional information becomes available. The final fair value allocated to the various Hughes Communications' assets and liabilities acquired as a result of the Acquisition may be significantly different from what is presented in the unaudited pro forma condensed combined financial information.





EchoStar Corporation
 
 
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2011
 
 
 
Hughes
 
 
 
 
 
 
 
EchoStar
 
Communications
 
Pro Forma
 
Reclassification
 
 
 
Historical
 
Historical
 
Adjustments
 
Adjustments
 
Total
Assets
(In thousands, except share data)
Current Assets:
 
 
 
 
 
 
 
 
 
   Cash and cash equivalents
$
121,596

 
$
116,914

 
$
1,941,000

(a)
$
—

 
$
100,000

 
 
 
 
 
(2,200,042
)
(c)
—

 
 
 
 
 
 
 
120,532

(b)
—

 
 
   Marketable investment securities
1,018,140

 
23,672

 
(120,532
)
(b)
—

 
921,280

   Trade accounts receivable - DISH Network,
 
 
 
 
 
 
 
 
 
   net of allowance for doubtful accounts of zero
250,050

 
—

 
—

 
—

 
250,050

   Other current assets
190,902

 
269,778

 
(3,121
)
(c)
(176
)
(d)
457,383

Total current assets
1,580,688

 
410,364

 
(262,163
)
 
(176
)
 
1,728,713

 
 
 
 
 
 
 
 
 
 
Noncurrent Assets:
 
 
 
 
 
 
 
 
 
    Restricted cash and marketable investment securities
17,426

 
—

 
4,554

(c)
334

(d)
22,314

    Property and equipment, net
1,276,352

 
837,601

 
67,645

(c)
—

 
2,181,598

    Intangible assets, net
160,579

 
56,009

 
345,798

(c)
—

 
562,386

    Goodwill and non-amortizable intangibles
69,810

 
5,093

 
904,368

(c)
—

 
979,271

    Marketable and other investment securities
752,836

 
—

 
10,500

(c)
16,475

(d)
779,811

    Other noncurrent assets, net
64,330

 
74,980

 
54,010

(a)
(16,633
)
(d)
153,825

 
 
 
 
 
(22,862
)
(c)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total noncurrent assets
2,341,333

 
973,683

 
1,364,013

 
176

 
4,679,205

      Total assets
$
3,922,021

 
$
1,384,047

 
$
1,101,850

 
$
—

 
$
6,407,918

 
 
 
 
 
 
 
 
 
 
Liabilities and Stockholder's Equity (Deficit)
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
    Trade accounts payable, accrued expenses and other
$
280,556

 
$
249,319

 
$
(15,082
)
(c)
$
—

 
$
514,793

    Deferred tax liabilities
63,890

 
—

 
(11,228
)
(c)
—

 
52,662

    Current portion of long-term debt and capital lease obligations
54,675

 
4,700

 
(1,766
)
(c)
—

 
57,609

Total current liabilities
399,121

 
254,019

 
(28,076
)
 
—

 
625,064

 
 
 
 
 
 
 
 
 
 
Long-Term Obligations, Net of Current Portion:
 
 
 
 
 
 
 
 
 
    Long-term debt and capital lease obligations, net of current portion
354,534

 
756,450

 
2,000,000

(a)
—

 
2,356,673

 
 
 
 
 
(754,311
)
(c)
 
 
 
 
 
 
 
 
 
 
 
 
 
    Deferred tax liabilities
79,031

 
—

 
258,323

(g)
 
 
337,354

    Other long-term liabilities
35,316

 
26,764

 
(18,623
)
(c)
—

 
43,457

Total long-term obligations, net of current portion
468,881

 
783,214

 
1,485,389

 
—

 
2,737,484

      Total liabilities
868,002

 
1,037,233

 
1,457,313

 
—

 
3,362,548

 
 
 
 
 
 
 
 
 
 
Stockholder's Equity (Deficit)
 
 
 
 
 
 
 
 
 
     Common stock
92

 
22

 
(22
)
(c)
—

 
92

     Additional paid-in capital
3,329,160

 
736,993

 
(736,993
)
(c)
—

 
3,329,160

     Accumulated other comprehensive income (loss)
194,896

 
(14,132
)
 
14,132

(c)
—

 
194,896

     Accumulated earnings (deficit)
(371,962
)
 
(386,918
)
 
386,918

(c)
—

 
(391,460
)
 
 
 
 
 
(4,102
)
(a)
—

 
 
 
 
 
 
 
(15,396
)
(c)
—

 
 
    Treasury stock, at cost
(98,162
)
 
—

 
—

 
—

 
(98,162
)
 
 
 
 
 
 
 
 
 
 
Total stockholder's equity (deficit)
3,054,024

 
335,965

 
(355,463
)
 
—

 
3,034,526

Noncontrolling interests
(5
)
 
10,849

 
—

 
—

 
10,844

Total stockholder's equity (deficit), including noncontrolling interest
3,054,019

 
346,814

 
(355,463
)
 
—

 
3,045,370

        Total liabilities and stockholder's equity (deficit)
$
3,922,021

 
$
1,384,047

 
$
1,101,850

 
$
—

 
$
6,407,918

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Combined Financial Information.




EchoStar Corporation
 
 
 
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Combined Statements of Operations
 
 
For the Year Ended December 31, 2010
 
 
 
 
Hughes
 
 
 
 
 
 
 
 
EchoStar
 
Communications
 
Pro Forma
 
Reclassification
 
 
 
 
Historical
 
Historical
 
Adjustments
 
Adjustments
 
Total
 
 
(In thousands)
Revenue:
 
 
 
 
 
 
 
 
 
 
Equipment revenue - DISH Network
 
$
1,470,173

 
$
—

 
$
—

 
$
—

 
$
1,470,173

Equipment revenue - other
 
347,765

 
252,003

 
—

 
—

 
599,768

Services and other revenue - DISH Network
 
468,399

 
—

 
—

 
—

 
468,399

Services and other revenue - other
 
64,032

 
791,324

 
(5,718
)
(c)
—

 
849,638

       Total revenue
 
2,350,369

 
1,043,327

 
(5,718
)
 
—

 
3,387,978

 
 
 
 
 
 
 
 
 
 
 
Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
Cost of sales - equipment
 
1,553,129

 
234,805

 
(11,643
)
(c)
(4,752
)
(d)
1,771,539

Cost of sales - services and other (exclusive of depreciation shown below)
 
236,356

 
493,023

 
—

 
(100,909
)
(d)
628,470

Research and development expenses
 
46,093

 
20,279

 
—

 
(3,296
)
(d)
63,076

Selling, general and administrative expenses
 
128,366

 
206,512

 
(13,354
)
(c)
(2,330
)
(d)
319,194

General and administrative expenses - DISH Network
 
15,189

 
—

 
—

 
—

 
15,189

Depreciation and amortization
 
228,911

 
3,084

 
81,198

(e)
111,287

(d)
424,480

       Total costs and expenses
 
2,208,044

 
957,703

 
56,201

 
—

 
3,221,948

 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
142,325

 
85,624

 
(61,919
)
 
—

 
166,030

 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
Interest income
 
14,472

 
2,043

 
—

 
—

 
16,515

Interest expense, net of amounts capitalized
 
(14,560
)
 
(59,345
)
 
(94,112
)
(f)
—

 
(168,017
)
Unrealized and realized gains (losses) on marketable
 
 
 
 
 
 
 
 
 
 
     investment securities and other investments
 
2,923

 
—

 
—

 
—

 
2,923

Unrealized gains (losses) on investments
 
 
 
 
 
 
 
 
 
 
     accounted for at fair value, net
 
144,473

 
—

 
—

 
—

 
144,473

Other, net
 
(860
)
 
374

 
—

 
—

 
(486
)
       Total other income (expense)
 
146,448

 
(56,928
)
 
(94,112
)
 
—

 
(4,592
)
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
288,773

 
28,696

 
(156,031
)
 
—

 
161,438

Income tax (provision) benefit, net
 
(84,415
)
 
(5,716
)
 
59,354

(g)
—

 
(30,777
)
Net income (loss)
 
204,358

 
22,980

 
(96,677
)
 
—

 
130,661

Net (income) attributable to the noncontrolling interests
 
—

 
(193
)
 
—

 
—

 
(193
)
Net income (loss) attributable to EchoStar common shareholders
 
$
204,358

 
$
22,787

 
$
(96,677
)
 
$
—

 
$
130,468

 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
 
85,084

 
21,606

 
(21,606
)
 
 
 
85,084

Diluted
 
85,203

 
22,738

 
(22,738
)
 
 
 
85,203

 
 
 
 
 
 
 
 
 
 
 
Earnings per share - common stock:
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per share
 
$
2.40

 
$
1.05

 
 
 
 
 
$
1.53

Diluted net income (loss) per share
 
$
2.40

 
$
1.00

 
 
 
 
 
$
1.53

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Combined Financial Information.





EchoStar Corporation
 
 
 
 
 
 
 
 
 
 
Unaudited Pro Forma Condensed Combined Statements of Operations
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31, 2011
 
 
 
 
Hughes
 
 
 
 
 
 
 
 
EchoStar
 
Communications
 
Pro Forma
 
Reclassification
 
 
 
 
Historical
 
Historical
 
Adjustments
 
Adjustments
 
Total
 
 
(In thousands)
Revenue:
 
 
 
 
 
 
 
 
 
 
Equipment revenue - DISH Network
 
$
272,126

 
$
—

 
$
—

 
$
—

 
$
272,126

Equipment revenue - other
 
65,909

 
48,422

 
—

 
—

 
114,331

Services and other revenue - DISH Network
 
121,207

 
—

 
—

 
—

 
121,207

Services and other revenue - other
 
20,584

 
215,670

 
(809
)
(c)
—

 
235,445

       Total revenue
 
479,826

 
264,092

 
(809
)
 
—

 
743,109

 
 
 
 
 
 
 
 
 
 
 
Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
Cost of sales - equipment
 
293,384

 
49,574

 
(1,151
)
(c)
(1,102
)
(d)
340,705

Cost of sales - services and other (exclusive of depreciation shown below)
 
61,460

 
132,710

 
—

 
(30,976
)
(d)
163,194

Research and development expenses
 
8,859

 
5,154

 
—

 
(712
)
(d)
13,301

Selling, general and administrative expenses
 
44,772

 
60,977

 
(1,320
)
(c)
(499
)
(d)
103,930

General and administrative expenses - DISH Network
 
3,489

 
—

 
—

 
—

 
3,489

Depreciation and amortization
 
57,014

 
757

 
19,088

(e)
33,289

(d)
110,148

       Total costs and expenses
 
468,978

 
249,172

 
16,617

 
—

 
734,767

 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
10,848

 
14,920

 
(17,426
)
 
—

 
8,342

 
 
 
 
 
 
 
 
 
 
 
Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
Interest income
 
2,677

 
419

 
—

 
—

 
3,096

Interest expense, net of amounts capitalized
 
462

 
(12,505
)
 
(26,317
)
(f)
—

 
(38,360
)
Unrealized and realized gains (losses) on marketable
 
 
 
 
 
 
 
 
 
 
     investment securities and other investments
 
665

 
—

 
—

 
—

 
665

Unrealized gains (losses) on investments
 
 
 
 
 
 
 
 
 
 
     accounted for at fair value, net
 
3,304

 
—

 
—

 
—

 
3,304

Other, net
 
6,991

 
(248
)
 
—

 
—

 
6,743

       Total other income (expense)
 
14,099

 
(12,334
)
 
(26,317
)
 
—

 
(24,552
)
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
24,947

 
2,586

 
(43,743
)
 
—

 
(16,210
)
Income tax (provision) benefit, net
 
(7,788
)
 
(1,901
)
 
16,609

(g)
—

 
6,920

Net income (loss)
 
17,159

 
685

 
(27,134
)
 
—

 
(9,290
)
Net loss attributable to the noncontrolling interests
 
5

 
153

 
—

 
—

 
158

Net income (loss) attributable to EchoStar common shareholders
 
$
17,164

 
$
838

 
$
(27,134
)
 
$
—

 
$
(9,132
)
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding
 
 
 
 
 
 
 
 
 
 
Basic
 
85,466

 
21,766

 
(21,766
)
 
 
 
85,466

Diluted
 
92,331

 
23,361

 
(23,361
)
 
 
 
85,466

 
 
 
 
 
 
 
 
 
 
 
Earnings per share - common stock:
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per share
 
$
0.20

 
$
0.04

 
 
 
 
 
$
(0.11
)
Diluted net income (loss) per share
 
$
0.19

 
$
0.04

 
 
 
 
 
$
(0.11
)
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Combined Financial Information.





Notes to Unaudited Pro Forma Condensed Combined Financial Information

(a)
Represents the pro forma adjustments necessary to reflect the financing of the Acquisition inclusive of transaction costs. The components of the cash received from the financing are composed of the following:
 
 
 
(In thousands)
Secured Notes
 
 
$
1,100,000

Unsecured Notes
 
 
900,000

 
 
 
2,000,000

Debt issuance costs
 
 
(52,500
)
Acquisition costs
 
 
(6,500
)
Total
 
 
$
1,941,000


We estimated direct acquisition costs of $6.5 million (reflected as an increase to accumulated deficit and net of tax effects of $2.4 million on the unaudited pro forma condensed combined balance sheet as of March 31, 2011).

(b)
Represents an estimate of the necessary working capital that will be provided by the sale of marketable investment securities. Although we have assumed a $100 million ending cash balance, the ultimate balance of cash and consequently the amount of marketable investment securities sold to fund this cash balance may materially differ from this estimate.

(c)
Represents pro forma adjustments necessary to reflect the Acquisition and related financing transactions, including (i) cash consideration of $2.2 billion for (a) the acquisition of Hughes Communications common shares of approximately $1.4 billion (determined as approximately 21.8 million issued and outstanding Hughes Communications common shares as well 0.8 million vested and outstanding common equity rights, all being acquired for $60.70 per share), and (b) settlement and adjustment of pre-acquisition Hughes Communications debt and associated interest rate swaps of approximately $782 million (inclusive of obligatory call premiums) that is required or was repaid as part of the Acquisition and an additional $27 million of interest related to the repayment of Hughes Communications debt on these extinguished instruments; (ii) preliminary allocation of the $2.2 billion of purchase consideration to the assets and liabilities acquired; (iii) elimination of certain Hughes Communications' assets and liabilities, such as historical deferred financing costs, subscriber acquisition costs (“SAC”), deferred revenue and other, in connection with acquisition accounting and the related elimination of Hughes Communications' historical equity; (iv) the reduction of revenue and the associated expenses on the pro forma condensed combined statements of operations to reflect elimination of deferred revenue and SAC in the preliminary purchase price allocation; and (v) reflects other direct transaction costs of approximately $24.4 million (reflected as an increase to accumulated deficit and net of tax effects of $9 million on the unaudited pro forma condensed combined balance sheet as of March 31, 2011.)

(d)
Represents the pro forma classification adjustments to conform Hughes Communications' accounting policy to those of EchoStar, including but not limited to, depreciation expense which will no longer be recorded as a component of cost of sales, research and development, or selling general and administrative expenses based on the nature of the underlying long-lived asset but will prospectively be presented in the caption depreciation and amortization.





(e)
Represents net incremental depreciation and amortization expense of $81 million and $19 million for the year ended December 31, 2010 and the three months ended March 31, 2011, respectively, as a result of the allocation of purchase price to certain amortizable assets with useful lives ranging from 1 year to 11 years. As indicated above, the allocation of purchase price is preliminary. To the extent that the final purchase price allocation increases or decreases depreciable or amortizable assets, and therefore decreases or increases goodwill, our operating costs, in the form of depreciation or amortization, will be impacted. For example, if an additional $50 million of the excess consideration were to be allocated to property and equipment or amortizable intangible assets (thus, reducing goodwill) and assuming an estimated life of 10 years using straight line depreciation or amortization, the accompanying unaudited pro forma condensed combined statement of operations for the year ended December 31, 2010 would reflect additional pre-tax expense of approximately $5 million.

(f)
Represents the estimated net increase in interest expense based on a weighted average rate of 7.01% for the Secured Notes and the Unsecured Notes. EchoStar has issued $2.0 billion in unregistered secured and unsecured notes in connection with the Acquisition.
 
 
For the Year Ended
 
For the Three Months
 
 
December 31, 2010
 
Ended March 31, 2011
 
 
(In thousands)
Interest on new debt instruments
 
$
(140,125
)
 
$
(35,031
)
Hughes Communications historical interest expense elimination
 
59,345

 
12,505

Amortization of deferred financing costs and changes in capitalized interest
 
(13,332
)
 
(3,791
)
              Total
 
$
(94,112
)
 
$
(26,317
)
 
 
 
 
 
(g)
Represents the tax effect of pro forma adjustments using the EchoStar blended federal, state and international statutory tax rates adjusted for permanent differences. As indicated in Note (b) the allocation of the purchase price is preliminary. For each additional $50 million of excess consideration allocated to non-amortizable assets, such as Federal Communications Commission licenses, the corresponding increase in deferred tax liability would be approximately $19 million (assuming a tax rate of 37%), which, in turn, would increase the estimated amount of goodwill.