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): February 28, 2017
ECHOSTAR CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA | 001-33807 | 26-1232727 | ||
(State or other jurisdiction of | (Commission File Number) | (IRS Employer | ||
incorporation) | 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)
HUGHES SATELLITE SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
COLORADO | 333-179121 | 45-0897865 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS 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)
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:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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‘Item 2.01. Completion of Acquisition or Disposition of Assets.
On February 28, 2017, EchoStar Corporation (“EchoStar”) completed the previously announced share exchange (the “Share Exchange”) whereby (i) EchoStar has received all of the shares of EchoStar Tracking Stock (defined below) owned by DISH Network L.L.C. (“DNLLC”), a wholly-owned subsidiary of DISH Network Corporation (“DISH”), in exchange for 100% of the equity interests of EchoStar Technologies Holding Corporation (“ET Corp”), formerly a direct wholly-owned subsidiary of EchoStar, which held that portion of the EchoStar Technologies business segment of EchoStar that (a) designed, developed and distributed secure end-to-end video technology solutions including digital set-top boxes and related products and technology, primarily for satellite TV service providers and telecommunications companies, (b) provided TV Anywhere technology through Slingbox® units directly to consumers via retail outlets and online, as well as to the pay-TV operator market, and (c) included EchoStar’s over-the-top, Streaming Video on Demand platform business, which includes assets acquired from Sling TV Holding L.L.C. (formerly DISH Digital Holding L.L.C.) and primarily provided support services to DISH’s Sling TV™ operations, and (ii) EchoStar Broadcasting Holding Parent L.L.C. (“EB LLC”), formerly an indirect subsidiary of EchoStar and a direct wholly owned subsidiary of Hughes Satellite Systems Corporation (“HSS”), received all of the shares of HSS Tracking Stock (defined below) owned by DISH Operating L.L.C. (“DOLLC”), a wholly-owned subsidiary of DISH, in exchange for 100% of the equity interests of EchoStar Broadcasting Holding Corporation (“EB Corp”), formerly a direct wholly owned subsidiary of EB LLC, which held EchoStar’s business of providing online video delivery and satellite video delivery for broadcasters and pay-TV operators, including satellite uplinking/downlinking, transmission services, signal processing, conditional access management and other services. The Share Exchange was structured in a manner to be a tax-free exchange for each of EchoStar and DISH and their respective subsidiaries. Subsequent to the Share Exchange, EB LLC merged with and into HSS.
Prior to consummation of the Share Exchange, EchoStar completed steps necessary for the transferring assets and liabilities to be owned by ET Corp and EB Corp and their respective subsidiaries. As part of these steps, HSS issued additional shares of common stock to a subsidiary of EchoStar and such shares were then distributed as a dividend to EchoStar. Certain data center assets were not included in the Share Exchange and remained owned by EB LLC and will be pledged as collateral to support HSS’s obligations under its indentures.
In March 2014, EchoStar and its subsidiary HSS each issued shares of preferred stock (the “EchoStar Tracking Stock” and “HSS Tracking Stock,” respectively, and together, the “Tracking Stock”) to DNLLC and DOLLC, respectively. The Tracking Stock tracked the economic performance of the residential retail satellite broadband business of our Hughes segment, including certain operations, assets and liabilities attributed to such business (collectively, the “Hughes Retail Group” or “HRG”), and represented in the aggregate an 80.0% economic interest in the Hughes Retail Group (the EchoStar Tracking Stock represented a 51.89% economic interest in the Hughes Retail Group and the HSS Tracking Stock represented a 28.11% economic interest in the Hughes Retail Group). As a result of the Share Exchange, the Tracking Stock has been retired and all agreements, arrangements and policy statements with respect to the Tracking Stock have been terminated and are of no further effect.
In connection with the Share Exchange, EchoStar and DISH and certain of their subsidiaries (i) have entered into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property and the provision of transitional services, (ii) terminated certain previously existing agreements, and (iii) entered into agreements for new transactions pursuant to which EchoStar and DISH will obtain certain products, services and rights from each other.
A substantial majority of the voting power of EchoStar and DISH is owned beneficially by Charles W. Ergen, EchoStar’s Chairman, and by certain trusts established by Mr. Ergen for the benefit of his family. In addition, EchoStar and DISH and their subsidiaries are parties to certain agreements pursuant to which they obtain certain products, services and rights from each other. For more information, see Note 19 to the consolidated financial statements in EchoStar’s Annual Report on Form 10-K for the year ended December 31, 2016.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On March 1, 2017, EchoStar filed with the Secretary of State of the State of Nevada, a Certificate of Withdrawal of Certificate of Designation with respect to the EchoStar Tracking Stock. The Certificate of Withdrawal, which was effective upon filing, eliminated from the Articles of Incorporation of EchoStar all matters set forth in EchoStar’s
Americas 92580893 v2 (2K) | ||
Certificate of Designation with respect to the EchoStar Tracking Stock. The information set forth under “Item 2.01 Completion of Acquisition or Disposition of Assets” is incorporated herein by reference. A copy of the Certificate of Withdrawal of Certificate of Designation is attached hereto as Exhibit 3.1 and incorporated herein by reference.
On March 1, 2017, HSS filed with the Secretary of State of the State of Colorado, Articles of Amendment to its Articles of Incorporation, effective upon filing, cancelling the designation of the HSS Tracking Stock and all matters set forth in HSS’s Articles of Incorporation with respect to the HSS Tracking Stock. The information set forth under “Item 2.01 Completion of Acquisition or Disposition of Assets” is incorporated herein by reference. A copy of the Articles of Amendment is attached hereto as Exhibit 3.2 and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated financial information of EchoStar prepared in accordance with Article 11 of Regulation S-X is filed as Exhibit 99.1 hereto and is incorporated herein by reference:
• | The unaudited pro forma condensed consolidated statements of operations of EchoStar for the years ended December 31, 2016, 2015 and 2014; |
• | The unaudited pro forma condensed consolidated balance sheet of EchoStar as of December 31, 2016; and |
• | Notes to the unaudited pro forma condensed consolidated financial statements. |
(d) Exhibits
Exhibit No. | Description | |
Exhibit 3.1 | Certificate of Withdrawal of Certificate of Designation of EchoStar Corporation | |
Exhibit 3.2 | Articles of Amendment to Articles of Incorporation of Hughes Satellite Systems Corporation | |
Exhibit 99.1 | Unaudited pro forma condensed consolidated financial statements of EchoStar Corporation | |
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This document and the exhibits thereto may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. 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 report, 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. See “Risk Factors” in EchoStar’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) and in the other documents EchoStar files with the SEC from time to time. The forward-looking statements speak only as of the date made, and EchoStar expressly disclaims any obligation to update these forward-looking statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ECHOSTAR CORPORATION | ||
HUGHES SATELLITE SYSTEMS CORPORATION | ||
Date: March 6, 2017 | By: | /s/ Dean A. Manson |
Executive Vice President, General Counsel and | ||
Secretary | ||
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Exhibit Index
Exhibit No. | Description | |
Exhibit 3.1 | Certificate of Withdrawal of Certificate of Designation of EchoStar Corporation | |
Exhibit 3.2 | Articles of Amendment to Articles of Incorporation of Hughes Satellite Systems Corporation | |
Exhibit 99.1 | Unaudited pro forma condensed consolidated financial statements of EchoStar Corporation | |
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AMD_PC Page 1 of 2 Rev. 12/20/2016
Document must be filed electronically.
Paper documents are not accepted.
Fees & forms are subject to change.
For more information or to print copies
of filed documents, visit www.sos.state.co.us.
ABOVE SPACE FOR OFFICE USE ONLY
Articles of Amendment
filed pursuant to §7-90-301, et seq. and §7-110-106 of the Colorado Revised Statutes (C.R.S.)
1. For the entity, its ID number and entity name are
ID number _________________________
(Colorado Secretary of State ID number)
Entity name ______________________________________________________.
2. The new entity name (if applicable) is ______________________________________________________.
3. (If the following statement applies, adopt the statement by marking the box and include an attachment.)
This document contains additional amendments or other information.
4. If the amendment provides for an exchange, reclassification or cancellation of issued shares, the
attachment states the provisions for implementing the amendment.
5. (Caution: Leave blank if the document does not have a delayed effective date. Stating a delayed effective date has significant legal
consequences. Read instructions before entering a date.)
(If the following statement applies, adopt the statement by entering a date and, if applicable, time using the required format.)
The delayed effective date and, if applicable, time of this document is/are _______________________.
(mm/dd/yyyy hour:minute am/pm)
Notice:
Causing this document to be delivered to the Secretary of State for filing shall constitute the affirmation or
acknowledgment of each individual causing such delivery, under penalties of perjury, that such document is such
individual's act and deed, or that such individual in good faith believes such document is the act and deed of the
person on whose behalf such individual is causing such document to be delivered for filing, taken in conformity with
the requirements of part 3 of article 90 of title 7, C.R.S. and, if applicable, the constituent documents and the organic
statutes, and that such individual in good faith believes the facts stated in such document are true and such document
complies with the requirements of that Part, the constituent documents, and the organic statutes.
This perjury notice applies to each individual who causes this document to be delivered to the Secretary of State,
whether or not such individual is identified in this document as one who has caused it to be delivered.
6. The true name and mailing
address of the individual causing
the document to be delivered for
filing are ____________________ ______________ ______________ _____
(Last) (First) (Middle) (Suffix)
______________________________________________________
(Street name and number or Post Office Box information)
______________________________________________________
__________________________ ____ ____________________
(City) (State) (Postal/Zip Code)
_______________________ ______________
(Province – if applicable) (Country – if not US)
United States
Germantown
Jeanne
20111159069
20876
Hughes Satellite Systems Corporation
11717 Exploration Lane
·
Hughes Satellite Systems Corp
Yost
MD
Colorado Secretary of State
Date and Time: 03/01/2017 03:39 PM
ID Number: 20111159069
Document number: 20171176386
Amount Paid: $25.00
AMD_PC Page 2 of 2 Rev. 12/20/2016
(If the following statement applies, adopt the statement by marking the box and include an attachment.)
This document contains the true name and mailing address of one or more additional individuals causing the
document to be delivered for filing.
Disclaimer:
This form/cover sheet, and any related instructions, are not intended to provide legal, business or tax advice, and are
furnished without representation or warranty. While this form/cover sheet is believed to satisfy minimum legal
requirements as of its revision date, compliance with applicable law, as the same may be amended from time to
time, remains the responsibility of the user of this form/cover sheet. Questions should be addressed to the user’s
legal, business or tax advisor(s).
CANCELLATION OF DESIGNATION
OF
HUGHES RETAIL PREFERRED TRACKING STOCK
By resolution of the Board of Directors of Hughes Satellite Systems Corporation (the
“Corporation”), duly adopted pursuant to the provisions of these Articles of Incorporation and pursuant to
§ 7-106-102 and § 7-106-302 of the Colorado Revised Statutes, the Corporation hereby rescinds, cancels
and terminates the designation of rights, preferences and privileges with respect to all three hundred (300)
shares of the Corporation’s Hughes Retail Preferred Tracking Stock, established by Articles of
Amendment filed on February 28, 2014. This Cancellation of Designation eliminates from the Articles of
Incorporation of the Corporation all matters set forth in the Certificate of Designation with respect to the
Corporation’s Hughes Retail Preferred Tracking Stock that had been previously filed with the Colorado
Secretary of State on February 28, 2014.
Exhibit 99.1
ECHOSTAR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On February 28, 2017, EchoStar Corporation and certain subsidiaries of EchoStar (the “Company” or “EchoStar”) completed the previously announced Share Exchange with DISH Network Corporation and certain of its subsidiaries (“DISH Network”).
Pursuant to the Share Exchange Agreement, among other things EchoStar received all of the shares of EchoStar Tracking Stock and HSS Tracking Stock in exchange for 100% of the equity interests of certain subsidiaries which held substantially all of the EchoStar Technologies business segment and certain other assets (the “Share Exchange”). The Share Exchange was structured in a manner to be a tax-free exchange for each of EchoStar and DISH Network.
The following unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2016, 2015 and 2014 assume that the transaction occurred on January 1, 2014. The following unaudited pro forma condensed consolidated balance sheet as of December 31, 2016 assumes that the transaction occurred on that date. Beginning in the first quarter of 2017, the historical financial results of the exchanged subsidiaries will be presented as discontinued operations in EchoStar’s condensed consolidated financial statements.
The unaudited pro forma condensed consolidated financial statements are presented based on information currently available, are intended for information purposes only, and are not intended to represent what EchoStar’s financial condition and results of operations would have been had the transaction referenced above occurred on the dates indicated above. In addition, the unaudited pro forma condensed consolidated financial statements are not necessarily indicative of EchoStar’s future financial condition or results of operations.
The unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in EchoStar’s Annual Report on Form 10-K for the year ended December 31, 2016.
The pro forma adjustments are based on available information and assumptions that EchoStar’s management believes are reasonable, factually supportable, reflect the impacts of events directly attributable to the transaction referenced above and for purposes of the statements of operations, are expected to have a continuing impact on the Company. The pro forma adjustments do not reflect future events that may occur after the Share Exchange, including expected selling, general and administrative dis-synergies and potential cost synergies. Refer to the Notes to the Unaudited Pro Forma Condensed Financial Statements for more information.
ECHOSTAR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
For the Year Ended December 31, 2016 | ||||||||||||||
Historical Condensed Consolidated | Entities Exchanged (1) | Pro Forma Adjustments | Pro Forma Condensed Consolidated | |||||||||||
Revenue: | ||||||||||||||
Services and other revenue - DISH Network | $ | 888,603 | $ | (425,523 | ) | $ | 4,039 | (2) | $ | 467,119 | ||||
Services and other revenue - other | 1,109,597 | (8,770 | ) | — | 1,100,827 | |||||||||
Equipment revenue - DISH Network | 711,289 | (702,449 | ) | — | 8,840 | |||||||||
Equipment revenue - other | 347,241 | (109,885 | ) | — | 237,356 | |||||||||
Total revenue | 3,056,730 | (1,246,627 | ) | 4,039 | 1,814,142 | |||||||||
Costs and Expenses: | ||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 844,498 | (327,043 | ) | 6,340 | (3) | 523,795 | ||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | 891,108 | (687,142 | ) | — | 203,966 | |||||||||
Selling, general and administrative expenses | 385,634 | (47,844 | ) | (1,566 | ) | (4) | 336,224 | |||||||
Research and development expenses | 76,024 | (44,854 | ) | — | 31,170 | |||||||||
Depreciation and amortization | 495,068 | (62,165 | ) | — | 432,903 | |||||||||
Total costs and expenses | 2,692,332 | (1,169,048 | ) | 4,774 | 1,528,058 | |||||||||
Operating income (loss) | 364,398 | (77,579 | ) | (735 | ) | 286,084 | ||||||||
Other Income (Expense): | ||||||||||||||
Interest income | 21,249 | (5 | ) | — | 21,244 | |||||||||
Interest expense, net of amounts capitalized | (123,630 | ) | 911 | — | (122,719 | ) | ||||||||
Gains (losses) on marketable investment securities, net | 9,767 | — | — | 9,767 | ||||||||||
Equity in earnings (losses) of unconsolidated affiliates, net | 13,310 | (2,508 | ) | — | 10,802 | |||||||||
Other, net | 1,750 | 381 | — | 2,131 | ||||||||||
Total other expense, net | (77,554 | ) | (1,221 | ) | — | (78,775 | ) | |||||||
Income (loss) before income taxes | 286,844 | (78,800 | ) | (735 | ) | 207,309 | ||||||||
Income tax (provision) benefit, net | (106,152 | ) | 5,654 | 25,456 | (5) | (75,042 | ) | |||||||
Net income | 180,692 | (73,146 | ) | 24,721 | 132,267 | |||||||||
Less: Net loss attributable to noncontrolling interest in HSS Tracking Stock | (944 | ) | — | 944 | (6) | — | ||||||||
Less: Net income attributable to other noncontrolling interests | 1,706 | — | — | 1,706 | ||||||||||
Net income (loss) attributable to EchoStar | 179,930 | (73,146 | ) | 23,777 | 130,561 | |||||||||
Less: Net loss attributable to Hughes Retail Preferred Tracking Stock | (1,743 | ) | — | 1,743 | (7) | — | ||||||||
Net income (loss) attributable to EchoStar common stock | $ | 181,673 | $ | (73,146 | ) | $ | 22,034 | $ | 130,561 | |||||
Weighted-average common shares outstanding - Class A and B common stock: | ||||||||||||||
Basic | 93,795 | 93,795 | ||||||||||||
Diluted | 94,410 | 94,410 | ||||||||||||
Earnings per share - Class A and B common stock: | ||||||||||||||
Basic | $ | 1.94 | $ | 1.39 | ||||||||||
Diluted | $ | 1.92 | $ | 1.38 | ||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
2
ECHOSTAR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
For the Year Ended December 31, 2015 | ||||||||||||||
Historical Condensed Consolidated | Entities Exchanged (1) | Pro Forma Adjustments | Pro Forma Condensed Consolidated | |||||||||||
Revenue: | ||||||||||||||
Services and other revenue - DISH Network | $ | 918,301 | $ | (386,149 | ) | $ | 3,879 | (2) | $ | 536,031 | ||||
Services and other revenue - other | 1,103,928 | (10,254 | ) | — | 1,093,674 | |||||||||
Equipment revenue - DISH Network | 763,184 | (752,432 | ) | — | 10,752 | |||||||||
Equipment revenue - other | 358,301 | (146,346 | ) | — | 211,955 | |||||||||
Total revenue | 3,143,714 | (1,295,181 | ) | 3,879 | 1,852,412 | |||||||||
Costs and Expenses: | ||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 856,065 | (282,725 | ) | 6,311 | (3) | 579,651 | ||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | 948,655 | (752,872 | ) | — | 195,783 | |||||||||
Selling, general and administrative expenses | 374,116 | (50,751 | ) | (999 | ) | (4) | 322,366 | |||||||
Research and development expenses | 78,287 | (51,910 | ) | — | 26,377 | |||||||||
Depreciation and amortization | 528,158 | (67,223 | ) | — | 460,935 | |||||||||
Impairment of long-lived assets | 2,400 | (2,400 | ) | — | — | |||||||||
Total costs and expenses | 2,787,681 | (1,207,881 | ) | 5,312 | 1,585,112 | |||||||||
Operating income (loss) | 356,033 | (87,300 | ) | (1,433 | ) | 267,300 | ||||||||
Other Income (Expense): | ||||||||||||||
Interest income | 10,429 | (3 | ) | — | 10,426 | |||||||||
Interest expense, net of amounts capitalized | (122,066 | ) | 831 | — | (121,235 | ) | ||||||||
Loss from partial redemption of debt | (5,044 | ) | — | — | (5,044 | ) | ||||||||
Gains (losses) on marketable investment securities, net | (6,443 | ) | — | — | (6,443 | ) | ||||||||
Other-than-temporary impairment loss on available-for-sale securities | (11,226 | ) | — | — | (11,226 | ) | ||||||||
Equity in earnings (losses) of unconsolidated affiliates, net | 1,895 | (4,372 | ) | — | (2,477 | ) | ||||||||
Other, net | (2,006 | ) | 1,038 | — | (968 | ) | ||||||||
Total other expense, net | (134,461 | ) | (2,506 | ) | — | (136,967 | ) | |||||||
Income (loss) before income taxes | 221,572 | (89,806 | ) | (1,433 | ) | 130,333 | ||||||||
Income tax (provision) benefit, net | (72,201 | ) | (3,735 | ) | 24,439 | (5) | (51,497 | ) | ||||||
Net income | 149,371 | (93,541 | ) | 23,006 | 78,836 | |||||||||
Less: Net loss attributable to noncontrolling interest in HSS Tracking Stock | (5,603 | ) | — | 5,603 | (6) | — | ||||||||
Less: Net income attributable to other noncontrolling interests | 1,617 | — | — | 1,617 | ||||||||||
Net income (loss) attributable to EchoStar | 153,357 | (93,541 | ) | 17,403 | 77,219 | |||||||||
Less: Net loss attributable to Hughes Retail Preferred Tracking Stock | (10,343 | ) | — | 10,343 | (7) | — | ||||||||
Net income (loss) attributable to EchoStar common stock | $ | 163,700 | $ | (93,541 | ) | $ | 7,060 | $ | 77,219 | |||||
Weighted-average common shares outstanding - Class A and B common stock: | ||||||||||||||
Basic | 92,397 | 92,397 | ||||||||||||
Diluted | 93,466 | 93,466 | ||||||||||||
Earnings per share - Class A and B common stock: | ||||||||||||||
Basic | $ | 1.77 | $ | 0.84 | ||||||||||
Diluted | $ | 1.75 | $ | 0.83 | ||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
3
ECHOSTAR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
For the Year Ended December 31, 2014 | ||||||||||||||
Historical Condensed Consolidated | Entities Exchanged (1) | Pro Forma Adjustments | Pro Forma Condensed Consolidated | |||||||||||
Revenue: | ||||||||||||||
Services and other revenue - DISH Network | $ | 828,612 | $ | (326,642 | ) | $ | 3,767 | (2) | $ | 505,737 | ||||
Services and other revenue - other | 1,096,938 | (23,259 | ) | — | 1,073,679 | |||||||||
Equipment revenue - DISH Network | 1,145,979 | (1,114,036 | ) | — | 31,943 | |||||||||
Equipment revenue - other | 374,049 | (161,824 | ) | — | 212,225 | |||||||||
Total revenue | 3,445,578 | (1,625,761 | ) | 3,767 | 1,823,584 | |||||||||
Costs and Expenses: | ||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 838,918 | (246,437 | ) | 6,129 | (3) | 598,610 | ||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | 1,288,998 | (1,080,486 | ) | — | 208,512 | |||||||||
Selling, general and administrative expenses | 372,010 | (57,232 | ) | (1,176 | ) | (4) | 313,602 | |||||||
Research and development expenses | 60,886 | (40,695 | ) | — | 20,191 | |||||||||
Depreciation and amortization | 556,676 | (70,781 | ) | — | 485,895 | |||||||||
Total costs and expenses | 3,117,488 | (1,495,631 | ) | 4,953 | 1,626,810 | |||||||||
Operating income (loss) | 328,090 | (130,130 | ) | (1,186 | ) | 196,774 | ||||||||
Other Income (Expense): | ||||||||||||||
Interest income | 9,102 | (18 | ) | — | 9,084 | |||||||||
Interest expense, net of amounts capitalized | (171,349 | ) | 3,002 | — | (168,347 | ) | ||||||||
Gains (losses) on marketable investment securities, net | 41 | — | — | 41 | ||||||||||
Equity in earnings (losses) of unconsolidated affiliates, net | 8,198 | 4,389 | — | 12,587 | ||||||||||
Other, net | 4,251 | (1,089 | ) | — | 3,162 | |||||||||
Total other expense, net | (149,757 | ) | 6,284 | — | (143,473 | ) | ||||||||
Income (loss) before income taxes | 178,333 | (123,846 | ) | (1,186 | ) | 53,301 | ||||||||
Income tax (provision) benefit, net | (30,784 | ) | 11,805 | 16,484 | (5) | (2,495 | ) | |||||||
Net income | 147,549 | (112,041 | ) | 15,298 | 50,806 | |||||||||
Less: Net loss attributable to noncontrolling interest in HSS Tracking Stock | (6,714 | ) | — | 6,714 | (6) | — | ||||||||
Less: Net income attributable to other noncontrolling interests | 1,389 | — | — | 1,389 | ||||||||||
Net income (loss) attributable to EchoStar | 152,874 | (112,041 | ) | 8,584 | 49,417 | |||||||||
Less: Net loss attributable to Hughes Retail Preferred Tracking Stock | (12,394 | ) | — | 12,394 | (7) | — | ||||||||
Net income (loss) attributable to EchoStar common stock | $ | 165,268 | $ | (112,041 | ) | $ | (3,810 | ) | $ | 49,417 | ||||
Weighted-average common shares outstanding - Class A and B common stock: | ||||||||||||||
Basic | 91,190 | 91,190 | ||||||||||||
Diluted | 92,616 | 92,616 | ||||||||||||
Earnings per share - Class A and B common stock: | ||||||||||||||
Basic | $ | 1.81 | $ | 0.54 | ||||||||||
Diluted | $ | 1.78 | $ | 0.53 | ||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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ECHOSTAR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
As of December 31, 2016 | ||||||||||||||
Historical Condensed Consolidated | Entities Exchanged (1) | Pro Forma Adjustments | Pro Forma Condensed Consolidated | |||||||||||
Assets | ||||||||||||||
Current Assets: | ||||||||||||||
Cash and cash equivalents | $ | 2,571,143 | $ | (778 | ) | $ | — | $ | 2,570,365 | |||||
Marketable investment securities, at fair value | 522,516 | — | — | 522,516 | ||||||||||
Trade accounts receivable, net of allowance for doubtful accounts | 209,788 | (27,261 | ) | — | 182,527 | |||||||||
Trade accounts receivable - DISH Network, net of allowance for doubtful accounts of zero | 278,615 | (259,198 | ) | — | 19,417 | |||||||||
Inventory | 72,444 | (9,824 | ) | — | 62,620 | |||||||||
Prepaids and deposits | 57,919 | (14,463 | ) | — | 43,456 | |||||||||
Other current assets | 10,862 | — | — | 10,862 | ||||||||||
Total current assets | 3,723,287 | (311,524 | ) | — | 3,411,763 | |||||||||
Noncurrent Assets: | ||||||||||||||
Restricted cash and marketable investment securities | 12,926 | — | — | 12,926 | ||||||||||
Property and equipment, net of accumulated depreciation | 3,669,303 | (271,107 | ) | — | 3,398,196 | |||||||||
Regulatory authorizations, net | 544,633 | — | — | 544,633 | ||||||||||
Goodwill | 510,630 | (6,457 | ) | — | 504,173 | |||||||||
Other intangible assets, net | 88,454 | (7,720 | ) | — | 80,734 | |||||||||
Investments in unconsolidated entities | 197,219 | (26,203 | ) | — | 171,016 | |||||||||
Other receivable - DISH Network | 90,586 | (2,334 | ) | — | 88,252 | |||||||||
Other noncurrent assets, net | 171,821 | (5,436 | ) | — | 166,385 | |||||||||
Total noncurrent assets | 5,285,572 | (319,257 | ) | — | 4,966,315 | |||||||||
Total assets | $ | 9,008,859 | $ | (630,781 | ) | $ | — | $ | 8,378,078 | |||||
Liabilities and Stockholders’ Equity | ||||||||||||||
Current Liabilities: | ||||||||||||||
Trade accounts payable | $ | 189,815 | $ | (61,318 | ) | $ | — | $ | 128,497 | |||||
Trade accounts payable - DISH Network | 5,032 | (3,960 | ) | — | 1,072 | |||||||||
Current portion of long-term debt and capital lease obligations | 37,307 | (4,323 | ) | — | 32,984 | |||||||||
Deferred revenue and prepayments | 62,956 | (2,967 | ) | — | 59,989 | |||||||||
Accrued compensation | 58,106 | (4,652 | ) | — | 53,454 | |||||||||
Accrued royalties | 23,199 | (23,199 | ) | — | — | |||||||||
Accrued interest | 46,504 | — | — | 46,504 | ||||||||||
Accrued expenses and other | 108,519 | (80,703 | ) | — | 27,816 | |||||||||
Total current liabilities | 531,438 | (181,122 | ) | — | 350,316 | |||||||||
Noncurrent Liabilities: | ||||||||||||||
Long-term debt and capital lease obligations, net of unamortized debt issuance costs | 3,622,879 | (416 | ) | — | 3,622,463 | |||||||||
Deferred tax liabilities, net | 754,020 | (13,465 | ) | (9,584 | ) | (8) | 730,971 | |||||||
Other noncurrent liabilities | 93,717 | (18,127 | ) | — | 75,590 | |||||||||
Total noncurrent liabilities | 4,470,616 | (32,008 | ) | (9,584 | ) | 4,429,024 | ||||||||
Total liabilities | 5,002,054 | (213,130 | ) | (9,584 | ) | 4,779,340 | ||||||||
Commitments and Contingencies | ||||||||||||||
Stockholders’ Equity: | ||||||||||||||
Preferred Stock: | ||||||||||||||
Hughes Retail Preferred Tracking Stock | 6 | — | (6 | ) | (9) | — | ||||||||
Common stock: | ||||||||||||||
Class A common stock | 52 | — | — | 52 | ||||||||||
Class B common stock | 48 | — | — | 48 | ||||||||||
Class C common stock | — | — | — | — | ||||||||||
Class D common stock | — | — | — | — | ||||||||||
Additional paid-in capital | 3,828,677 | (406,708 | ) | 34,203 | (9) | 3,456,172 | ||||||||
Accumulated other comprehensive loss | (124,803 | ) | 3,594 | — | (121,209 | ) | ||||||||
Accumulated earnings (deficit) | 314,247 | (14,537 | ) | 49,297 | (9) | 349,007 | ||||||||
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Treasury stock, at cost | (98,162 | ) | — | — | (98,162 | ) | ||||||||
Total EchoStar stockholders’ equity | 3,920,065 | (417,651 | ) | 83,494 | 3,585,908 | |||||||||
Noncontrolling interest in HSS Tracking Stock | 73,910 | — | (73,910 | ) | (9) | — | ||||||||
Other noncontrolling interests | 12,830 | — | — | 12,830 | ||||||||||
Total stockholders’ equity | 4,006,805 | (417,651 | ) | 9,584 | 3,598,738 | |||||||||
Total liabilities and stockholders’ equity | $ | 9,008,859 | $ | (630,781 | ) | $ | — | $ | 8,378,078 | |||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Adjustments to the pro forma condensed consolidated statements of operations:
(1) | The adjustments set forth in the “Entities Exchanged” column represent the actual results of the subsidiaries of EchoStar that were exchanged in the Share Exchange with no further pro forma adjustments. |
(2) | Adjustments related to a new leasing arrangements with DISH Network related to certain Data Center services and certain office space. These are primarily real estate leases ranging from three to fifteen years and are subject to renewal terms. |
(3) | Adjustments for expenses related to new leasing arrangements with DISH Network related to certain Data Center services, satellite related services and certain office space. These leases range in term from three to fifteen years and are subject to renewal terms. |
(4) | Adjustments for expenses related to new leasing arrangements with DISH Network related to Data Center services, the elimination of nonrecurring transaction costs incurred during the year ended December 31, 2016 that are directly related to the Share Exchange and employee compensation for those terminated as result of the Share Exchange. |
(5) | Represents the tax impact associated with the pro forma adjustments at the applicable statutory income tax rates in effect in the respective tax jurisdictions during the periods presented. |
(6) | Reflects the removal of the noncontrolling interests portion of the HSSC Tracking Stock to EchoStar as a result of the retirement of the HSSC Tracking Stock. |
(7) | Represents the reversal of the 80% economic interest of the operating results of the Hughes Retail Group as a result of the retirement of the EchoStar Tracking Stock and HSSC Tracking Stock. |
Adjustments to the pro forma condensed consolidated balance sheet:
(8) | The adjustments to our deferred tax liabilities are to reflect the new value of these liabilities subsequent to the Share Exchange. |
(9) | Stockholders’ equity was adjusted for the retirement of the EchoStar Tracking Stock and HSSC Tracking Stock on March 1, 2017. |
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