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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020.
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 001-33807
EchoStar Corporation
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
Nevada | | 26-1232727 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | |
100 Inverness Terrace East, | Englewood, | Colorado | | 80112-5308 |
(Address of principal executive offices) | | (Zip Code) |
| | | | |
(303) | 706-4000 | | | Not Applicable |
(Registrant’s telephone number, including area code) | | (Former name, former address and former fiscal year, if changed since last report) |
| | | | |
Securities registered pursuant to Section 12(b) of the Act: | | |
Class A common stock | $0.001 par value | | The NASDAQ Stock Market LLC |
(Title of each class) | | (Name of each exchange on which registered) |
SATS | | |
(Ticker symbol) | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| | | | | | | | | | | | | | | | | | |
Large accelerated filer | | ☒ | Accelerated filer | ☐ | Emerging growth company | ☐ |
Non-accelerated filer | | ☐ | Smaller reporting company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 29, 2020, the registrant’s outstanding common stock consisted of 50,458,521 shares of Class A common stock and 47,687,039 shares of Class B common stock, each $0.001 par value.
TABLE OF CONTENTS
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about our estimates, expectations, plans, objectives, strategies, financial condition, expected impact of regulatory developments and legal proceedings, opportunities in our industries and businesses and other trends and projections for the next fiscal quarter and beyond. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements may also be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” “continue,” “future,” “will,” “would,” “could,” “can,” “may” and similar terms. These forward-looking statements are based on information available to us as of the date of this Form 10-Q and represent management’s current views and assumptions. Forward-looking statements are not guarantees of future performance, events or results and involve potential known and unknown risks, uncertainties and other factors, many of which may be beyond our control and may pose a risk to our operating and financial condition. Accordingly, actual performance, events or results could differ materially from those expressed or implied in the forward-looking statements due to a number of factors including, but not limited to:
•significant risks related to the construction and operation of our satellites, such as the risk of not being able to timely complete the construction, or a material malfunction on one or more, of our satellites and our general lack of commercial insurance coverage on our satellites;
•our ability and the ability of third parties with whom we engage in order to operate our business, including customers, suppliers, vendors, financing sources, governmental entities and others, to successfully or fully operate as a result of outbreaks of viruses or widespread illness, including existing, continuing and future impacts and consequences of the COVID-19 pandemic caused by the novel coronavirus;
•our ability to implement and/or realize benefits of our domestic and/or international investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions;
•legal proceedings relating to the BSS Transaction or AGR (each as defined herein) matter, which could result in substantial costs and material adverse effects on our business, results of operations, financial condition and prospects;
•our ability to realize the anticipated benefits of our current satellites and any future satellite we may construct or acquire;
•risks related to our foreign operations and other uncertainties associated with doing business internationally, including changes in foreign exchange rates between foreign currencies and the United States (“U.S.”) dollar, economic instability, political disturbances and the consequences of being subject to foreign regulation and foreign legal proceedings, including increased operations costs and potential fines and penalties for violations, which may be substantial;
•the failure of third-party providers of components, manufacturing, installation services and customer support services to appropriately deliver the contracted goods or services; and
•our ability to bring advanced technologies to market to keep pace with our customers and competitors.
Other factors that could cause or contribute to such differences include, but are not limited to, those discussed under the caption Risk Factors in Part II, Item 1A of this Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”), those discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this Form 10-Q and in Part II, Item 7 of our Form 10-K and those discussed in other documents we file with the SEC.
All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. Investors should consider the risks and uncertainties described herein and should not place undue reliance on any forward-looking statements. We do not undertake, and specifically disclaim, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Although we believe that the expectations reflected in any forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievements. We do not assume responsibility for the accuracy and completeness of any forward-looking statements. We assume no responsibility for updating
forward-looking information contained or incorporated by reference herein or in any documents we file with the SEC, except as required by law.
Should one or more of the risks or uncertainties described herein or in any documents we file with the SEC occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | |
| | As of |
| | September 30, 2020 | | December 31, 2019 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 555,550 | | | $ | 1,519,431 | |
Marketable investment securities | | 1,950,804 | | | 940,623 | |
Trade accounts receivable and contract assets, net | | 190,950 | | | 196,629 | |
Other current assets, net | | 192,724 | | | 179,531 | |
Total current assets | | 2,890,028 | | | 2,836,214 | |
Non-current assets: | | | | |
Property and equipment, net | | 2,372,594 | | | 2,528,738 | |
Operating lease right-of-use assets | | 129,073 | | | 114,042 | |
Goodwill | | 508,660 | | | 506,953 | |
Regulatory authorizations, net | | 475,824 | | | 478,598 | |
Other intangible assets, net | | 20,550 | | | 29,507 | |
Other investments, net | | 284,238 | | | 325,405 | |
Other non-current assets, net | | 344,569 | | | 334,841 | |
Total non-current assets | | 4,135,508 | | | 4,318,084 | |
Total assets | | $ | 7,025,536 | | | $ | 7,154,298 | |
| | | | |
Liabilities and Stockholders’ Equity | | | | |
Current liabilities: | | | | |
Trade accounts payable | | $ | 111,099 | | | $ | 124,080 | |
Current portion of long-term debt, net | | 897,303 | | | — | |
Contract liabilities | | 89,622 | | | 101,060 | |
Accrued expenses and other current liabilities | | 276,703 | | | 270,879 | |
Total current liabilities | | 1,374,727 | | | 496,019 | |
Non-current liabilities: | | | | |
Long-term debt, net | | 1,495,078 | | | 2,389,168 | |
Deferred tax liabilities, net | | 352,948 | | | 351,692 | |
Operating lease liabilities | | 115,376 | | | 96,941 | |
Other non-current liabilities | | 74,271 | | | 74,925 | |
Total non-current liabilities | | 2,037,673 | | | 2,912,726 | |
Total liabilities | | 3,412,400 | | | 3,408,745 | |
| | | | |
Commitments and contingencies | | | | |
| | | | | | | | | | | | | | |
Stockholders’ equity: | | | | |
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both September 30, 2020 and December 31, 2019 | | — | | | — | |
Common stock, $0.001 par value, 4,000,000,000 shares authorized: | | | | |
Class A common stock, $0.001 par value, 1,600,000,000 shares authorized, 57,140,432 shares issued and 50,458,512 shares outstanding at September 30, 2020 and 56,592,251 shares issued and 50,107,330 shares outstanding at December 31, 2019 | | 57 | | | 57 | |
Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at both September 30, 2020 and December 31, 2019 | | 48 | | | 48 | |
Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both September 30, 2020 and December 31, 2019 | | — | | | — | |
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both September 30, 2020 and December 31, 2019 | | — | | | — | |
Additional paid-in capital | | 3,317,868 | | | 3,290,483 | |
Accumulated other comprehensive income (loss) | | (209,538) | | | (122,138) | |
Accumulated earnings (losses) | | 583,474 | | | 632,809 | |
Treasury stock, at cost | | (137,347) | | | (131,454) | |
Total EchoStar Corporation stockholders’ equity | | 3,554,562 | | | 3,669,805 | |
Non-controlling interests | | 58,574 | | | 75,748 | |
Total stockholders’ equity | | 3,613,136 | | | 3,745,553 | |
Total liabilities and stockholders’ equity | | $ | 7,025,536 | | | $ | 7,154,298 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
1
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Revenue: | | | | | | | | |
Services and other revenue | | $ | 426,532 | | | $ | 406,537 | | | $ | 1,251,932 | | | $ | 1,211,991 | |
Equipment revenue | | 46,970 | | | 65,725 | | | 146,702 | | | 175,084 | |
Total revenue | | 473,502 | | | 472,262 | | | 1,398,634 | | | 1,387,075 | |
Costs and expenses: | | | | | | | | |
Cost of sales - services and other (exclusive of depreciation and amortization) | | 146,577 | | | 143,842 | | | 432,848 | | | 429,869 | |
Cost of sales - equipment (exclusive of depreciation and amortization) | | 37,079 | | | 51,188 | | | 115,529 | | | 142,744 | |
Selling, general and administrative expenses | | 115,358 | | | 122,629 | | | 354,437 | | | 383,952 | |
Research and development expenses | | 7,676 | | | 6,136 | | | 21,378 | | | 19,411 | |
Depreciation and amortization | | 129,822 | | | 122,374 | | | 392,077 | | | 361,619 | |
Total costs and expenses | | 436,512 | | | 446,169 | | | 1,316,269 | | | 1,337,595 | |
Operating income (loss) | | 36,990 | | | 26,093 | | | 82,365 | | | 49,480 | |
Other income (expense): | | | | | | | | |
Interest income, net | | 7,364 | | | 17,175 | | | 33,707 | | | 64,817 | |
Interest expense, net of amounts capitalized | | (37,967) | | | (49,865) | | | (112,458) | | | (156,813) | |
Gains (losses) on investments, net | | 14,998 | | | 8,295 | | | (37,764) | | | 28,087 | |
Equity in earnings (losses) of unconsolidated affiliates, net | | (2,134) | | | (3,209) | | | (5,866) | | | (14,317) | |
Foreign currency transaction gains (losses), net | | 6,681 | | | (15,094) | | | (2,603) | | | (14,501) | |
Other, net | | 291 | | | (1,493) | | | (379) | | | (1,527) | |
Total other income (expense), net | | (10,767) | | | (44,191) | | | (125,363) | | | (94,254) | |
Income (loss) from continuing operations before income taxes | | 26,223 | | | (18,098) | | | (42,998) | | | (44,774) | |
Income tax benefit (provision), net | | (2,950) | | | (5,016) | | | (6,309) | | | (12,607) | |
Net income (loss) from continuing operations | | 23,273 | | | (23,114) | | | (49,307) | | | (57,381) | |
Net income (loss) from discontinued operations | | — | | | 2,008 | | | — | | | 46,223 | |
Net income (loss) | | 23,273 | | | (21,106) | | | (49,307) | | | (11,158) | |
Less: Net loss (income) attributable to non-controlling interests | | 2,167 | | | 2,797 | | | 9,040 | | | 1,359 | |
Net income (loss) attributable to EchoStar Corporation common stock | | $ | 25,440 | | | $ | (18,309) | | | $ | (40,267) | | | $ | (9,799) | |
| | | | | | | | |
Earnings (losses) per share - Class A and B common stock: | | | | | | | | |
Basic and diluted earnings (losses) from continuing operations per share | | $ | 0.26 | | | $ | (0.21) | | | $ | (0.41) | | | $ | (0.58) | |
Total basic and diluted earnings (losses) per share | | $ | 0.26 | | | $ | (0.19) | | | $ | (0.41) | | | $ | (0.10) | |
| | | | | | | | |
| | | | | | | | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the three months ended September 30, | | For the nine months ended September 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Net income (loss) | | $ | 23,273 | | | $ | (21,106) | | | $ | (49,307) | | | $ | (11,158) | |
Other comprehensive income (loss), net of tax: | | | | | | | | |
Foreign currency translation | | (11,585) | | | (14,539) | | | (112,100) | | | (10,732) | |
Unrealized gains (losses) on available-for-sale debt securities | | 27 | | | 8 | | | (248) | | | 3,299 | |
Other | | 6,900 | | | 2,367 | | | 4,322 | | | 1,435 | |
Amounts reclassified to net income (loss): | | | | | | | | |
Realized losses (gains) on available-for-sale debt securities | | (1) | | | — | | | (1) | | | (566) | |
Total other comprehensive income (loss), net of tax | | (4,659) | | | (12,164) | | | (108,027) | | | (6,564) | |
Comprehensive income (loss) | | 18,614 | | | (33,270) | | | (157,334) | | | (17,722) | |
Less: Comprehensive loss (income) attributable to non-controlling interests | | 4,098 | | | 2,797 | | | 29,667 | | | 1,359 | |
Comprehensive income (loss) attributable to EchoStar Corporation | | $ | 22,712 | | | $ | (30,473) | | | $ | (127,667) | | | $ | (16,363) | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Amounts in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Earnings (Losses) | | Treasury Stock, at cost | | Non-controlling Interests | | Total |
Balance, June 30, 2019 | | $ | 104 | | | $ | 3,777,499 | | | $ | (119,500) | | | $ | 704,236 | | | $ | (131,454) | | | $ | 12,066 | | | $ | 4,242,951 | |
Issuances of Class A common stock: | | | | | | | | | | | | | | |
Exercise of stock options | | — | | | 2,640 | | | — | | | — | | | — | | | — | | | 2,640 | |
| | | | | | | | | | | | | | |
Employee Stock Purchase Plan | | — | | | 2,650 | | | — | | | — | | | — | | | — | | | 2,650 | |
Stock-based compensation | | — | | | 2,287 | | | — | | | — | | | — | | | — | | | 2,287 | |
R&D tax credits utilized by DISH Network | | — | | | (13) | | | — | | | — | | | — | | | — | | | (13) | |
Purchase of non-controlling interest | | — | | | 1,833 | | | — | | | — | | | — | | | (1,833) | | | — | |
BSS Transaction | | — | | | (535,103) | | | — | | | — | | | — | | | — | | | (535,103) | |
Other comprehensive income (loss) | | — | | | — | | | (12,164) | | | — | | | — | | | — | | | (12,164) | |
Net income (loss) | | — | | | — | | | — | | | (18,309) | | | — | | | (2,797) | | | (21,106) | |
Other, net | | — | | | 15 | | | — | | | — | | | — | | | 1,758 | | | 1,773 | |
Balance, September 30, 2019 | | $ | 104 | | | $ | 3,251,808 | | | $ | (131,664) | | | $ | 685,927 | | | $ | (131,454) | | | $ | 9,194 | | | $ | 3,683,915 | |
| | | | | | | | | | | | | | |
Balance, June 30, 2020 | | $ | 105 | | | $ | 3,311,861 | | | $ | (206,810) | | | $ | 558,034 | | | $ | (137,347) | | | $ | 58,425 | | | $ | 3,584,268 | |
Issuances of Class A common stock: | | | | | | | | | | | | | | |
Exercise of stock options | | — | | | 477 | | | — | | | — | | | — | | | — | | | 477 | |
| | | | | | | | | | | | | | |
Employee Stock Purchase Plan | | — | | | 2,766 | | | — | | | — | | | — | | | — | | | 2,766 | |
Stock-based compensation | | — | | | 2,378 | | | — | | | — | | | — | | | — | | | 2,378 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Contribution by non-controlling interest holder | | — | | | — | | | — | | | — | | | — | | | 4,268 | | | 4,268 | |
Other comprehensive income (loss) | | — | | | — | | | (6,670) | | | — | | | — | | | (1,931) | | | (8,601) | |
Net income (loss) | | — | | | — | | | — | | | 25,440 | | | — | | | (2,167) | | | 23,273 | |
| | | | | | | | | | | | | | |
Other, net | | — | | | 386 | | | 3,942 | | | — | | | — | | | (21) | | | 4,307 | |
Balance, September 30, 2020 | | $ | 105 | | | $ | 3,317,868 | | | $ | (209,538) | | | $ | 583,474 | | | $ | (137,347) | | | $ | 58,574 | | | $ | 3,613,136 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Amounts in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Earnings (Losses) | | Treasury Stock, at cost | | Non-controlling Interests | | Total |
Balance, December 31, 2018 | | $ | 102 | | | $ | 3,702,522 | | | $ | (125,100) | | | $ | 694,129 | | | $ | (131,454) | | | $ | 15,275 | | | $ | 4,155,474 | |
Issuances of Class A common stock: | | | | | | | | | | | | | | |
Exercise of stock options | | 2 | | | 64,141 | | | — | | | — | | | — | | | — | | | 64,143 | |
Employee benefits | | — | | | 6,654 | | | — | | | — | | | — | | | — | | | 6,654 | |
Employee Stock Purchase Plan | | — | | | 7,724 | | | — | | | — | | | — | | | — | | | 7,724 | |
Stock-based compensation | | — | | | 7,120 | | | — | | | — | | | — | | | — | | | 7,120 | |
R&D tax credits utilized by DISH Network | | — | | | (432) | | | — | | | — | | | — | | | — | | | (432) | |
Purchase of non-controlling interest | | — | | | (833) | | | — | | | — | | | — | | | (6,480) | | | (7,313) | |
BSS Transaction | | — | | | (535,103) | | | — | | | — | | | — | | | — | | | (535,103) | |
Other comprehensive income (loss) | | — | | | — | | | (6,564) | | | — | | | — | | | — | | | (6,564) | |
Net income (loss) | | — | | | — | | | — | | | (9,799) | | | — | | | (1,359) | | | (11,158) | |
Other, net | | — | | | 15 | | | — | | | 1,597 | | | — | | | 1,758 | | | 3,370 | |
Balance, September 30, 2019 | | $ | 104 | | | $ | 3,251,808 | | | $ | (131,664) | | | $ | 685,927 | | | $ | (131,454) | | | $ | 9,194 | | | $ | 3,683,915 | |
| | | | | | | | | | | | | | |
Balance, December 31, 2019 | | $ | 105 | | | $ | 3,290,483 | | | $ | (122,138) | | | $ | 632,809 | | | $ | (131,454) | | | $ | 75,748 | | | $ | 3,745,553 | |
Cumulative effect of accounting changes | | — | | | — | | | — | | | (9,068) | | | — | | | (240) | | | (9,308) | |
Balance, January 1, 2020 | | 105 | | | 3,290,483 | | | (122,138) | | | 623,741 | | | (131,454) | | | 75,508 | | | 3,736,245 | |
Issuances of Class A common stock: | | | | | | | | | | | | | | |
Exercise of stock options | | — | | | 983 | | | — | | | — | | | — | | | — | | | 983 | |
Employee benefits | | — | | | 6,920 | | | — | | | — | | | — | | | — | | | 6,920 | |
Employee Stock Purchase Plan | | — | | | 8,066 | | | — | | | — | | | — | | | — | | | 8,066 | |
Stock-based compensation | | — | | | 6,887 | | | — | | | — | | | — | | | — | | | 6,887 | |
| | | | | | | | | | | | | | |
Issuance of equity and contribution of assets pursuant to the Yahsat JV formation | | — | | | 4,338 | | | — | | | — | | | — | | | (1,514) | | | 2,824 | |
Contribution by non-controlling interest holder | | — | | | | | — | | | — | | | — | | | 14,268 | | | 14,268 | |
Other comprehensive income (loss) | | — | | | | | (91,342) | | | — | | | — | | | (20,627) | | | (111,969) | |
Net income (loss) | | — | | | | | — | | | (40,267) | | | — | | | (9,040) | | | (49,307) | |
Treasury share repurchase | | — | | | | | — | | | — | | | (5,893) | | | | | (5,893) | |
Other, net | | — | | | 191 | | | 3,942 | | | — | | | — | | | (21) | | | 4,112 | |
Balance, September 30, 2020 | | $ | 105 | | | $ | 3,317,868 | | | $ | (209,538) | | | $ | 583,474 | | | $ | (137,347) | | | $ | 58,574 | | | $ | 3,613,136 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| | | | | | | | | | | | | | |
| | For the nine months ended September 30, |
| | 2020 | | 2019 |
Cash flows from operating activities: | | | | |
Net income (loss) | | $ | (49,307) | | | $ | (11,158) | |
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | | | | |
Depreciation and amortization | | 392,077 | | | 459,054 | |
Losses (gains) on investments, net | | 37,764 | | | (28,087) | |
Equity in losses (earnings) of unconsolidated affiliates, net | | 5,866 | | | 14,317 | |
Foreign currency transaction losses (gains), net | | 2,603 | | | 14,501 | |
Deferred tax provision (benefit), net | | 4,474 | | | 22,949 | |
Stock-based compensation | | 6,887 | | | 7,120 | |
Amortization of debt issuance costs | | 3,212 | | | 4,882 | |
Dividends received from unconsolidated affiliates | | — | | | 2,716 | |
Other, net | | (9,145) | | | 9,617 | |
Changes in assets and liabilities, net: | | | | |
Trade accounts receivable and contract assets, net | | (9,157) | | | (5,439) | |
Other current assets, net | | (21,090) | | | (42,140) | |
Trade accounts payable | | (17,824) | | | 18,180 | |
Contract liabilities | | (11,438) | | | 37,273 | |
Accrued expenses and other current liabilities | | 29,155 | | | 27,972 | |
Non-current assets and non-current liabilities, net | | 1,325 | | | 1,303 | |
Net cash flows from operating activities | | 365,402 | | | 533,060 | |
| | | | |
Cash flows from investing activities: | | | | |
Purchases of marketable investment securities | | (2,234,671) | | | (655,265) | |
Sales and maturities of marketable investment securities | | 1,231,790 | | | 1,988,078 | |
Expenditures for property and equipment | | (295,041) | | | (314,861) | |
Expenditures for externally marketed software | | (27,824) | | | (21,364) | |
Purchase of other investments | | (5,500) | | | — | |
Investments in unconsolidated affiliates | | — | | | (7,503) | |
| | | | |
Dividend received from unconsolidated affiliate | | — | | | 2,284 | |
| | | | |
| | | | |
Net cash flows from investing activities | | (1,331,246) | | | 991,369 | |
| | | | |
Cash flows from financing activities: | | | | |
Repurchase and maturity of the 2019 Senior Secured Notes | | — | | | (920,923) | |
Payment of finance lease obligations | | (606) | | | (29,135) | |
Payment of in-orbit incentive obligations | | (1,268) | | | (5,269) | |
Net proceeds from Class A common stock options exercised | | 983 | | | 64,143 | |
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan | | 8,066 | | | 7,724 | |
Treasury share purchase | | (5,893) | | | — | |
Contribution by non-controlling interest holder | | 14,268 | | | — | |
Purchase of non-controlling interest | | — | | | (7,313) | |
Other, net | | 998 | | | 758 | |
Net cash flows from financing activities | | 16,548 | | | (890,015) | |
| | | | |
Effect of exchange rates on cash and cash equivalents | | (8,348) | | | (411) | |
Net increase (decrease) in cash and cash equivalents | | (957,644) | | | 634,003 | |
Cash and cash equivalents, including restricted amounts, beginning of period | | 1,521,889 | | | 929,495 | |
Cash and cash equivalents, including restricted amounts, end of period | | $ | 564,245 | | | $ | 1,563,498 | |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
ECHOSTAR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ORGANIZATION AND BUSINESS ACTIVITIES
Principal Business
EchoStar Corporation (which, together with its subsidiaries, is referred to as “EchoStar,” the “Company,” “we,” “us” and “our”) is a holding company that was organized in October 2007 as a corporation under the laws of the State of Nevada and has operated as a separately traded public company from DISH Network Corporation (“DISH”) since 2008. Our Class A common stock is publicly traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “SATS.”
We are a global provider of broadband satellite technologies, broadband internet services for consumer customers, which include home and small to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and communications solutions for enterprise customers, which include aeronautical and government enterprises. We operate in the following two business segments:
•Hughes — which provides broadband satellite technologies and broadband internet services to domestic and international consumer customers and broadband network technologies, managed services, equipment, hardware, satellite services and communication solutions to service providers and enterprise customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.
•ESS — which uses certain of our owned and leased in-orbit satellites and related licenses to provide satellite services on a full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers.
Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Accounting, Real Estate and Legal) and other activities, such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments, that have not been assigned to our business segments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other. We also divide our operations by primary geographic market as follows: (i) North America (the U.S. and its territories, Mexico, and Canada); (ii) South and Central America; and (iii) Other (Asia, Africa, Australia, Europe, India, and the Middle East). Refer to Note 14. Segment Reporting for further detail.
In September 2019, pursuant to a master transaction agreement (the “Master Transaction Agreement”) with DISH and a wholly-owned subsidiary of DISH (“Merger Sub”), (i) we transferred certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily related to the former portion of our ESS segment that managed, marketed and provided (1) broadcast satellite services primarily to DISH and its subsidiaries (together with DISH, “DISH Network”) and our joint venture Dish Mexico, S. de R.L. de C.V. (“Dish Mexico”) and its subsidiaries, and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of our other businesses (collectively, the “BSS Business”) to one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), (ii) we distributed to each holder of shares of our Class A or Class B common stock entitled to receive consideration in the transaction an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to one share of BSS Common Stock for each share of our Class A or Class B common stock owned by such stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and with DISH then owning and operating the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).
Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. As a result of the BSS Transaction, the financial results of the BSS Business, except for certain real estate that transferred in the transaction, are presented as discontinued operations
ECHOSTAR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
and, as such, excluded from continuing operations and segment results for the three and nine months ended September 30, 2019, as presented in these unaudited Condensed Consolidated Financial Statements and the accompanying notes (collectively, the “Condensed Consolidated Financial Statements”).
All amounts in the following footnotes reference results from continuing operations unless otherwise noted. Refer to Note 4. Discontinued Operations for further detail.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES