EchoStar Announces Financial Results for Three and Nine Months Ending September 30, 2017

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Nov 08, 2017, 05:00 ET

ENGLEWOOD, Colo., Nov. 8, 2017 /PRNewswire/ -- EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three and nine months ending September 30, 2017.

Three Months Ending September 30, 2017 Financial Highlights:

Consolidated revenues of $481 million.
Consolidated net income from continuing operations of $35.9 million, consolidated net income attributable to EchoStar common stock of $34.7 million and diluted earnings per share of $0.36.
Consolidated EBITDA of $220 million (see reconciliation of this non-GAAP measure below).

Nine Months Ended September 30, 2017 Financial Highlights:

Consolidated revenue of $1.38 billion.
Consolidated net income from continuing operations of $73.2 million, consolidated net income attributable to EchoStar common stock of $80.5 million and diluted earnings per share of $0.83.
Consolidated EBITDA of $588 million (see reconciliation of this non-GAAP measure below).

Additional Highlights:

Approximately 1,140,000 Hughes broadband subscribers as of September 30, 2017.
Cash, cash equivalents and current marketable investment securities of $3.28 billion as of September 30, 2017

Starting with the quarter that ended March 31, 2017, we changed the way we present our segments. Previously, our business segments reflected an allocation of the costs of our corporate functions. Under our new presentation, these costs are no longer allocated to the operating segments and are now reported as part of the Corporate and Other segment (previously "All Other and Eliminations").

In addition, results of our EchoStar Technology segment, which was transferred to DISH Network Corporation in the Share Exchange transaction, are included in Discontinued Operations.

Set forth below is a table highlighting certain of EchoStar's segment results for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
	(Dollars in thousands)
Revenue
Hughes	$	380,061	$	355,876	$	1,072,143	$	1,021,451
EchoStar Satellite Services	97,093		101,480		295,785		305,919
Corporate & Other	4,079		2,690		11,532		7,308
Total	$	481,233	$	460,046	$	1,379,460	$	1,334,678

EBITDA
Hughes	$	131,817	$	125,522	$	342,693	$	353,505
EchoStar Satellite Services	78,345		84,257		241,873		257,181
Corporate & Other	9,699		(20,477)		3,472		(45,506)
Total	$	219,861	$	189,302	$	588,038	$	565,180

Net income (loss) attributable to EchoStar common stock	$	34,669	$	36,644	$	80,533	$	143,451
Diluted earnings per share (in dollars)	$	0.36	$	0.39	$	0.83	$	1.52
Net income from continuing operations	$	35,855	$	32,911	$	73,221	$	112,549

Capital expenditures from continuing operations	$	192,131	$	139,574	$	410,145	$	477,818

The following table reconciles total consolidated Net income to EBITDA.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
	(Dollars in thousands)
Net income	$	35,201	$	37,410	$	79,675	$	141,762

Interest income and expense, net	43,634		31,057		126,156		66,650
Income tax provision	6,082		17,394		9,073		61,258
Depreciation and amortization	134,822		108,549		379,939		324,743
Net (income) loss from discontinued operations	654		(4,499)		(6,454)		(29,213)
Net income attributable to noncontrolling interests	(532)		(609)		(351)		(20)
EBITDA	$	219,861	$	189,302	$	588,038	$	565,180

Note on Use of Non-GAAP Financial Measures

EBITDA is defined as "Net income" excluding "Interest expense, net of amounts capitalized," "Interest income", "Income tax provision" and "Depreciation and amortization." EBITDA is not a measure determined in accordance with US GAAP. This non-GAAP measure is reconciled to net income in the table above. EBITDA should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with GAAP. EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes EBITDA provides meaningful supplemental information regarding the underlying operating performance of our business. Management also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties to evaluate the performance of companies in our industry.

The consolidated financial statements of EchoStar for the periods ended September 30, 2017 and 2016 are attached to this press release. Detailed financial data and other information are available in EchoStar's Quarterly Report on Form 10-Q for the period ended September 30, 2017 filed today with the Securities and Exchange Commission.

EchoStar will host its earnings conference call on Wednesday, November 8, 2017 at 11:00 a.m. Eastern Time. The call-in numbers are (877) 815-1625 (toll-free) and (716) 247-5178 (international), Conference ID # 5279369.

About EchoStar Corporation

EchoStar Corporation (NASDAQ: SATS) is a premier global provider of satellite communications solutions. Headquartered in Englewood, Colo., and conducting business around the globe, EchoStar is a pioneer in secure communications technologies through its Hughes Network Systems and EchoStar Satellite Services business segments.

Safe Harbor Statement under the US 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 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. We assume no responsibility for the accuracy of forward-looking statements or information or for updating forward-looking information or statements. These statements are subject to certain risks, uncertainties, and assumptions. See "Risk Factors" in EchoStar's Annual Report on Form 10-K for the period ended December 31, 2016 and Quarterly Report on Form 10-Q for the period ended September 30, 2017, each as filed with the Securities and Exchange Commission and in the other documents EchoStar files with the Securities and Exchange Commission from time to time.

ECHOSTAR CORPORATION Condensed Consolidated Balance Sheets (Dollars in thousands, except per-share amounts)


	As of
		September 30, 2017		December 31, 2016
Assets
Current Assets:
Cash and cash equivalents		$	2,798,359	$	2,570,365
Marketable investment securities, at fair value		485,035		522,516
Trade accounts receivable, net of allowance for doubtful accounts of $13,211 and $12,956, respectively		192,387		182,527
Trade accounts receivable - DISH Network, net of allowance for doubtful accounts of zero		52,512		19,417
Inventory		91,232		62,620
Prepaids and deposits		53,536		43,456
Other current assets		12,746		10,862
Current assets of discontinued operations		145		311,524
Total current assets		3,685,952		3,723,287
Noncurrent Assets:
Restricted cash and marketable investment securities		13,736		12,926
Property and equipment, net of accumulated depreciation of $2,551,678 and $2,598,492, respectively		3,530,459		3,398,195
Regulatory authorizations, net		545,557		544,633
Goodwill		504,173		504,173
Other intangible assets, net		62,635		80,734
Investments in unconsolidated entities		165,290		171,016
Other receivable - DISH Network		92,133		90,586
Other noncurrent assets, net		207,221		166,385
Noncurrent assets of discontinued operations		—		316,924
Total noncurrent assets		5,121,204		5,285,572
Total assets		$	8,807,156	$	9,008,859
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable		$	120,436	$	170,297
Trade accounts payable - DISH Network		6,556		1,072
Current portion of long-term debt and capital lease obligations		38,407		32,984
Deferred revenue and prepayments		56,285		59,989
Accrued interest		57,837		46,487
Accrued compensation		37,096		53,454
Accrued expenses and other		110,872		95,726
Current liabilities of discontinued operations		542		71,429
Total current liabilities		428,031		531,438
Noncurrent Liabilities:
Long-term debt and capital lease obligations, net of unamortized debt issuance costs		3,605,715		3,622,463
Deferred tax liabilities, net		745,965		746,667
Other noncurrent liabilities		131,626		90,785
Noncurrent liabilities of discontinued operations		—		10,701
Total noncurrent liabilities		4,483,306		4,470,616
Total liabilities		4,911,337		5,002,054
Commitments and Contingencies (Note 14)
Stockholders' Equity:
Preferred stock, $.001 par value, 20,000,000 shares authorized:
Hughes Retail Preferred Tracking Stock, $.001 par value, zero authorized, issued and outstanding at September 30, 2017 and 13,000,000 shares authorized and 6,290,499 issued and outstanding at December 31, 2016		—		6
Common stock, $.001 par value, 4,000,000,000 shares authorized:
Class A common stock, $.001 par value, 1,600,000,000 shares authorized, 53,564,095 shares issued and 48,031,777 shares outstanding at September 30, 2017 and 52,243,465 shares issued and 46,711,147 shares outstanding at December 31, 2016		54		52
Class B common stock, $.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at each of September 30, 2017 and December 31, 2016		48		48
Class C common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2017 and December 31, 2016		—		—
Class D common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2017 and December 31, 2016		—		—
Additional paid-in capital		3,660,696		3,828,677
Accumulated other comprehensive loss		(88,732)		(124,803)
Accumulated earnings		408,079		314,247
Treasury stock, at cost		(98,162)		(98,162)
Total EchoStar stockholders' equity		3,881,983		3,920,065
Noncontrolling interest in HSS Tracking Stock		—		73,910
Other noncontrolling interests		13,836		12,830
Total stockholders' equity		3,895,819		4,006,805
Total liabilities and stockholders' equity		$	8,807,156	$	9,008,859

ECHOSTAR CORPORATION Condensed Consolidated Statements of Operations (In thousands)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Revenue:
Services and other revenue - DISH Network	$	111,135	$	115,127	$	339,824	$	347,440
Services and other revenue - other	310,973		276,280		865,817		820,149
Equipment revenue - DISH Network	126		2,138		175		7,008
Equipment revenue - other	58,999		66,501		173,644		160,081
Total revenue	481,233		460,046		1,379,460		1,334,678
Costs and Expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	138,641		131,594		404,448		384,942
Cost of sales - equipment (exclusive of depreciation and amortization)	52,051		53,599		153,854		143,252
Selling, general and administrative expenses	91,003		80,672		263,820		240,454
Research and development expenses	8,302		9,030		23,444		23,524
Depreciation and amortization	134,822		108,549		379,939		324,743
Total costs and expenses	424,819		383,444		1,225,505		1,116,915
Operating income	56,414		76,602		153,955		217,763

Other Income (Expense):
Interest income	12,012		6,259		30,342		13,726
Interest expense, net of amounts capitalized	(55,646)		(37,316)		(156,498)		(80,376)
Gains on investments, net	20,090		230		33,962		8,179
Other-than-temporary impairment loss on available-for-sale securities	—		—		(3,298)		—
Equity in earnings of unconsolidated affiliates, net	4,381		4,166		15,620		8,984
Other, net	4,686		364		8,211		5,531
Total other expense, net	(14,477)		(26,297)		(71,661)		(43,956)
Income from continuing operations before income taxes	41,937		50,305		82,294		173,807
Income tax provision	(6,082)		(17,394)		(9,073)		(61,258)
Net income from continuing operations	35,855		32,911		73,221		112,549
Net income (loss) from discontinued operations	(654)		4,499		6,454		29,213
Net income	35,201		37,410		79,675		141,762
Less: Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock	—		85		(655)		(926)
Less: Net income attributable to other noncontrolling interests	532		524		1,006		946
Net income attributable to EchoStar	34,669		36,801		79,324		141,742
Less: Net income (loss) attributable to Hughes Retail Preferred Tracking Stock	—		157		(1,209)		(1,709)
Net income attributable to EchoStar common stock	$	34,669	$	36,644	$	80,533	$	143,451

Amounts attributable to EchoStar common stock:
Net income from continuing operations	$	35,323	$	32,145	$	74,079	$	114,238
Net income (loss) from discontinued operations	(654)		4,499		6,454		29,213
Net income attributable to EchoStar common stock	$	34,669	$	36,644	$	80,533	$	143,451

Weighted-average common shares outstanding - Class A and B common stock:
Basic	95,656		93,898		95,316		93,661
Diluted	96,890		94,401		96,626		94,189

Earnings (loss) per share - Class A and B common stock:
Basic:
Continuing operations	$	0.37	$	0.34	$	0.78	$	1.22
Discontinued operations	(0.01)		0.05		0.06		0.31
Total basic earnings per share	$	0.36	$	0.39	$	0.84	$	1.53
Diluted:
Continuing operations	$	0.36	$	0.34	$	0.77	$	1.21
Discontinued operations	—		0.05		0.06		0.31
Total diluted earnings per share	$	0.36	$	0.39	$	0.83	$	1.52

ECHOSTAR CORPORATION Condensed Consolidated Statements of Cash Flows (In thousands)


	For the Nine Months Ended September 30,
	2017		2016
Cash Flows from Operating Activities:
Net income	$	79,675	$	141,762
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	391,598		370,872
Equity in earnings of unconsolidated affiliates, net	(14,461)		(11,181)
Gain and impairment on investments, net	(30,664)		(8,179)
Stock-based compensation	7,169		11,953
Deferred tax provision	7,924		71,422
Dividends received from unconsolidated entities	15,000		15,000
Proceeds from sale of trading securities	8,922		7,140
Changes in current assets and current liabilities, net	144,677		(47,013)
Changes in noncurrent assets and noncurrent liabilities, net	(23,474)		8,097
Other, net	5,570		14,836
Net cash flows from operating activities	591,936		574,709
Cash Flows from Investing Activities:
Purchases of marketable investment securities	(319,912)		(883,288)
Sales and maturities of marketable investment securities	376,648		643,865
Expenditures for property and equipment	(422,661)		(533,669)
Refunds and other receipts related to capital expenditures	—		24,087
Changes in restricted cash and marketable investment securities	(810)		7,351
Investments in unconsolidated entities	—		(1,636)
Sale of investment in unconsolidated entity	17,781		—
Expenditures for externally marketed software	(25,447)		(17,991)
Other, net	—		1,462
Net cash flows from investing activities	(374,401)		(759,819)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt	—		1,500,000
Payments of debt issuance costs	(414)		(6,275)
Repayment of debt and capital lease obligations	(26,394)		(30,615)
Net proceeds from Class A common stock options exercised	33,156		4,679
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan	6,938		11,478
Cash exchanged for Tracking Stock	(651)		—
Other, net	(3,968)		(3,373)
Net cash flows from financing activities	8,667		1,475,894
Effect of exchange rates on cash and cash equivalents	1,014		684
Net increase in cash and cash equivalents	227,216		1,291,468
Cash and cash equivalents, beginning of period	2,571,143		924,240
Cash and cash equivalents, end of period	$	2,798,359	$	2,215,708

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest (including capitalized interest)	$	183,451	$	97,044
Capitalized interest	$	45,496	$	70,386
Cash paid for income taxes	$	10,071	$	9,187
Employee benefits paid in Class A common stock	$	11,200	$	11,126
Property and equipment financed under capital lease obligations	$	8,423	$	7,172
Increase (decrease) in capital expenditures included in accounts payable, net	$	(3,494)	$	21,951
Capitalized in-orbit incentive obligations	$	43,890	$	—
Noncash net assets exchanged for Tracking Stock	$	299,425	$	—