Hughes Network Systems 8-K Results of Operations and Financial Condition

FOR IMMEDIATE RELEASE

Hughes Communications, Inc. Announces Fourth Quarter and

Full Year 2006 Results

Hughes Network Systems, LLC Full Year 2006 Revenues Increase 6% over

Full Year 2005 to $858 million;

EBITDA Increases 24% to $108 million, Adjusted EBITDA Increases 9% to $126 million;

Cash from Operations Doubles to $92 million

Germantown, Md., March 26, 2007—Hughes Communications, Inc. (NASDAQ: HUGH) (“Hughes”), the global leader in broadband satellite network solutions and services, today announced financial results for the fourth quarter and year ended December 31, 2006. Hughes’ consolidated operations are classified into three reportable segments: VSAT; Telecom Systems; and Other. The VSAT and Telecom Systems segments represent all the operations of Hughes Network Systems, LLC (“HNS”), Hughes’ principal operating subsidiary. The Other segment includes the financial results of Hughes Corporate, Electronic System Products, Inc., and investments in the other companies that were contributed from SkyTerra Communications, Inc. (“SkyTerra”), Hughes’ predecessor, prior to the separation of SkyTerra and Hughes in February 2006.

Hughes Network Systems, LLC (HNS)

“HNS had strong financial performance in 2006,” said Pradman Kaul, president and chief executive officer. “Revenues increased by 6% over 2005 to $858 million and our profitability in 2006 was also very strong. Operating Income for the year was $58 million, a growth of 27% over 2005; EBITDA increased by 24% to $108 million in 2006 over 2005, and Adjusted EBITDA grew by 9% to $126 million in the same period. We generated $92 million of cash from operations in 2006, which is more than double what we generated in 2005. The major contributors to revenue growth were our consumer/SMB and mobile satellite businesses. Consumer/SMB subscribers grew 19% from 274,400 at the end of 2005 to 327,500 at the end of 2006. Revenue in the consumer/SMB business also grew by 18% over FY 2005 to $292 million. Revenue from our mobile satellite business grew 47% in 2006 over 2005, primarily through revenue from Thuraya, Terrestar and ICO. Our North American and International enterprise businesses continued to be a steady revenue base contributing over half of HNS’ total revenue in 2006, with significant orders from Exxon Mobil, Walgreens, Saudi MOFA, Enlaces Integra, Rite Aid, GTECH, Federal Express, Telmex, Galaxy Broadband, Murphy Oil, Jack in the Box, Sonic, Real Time, Yum Brands, and others. Overall, we are pleased that we have delivered on our business plan both financially and strategically in 2006.”

“These impressive full-year results were a result of sustained quarterly performance, including a strong fourth quarter,” continued Kaul. “We grew fourth quarter 2006 revenue by 7% and EBITDA by 13% over the fourth quarter of 2005. Adjusted EBITDA for fourth quarter 2006 grew 11% over the same period in 2005. The growth engines in the fourth quarter were once again the consumer/SMB and mobile satellite businesses; the consumer/SMB revenue grew by 19% in the fourth quarter of 2006 over the fourth quarter of 2005, and the mobile satellite revenue more than doubled in the fourth quarter of 2006 over the fourth quarter of 2005.”

Set forth below is a table highlighting certain of HNS’ results for the three months and twelve months ended December 31, 2006 and December 31, 2005.

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Hughes Network Systems, LLC
	Three Months Ended December 31,				Twelve Months Ended December 31,
(Dollars in thousands)	2006		2005		2006		2005
Revenue
VSAT	$	215,465	$	212,398	$	767,237	$	738,320
Telecom Systems		27,850		15,733		90,988		68,589
Total	$	243,315	$	228,131	$	858,225	$	806,909
Operating income
VSAT	$	19,609	$	27,607	$	38,803	$	33,289
Telecom Systems		5,342		2,580		18,871		12,240
Total	$	24,951	$	30,187	$	57,674	$	45,529
Net income	$	11,194	$	21,943	$	19,102	$	24,048
EBITDA	$	44,700	$	39,533	$	108,003	$	87,324
Adjusted EBITDA	$	45,455	$	41,040	$	125,619	$	114,763

a) For the definitions of EBITDA and Adjusted EBITDA, see “Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures” below.

Commenting on the financial performance, Grant Barber, executive vice president and chief financial officer said, “As you can see from the table above, our revenue, EBITDA, and Adjusted EBITDA have shown steady improvement in the year ended December 2006 over the same period in 2005. Our ongoing focus on working capital management resulted in a net generation of $92 million of cash from operations in the year ended December 2006, a significant improvement over year ended December 2005. HNS ended full-year 2006 with a strong balance sheet including $203 million of cash and marketable securities for HNS. The consolidated cash and marketable securities balance for Hughes as of the year ended December 31, 2006 was $214 million. I am also pleased to report that in February 2007, we closed a $115 million senior unsecured credit facility with a syndicate of banks, further improving our liquidity.”

Selected Highlights

• Mobile Satellite Ventures, LP (MSV) and HNS announced the signing of a contract under which HNS will develop and supply MSV’s Satellite Base Transceiver Sub-System (S-BTS). The contract value is over $43 million. The S-BTS is the central element of the base station, which will facilitate communication between MSV’s satellites and terrestrial communications network.

• HNS announced that the European Telecommunications Standards Institute (ETSI) has approved the Internet Protocol over Satellite.v2 (IPoS.v2) air interface standard, which incorporates the DVB-S2 industry standard with ACM (Adaptive Coding and Modulation). IPoS is the most widely deployed satellite broadband standard in the world.

• Pilot sites in the US and UK have been chosen for the introduction of BPTV, an innovative digital signage media service with advertising and unique BP programming content shown on screens placed at gasoline stations, as well as in-store. The HughesNet™ Digital Media Solution that delivers BPTV programming encompasses the planning, installation, and remote operation of the screens, speakers and supporting broadband network infrastructure. Content broadcasting is delivered over Hughes’ cost-effective, highly-scalable HughesNet broadband service platform. In addition, Hughes provides program scheduling, management, and independent certification of advertisements—a critical issue for advertisers.

• The number of HughesNet consumer/SMB subscribers reached 327,500 at the end of the fourth quarter of 2006, a 19% growth over the same period in 2005.

• HNS announced that it has been named North American Space & Communications Company of the Year by global growth consulting company Frost & Sullivan. The prestigious award is presented

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only to companies that demonstrate and exemplify the criteria set forth by Frost & Sullivan, such as technology innovation, market potential, proof of success, strategic marketing, revenue growth, new market penetration, visibility, and leadership.

To summarize, Kaul said, “Our fundamental message is the same today as it was twelve months ago—a strong enterprise segment that provides the core revenue with loyal customers who commit to long-term contracts, with growth being fueled by the consumer/SMB and mobile satellite markets. Looking ahead, we expect to commence commercial service on SPACEWAY 3, our next-generation satellite, in early 2008. We expect that SPACEWAY 3 will substantially reduce our costs and open up new revenue opportunities going forward in the enterprise and consumer/SMB markets. We believe that all the above, combined with the strong financial performance in 2006, have positioned HNS very well for 2007 and beyond.”

Hughes Communications, Inc. (Hughes)

On January 1, 2006, Hughes consummated the purchase (the “January 2006 Acquisition”) from DTV Network Systems, Inc. of the remaining 50% of HNS. As a result of the January 2006 Acquisition, Hughes’ business has changed materially. For periods following the closing of the January 2006 Acquisition, the financial position and operating results of HNS are included in Hughes’ consolidated financial statements. From April 22, 2005 (the date of the acquisition of the initial 50% interest in HNS) through December 31, 2005, Hughes’ investment in HNS is recorded using the equity method of accounting.

Certain financial information for Hughes is shown below. The financial information for the three and twelve months ended December 31, 2006 is a combination of HNS and Other Businesses.

Hughes Communications, Inc.
	Three Months Ended December 31,						Three Months Ended December 31,
(Dollars in thousands)	2006			2005			2006			2005
Revenue
VSAT	$	215,465		$	—		$	767,237		$	—
Telecom Systems		27,850			—			90,988			—
Other		89			172			474			615
Total	$	243,404		$	172		$	858,699		$	615
Operating income (loss)
VSAT	$	19,609		$	—		$	38,803		$	—
Telecom Systems		5,342			—			18,871			—
Other		(1,756	)		(3,705	)		(5,032	)		(9,299	)
Total	$	23,195		$	(3,705	)	$	52,642		$	(9,299	)
Net income (loss)	$	9,457		$	57,669		$	(39,113	)	$	59,325
EBITDA	$	42,802		$	7,104		$	101,607		$	7,582

a) For the definition of EBITDA, see “Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures” below.

The net loss for the twelve months ended December 31, 2006 includes a tax charge of approximately $51.3 million in connection with the SkyTerra/Hughes separation. As Hughes is the accounting successor to SkyTerra, the taxes associated with the separation are included in Hughes’ results for the quarter ended March 31, 2006 and a portion of the deferred tax assets were utilized to satisfy the tax expense resulting from the taxable gain. This expense did not have an impact on Hughes’ cash flows from operations.

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Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

The following table reconciles the differences between HNS’ net income as determined under United States of America generally accepted accounting principles (GAAP), EBITDA and Adjusted EBITDA.

Hughes Network Systems, LLC
	Three Months Ended December 31,						Twelve Months Ended December 31,
(Dollars in thousands)	2006			2005			2006			2005
Net income	$11,194			$21,943			$ 19,102			$ 24,048
Add:
Interest expense		15,143			8,588			46,041			24,375
Foreign income tax expense		1,221			383			3,276			873
Depreciation and amortization		19,723			9,858			48,459			40,943
Less:
Interest income		(2,581	)		(1,239	)		(8,875	)		(2,915	)
EBITDA	$	44,700		$	39,533		$	108,003		$	87,324
Add:
Inventory provision related to shift to Broadband focus		—			—			11,879			—
HughesNet branding costs		—			—			1,454			—
Facilities costs		—			—			—			2,363
Transaction costs related to the April 2005 Acquisition		—			489			—			1,468
Elimination of payroll and benefits reflective of headcount reductions		—			—			—			5,418
Assumed net reduction of SPACEWAY operating costs		—			—			—			4,542
Restructuring charge		—			—			—			3,068
Benefits/insurance programs sponsored by DIRECTV		425			653			2,385			7,597
Legal expenses related to non-acquired business		—			—			—			2,178
Legal settlement and related fees—pre-April 2005 Acquisition		—			—			586			—
Equity incentive plan compensation		80			115			312			115
Management fee to Hughes Communications, Inc.		250			250			1,000			690
Adjusted EBITDA	$	45,455		$	41,040		$	125,619		$	114,763

The following table reconciles the differences between Hughes’ net income as determined under GAAP and EBITDA:

Hughes Communications, Inc.
	Three Months Ended December 31,						Twelve Months Ended December 31,
(Dollars in thousands)	2006			2005			2006			2005
Net income (loss)	$ 9,457			$ 57,669			$(39,113)			$ 59,325
Add:
Interest expense		15,143			—			47,791			—
Income tax expense (benefit)		1,221			(50,334	)		54,110			(50,334	)
Depreciation and amortization		19,723			7			48,459			27
Less:
Interest income		(2,742	)		(238	)		(9,640	)		(1,436	)
EBITDA	$	42,802		$	7,104		$	101,607		$	7,582

The financial statements of Hughes and HNS for the twelve months ended December 31, 2006 are attached to this press release.

Note:

EBITDA is defined as earnings (loss) before interest, income taxes, depreciation and amortization. Adjusted EBITDA is used in calculating covenant compliance under HNS’ credit agreement and the indenture governing HNS’ 9 ¹/2% Senior Notes due 2014. Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain adjustments, including the net costs of SPACEWAY for the first quarter of 2005 to reflect the effects of the implementation of the SPACEWAY services agreement with DIRECTV, Inc. as if it had

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occurred on January 1, 2005. EBITDA and Adjusted EBITDA are not recognized terms under GAAP. EBITDA and Adjusted EBITDA do not represent net income or cash flows from operations, as these terms are defined under GAAP, and should not be considered as alternatives to net income as an indicator of operating performance or to cash flows as a measure of liquidity. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of cash flow available to management for discretionary use, as such measures do not consider certain cash requirements such as capital expenditures (including expenditures on VSAT operating lease hardware and capitalized software development costs), tax payments, and debt service requirements (including VSAT operating lease hardware). EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures reported by other companies. EBITDA and Adjusted EBITDA are presented herein because HNS and Hughes use such information in their review of the performance of management and in the performance of their business. In addition, information concerning Adjusted EBITDA is being presented because it reflects important components included in the financial covenants under the senior note indenture and HNS’ credit agreement.

About Hughes Communications, Inc.

Hughes Communications, Inc. (NASDAQ: HUGH) is the 100 percent owner of Hughes Network Systems, LLC. Hughes is the global leader in providing broadband satellite networks and services for enterprises, governments, small businesses, and consumers. HughesNet encompasses all broadband solutions and managed services from Hughes, bridging the best of satellite and terrestrial technologies. Its broadband satellite products are based on the IPoS (IP over Satellite) global standard, approved by the TIA, ETSI, and ITU standards organizations. To date, Hughes has shipped more than 1.2 million systems to customers in over 100 countries.

Headquartered outside Washington, D.C., in Germantown, Maryland, USA, Hughes maintains sales and support offices worldwide. For more information, please visitwww.hughes.com.

Safe Harbor Statement under the U.S. Private Securities Litigation Reform Act of 1995

This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, discussions regarding industry outlook and Hughes’ expectations regarding the performance of its business, its future liquidity and capital resource needs, its strategic plans and objectives and the ability to launch and deploy SPACEWAY 3. These forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this release, the words “believe,” “anticipate,” “estimate,” “expect,” “intend,” “project,” “plans” and similar expressions and the use of future dates are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. These statements are subject to certain risks, uncertainties and assumptions, including, but not limited to, the following: risks related to Hughes’ substantial leverage and restrictions contained in its debt agreements, technological developments, its reliance on providers of satellite transponder capacity, changes in demand for Hughes’ services and products, competition, industry trends, regulatory changes, foreign currency exchange rate fluctuations and other risks identified and discussed under the caption “Risk Factors” in Hughes’ Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Securities and Exchange Commission on March 26, 2007 and in the other documents Hughes files with the Securities and Exchange Commission from time to time.

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^©Hughes Communications, Inc. All rights reserved. Hughes, HughesNet, IPoS, and SPACEWAY are trademarks of Hughes Network Systems, LLC. DIRECTV and DIRECWAY are registered trademarks of The DIRECTV Group, Inc.

Contact Information
Investor Relations Contact: Deepak Dutt, Vice President, Treasurer and Investor Relations Officer Email:ddutt@hns.com Phone: 301-428-7010	Media Contact: Judy Blake, Director, Marketing Communications Email:jblake@hns.com Phone: 301-601-7330

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Attachments

Hughes Communications, Inc.

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Hughes Network Systems, LLC

Balance Sheets

Statements of Operations

Statements of Cash Flows

6

HUGHES COMMUNICATIONS, INC.

Consolidated Balance Sheets

(Dollars in thousands)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	106,933		$	21,964
Marketable securities		107,320			6,000
Receivables, net		180,955			47
Inventories		61,280			—
Prepaid expenses and other		38,683			3,330
Deferred income taxes		1,264			23,378
Assets held-for-sale		—			468
Total current assets		496,435			55,187
Property, net		312,497			18
Capitalized software costs, net		41,159			—
Intangible assets, net		30,663			—
Investment in Mobile Satellite Ventures LP		—			42,761
Investment in Hughes Network Systems, LLC		—			75,282
Deferred income taxes		2,440			26,956
Other assets		48,450			5,133
Total assets	$	931,644		$	205,337
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	59,391		$	2,380
Short term borrowings and current portion of long-term debt		27,210			—
Accrued liabilities		124,586			2,473
Due to affiliates		13,119			—
Liabilities held-for-sale		—			525
Total current liabilities		224,306			5,378
Long-term debt		469,190			—
Other long-term liabilities		18,079			—
Total liabilities		711,575			5,378
Commitments and contingencies
Minority interests		4,680			8,474
Series A Redeemable Convertible Preferred Stock, $0.01 par value, net of amortized discount of $28,194 at December 31, 2005					93,100
Stockholders’ Equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized and no shares issued and outstanding at December 31, 2006; no shares authorized, issued or outstanding as of December 31, 2005
Preferred stock, $0.01 par value; no shares authorized, issued or outstanding as of December 31, 2006; 10,000,000 shares authorized and 1,199,077 shares Series A Redeemable Convertible Preferred Stock issued and outstanding as of December 31, 2005					—
Common stock, $0.001 par value; 64,000,000 shares authorized; 19,000,622 shares and 4,365,988 shares issued and outstanding as of December 31, 2006 and 2005, respectively		19			4
Non-voting common stock, $0.01 par value; no shares authorized, issued or outstanding as of December 31, 2006; 50,000,000 shares authorized, and 4,495,106 shares issued and outstanding as of December 31, 2005					45
Additional paid in capital		626,927			473,737
Accumulated deficit		(410,408	)		(371,295	)
Accumulated other comprehensive loss		(1,149	)		(4,106	)
Total stockholders’ equity		215,389			98,385
Total liabilities and stockholders’ equity	$	931,644		$	205,337

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HUGHES COMMUNICATIONS, INC.

Consolidated Statements of Operations

(Dollars in thousands, except share and per share amounts)

	Year Ended December 31,
	2006			2005			2004
Revenues:
Services	$	440,450		$	615		$	2,117
Hardware sales		418,249			—			—
Total revenues		858,699			615			2,117
Operating costs and expenses:
Cost of services		309,698			326			2,036
Cost of hardware products sold		327,708			—			—
Selling, general and administrative		139,449			9,588			9,367
Research and development		23,058			—			—
Amortization of intangibles		6,144			—			—
Total operating costs and expenses		806,057			9,914			11,403
Operating income (loss)		52,642			(9,299	)		(9,286	)
Other income (expense):
Interest expense		(47,791	)		—			—
Interest income		9,640			1,436			10,548
Other income, net		2,323			877			21,030
Income before income tax (expense) benefit; minority interests in net (earnings) losses of subsidiaries; equity in (losses) earnings of unconsolidated affiliates; and discontinued operations		16,814			(6,986	)		22,292
Income tax (expense) benefit		(54,110	)		50,334			—
Minority interests in net (earnings) losses of subsidiaries		118			1,925			(810	)
Equity in (losses) earnings of unconsolidated affiliates		(2,132	)		13,947			(2,356	)
(Loss) income from continuing operations		(39,310	)		59,220			19,126
Discontinued operations:
Loss from discontinued operations		(43	)		(956	)		(1,960	)
Gain on sale of discontinued operations		240			1,061			—
Net (loss) income		(39,113	)		59,325			17,166
Cumulative dividends and accretion of convertible preferred stock to liquidation value		(1,454	)		(9,969	)		(9,918	)
Net (loss) income attributable to common stockholders	$	(40,567	)	$	49,356		$	7,248
Basic net (loss) earnings per common share:
Continuing operations	$	(2.44	)	$	5.59		$	1.22
Discontinued operations		0.01			0.01			(0.26	)
Basic net (loss) earnings per common share	$	(2.43	)	$	5.60		$	0.96
Diluted net (loss) earnings per common share:
Continuing operations	$	(2.44	)	$	5.33		$	1.16
Discontinued operations		0.01			0.01			(0.25	)
Diluted net (loss) earnings per common share	$	(2.43	)	$	5.34		$	0.91
Basic weighted average common shares outstanding		16,668,591			8,807,237			7,557,948
Diluted weighted average common shares outstanding		16,668,591			9,244,011			7,918,685

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HUGHES COMMUNICATIONS, INC.

Consolidated Statements of Cash Flows

(Dollars in thousands)

	Year Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net (loss) income	$	(39,113	)	$	59,325		$	17,166
Adjustments to reconcile net (loss) income to cash flows from operating activities:
Gain on Motient note		—			—			(22,516	)
Loss (gain) on discontinued operations		43			(105	)		1,960
Depreciation and amortization		48,459			27			44
Amortization of debt issuance costs		1,056			—			—
Equity plan compensation expense		3,720			965			3,095
Equity in earnings of Hughes Network Systems, LLC		—			(24,054	)		—
Equity in losses of unconsolidated affiliates		2,132			9,469			1,020
Loss on investments in affiliates		—			638			1,336
Minority interests		(118	)		(1,925	)		810
Gain on disposal of assets		(222	)		(49	)		—
Gain on receipt of investment from unconsolidated affiliates		(1,788	)		—			—
Compensation expense for issuance of warrants by consolidated subsidiary		—			—			296
Change in other operating assets and liabilities, net of acquisitions:
Receivables, net		24,599			(18	)		208
Inventories		11,894			—			—
Deferred income taxes		46,630			(50,334	)		—
Prepaid expenses and other		9,979			4,863			10,314
Deferred revenue		—			(20	)		(138	)
Accounts payable		(11,675	)		(4,153	)		4,114
Accrued liabilities and other		(5,413	)		—			—
Net cash provided by (used in) continuing operations		90,183			(5,371	)		17,709
Net cash used in discontinued operations		(10	)		(1,093	)		(1,565	)
Net cash provided by (used in) operating activities		90,173			(6,464	)		16,144
Cash flows from investing activities:
Acquisition of Hughes Network Systems, LLC, net of cash received		12,753			(50,000	)		—
Repayments of notes receivable		—			—			21,500
Change in restricted cash		(2,883	)		(3,060	)		—
Purchase of marketable investments, net		(90,112	)		(12,228	)		(68,602	)
Cash paid for investments in affiliates		—			(3,562	)		(1,928	)
Net sales of short-term investments		—			65,977			30,649
Expenditures for property		(77,191	)		(3	)		(11	)
Proceeds from sale of property and intangibles		521			62			—
Sales of investment in affiliates		—			1,923			—
Expenditures for capitalized software		(16,416	)		—			—
Other, net		—			—			19
Net cash used in continuing operations		(173,328	)		(891	)		(18,373	)
Net cash used in discontinued operations		—			(63	)		(952	)
Net cash used in investing activities		(173,328	)		(954	)		(19,325	)

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HUGHES COMMUNICATIONS, INC.

Consolidated Statements of Cash Flows (Continued)

(Dollars in thousands)

	Year Ended December 31,
	2006			2005			2004
Cash flows from financing activities:
Net decrease in notes and loans payable		(1,609	)		—			—
Distributions to minority interest of consolidated subsidiary		—			—			(3,361	)
Debt borrowings from Apollo		100,000			—			—
Debt repayments to Apollo		(100,000	)		—			—
Proceeds from rights offering		100,000			—			—
Distribution to SkyTerra		(9,314	)		—			—
Proceeds from issuance of common stock, net of costs		—			—			35,044
Payment of dividends on preferred stock		(1,394	)		(5,575	)		(1,394	)
Proceeds from exercise of stock options and warrants		2,206			140			284
Repurchase of common stock of consolidated subsidiary		—			(4	)		(2	)
Long-term debt borrowings		455,330			—			—
Repayment of long-term debt		(364,872	)		—			—
Debt issuance costs		(11,668	)		—			—
Net cash provided by (used in) continuing operations		168,679			(5,439	)		30,571
Net cash provided by discontinued operations		—			76			450
Net cash provided by (used in) financing activities		168,679			(5,363	)		31,021
Effect of exchange rate changes on cash and cash equivalents		(555	)		11			(3	)
Net increase (decrease) in cash and cash equivalents		84,969			(12,770	)		27,837
Cash and cash equivalents at beginning of the period		21,964			34,734			6,897
Cash and cash equivalents at end of the period	$	106,933		$	21,964		$	34,734
Supplemental cash flow information:
Cash paid for interest	$	41,464		$	—		$	—
Cash paid for income taxes	$	6,578		$	—		$	—
Noncash financing activities:
Conversion of notes receivable to partnership interest in Mobile Satellite Ventures LP							$	51,118
Common stock issued in connection with purchase of interest in Hughes Network Systems, LLC				$	5,160
Supplemental non-cash disclosure due to acquisition by Hughes Communications, Inc.:
Increase in assets	$	51,471
Increase in liabilities		40,118
Increase in net assets	$	11,353

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HUGHES NETWORK SYSTEMS

Balance Sheets

(Dollars in thousands)

	Consolidated Successor			Consolidated Predecessor
	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	99,098		$	113,267
Marketable securities		103,466			13,511
Receivables, net		180,694			200,982
Inventories		61,280			73,526
Prepaid expenses and other		39,175			48,672
Total current assets		483,713			449,958
Property, net		312,497			259,578
Capitalized software costs, net		41,159			16,664
Intangible assets, net		30,663			—
Other assets		44,358			30,324
Total assets	$	912,390		$	756,524
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	57,781		$	51,294
Short term borrowings and current portion of long-term debt		27,210			29,616
Accrued liabilities		123,576			130,601
Due to affiliates		13,592			18,960
Total current liabilities		222,159			230,471
Long-term debt		469,190			342,406
Due to affiliates		—			8,967
Other long-term liabilities		18,079			3,494
Total liabilities		709,428			585,338
Commitments and contingencies
Minority interests		4,659			6,594
Equity:
Class A membership interests		180,346			125,768
Class B membership interests		—			—
Retained earnings		19,102			46,571
Accumulated other comprehensive loss		(1,145	)		(7,747	)
Total equity		198,303			164,592
Total liabilities and equity	$	912,390		$	756,524

11

HUGHES NETWORK SYSTEMS

Statements of Operations

(Dollars in thousands)

	Consolidated Successor			Consolidated Predecessor			Combined Consolidated Prior Predecessor
	Year Ended December 31, 2006			April 23 - December 31, 2005			January 1 - April 22, 2005			Year Ended December 31, 2004
Revenues:
Services	$	439,976		$	303,467		$	121,917		$	383,519
Hardware sales		418,249			280,001			101,524			405,831
Total revenues		858,225			583,468			223,441			789,350
Operating costs and expenses:
Cost of services		309,583			209,226			88,092			290,365
Cost of hardware products sold		327,708			206,431			86,467			338,650
Selling, general and administrative		134,058			80,658			50,142			158,102
Research and development		23,058			19,102			18,194			55,694
Amortization of intangibles		6,144						—			—
Restructuring costs		—			1,443			1,625			10,993
SPACEWAY impairment provision		—			—			—			1,217,745
Asset impairment provision		—			—			—			150,300
Total operating costs and expenses		800,551			516,860			244,520			2,221,849
Operating income (loss)		57,674			66,608			(21,079	)		(1,432,499	)
Other income (expense):
Interest expense		(46,041	)		(22,744	)		(1,631	)		(7,466	)
Interest income		8,875			2,813			102			772
Other income, net		2,033			198			—			5,805
Income (loss) before income tax expense, minority interest in net (earnings) losses of subsidiaries and equity in earnings of unconsolidated affiliates		22,541			46,875			(22,608	)		(1,433,388	)
Income tax expense		(3,276	)		(693	)		(180	)		(32	)
Minority interests in net (earnings) loss of subsidiaries		(163	)		366			231			(64	)
Equity in earnings of unconsolidated affiliates		—			23			34			—
Net income (loss)	$	19,102		$	46,571		$	(22,523	)	$	(1,433,484	)

12

HUGHES NETWORK SYSTEMS

Statements of Cash Flows

(Dollars in thousands)

	Consolidated Successor			Consolidated Predecessor			Combined Consolidated Prior Predecessor
	Year Ended			April 23 -			January 1 -			Year Ended
	December 31,			December 31,			April 22,			December 31,
	2006			2005			2005			2004
Cash flows from operating activities:
Net income (loss)	$	19,102		$	46,571		$	(22,523	)	$	(1,433,484	)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization		48,459			27,209			13,734			96,973
Amortization of debt issuance costs		1,056			970			60			—
Gain on receipt of investment by subsidiary		(1,788	)		—			—			—
Equity plan compensation expense		296			115			—			—
Minority interest		163
Equity in losses from unconsolidated affiliates		—			(26	)		—			—
Gain on disposal of assets		—			—			—			(5,804	)
SPACEWAY impairment provision		—			—			—			1,217,745
Asset impairment provision		—			—			—			150,300
Other		—			(198	)		—			—
Change in other operating assets and liabilities, excluding the effect of the HCI Transaction:
Receivables, net		24,839			(37,886	)		5,438			41,471
Inventories, net		11,894			22,987			2,738			22,863
Prepaid expenses and other		3,335			(1,681	)		(3,965	)		8,197
Accounts payable		(11,286	)		11,093			(31,721	)		9,920
Accrued liabilities and other		(4,337	)		24,298			(16,457	)		(20,445	)
Net cash provided by (used in) operating activities		91,733			93,452			(52,696	)		87,736
Cash flows from investing activities:
Change in restricted cash		(294	)		(4,860	)		1,978			(1,152	)
Purchase of short-term investments, net		(89,254	)		(13,544	)		—			—
Expenditures for property		(77,191	)		(53,694	)		(22,912	)		(122,158	)
Expenditures for capitalized software		(16,416	)		(12,871	)		(3,273	)		(16,673	)
Proceeds from sale of property and intangibles		521			1,263			—			17,016
Other, net		—			224			(958	)		148
Net cash used in investing activities		(182,634	)		(83,482	)		(25,165	)		(122,819	)
Cash flows from financing activities:
Net (decrease) increase in notes and loans payable		(1,609	)		(3,309	)		871			(7,955	)
(Distributions to) contributions from former owners, net		—			—			(108,868	)		52,429
Long-term debt borrowings		455,330			18,882			327,775			33,245
Repayment of long-term debt		(364,872	)		(31,222	)		(30,141	)		(70,659	)
Debt issuance costs		(11,668	)		—			(10,482	)		—
Net cash provided by (used in) financing activities		77,181			(15,649	)		179,155			7,060
Effect of exchange rate changes on cash and cash equivalents		(449	)		(2,824	)		5,669			865
Net (decrease) increase in cash and cash equivalents		(14,169	)		(8,503	)		106,963			(27,158	)
Cash and cash equivalents at beginning of the period		113,267			121,770			14,807			41,965
Cash and cash equivalents at end of the period	$	99,098		$	113,267		$	121,770		$	14,807
Supplemental cash flow information:
Cash paid for interest	$	39,714		$	22,138		$	1,496		$	10,422
Cash paid for income taxes	$	3,615		$	1,121		$	208		$	732
Supplemental disclosure of non-cash financing activities:
Property transferred to Parent										$	308,000
Supplemental non-cash disclosure due to acquisition by Hughes Communications, Inc.:
Increase in assets	$	51,471
Increase in liabilities		40,118
Increase in net assets	$	11,353

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