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.
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.
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.
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 |
|
|
| | | | | | | | | | | | | | |
| 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.
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. |
