Hughes Communications Inc. (HUGH) filed Quarterly Report for the period ended 2009-09-30.
Hughes Network Systems LLC 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. To date Hughes has shipped more than one million systems to customers in over hundred countries. Its broadband satellite products are based on the IPoS global standard approved by the TIA ETSI and ITU standards organizations. Hughes Communications Inc. has a market cap of $488.4 million; its shares were traded at around $22.61 with a P/E ratio of 86.9 and P/S ratio of 0.5.
Highlight of Business Operations:
Net loss attributable to our stockholders was $2.6 million and $55.1 million for the three and nine months ended September 30, 2009, respectively, compared to a net income attributable to our stockholders of $3.2 million and $5.7 million, respectively, for the same periods in 2008. The loss for the three months ended September 30, 2009 was mainly impacted by higher interest expense incurred from the issuance in May 2009 of $150 million of 9.50% senior notes maturing on April 15, 2014 (the “2009 Senior Notes”) and from higher marketing costs due to our expanded efforts in promoting our consumer business. The loss for the nine months ended September 30, 2009 was significantly impacted by the $44.4 million impairment loss recognized in the second quarter of 2009 associated with our prepaid deposit (the “Deposit”) paid to Sea Launch Company, LLC (“Sea Launch”). For further discussion of the impairment loss, see Note 10—Other Assets to our unaudited condensed consolidated financial statements included in Part I-Item 1 of this report. In addition to higher interest expense on the 2009 Senior Notes, the commencement of services on SPACEWAY 3 network in April 2008, for which the Company recognized $19.6 million of depreciation expense in 2009 compared to $12.5 million in 2008, also contributed to the loss for the nine months ended September 30, 2009.
Consumer Group—We have made significant investments in our Consumer group as we believe there is a large segment of this market that is underserved by terrestrial alternatives such as Digital Subscriber Line (“DSL”) and cable. We continue to review and adjust pricing policies relative to other competitive offerings in the marketplace in connection with our Consumer hardware and service offerings. In September 2008, we began offering customers the option to rent the equipment with a 24 month service contract. We believe that the consumer rental program will expand our customer base while providing customers with an economical alternative to purchasing the equipment. We have incurred and expect to continue to incur significant costs, including subscriber acquisition costs, related to hardware and associated marketing costs in our Consumer group. As of September 30, 2009, we had approximately 464,200 subscribers in our consumer business that generated consumer revenues of $107.1 million and $310.0 million for the three and nine months ended September 30, 2009, respectively.
On May 27, 2009, HNS, along with its subsidiary, HNS Finance Corp., as co-issuer, completed the offering of the 2009 Senior Notes. The notes are guaranteed on a senior unsecured basis by each of HNS current and future domestic subsidiaries that guarantee any of HNS indebtedness or indebtedness of HNS other subsidiary guarantors. Interest on the 2009 Senior Notes is accrued from April 15, 2009 and is paid semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2009. After the original issue discount of $13.6 million and related offering expenses of approximately $4.5 million, HNS received net proceeds of approximately $133.6 million, including $1.7 million of prepaid interest received from the note holders, from the offering. HNS intends to use these net proceeds for general corporate purposes, which could include working capital needs, corporate development opportunities (which may include acquisitions), capital expenditures and opportunistic satellite fleet expansion.
On March 12, 2009, we invested $13.0 million in the convertible preferred stock of Hughes Telematics, Inc. (“HTI Preferred Stock”) as part of a $50.0 million private placement. In connection with the merger of HTI with Polaris Acquisition Corp. (the “Merger”), which occurred on March 31, 2009, wherein HTI became a publicly traded company, our outstanding HTI Preferred Stock was converted into HTI common stock. In connection with the Merger, we also received certain additional common shares of HTI that are subject to HTI achieving certain “earn-out” targets over five years. If the full earn-out is achieved, our investment could represent approximately 3.8% of HTI s outstanding common stock.
The Company acquired an equity investment in Hughes Systique Corporation (“Hughes Systique”) Series A Preferred Stock of $3.0 million and $1.5 million in October 2005 and January 2008, respectively. HNS has contracted with Hughes Systique for software development services. As of September 30, 2009, on an undiluted basis, our ownership in Hughes Systique was approximately 45.23% and the ownership of our CEO and President
Revenue from our International Enterprise group for the three months ended September 30, 2009 decreased by 20.9% to $47.5 million compared to the same period in 2008, primarily due to the completion of terminal shipments on a multi-year contract for a large lottery operator in the United Kingdom and the unfavorable impact of currency exchange rates of $3.9 million resulting from the appreciation of the U.S. dollar. Partially offsetting these decreases were higher revenues from our Mexico operations and from our Brazil operations as the number of sites in service in Brazil approached 11,000 as of September 30, 2009.
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