# EchoStar CORP: Form 10-Q for the period ended Jun 30, 2010

- Company: [EchoStar CORP](/companies/echo.md) (CIK 1415404)
- Form: 10-Q
- Filed: 2010-08-09
- Accepted by EDGAR: Aug 9, 2010, 10:35 ET
- Period: 2010-06-30
- Accession: 0001193125-10-182387
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1415404/000119312510182387/d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1415404/000119312510182387/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2010-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2010-04-01 to 2010-06-30 | $603.0m | us-gaap:SalesRevenueNet |
| Revenue | 6 months, 2010-01-01 to 2010-06-30 | $1.23bn | us-gaap:SalesRevenueNet |
| Cost of revenue | 3 months, 2010-04-01 to 2010-06-30 | $404.0m | us-gaap:CostOfGoodsSold |
| Cost of revenue | 6 months, 2010-01-01 to 2010-06-30 | $826.2m | us-gaap:CostOfGoodsSold |
| Research and development | 3 months, 2010-04-01 to 2010-06-30 | $12.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2010-01-01 to 2010-06-30 | $24.6m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2010-04-01 to 2010-06-30 | $33.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2010-01-01 to 2010-06-30 | $66.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2010-04-01 to 2010-06-30 | $31.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2010-01-01 to 2010-06-30 | $72.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2010-04-01 to 2010-06-30 | $16.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2010-01-01 to 2010-06-30 | $39.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2010-04-01 to 2010-06-30 | −$41.5m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2010-01-01 to 2010-06-30 | $30.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2010-04-01 to 2010-06-30 | −$0.49 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2010-01-01 to 2010-06-30 | $0.36 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2010-04-01 to 2010-06-30 | −$0.49 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2010-01-01 to 2010-06-30 | $0.36 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2010-04-01 to 2010-06-30 | 85,102 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2010-01-01 to 2010-06-30 | 85,078 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2010-01-01 to 2010-06-30 | $118.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2010-01-01 to 2010-06-30 | $103.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2010-01-01 to 2010-06-30 | $605.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2010-06-30 | $122.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2010-06-30 | $1.40bn | us-gaap:AssetsCurrent |
| Total assets | at 2010-06-30 | $3.55bn | us-gaap:Assets |
| Current liabilities | at 2010-06-30 | $350.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2010-06-30 | $797.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2010-06-30 | $2.75bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 5,030 characters.

***Equipment revenue – DISH Network. “***Equipment revenue – DISH Network” totaled $769 million during the six months ended June 30, 2010, an increase of $244 million or 46.5% compared to the same period in 2009. This change related primarily to an increase in unit sales of set-top boxes, partially offset by a decline in average revenue per unit. The decline in average revenue per unit was driven by continued manufacturing efficiencies and a change to one of our component vendor contracts, which reduced our set-top box costs. Pursuant to the receiver agreement, set-top boxes are sold to DISH Network at cost plus a fixed margin resulting in a decline in revenue per unit when lower set-top box costs are incurred.

***Equipment revenue – other. “***Equipment revenue – other” totaled $199 million during the six months ended June 30, 2010, an increase of $72 million or 56.4% compared to the same period in 2009. This change resulted primarily from a $44 million increase in sales to Dish Mexico and an increase in sales of $24 million to Bell TV. Although the number of units sold to Bell TV increased, the average revenue per unit to Bell TV decreased compared to the same period in 2009 due to a change in sales mix and as a result of the early 2009 amendment to our agreement with Bell TV, discussed below. The sales to Dish Mexico were in addition to the original commitment associated with our investment in Dish Mexico.

Other than our revenue from DISH Network, a majority of our revenue during the six months ended June 30, 2010 was attributable to sales of equipment to Bell TV. In early 2009, we completed a multi-year contract extension with Bell TV that makes us the exclusive provider of certain digital set-top boxes to Bell TV. The agreement includes fixed pricing over the term of the agreement as well as providing future engineering development for enhanced Bell TV service offerings. There can be no assurance that sales to Bell TV will continue at historical levels, and any decline could adversely affect our gross margins and profitability.

***Services and other revenue – DISH Network. “***Services and other revenue – DISH Network” totaled $234 million during the six months ended June 30, 2010, an increase of $42 million or 22.2% compared to the same period in 2009. The change was driven by an increase in transponder leasing primarily related to the Nimiq 5 satellite, which was placed into service in October 2009, and the increase in monthly lease rates per transponder on certain satellites based on the terms of our amended lease agreements. See Note 13 in the Notes to the Condensed Consolidated Financial Statements for further discussion.

***Cost of sales – equipment. “***Cost of sales – equipment” totaled $826 million during the six months ended June 30, 2010, an increase of $268 million or 47.9% compared to the same period in 2009. This change primarily resulted from an increase in unit sales of digital set-top boxes and related components to DISH Network, Dish Mexico and Bell TV. “Cost of sales – equipment” represented 85.4% and 85.7% of total equipment sales during the six months ended June 30, 2010 and 2009, respectively.

***Cost of sales – services and other. “***Cost of sales – services and other” totaled $118 million during the six months ended June 30, 2010, an increase of $17 million or 16.6% compared to the same period during 2009. This change primarily resulted from an increase in costs related to the Nimiq 5 satellite, which was placed into service in October 2009, and the EchoStar I satellite. “Cost of sales – services and other” represented 44.8% and 47.9% of total “Services and other revenue” during the six months ended June 30, 2010 and 2009, respectively. The improvement in this expense to revenue ratio was primarily driven by an increase in transponder leasing revenue.

***Selling, general and administrative expenses. “***Selling, general and administrative expenses” totaled $75 million during the six months ended June 30, 2010, an increase of $9 million or 12.9% compared to the same period in 2009. This change was primarily attributable to an increase in litigation expenses. “Selling, general and administrative expenses” represented 6.1% and 7.7% of “Total revenue” during the six months ended June 30, 2010 and 2009, respectively. The decrease in the ratio of the expenses to “Total revenue” was primarily attributable to the increase in “Total revenue” relative to the increase in expense, discussed previously.

***Unrealized and realized gains (losses) on marketable investment securities and other investments. “***Unrealized and realized gains (losses) on marketable investment securities and other investments” totaled a net loss of $22 million during the six months ended June 30, 2010, a $19 million increase compared to the same period in 2009. This change primarily resulted from a $15 million increase in impairment charges on our marketable and other investment securities during 2010 compared to the same period in 2009.

## Market risk

As filed, 3,521 characters.

#### Strategic Marketable Investment Securities

As of June 30, 2010, we held strategic and financial debt and equity investments of public companies with a fair value of $176 million. These investments, which are held for strategic and financial purposes, are concentrated in a small number of companies, are highly speculative and have experienced and continue to experience volatility. The fair value of our strategic and financial debt and equity investments can be significantly impacted by the risk of adverse changes in securities markets generally, as well as risks related to the performance of the companies whose securities we have invested in, risks associated with specific industries, and other factors. These investments are subject to significant fluctuations in fair value due to the volatility of the securities markets and of the underlying businesses. In general, the debt instruments held in our strategic marketable investment securities portfolio are not significantly impacted by interest rate fluctuations as their value is more closely related to factors specific to the underlying business. A hypothetical 10% adverse change in the price of our public strategic debt and equity investments would result in a decrease of approximately $18 million in the fair value of these investments.

### Restricted Cash and Marketable Investment Securities and Noncurrent Marketable and Other Investment Securities

#### Restricted Cash and Marketable Investment Securities

As of June 30, 2010, we had $17 million of restricted cash and marketable investment securities invested in: (a) cash; (b) debt instruments of the United States Government and its agencies; (c) commercial paper and corporate notes with an overall average maturity of less than one year and rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations; and/or (d) instruments with similar risk, duration and credit quality characteristics to the commercial paper described above. Based on our June 30, 2010 investment portfolio, a hypothetical 10% increase in average interest rates would not have a material impact in the fair value of our restricted cash and marketable investment securities.

#### Other Investment Securities

As of June 30, 2010, we had $611 million of public and nonpublic debt and equity instruments that we hold for strategic business purposes. We account for these investments under the cost, equity and/or fair value methods of accounting. A hypothetical 10% adverse change in the price of these debt and equity instruments would result in a decrease of approximately $61 million in the fair value of these investments.

Our ability to realize value from our strategic investments in companies that are not publicly traded depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them.

### Long-Term Debt

As of June 30, 2010, we had $422 million of long-term debt, of which $415 million represents our capital lease obligations, which are not subject to fair value disclosure requirements.

### Derivative Financial Instruments

In general, we do not use derivative financial instruments for hedging or speculative purposes, but we may do so in the future.

## Controls and procedures

As filed, 846 characters.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 264 characters.

Item 1A, “Risk Factors,” of our Annual Report on Form 10-K/A for the year ended December 31, 2009 includes a detailed discussion of our risk factors. During the six months ended June 30, 2010, there were no material changes in risk factors as previously disclosed.

Filed Aug 9, 2010.
Source: SEC EDGAR, the filing index for accession 0001193125-10-182387. Last ingested by Listed: Nov 10, 2026, 16:52 ET. No prices; not investment advice.