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Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

The following table reconciles the differences between Hughes’ Net Income (Loss), as determined under United States of America Generally Accepted Accounting Principles (GAAP), and Adjusted EBITDA.

Hughes Communications, Inc.
		Three Months								Nine Months								Twelve Months
		Ended September 30,								Ended September 30,								Ended September 30,
(Dollars in thousands)		2010				2009				2010				2009				2010				2009
Net income (loss) attributable to HCI stockholders		$	10,137			$	(2,622	)		$	5,907			$	(55,060	)		$	8,274			$	(51,709	)
Add:
Equity incentive plan compensation			1,890				1,849				5,679				5,473				7,577				7,206
Interest expense			14,499				17,735				46,129				47,125				63,123				61,147
Income tax expense (benefit)			1,552				966				4,336				790				5,992				4,253
Depreciation and amortization			33,501				26,879				95,612				73,209				125,134				93,238
Long-term incentive/retention cash plan			-				-				-				1,538				-				4,817
Sea Launch impairment			-				-				-				44,400				-				44,400
HTI investment impairment			-				-				-				-				5,239				-
Data Synapse impairment			-				-				-				1,000				-				1,000
Less:
Interest income			(423	)			(501	)			(1,670	)			(1,028	)			(2,864	)			(1,741	)
Adjusted EBITDA		$	61,156			$	44,306			$	155,993			$	117,447			$	212,475			$	162,611

The following table reconciles the differences between HNS’ Net Income (Loss), as determined under GAAP, and Adjusted EBITDA.

 

Hughes Network Systems, LLC
		Three Months								Nine Months								Twelve Months
		Ended September 30,								Ended September 30,								Ended September 30,
(Dollars in thousands)		2010				2009				2010				2009				2010				2009
Net income (loss) attributable to HNS		$	10,800			$	(1,570	)		$	8,032			$	(52,134	)		$	15,261			$	(47,715	)
Add:
Equity incentive plan compensation			1,806				1,768				5,433				5,117				7,249				6,728
Interest expense			14,493				17,727				46,113				47,106				63,101				61,128
Income tax expense (benefit)			1,551				981				4,331				775				5,992				4,262
Depreciation and amortization			33,343				26,709				95,127				72,788				124,478				92,817
Long-term incentive/retention cash plan			-				-				-				1,538				-				4,817
Sea Launch impairment			-				-				-				44,400				-				44,400
Less:
Interest income			(359	)			(468	)			(1,486	)			(865	)			(2,609	)			(1,274	)
Adjusted EBITDA		$	61,634			$	45,147			$	157,550			$	118,725			$	213,472			$	165,163

The condensed consolidated financial statements of Hughes and HNS for the periods ended September 30, 2010 and 2009 are attached to this press release.

Note on Use of Non-GAAP Financial Measures

 

Hughes provides non-GAAP financial data in addition to providing financial results in accordance with GAAP. This press release includes Adjusted EBITDA as a supplemental non-GAAP financial measure. Adjusted EBITDA is defined as earnings (loss) before interest, income taxes, depreciation, amortization, equity incentive plan compensation, long-term incentive/retention cash plan, and other adjustments permitted by the debt instruments of HNS. We believe this non-GAAP financial measure provides useful information to both management and investors by excluding specific expenses that we believe are not indicative of our core operating results. Internally, we use this non-GAAP measure in our review of the performance of management and in the performance of our business and operations. Management also uses Adjusted EBITDA of HNS for purposes of de termining the payments to be made in connection with the long-term cash incentive retention program. Externally, we believe that investors may find this non-GAAP financial information useful in their assessment of our operating performance. In addition, we believe that this non-GAAP financial measure provides information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. Adjusted EBITDA of HNS is also used in calculating covenant compliance under HNS’ credit agreements and the indenture governing HNS’ 9½% Senior Notes due 2014, issued in 2006 and 2009.

 

Adjusted EBITDA is not a recognized term under GAAP. This non-GAAP measure does not represent net income or cash flows from operations, as these terms are defined under GAAP and should not be considered as an alternative to net income as an indicator of operating performance or to cash flows as a measure of liquidity. Additionally, this non-GAAP measure is not intended to be a measure of cash flow available to management for discretionary use, as such measure does not consider certain cash requirements, such as

 

 

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capital expenditures (including expenditures on VSAT operating lease hardware and capitalized software development costs), tax payments, debt service requirements (including VSAT operating lease hardware), and payments under the long-term cash incentive retention program. Adjusted EBITDA, as presented herein, is not necessarily comparable to similarly titled measures reported by other companies. Any analysis of non-GAAP financial measures should be used only in conjunction with results presented in accordance with GAAP.

The amounts reflected in the reconciliation table above for the twelve months ended September 30, 2010 represent consolidated financial data for the year ended December 31, 2009, minus consolidated financial data for the nine months ended September 30, 2009 plus consolidated financial data for the nine months ended September 30, 2010.  The amounts reflected in the reconciliation table above for the twelve months ended September 30, 2009 represent consolidated financial data for the year ended December 31, 2008, minus consolidated financial data for nine months ended September 30, 2008 plus consolidated financial data for the nine months ended September 30, 2009.

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 global standards approved by the TIA, ETSI, and ITU standards organizations, including IPoS/DVB-S2, RSM-A, and GMR-1. To date, Hughes has shipped more than 2.2 million systems to customers in over 100 countries.

Headquartered outside Washington, DC, in Germantown, Maryland, USA, Hughes maintains sales and support offices worldwide. For more information, please visit www.hughes.com.

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 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. 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-l ooking 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, 2009, filed with the Securities and Exchange Co mmission on March 3, 2010, and in the other documents Hughes files with the Securities and Exchange Commission from time to time.