<PAGE>
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 33-76450
DISH, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0312499
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
90 INVERNESS CIRCLE EAST
ENGLEWOOD, COLORADO 80112
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(303) 799-8222
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
ON MAY 13, 1996, REGISTRANT'S OUTSTANDING VOTING STOCK CONSISTED OF
1,000 SHARES OF COMMON STOCK, $0.01 PAR VALUE.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS
(H)(1)(A) AND (B) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH
THE REDUCED DISCLOSURE FORMAT.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
DISH, LTD. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Consolidated Financial Statements:
Balance Sheets as of December 31, 1995
and March 31, 1996 (Unaudited) . . . . . . . 1
Statements of Income for the three months
ended March 31, 1995 and 1996 (Unaudited) . 2
Statements of Cash Flows for the three months
ended March 31, 1995 and 1996 (Unaudited) . 3
Condensed Notes to Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 20
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
DECEMBER 31, MARCH 31,
1995 1996
----------- ---------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,949 $ 2,155
Marketable investment securities . . . . . . . . . . . . . . . . . . . . . . . 210 212
Trade accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . 10,435 13,131
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,769 27,298
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,870 4,504
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,834 4,415
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,791 12,429
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 81,858 64,144
RESTRICTED CASH AND MARKETABLE SECURITIES:
1994 Notes escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,291 63,617
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,400 41,900
PROPERTY AND EQUIPMENT, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 333,199 333,231
OTHER NONCURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,547 45,142
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $559,295 $548,034
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,063 $ 12,280
Deferred programming revenue . . . . . . . . . . . . . . . . . . . . . . . . . 5,563 7,416
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . 21,335 6,688
Notes payable and current portion of long-term debt . . . . . . . . . . . . . 4,782 4,783
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 50,743 31,167
LONG-TERM DEFERRED PROGRAMMING REVENUE . . . . . . . . . . . . . . . . . . . . . . -- 3,790
1994 NOTES, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382,218 395,333
LONG-TERM MORTGAGE DEBT AND NOTE PAYABLE, excluding current portion . . . . . . . 33,444 32,421
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 466,405 462,711
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDER'S EQUITY (Note 1):
Preferred Stock, 20,000,000 and no shares authorized, 1,616,681
and no shares of Series A Cumulative Preferred Stock issued and
outstanding, including accrued dividends of $1,555,000 and $0, respectively . 16,607 --
Class A Common Stock, $.01 par value, 200,000,000 and no shares
authorized, 6,470,599 and no shares issued and outstanding, respectively . . 65 --
Class B Common Stock, $.01 par value, 100,000,000 and no shares
authorized, 29,804,401 and no shares issued and outstanding, respectively . . 298 --
Common Stock, $.01 par value, none and 1,000 shares authorized,
issued and outstanding, respectively . . . . . . . . . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,495 106,465
Unrealized holding gains on available-for-sale securities, net of deferred taxes 251 (26)
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . (13,826) (21,116)
-------- --------
Total stockholder's equity . . . . . . . . . . . . . . . . . . . . . . . . 92,890 85,323
-------- --------
Total liabilities and stockholder's equity . . . . . . . . . . . . . . . . . $559,295 $548,034
-------- --------
-------- --------
The accompanying notes to consolidated financial
statements are an integral part of these balance sheets.
</TABLE>
1
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1996
---- -----
<S> <C> <C>
REVENUE:
DTH products and technical services . . . . . . . . $ 36,277 $ 36,741
Programming . . . . . . . . . . . . . . . . . . . . 3,871 3,913
Loan origination and participation income . . . . . 265 372
---- -----
Total revenue . . . . . . . . . . . . . . . . 40,413 41,026
---- -----
EXPENSES:
DTH products and technical services . . . . . . . . 29,445 32,750
Programming . . . . . . . . . . . . . . . . . . . . 3,432 3,283
Selling, general and administrative . . . . . . . . 7,871 10,571
Depreciation . . . . . . . . . . . . . . . . . . . . 363 3,330
---- -----
Total expenses . . . . . . . . . . . . . . . 41,111 49,934
---- -----
OPERATING LOSS . . . . . . . . . . . . . . . . . . . . (698) (8,908)
OTHER INCOME (EXPENSE):
Interest income . . . . . . . . . . . . . . . . . . 3,638 1,708
Interest expense, net of amounts capitalized . . . . (6,563) (4,941)
Other, net . . . . . . . . . . . . . . . . . . . . . 28 (1)
---- -----
Total other income (expense) . . . . . . . . (2,897) (3,234)
---- -----
NET LOSS BEFORE INCOME TAXES . . . . . . . . . . . . . (3,595) (12,142)
BENEFIT FOR INCOME TAXES . . . . . . . . . . . . . . . 1,355 4,852
---- -----
NET LOSS . . . . . . . . . . . . . . . . . . . . . . $ (2,240) $ (7,290)
---- -----
---- -----
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
2
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1996
---- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,240) $ (7,290)
Adjustments to reconcile net loss to net cash flows from
operating activities --
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 363 3,330
Provision for doubtful accounts . . . . . . . . . . . . . . 111 610
Benefit for deferred taxes . . . . . . . . . . . . . . . . (2,493) (2,800)
Amortization of deferred debt issuance costs on 1994 Notes 315 315
Amortization of discount on 1994 Notes,
net of amounts capitalized . . . . . . . . . . . . . . . 6,131 4,189
Equity in earnings of joint venture . . . . . . . . . . . . (15) --
Change in reserve for excess and obsolete inventory . . . . 233 227
Long-term deferred programming revenue . . . . . . . . . . . -- 3,790
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 26 (170)
Changes in working capital items --
Trade accounts receivable . . . . . . . . . . . . . . . . . (728) (2,081)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . (4,238) 11,244
Income tax receivable . . . . . . . . . . . . . . . . . . -- (634)
Other current assets . . . . . . . . . . . . . . . . . . . (730) 362
Liability under cash management program . . . . . . . . . (57) --
Trade accounts payable . . . . . . . . . . . . . . . . . . (1,061) (6,783)
Deferred programming revenue . . . . . . . . . . . . . . . (657) 1,853
Accrued expenses . . . . . . . . . . . . . . . . . . . . . 1,221 109
Other current liabilities . . . . . . . . . . . . . . . . 38 244
------- -------
Net cash flows from operating activities . . . . . . . . (3,781) 6,515
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities . . . . . . . . . (15,211) (2)
Sales of marketable investment securities . . . . . . . . . . . 27,777 --
Purchases of restricted marketable investment securities . . . . -- (15,500)
Purchases of property and equipment . . . . . . . . . . . . . . (538) (2,715)
Investment earnings placed in escrow . . . . . . . . . . . . . . (2,714) (1,057)
Funds released from escrow account . . . . . . . . . . . . . . . 16,257 10,285
Expenditures for satellite systems under construction . . . . . (19,621) (7,928)
Expenditures for FCC authorizations . . . . . . . . . . . . . . -- (370)
------- -------
Net cash flows from investing activities . . . . . . 5,950 (17,287)
------- -------
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
3
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1996
------------ ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of mortgage indebtedness and note payable . . . . . . . $ (57) $ (1,022)
------------ ----------
Net cash flows from financing activities . . . . . . . (57) (1,022)
------------ ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . 2,112 (11,794)
CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . . . . . 17,506 13,949
------------ ----------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . . . . . . $ 19,618 $ 2,155
------------ ----------
------------ ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized . . . . . . . . $ 106 $ 354
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . 39 --
Cumulative Series A Preferred Stock dividends . . . . . . . . . . 301 --
Satellite launch payment for EchoStar II applied to EchoStar I launch -- 15,000
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
4
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND MARCH 31, 1996
(1) ORGANIZATION AND PRESENTATION OF FINANCIAL STATEMENTS
Dish, Ltd. ("Dish") successfully launched its first direct broadcast
satellite ("DBS"), EchoStar I, in December 1995 and, on March 4, 1996, began
broadcasting its DBS programming (the "Dish Network-SM-") to the entire
continental United States. The Dish Network-SM- currently includes over 100
channels of high quality digital video and audio programming and will
expand to approximately 200 digital video and audio channels following the
successful launch of a second DBS satellite, DirectSat I ("EchoStar II"),
currently scheduled in the fall of 1996.
In addition to its DBS business, Dish is engaged in the design,
manufacture, distribution and installation of satellite direct to home
("DTH") products, domestic distribution of DTH programming and consumer
financing of Dish's domestic DTH products and services. In the first
quarter of 1996, Dish's ultimate parent corporation, EchoStar
Communications Corporation ("EchoStar") formed a wholly owned subsidiary,
Dish Network Credit Corporation ("DNCC"), for the purpose of providing
consumer financing for EchoStar's domestic DTH products and services. At
that time, Dish's subsidiary that previously provided these services ceased
new loan origination activities. In future periods, Dish's revenue from
loan origination and participation income will decline.
In January 1996, Dish's Articles of Incorporation were amended whereby
EchoStar exchanged all previously outstanding capital stock of Dish for
1,000 shares of Dish's new $.01 par value Common Stock. The accompanying
March 31, 1996 balance sheet reflects this exchange.
In January 1996, EchoStar formed a wholly owned subsidiary,
EchoStar Satellite Broadcasting Corporation ("ESB"), for the purpose of
completing a private offering (the "1996 Notes Offering"), pursuant to
Rule 144A of the Securities Act of 1933, as amended (the "Securities
Act"), of 13 1/8% Senior Secured Discount Notes due 2004 (the "1996
Notes"), resulting in net proceeds of approximately $337.0 million.
The 1996 Notes Offering was consummated in March 1996. Proceeds from
the 1996 Notes Offering will be used for: (i) continued development,
marketing and distribution of the Dish Network-SM-; (ii) EchoStar's
purchase of DBS frequencies at 148DEG. WL; (iii) construction, launch and
insurance of EchoStar III and EchoStar IV; (iv) additional launch costs of
EchoStar II; and (v) other general corporate purposes. The additional
frequencies were acquired by EchoStar at a public auction held by the
Federal Communications Commission ("FCC") in January 1996 (the "FCC
Auction"). In connection with the 1996 Notes Offering, EchoStar
contributed all of the outstanding capital stock of Dish to ESB. This
transaction has been accounted for as a reorganization of entities under
common control whereby Dish has been treated as the predecessor to ESB. ESB
is subject to all, and EchoStar is subject to certain of, the terms and
conditions of the Indenture related to the 1996 Notes (the "1996 Notes
Indenture"). On April 24, 1996, ESB filed a Registration Statement on Form
S-1 under the Securities Act to exchange the 1996 Notes for publicly
registered notes.
In June 1995, EchoStar completed an offering of its Class A Common
Stock, resulting in net proceeds of approximately $63.0 million (the "Equity
Offering"). In June 1994, Dish completed an offering of 12 7/8% Senior
Secured Discount Notes due 2004 (the "1994 Notes") and Warrants
(collectively, the "1994 Notes Offering"), resulting in net proceeds of
approximately $323.3 million. Dish and most of its subsidiaries are
subject to the terms and conditions of the Indenture related to the 1994
Notes (the "1994 Notes Indenture").
EchoStar presently owns approximately 40% of the outstanding
common stock of Direct Broadcasting Satellite Corporation ("DBSC"). DBSC's
principal assets include an FCC conditional satellite construction permit and
specific orbital slot assignments for eleven DBS frequencies at 61.5DEG.
WL and eleven DBS frequencies at 175DEG. WL (the "DBS Rights"). EchoStar
intends to merge DBSC with Direct Broadcasting Satellite Corporation
("New DBSC"), a wholly owned subsidiary of EchoStar (the "DBSC
Merger"). The DBSC Merger has been approved by DBSC shareholders but
will not be consummated until the FCC has approved the DBSC Merger. Athough
no assurances can be given, EchoStar expects the FCC to issue an order
with respect to the DBSC Merger in the near future. Assuming FCC approval of
the DBSC Merger, EchoStar will hold, through New DBSC, DBSC's DBS Rights. On
April 16, 1996, EchoStar filed a Registration Statement on Form S-4 under the
Securities Act covering 658,000 shares of EchoStar Class A Common Stock
that are intended to be issued in connection with the DBSC Merger.
5
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The accompanying consolidated financial statements include only the
accounts of Dish and its subsidiaries and exclude all accounts of Dish's
parent, ESB, and its ultimate parent, EchoStar.
Unless otherwise stated herein, or the context otherwise requires,
references herein to Dish shall include Dish and all of its direct and
indirect subsidiaries, and EchoStar shall include EchoStar, ESB, Dish and all
of their direct and indirect wholly owned subsidiaries.
The accompanying unaudited condensed Consolidated Financial Statements
have been prepared in accordance with generally accepted accounting
principles for interim financial informationand with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the Combined
and Consolidated Financial Statements and footnotes thereto included in
Dish, Ltd.'s Annual Report on Form 10-K for the year ended December 31, 1995.
Certain prior year amounts have been reclassified to conform with the current
year presentation.
SIGNIFICANT RISKS AND UNCERTAINTIES
Execution of EchoStar's business strategy to launch and operate
DBS satellites has dramatically changed its operating results and
financial position. As of March 31, 1996, EchoStar expects to expend
approximately an additional $520 million through 1999 to build, launch
and support its first four satellites (Note 6), assuming receipt of all
required FCC licenses and permits. EchoStar consummated the 1994 Notes
Offering, the 1996 Notes Offering and the Equity Offering to satisfy these
capital requirements. Annual interest expense on the 1994 and 1996 Notes
and depreciation of the investment in the satellites and related assets will
each be of a magnitude that exceeds historical levels of income before
taxes. Beginning in 1995 EchoStar reported significant net losses and
expects net losses to continue for the foreseeable future. EchoStar's
plans also include the construction and launch of two fixed service
satellites, additional DBS satellites and marketing campaigns
(including receiver subsidization if conditions warrant) to promote its
DBS products and services. EchoStar may need to raise significant
additional funds for construction and launch of additional satellites, and
there can be no assurance that necessary funds will be available or, if
available, they will be available on terms favorable to EchoStar. However,
management believes, but can give no assurance, that demand for its DBS
products and services will result in sufficient cash flow which, together
with other sources of capital, will be sufficient to satisfy future
planned expenditures. Significant delays or launch failures in EchoStar's
satellite launch program may have significant adverse consequences to
EchoStar's operating results and financial condition.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses for
each reporting period. Actual results could differ from those estimates.
(2) SUPPLEMENTAL ANALYSIS
CASH AND CASH EQUIVALENTS
Dish considers all liquid investments purchased with an original
maturity of ninety days or less to be cash equivalents. Cash equivalents
as of December 31, 1995 and March 31, 1996 consist of money market funds,
corporate notes and commercial paper stated at cost which equates to
market value.
6
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
RESTRICTED CASH AND MARKETABLE SECURITIES
Dish classifies all marketable investment securities as
available-for-sale. Accordingly, these investments are reflected at
market value based on quoted market prices. Related unrealized gains
and losses are reported as a separate component of stockholder's equity, net
of related deferred income taxes. The specific identification method is
used to determine cost in computing realized gains and losses.
Restricted Cash and Marketable Securities in escrow as
reflected on the accompanying balance sheets represent the remaining net
proceeds received from the 1994 Notes Offering, plus interest earned,
less amounts expended to date in connection with the development,
construction and launch of the Dish Network-SM-. These proceeds are held
in a separate escrow account (the "1994 Escrow Account") for the benefit of
the holders of the 1994 Notes and are invested in certain debt and other
marketable securities, as permitted by the 1994 Notes Indenture, until
disbursed for the express purposes identified in the 1994 Notes Offering
Prospectus.
Other Restricted Cash includes $11.4 million to satisfy certain
covenants regarding launch insurance required by the 1994 Notes Indenture.
Dish is required to maintain launch insurance and Restricted Cash totalling
$225.0 million for each of EchoStar I and EchoStar II. Dish has obtained
$219.3 million of launch insurance on each satellite, and, together with
the cash segregated and reserved on the accompanying balance sheets,
has satisfied its insurance obligations under the 1994 Notes Indenture.
In addition, as of March 31, 1996, $15.0 million was in an escrow account
established pursuant to a DBS satellite receiver manufacturing contract for
payment to the manufacturer as certain milestones are reached and $15.5
million was in an escrow account for the purpose of cash collateralizing
certain standby letters of credit (Note 4). The major components of
Restricted Cash and Marketable Securities are as follows (in thousands):
<TABLE>
DECEMBER 31, 1995 MARCH 31, 1996
------------------------------- ------------------------------------------
UNREALIZED UNREALIZED
AMORTIZED HOLDING MARKET AMORTIZED HOLDING MARKET
COST GAIN VALUE COST GAIN (LOSS) VALUE
------- ---- -------- -------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Commercial paper . . . . . $66,214 $-- $66,214 $70,311 $ -- $70,311
Government bonds . . . . . 32,904 420 33,324 34,900 (26) 34,874
Accrued interest . . . . . 153 -- 153 332 -- 332
------- ---- -------- -------- ----- ---------
$99,271 $420 $99,691 $105,543 $(26) $105,517
------- ---- -------- -------- ----- ---------
------- ---- -------- -------- ----- ---------
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost or market value. Cost is
determined using the first-in, first-out ("FIFO") method. Proprietary
products are manufactured by outside suppliers to Dish's specifications.
Dish also distributes non-proprietary products purchased from other
manufacturers. Manufactured inventories include materials, labor and
manufacturing overhead. Cost of other inventories includes parts, contract
manufacturers' delivered price, assembly and testing labor, and related
overhead, including handling and storage costs. The major components
of inventory were as follows (in thousands).
7
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
DECEMBER 31, MARCH 31,
1995 1996
----------- -------
Finished goods . . . . . . . . . . . . . . . $20,458 $17,957
DBS receiver components . . . . . . . . . . . 9,615 9,728
Competitor DBS Receivers . . . . . . . . . . 9,404 559
Spare parts . . . . . . . . . . . . . . . . . 2,089 2,078
Reserve for excess and obsolete inventory . . (2,797) (3,024)
----------- -------
$ 38,769 $27,298
----------- -------
----------- -------
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
The composition of accrued expenses and other current liabilities
is as follows (in thousands):
DECEMBER 31, MARCH 31,
1995 1996
----------- -------
Accrued EchoStar I launch costs . . . . $15,000 $ --
Accrued expenses . . . . . . . . . . . 3,850 3,959
Reserve for warranty costs . . . . . . 1,013 1,013
Other . . . . . . . . . . . . . . . . 1,472 1,716
----------- -------
$21,335 $6,688
----------- -------
----------- -------
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated
depreciation. Cost includes interest capitalized on the EchoStar DBS
System during construction at EchoStar's effective borrowing rate. The
major components of property and equipment were as follows (in thousands):
ESTIMATED
USEFUL LIFE DECEMBER 31, MARCH 31,
(IN YEARS) 1995 1996
----------- ----------- -------
Construction in progress . . . . . . . . . -- $282,373 $81,322
EchoStar I satellite . . . . . . . . . . . 10 -- 198,143
Furniture, fixtures and equipment . . . . . 2-12 17,163 21,329
Buildings and improvements . . . . . . . . 7-40 21,006 21,109
Tooling and other . . . . . . . . . . . . . 2 2,039 3,470
Land . . . . . . . . . . . . . . . . . . . -- 1,613 1,613
Vehicles . . . . . . . . . . . . . . . . . 7 1,310 1,325
Furniture and equipment held for sale . . . 17,062 17,614
Computer equipment held for sale . . . . . 902 885
-------- --------
Total property and equipment 343,468 346,810
Less-Accumulated depreciation . . . . . . . (10,269) (13,579)
-------- --------
Net property and equipment . . . . . $333,199 $333,231
-------- --------
-------- --------
8
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Construction in progress principally includes capitalized costs
related to EchoStar II, which is scheduled for launch in the fall of 1996.
Construction in progress consisted of the following (in thousands):
DECEMBER 31, MARCH 31,
1995 1996
----------- --------
Progress amounts for satellite construction,
launch, launch insurance, capitalized interest,
launch and in-orbit tracking, telemetry and
control services:
EchoStar I . . . . . . . . . . . . $193,629 $ --
EchoStar II . . . . . . . . . . . . 88,634 81,133
Other . . . . . . . . . . . . . . . 110 189
------- -------
$ 282,373 $81,322
------- -------
------- -------
OTHER NONCURRENT ASSETS
The major components of other noncurrent assets were as follows
(in thousands):
DECEMBER 31, MARCH 31,
1995 1996
----------- --------
Deferred tax assets, net . . . . . . . . . . $12,109 $12,497
FCC authorizations, net of amortization . . . 11,309 11,681
1994 Notes deferred debt issuance costs,
net of amortization . . . . . . . . . . . . 10,622 10,307
SSET convertible subordinated debentures and
accrued interest . . . . . . . . . . . . 9,610 9,758
Other, net . . . . . . . . . . . . . 897 899
------- -------
$44,547 $45,142
------- -------
------- -------
(3) LONG-TERM DEBT
1994 NOTES
On June 7, 1994, Dish completed the 1994 Notes Offering of 624,000
units consisting of $624 million aggregate principal amount of the 1994
Notes and 3,744,000 Warrants. The 1994 Notes Offering resulted in net
proceeds to Dish of approximately $323.3 million. Interest on the 1994
Notes currently is not payable in cash but accrues through June 1, 1999,
with the 1994 Notes accreting to $624 million by that date. Thereafter,
interest on the 1994 Notes will be payable in cash semi-annually on June 1
and December 1 of each year, commencing December 1, 1999. At March 31,
1996, the 1994 Notes were reflected in the accompanying financial statements
at $395.3 million, net of unamortized discount of $228.7 million.
9
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(4) BANK CREDIT FACILITY AND LETTERS OF CREDIT
On May 6, 1994, the principal subsidiaries of Echostar, except
EchoStar Satellite Corporation ("ESC") (the "Borrowers"), entered into an
agreement with Bank of America Illinois, to provide a revolving
credit facility (the "Credit Facility") for working capital advances and for
letters of credit necessary for inventory purchases and satellite
construction payments. The Credit Facility expired in May 1996 and
EchoStar does not currently intend to arrange a new credit facility.
Instead, EchoStar is using available cash to collateralize its letter of
credit obligations, which historically has been the only significant use of
the Credit Facility. At March 31, 1996, EchoStar had cash collateralized
$15.5 million of certain standby letters of credit for trade purchases
which is included in restricted cash and marketable securities in the
accompanying financial statements (Note 2).
(5) INCOME TAXES
The components of the benefit for income taxes were as follows (in
thousands):
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1996
------- ------
Current (provision) benefit
Federal . . . . . . . . . . . . . . . . . . . . $ (767) $1,971
State . . . . . . . . . . . . . . . . . . . . . (194) 203
Foreign . . . . . . . . . . . . . . . . . . . . (177) (122)
------- ------
(1,138) 2,052
------- ------
Deferred benefit
Federal . . . . . . . . . . . . . . . . . . . . 2,050 2,568
State . . . . . . . . . . . . . . . . . . . . . 443 232
------- ------
2,493 2,800
------- ------
Total benefit . . . . . . . . . . . . . . $1,355 $4,852
------- ------
------- ------
Dish's deferred tax assets (approximately $16.9 million at March
31, 1996) relate principally to temporary differences for amortization of
original issue discount on the 1994 Notes and various accrued expenses
which are not deductible until paid. No valuation allowance has been
provided because Dish currently believes it is more likely than not that
these deferred assets will ultimately be realized. If future operating
results differ materially and adversely from Dish's current expectations, its
judgment regarding the need for a valuation allowance may change.
10
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(6) OTHER COMMITMENTS AND CONTINGENCIES
SATELLITE CONTRACTS
EchoStar has contracted with Martin Marietta Corporation ("Martin
Marietta") for the construction and delivery of high powered DBS satellites
and for related services. Penalties are payable by Martin Marietta as a
result of delays in the delivery of EchoStar I by Martin Marietta and may
be payable with respect to EchoStar II or EchoStar III. As of November
19, 1995, the date that EchoStar I was delivered by Martin Marietta to
China, those penalties totaled approximately $3.2 million with respect to
EchoStar I. Penalties of $2.0 million are payable by Martin Marietta in
the event that EchoStar II is not delivered by May 15, 1996. Thereafter,
delays in the delivery of EchoStar II would result in PER DIEM additional
penalties up to a maximum of $5.0 million in the aggregate. Beginning August
1, 1997, a PER DIEM penalty of $3,333, to a maximum of $100,000, is
payable if EchoStar III is not delivered by July 31, 1997. Beginning
September 1, 1997, additional delays in the delivery of EchoStar III
would result in additional PER DIEM penalties of $33,333, up to a maximum
of $5.0 million in the aggregate.
EchoStar has entered into a contract with Arianespace, Inc.
("Arianespace") to launch EchoStar II from Korou, French Guiana in the
fall of 1996 (the "Arianespace Contract"). The launch is scheduled to be
performed on a dedicated Ariane 42P launch vehicle. The Arianespace
Contract provides the potential for the EchoStar launch to occur before
the fall of 1996 if earlier scheduled launches are accelerated or
delayed. The Arianespace Contract contains provisions entitling either
party to delay the launch in limited circumstances, subject to the payment
of penalties in some cases. As of March 31, 1996, EchoStar has paid
Arianespace approximately $4.4 pursuant to the Arianespace Contract. All
remaining payments are payable monthly and will be due prior to the launch.
EchoStar II was previously scheduled to be launched by the same
launch provider as EchoStar I, China Great Wall Industry Corporation
("Great Wall"). EchoStar I was successfully launched by Great Wall in
December 1995. EchoStar notified Great Wall of its decision to terminate
the launch of EchoStar II with Great Wall. EchoStar applied $15.0 million
previously paid Great Wall in connection with this launch to the final
$15.0 million owed Great Wall related to the launch of EchoStar I. In May
1996, EchoStar received a refund of the remaining $4.5 million previously
paid Great Wall in connection with the second launch.
EchoStar has entered into a contract for launch services with
Lockheed Martin Commercial Launch Services, Inc. ("Lockheed") for the
launch of EchoStar III from Cape Canaveral Air Station, Florida during
the fall of 1997, subject to delay or acceleration in certain
circumstances (the "Lockheed Contract"). The Lockheed Contract provides
for launch of the satellite utilizing an Atlas IIAS launch vehicle.
EchoStar has made an initial payment to Lockheed of $5.0 million and the
remaining cost is payable in installments in accordance with the payment
schedule set forth in the Lockheed Contract, which requires that
substantially all payments be made to Lockheed prior to the launch.
EchoStar has contracted with Lockheed-Khrunichev-Energia-International,
Inc. ("LKE") for the launch of EchoStar IV during 1998 from the Kazakh
Republic, a territory of the former Soviet Union, utilizing a Proton launch
vehicle (the "LKE Contract"). Either party may request a delay in the
relevant launch period, subject to the payment of penalties based on the
length of the delay and the proximity of the request to the launch date.
EchoStar has paid LKE $20.0 million pursuant to the LKE Contract. No
additional payments are currently required to be made to LKE until 1997.
11
<PAGE>
DISH, LTD. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
PURCHASE COMMITMENTS
Dish has entered into agreements with various manufacturers to
purchase DBS satellite receivers and related components manufactured based
on Dish's supplied specifications. As of March 31, 1996 the remaining
commitments total as much as $622.2 million. At March 31, 1996, the total
of all outstanding purchase order commitments with domestic and foreign
suppliers was as much as $641.3 million. All but approximately $85.9
million of the purchases related to these commitments are expected to be
made during 1996 and the remainder is expected to be made during 1997.
EchoStar expects to finance these purchases from available cash,
marketable investment securities and sales of inventory, including the sale
of EchoStar Receiver Systems and related products.
OTHER RISKS AND CONTINGENCIES
EchoStar is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position or results of operations of EchoStar.
(7) SUMMARY FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS
The 1994 Notes are fully, unconditionally and jointly and severally
guaranteed by all subsidiaries of Dish, except for certain de minimis
domestic and foreign subsidiaries. Summarized financial information for
Dish and the subsidiary guarantors is as follows (in thousands):
THREE MONTHS ENDED
MARCH 31,
-----------------
1995 1996
---- ----
Income Statement Data --
Revenue . . . . . . . . . . . . . . . . . . . $ 40,076 $ 40,973
Expenses . . . . . . . . . . . . . . . . . . . 40,730 49,910
---- ----
Operating loss . . . . . . . . . . . . . . . . (654) (8,937)
Other income (expense), net . . . . . . . . . (2,892) (3,147)
---- ----
Net loss before income taxes . . . . . . . . . (3,546) (12,084)
Benefit for income taxes . . . . . . . . . . . 1,348 4,848
-------- --------
Net loss . . . . . . . . . . . . . . . . $ (2,198) $(7,236)
-------- --------
-------- --------
DECEMBER 31, MARCH 31,
1995 1996
-------- --------
Balance Sheet Data --
Current assets . . . . . . . . . . . . . . . . $ 81,959 $ 64,321
Property and equipment, net . . . . . . . . . 333,160 333,191
Other noncurrent assets . . . . . . . . . . . 143,866 150,285
-------- --------
Total assets . . . . . . . . . . . . . . $558,985 $547,797
-------- --------
-------- --------
Current liabilities . . . . . . . . . . . . . $ 50,710 $ 34,943
Long-term liabilities . . . . . . . . . . . . 415,662 427,754
Stockholder's equity . . . . . . . . . . . . . 92,613 85,100
-------- --------
Total liabilities and stockholder's equity $558,985 $547,797
-------- --------
-------- --------
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Dish currently operates four related businesses: (i) operation of the
Dish Network-SM- and continued development of the EchoStar DBS System;
(ii) design, manufacture, marketing, installation and distribution of
DTH products worldwide; (iii) domestic distribution of DTH programming;
and (iv) consumer financing of Dish's domestic products and services. The
growth of DBS service and equipment sales has had and will continue to have
a material negative impact on Dish's domestic sales of C-band DTH products.
On March 4, 1996 Dish began broadcasting and selling programming packages
available on the Dish Network-SM- service. Dish expects to derive its
revenue principally from monthly fees from subscribers for Dish Network-SM-
programming and, to a lesser extent, from the sale of EchoStar Receiver
Systems. As sales of EchoStar DBS programming and receivers increase,
Dish expects the decline in its sales of domestic C-band DTH products to
continue at an accelerated rate.
Dish will generally bill for Dish Network-SM- programming periodically
in advance and will recognize revenue as service is provided. Revenue
will be a function of the number of subscribers, the mix of
programming packages selected and the rates charged, and transaction fees
for ancillary programming and transponder leasing activities. From time to
time Dish may engage in promotional activities that include discounted rates
for limited periods, which will result in lower average revenue per
subscriber for the applicable periods. DBS programming costs will
generally be based upon the number of subscribers to each programming
offering. Since the Dish Network-SM- did not commence operations until March
1996, its operating activities had a minimal effect on Dish's results of
operations for the three month period ended March 31, 1996.
RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED MARCH 31, 1996 COMPARED TO THREE MONTH PERIOD ENDED
MARCH 31, 1995
REVENUE. Total revenue for the three month period ended March 31, 1996
was $41.0 million, an increase of $613,000, or 2%, as compared to the
same period in 1995 of $40.4 million. Revenue from domestic sales of DTH
products for the three month period ended March 31, 1996 was $24.0 million,
an increase of $3.4 million, or 17%, as compared to the same period in 1995.
The increase in domestic revenue was primarily due to $8.2 million in
revenue from the sale of EchoStar Receiver Systems during the three month
period ended March 31, 1996. There were no EchoStar Receiver System sales
during the comparable period in 1995. Approximately $922,000 of the increase
in domestic revenue for the three month period ended March 31, 1996 was due
to an increase in the number of satellite receivers sold for a competitor's
DBS system ("Competitor DBS Receivers"). Revenue from Competitor DBS
Receiver sales was $7.7 million for the three month period ended March 31,
1996, as compared to $6.8 million for the same period in 1995. The increases
in domestic revenue were principally offset by a decrease of $4.7 million,
or 47%, in revenue from sales of C-band satellite receivers and related
accessories, during the three month period ended March 31, 1996, as compared
to the same period in 1995. The increases in domestic revenue were also
partially offset by a decrease of $1.2 million, or 42%, in revenue from
sales of non-proprietary descrambler modules, during the three month period
ended March 31, 1996, as compared to the same period in 1995. The domestic
market for C-band DTH products continued to decline during the three month
period ended March 31, 1996, and this decline will continue with the growth
of DBS service and equipment sales. This decline had been expected by
Dish as described below.
Domestically, Dish sold approximately 45,000 satellite receivers in the
three month period ended March 31, 1996, an increase of 67% as compared to
approximately 27,000 receivers for the same period in 1995. Although there
was an increase in the number of satellite receivers sold in 1996 as
compared to 1995, overall revenue did not increase proportionately as a
result of a substantial shift in product mix to lower priced DBS receivers
and related accessories, and an approximate 23% reduction in the average
selling price of C-band receivers. Included in the number of satellite
receivers sold for the three month period ended March 31, 1996 are
approximately 17,000 EchoStar Receiver Systems. EchoStar Receiver System
revenue represented approximately 20% of total revenue for the three month
period ended March 31, 1996.
13
<PAGE>
Also included in the number of satellite receivers sold for the three
month period ended March 31, 1996 are approximately 18,000 Competitor DBS
Receivers as compared to 11,000 for the same period in 1995. During the
three month period ended March 31, 1996, the Competitor DBS Receivers were
sold at an approximate 30% reduction in the average selling price as
compared to the same period in 1995. Competitor DBS Receiver revenue was 19%
of total revenue for the three month period ended March 31, 1996. Dish's
agreement to distribute Competitor DBS Receiver systems terminated on
December 31, 1995 and during the first quarter of 1996, Dish sold the
majority of its existing inventory of Competitor DBS Receivers. The
elimination of Competitor DBS Receiver inventory will be offset by a
substantial increase in inventory of EchoStar Receiver Systems and related
components, the sale of which is expected to offset the elimination of
revenue derived from the sale of Competitor DBS Receivers.
Dish markets its current C-band DTH products by offering competitive
pricing and consumer financing in order to minimize the decline in
domestic C-band DTH sales resulting from the increased popularity of DBS
equipment and programming. Additionally, during all of 1995 and through
the first quarter of 1996, Dish sold Competitor DBS Receivers which partially
offset the decline in domestic C-band sales in 1995. During the three
month period ended March 31, 1996 the decline in sales of C-band DTH
products was more than offset by sales of Competitor DBS Receiver and
EchoStar Receiver Systems. With the elimination of Competitor DBS
Receiver inventory, domestic DTH product revenue in subsequent quarters
will be derived substantially from the sale of EchoStar Receiver Systems
which, although no assurances can be given, should accelerate in the second
quarter as demand for Dish Network-SM- programming increases as a result of
heightened advertising and marketing efforts.
Loan origination and participation income for the three month period
ended March 31, 1996 was $372,000, an increase of $107,000, or 40%,
compared to the same period in 1995. The increase in loan origination
and participation income for the three month period ended March 31, 1996 was
primarily due to increased finance volume, including the financing of
EchoStar Receiver Systems. In the first quarter of 1996, EchoStar formed a
wholly owned subsidiary, DNCC, for the purpose of providing consumer
financing for EchoStar's domestic DTH products and services. At that time,
Dish's subsidiary that previously provided these services ceased new loan
origination activities. In future periods revenue from loan origination
and participation income will decline.
Programming revenue for the three month period ended March 31, 1996
was $3.9 million, an increase of $42,000, or 1%, as compared to the same
period in 1995. The increase was primarily due to Dish Network-SM- consumer
and commercial programming revenue of $464,000 generated during the three
month period ended March 31, 1996. The increase in revenue derived from the
sale of Dish Network-SM- programming was offset by a decrease in C-band DTH
programming revenue. The industry-wide decline in domestic C-band
equipment sales has resulted, and is expected to continue to result in,
a decline in C-band DTH programming revenue. Dish believes that the
expected decline in C-band DTH programming revenue in 1996 will be more than
offset by sales of Dish Network-SM- programming.
Revenue from international sales of DTH products for the three month
period ended March 31, 1996 was $12.8 million, a decrease of $3.0 million,
or 19%, as compared to the same period in 1995. This decrease during the
three month period ended March 31, 1996, resulted principally from reduced
sales to the Middle East where Dish's largest international DTH customer is
based, and an approximate 20% reduction in the average selling price of
analog satellite receivers. This decline was partially offset by increased
sales in Africa. Revenue from sales of DTH products in the Middle East
suffered beginning in August 1995 as a result of restrictions against
imports, and may not return to historic analog levels even as import
restrictions are eased. Historic analog sales levels may not be reached
because of new digital service planned for the Middle East which is currently
expected to begin in the third quarter of 1996. Overall, Dish's
international markets for analog DTH products declined during the three
month period ended March 31, 1996 as anticipation for new digital services
increased. Also, the decrease discussed above was partially offset by
an increase in other DTH product revenue. Internationally, Dish
sold approximately 76,000 analog satellite receivers during the three
month period ended March 31, 1996, a decrease of 11%, compared to
approximately 85,000 units sold during the same period in 1995. The
decrease was principally due to international anticipation of new digital
services as discussed above. Dish is currently negotiating with digital
service providers to distribute their proprietary receivers in Dish's
international markets.
14
<PAGE>
OPERATING EXPENSES. Costs of DTH products sold were $32.8 million
for the three month period ended March 31, 1996, an increase of $3.3 million,
or 11%, as compared to the same period in 1995. The increase in DTH
operating expenses for 1996 resulted primarily from the increase in sales of
DTH products. Operating expenses for DTH products as a percentage of DTH
product revenue were 89% and 81% for the three month period ended March 31,
1996 and 1995, respectively. The increase was principally the result of
declining sales prices of C-band DTH products and Competitor DBS Receivers
as described above, during the three month period ended March 31, 1996 as
compared to the same period in 1995.
Operating expenses for programming were $3.3 million for the three
month period ended March 31, 1996, a decrease of $149,000, or 4%, as
compared to the same period in 1995. Operating expenses for programming
as a percentage of programming revenue for the three month period ended
March 31, 1996 were 84% as compared to 89% for the same period in 1995.
The decrease in operating expenses for programming as a percentage of
programming revenue for the three month period ended March 31, 1996 was
primarily a result of higher margins earned on Dish Network-SM- programming
partially offset by declining margins on C-band programming.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general
and administrative expenses were $10.6 million for the three month period
ended March 31, 1996, an increase of $2.7 million, or 34%, as compared to
the same period in 1995. Selling, general and administrative expenses as
a percentage of total revenue increased to 26% for the three month period
ended March 31, 1996 as compared to 19% for the same period in 1995. This
increase was principally due to: (i) marketing and advertising prior to and
in conjunction with the introduction of Dish Network-SM- service; (ii)
increased personnel in all areas of the organization to support the Dish
Network-SM-; and (iii) costs related to the Digital Broadcast Center, which
commenced operations in the third quarter of 1995.
Research and development costs totaled $1.2 million for the three month
period ended March 31, 1996, as compared to $1.3 million for the same period
in 1995. The decrease was principally due to the reduction in research
necessary to provide C-band receivers to domestic and international
markets, partially offset by increased research and development costs
related to digital DBS satellite receivers.
EBITDA. EBITDA for the three month period ended March 31, 1996
was a negative $5.6 million, a decrease of $5.3 million compared to the
same period in 1995. The decrease resulted from the factors affecting
revenue and expenses discussed above. EBITDA represents earnings before
interest income, interest expense net of other income, income taxes,
depreciation and amortization. EBITDA is commonly used in the
telecommunications industry to analyze companies on the basis of operating
performance, leverage and liquidity. EBITDA is not intended to
represent cash flows for the period, nor has it been presented as an
alternative to operating income as an indicator of operating performance
and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with generally accepted
accounting principles.
DEPRECIATION. Depreciation for the three month period ended March
31, 1996 was $3.3 million, an increase of $3.0 million, or 817%, as
compared to the same period in 1995. The overall increase primarily
resulted from depreciation on the Digital Broadcast Center and EchoStar
I which were placed in service during the fourth quarter of 1995 and the
first quarter of 1996, respectively.
OTHER INCOME AND EXPENSE. Other expense for the three month period
ended March 31, 1996 was $3.2 million, an increase of $337,000, or 12% as
compared to the same period in 1995. The increase in other expense for the
three month period ending March 31, 1996 resulted primarily from a
reduction in interest income due to an overall decrease for the period in
the 1994 Notes Escrow Account, cash and marketable investment securities.
This was partially offset by a decrease in interest expense resulting
from additional interest capitalized in 1996 as compared to the same period
in 1995.
PROVISION FOR INCOME TAXES. Income tax benefit for the three month
period ended March 31, 1996 was $4.8 million compared to $1.4 million during
the same period in 1995. This increase is principally the result of changes
in components of income and expenses discussed above during the three month
period ended March 31, 1996. Dish's deferred tax assets (approximately
$16.9 million at March 31, 1996) relate principally to temporary differences
for amortization of original issue discount on the 1994 Notes and various
accrued expenses
15
<PAGE>
which are not deductible until paid. No valuation allowance has been
provided because Dish currently believes it is more likely than not that
these deferred assets will ultimately be realized. If future operating
results differ materially and adversely from Dish's current expectations,
its judgment regarding the need for a valuation allowance may change.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operations were $6.5 million for the three month
period ended March 31, 1996 as compared to $3.8 million used by
operations for the same period in 1995. Cash provided by operations for
the three month period ended March 31, 1996 was mainly a result of deferred
programming revenue received related to the Dish Network-SM- and the sale of
the majority of Competitor DBS Receiver inventory. Dish expects any
declines in inventory to be offset by substantial increases in EchoStar
Receiver System inventory and related components. The anticipated
increase in inventory is expected to negatively affect cash flow in the short
term. However, as EchoStar builds its Dish Network-SM- subscriber base, the
negative affect on cash flow should be offset by an increase in revenue
attributable to sales of EchoStar Receiver Systems and Dish Network-SM-
programming. In the event subscription to Dish Network-SM- programming do not
meet anticipated levels, the negative affect on cash flow will continue.
Certain subsidiaries of EchoStar are parties to a credit facility (the
"Credit Facility") with Bank of America Illinois. The Credit Facility
expired in May 1996 and EchoStar does not currently intend to arrange a
replacement credit facility. Instead, EchoStar is using available cash to
collateralize its letter of credit obligations, which historically was the
only significant use of the Credit Facility. At March 31, 1996, EchoStar
had cash collateralized $15.5 million of certain standby letters of credit
for trade purchases which is included in restricted cash and marketable
securities in the accompanying balance sheet.
During June 1994, Dish issued 624,000 units consisting of $624.0
million principal amount of the 1994 Notes and 3,744,000 Warrants
(representing 2,808,000 shares of EchoStar Class A Common Stock) for
aggregate net proceeds of approximately $323.3 million, which were placed in
the 1994 Escrow Account. Through March 31, 1996, $276.8 million had been
withdrawn from the 1994 Escrow Account. Of that amount, $28.3 million was
to reimburse Dish for monies expended for the construction and launch of
EchoStar I and EchoStar II prior to June 7, 1994, and will be reinvested in
development of the EchoStar DBS System. At March 31, 1996, approximately
$251.9 million of these proceeds had been applied to development and
construction of the EchoStar DBS System and approximately $24.9 million had
been applied to other permitted uses. As of March 31, 1996, approximately
$63.6 million remained in the 1994 Escrow Account, which included
investment earnings. Total cash on hand and marketable investment
securities at March 31, 1996 were approximately $2.4 million.
In March 1996, ESB consummated a private placement of the 1996 Notes.
ESB was formed in January 1996 for the purpose of the 1996 Notes Offering.
EchoStar has contributed all of the outstanding capital stock of Dish to
ESB. ESB issued 580,000 notes consisting of $580.0 million principal amount
of the 1996 Notes for aggregate net proceeds of approximately $337.0 million
of which $177.3 million was placed in the 1996 Escrow Account and the
remaining $159.7 million is included in cash and cash equivalents in the
accompanying balance sheet at March 31, 1996. Through March 31, 1996,
$7.5 million had been withdrawn from the 1996 Escrow Account for
development and construction of the EchoStar DBS System. As of March 31,
1996, approximately $170.0 million remained in the 1996 Escrow Account, which
included investment earnings.
Based upon existing cash resources and expected revenue and expenses,
exclusive of Dish Network-SM- marketing expenses, EchoStar anticipates
requiring an additional $40.0 million in working capital in 1996 related
to operations and the development of the EchoStar DBS System. This cash
requirement could increase if subscribers are not added as planned or
expenses, including subsidization of EchoStar Receiver Systems, exceed
present estimates. Additionally, in 1996, EchoStar has expended or
expects to expend: (i) approximately $125.3 million in connection with
the launch of EchoStar II and EchoStar III; (ii) approximately $46.7 million
for launch insurance on EchoStar II and EchoStar III; (iii)
approximately $52.5 million for construction of EchoStar III and
EchoStar IV; (iv) approximately $8.0 million for in-orbit payments to
Martin Marietta on EchoStar I and EchoStar II; (v) approximately $52.3
million for the purchase of DBS frequencies at 148DEG. WL; (vi) $10.4
16
<PAGE>
million for other 1994 Escrow related expenditures
related to development of the EchoStar DBS System; and (vii) up to $95.0
million for the introduction, product marketing and other operating expenses
for the Dish Network-SM-. Funds for these expenditures, as well as proposed
expenditures beyond 1996 related to costs expected to be incurred in
connection with the construction and launch of EchoStar's first four
satellites, in an approximate amount of $235.0 million, are expected to
come from the 1996 Notes Escrow Account, the 1994 Notes Escrow Account and
available cash and marketable investment securities. However, in order to
continue development of the third and fourth satellites beyond the third
quarter in 1997, additional capital will be required. There are no
assurances that additional capital will be available, or, if available,
that it will be available on terms favorable to EchoStar.
In addition to the commitments described above, Dish has entered
into agreements to purchase DBS satellite receivers and related components
for the EchoStar DBS System. As of March 31, 1996 those purchase order
commitments totaled as much as $622.2 million. At March 31, 1996, the
total of all outstanding purchase order commitments with domestic and
foreign suppliers was as much as $641.3 million. All but approximately
$85.9 million of the purchases related to these commitments are expected to
be made during 1996 and the remainder is expected to be made during 1997.
EchoStar expects to finance these commitments from available cash,
marketable investment securities and sales of inventory, including the sale
of EchoStar Receiver Systems and related products.
In the event price and marketing competition intensifies among DBS and
other "small dish" operators, EchoStar may be at a competitive disadvantage
as a result of its limited financial resources, and would be required to
raise additional capital during 1996 if DBS hardware subsidizations
increase significantly. EchoStar had outstanding $415.7 million and
$778.6 million of long-term debt (including the 1994 and 1996 Notes,
deferred satellite contract payments on EchoStar I and mortgage debt)
as of December 31, 1995 and March 31, 1996, respectively. In addition,
because interest on the 1994 Notes is not payable currently in cash but
accretes through June 1, 1999, the 1994 Notes will increase by $241.8
million through that date. Also, because interest on the 1996 Notes is
not payable in cash but accretes through March 15, 2000, the 1996 Notes
will increase by $230.0 million through that date. Contractor financing of
$28.0 million is available for EchoStar II. Interest on the contractor
financing is at the prime rate and principal payments are payable in equal
monthly installments over five years following the launch of the satellite.
AVAILABILITY OF OPERATING CASH FLOW TO ECHOSTAR
The 1994 and 1996 Notes Indentures impose various restrictions on the
transfer of funds among EchoStar and its subsidiaries. Although the 1996
Notes are collateralized by the stock of Dish, various assets expected to
form an integral part of the EchoStar DBS System (and not otherwise
encumbered by the 1994 Notes Indenture), and guarantees of EchoStar and
certain of its other subsidiaries, ESB's ability to fund interest and
principal payments on the 1996 Notes will depend on successful operation of
the Dish Network-SM- and ESB having access to available cash flows generated
by the Dish Network-SM-. If cash available to ESB is not sufficient to
service the 1996 Notes, EchoStar would be required to obtain cash from
other sources such as assetsales, issuance of equity securities, or new
borrowings. There can be no assurance that those alternative sources would
be available, or available on favorable terms, or sufficient to meet debt
service requirements on the 1996 Notes.
ASSETS OF PRINCIPAL GUARANTORS
EchoStar guarantees the 1996 Notes on a subordinated basis.
EchoStar's Equity Offering resulted in net proceeds of approximately $63.0
million. EchoStar's assets at March 31, 1996 included assets purchased
with those proceeds and cash remaining from the Equity Offering.
Substantially all of the proceeds from the Equity Offering were used: (i) to
secure launches for a third and fourth satellite; (ii) to support, through
loans to DBSC, construction of a third satellite; (iii) to purchase, for
$4.0 million, convertible subordinated secured debentures from DBS
Industries, Inc.; and (iv) for general corporate purposes, including the
down payment, for DBS frequencies purchased at 148DEG. WL at the FCC
Auction in January 1996, which will be reimbursed with the proceeds of the
1996 Notes Offering.
17
<PAGE>
OTHER
1994 AND 1996 NOTES
EchoStar I was successfully launched by Great Wall in December 1995.
In the event of a launch failure of EchoStar II, Dish would first be
required under the 1994 Notes Indenture to make an offer to repurchase
one-half of the then accreted value of the 1994 Notes. In the event that
EchoStar does not have the right to use orbital slot authorizations granted
by the FCC covering a minimum of 21 transponders at a single full CONUS
orbital slot, ESB and Dish will be required to make an offer to repurchase
all or a portion of the outstanding 1996 and 1994 Notes, respectively.
Additionally, in the event that EchoStar DBS Corporation, a wholly owned
subsidiary of EchoStar, fails to obtain authorization from the FCC for
frequencies purchased at the FCC Auction in January 1996, or in the event
that such authorization is revoked or rescinded, ESB will be required under
the 1996 Notes Indenture to repurchase the maximum principal amount of
the 1996 Notes that may be purchased with the proceeds of any refund
received from the FCC.
If the DBSC Merger or a similar transaction does not occur on or before
March 1, 1997, ESB will be required to repurchase at least $83.0 million
principal amount of the 1996 Notes. Further, in the event that EchoStar
incurs more than $7.8 million in expenses (as defined in the 1996 Notes
Indenture) in connection with the DBSC Merger, ESB will be required to
apply an amount equal to such expenses minus $7.8 million to an offer to
repurchase the maximum principal amount of the 1996 Notes that may be
purchased out of such proceeds.
If any of the above described events were to occur, EchoStar's
plan of operations, including its liquidity, would be adversely affected and
its current business plan could not be fully implemented. Further,
EchoStar's short-term liquidity would be adversely affected in the event of:
(i) significant delay in the delivery of certain products and equipment
necessary for operation of the EchoStar DBS System; (ii) shortfalls in
estimated levels of operating cash flows; or (iii) unanticipated expenses
in connection with development of the EchoStar DBS System.
RECEIVER MANUFACTURERS
Dish has agreements with two manufacturers to supply the receiver
component of EchoStar Receiver Systems. To date, only one of the
manufacturers has produced a receiver acceptable to Dish, and that
manufacturer is presently manufacturing receivers in quantities sufficient
to meet expected demand. No assurances can be given that Dish's other
manufacturer will be able to produce an acceptable receiver in the
future. In the event the other manufacturer is unable to produce a
receiver acceptable to Dish, Dish could be dependent on one manufacturing
source for its receivers. To date, Dish has paid this manufacturer $10.0
million and has an additional $15.0 million in an escrow account as
security for Dish's payment obligations under the contract.
EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 121, "Accounting for Impairment Of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No.
121"). EchoStar has adopted SFAS No. 121 in the first quarter of 1996 and
its adoption has not had a significant impact on EchoStar's financial
position, results of operations or cash flows.
Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" ("SFAS No. 123"), issued by FASB in October
1995 and effective for fiscal years beginning after December 15, 1995,
encourages, but does not require, a fair value based method of accounting
for employee stock options or similar equity instruments. It also
allows an entity to elect to continue to measure compensation cost under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" ("APB No. 25"), but requires pro forma disclosures of net
income and earnings per share as if the fair value based method of
accounting had been applied. EchoStar has adopted SFAS No. 123 in the first
quarter of 1996 and has elected to continue to measure compensation cost
under APB No. 25 and to comply with the pro forma disclosure requirements.
Therefore, this statement has had no impact on EchoStar's results of
operations.
18
<PAGE>
IMPACT OF INFLATION; BACKLOG
Inflation has not materially affected EchoStar's operations during
the past three years. EchoStar believes that its ability to increase
charges for products and services in future periods will depend primarily
on competitive pressures. EchoStar does not have any material backlog of
its products.
PART II
ITEM 1. LEGAL PROCEEDINGS
EchoStar is a party to certain legal proceedings arising in the
ordinary course of its business. EchoStar does not believe that any of
these proceedings will have a material adverse affect on EchoStar's financial
position or results of operations.
19
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION
- ---------- -----------
2.1* Amended and Restated Agreement for Exchange of Stock and Merger,
dated as of May 31, 1995, by and among EchoStar Communications
Corporation, a Nevada corporation formed in April 1995
("EchoStar"), Charles W. Ergen and EchoStar (incorporated herein
by reference to Exhibit 2.2 to the Registration Statement Form S-1,
Registration No. 33-91276).
2.2* Agreement regarding purchase of debentures between Dish, Ltd.
(formerly EchoStar Communications Corporation, a Nevada corporation
formed in December 1993 ("Dish")), SSE Telecom, Inc. ("SSET"),
dated March 14, 1994, including Plan and Agreement of Merger,
by and among Dish, DirectSat Merger Corporation, DirectSat
Corporation and SSET (incorporated herein by reference to Exhibit
2.2 to the Registration Statement on Form S-1, Registration
No. 33-76450).
3.1(a)* Amended and Restated Articles of Incorporation of Dish
(incorporated herein by reference to Exhibit 3.1(a) to the Annual
Report on Form 10-K of Dish for the fiscal year end December 31,
1995).
3.1(b)* Bylaws of Dish (incorporated herein by reference to Exhibit 3.1(b)
to the Annual Report on Form 10-K of Dish for the fiscal year ended
December 31, 1995).
4.1* Indenture of Trust between Dish and First Trust National
Association ("First Trust"), as Trustee (incorporated herein
by reference to the Registration Statement on Form S-1 of Dish,
Registration No. 33-76450).
4.2* Warrant Agreement between EchoStar and First Trust, as Warrant Agent
(incorporated herein by reference to the Registration
Statement on Form S-1 of Dish, Registration No. 33-76450).
4.3* Security Agreement in favor of First Trust, as Trustee under the
Indenture filed as Exhibit 4.1 (incorporated herein by reference
to the Registration Statement on Form S-1 of Dish, Registration
No. 33-76450).
4.4* Escrow and Disbursement Agreement between Dish and First Trust
(incorporated herein by reference to the Registration Statement
on Form S-1 of Dish, Registration No. 33-76450).
4.5* Pledge Agreement in favor of First Trust, as Trustee under the
Indenture filed as Exhibit 4.1 herein (incorporated herein by
reference to the Registration Statement on Form S-1 of Dish,
Registration No. 33-76450).
4.6* Intercreditor Agreement among First Trust, Continental Bank,
N.A. and Martin Marietta Corporation ("Martin Marietta")
(incorporated herein by reference to the Registration Statement
on Form S-1 of Dish, Registration No. 33-76450).
4.7* Series A Preferred Stock Certificate of Designation of EchoStar
(incorporated herein by reference to Exhibit 4.7 to the Registration
Statement on Form S-1 of EchoStar, Registration No. 33-91276).
4.8* Registration Rights Agreement by and between EchoStar and Charles
W. Ergen (incorporated herein by reference to Exhibit 4.8 to the
Registration Statement on Form S-1 of EchoStar, Registration No.
33-91276).
20
<PAGE>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
4.9* Indenture of Trust between ESB and First Trust, as Trustee
(incorporated herein by reference to Exhibit 4.9 to the Annual
Report on Form 10-K of EchoStar, Commission File No. 0-26176).
4.10* Security Agreement of ESB in favor of First Trust, as Trustee
under the Indenture filed as Exhibit 4.9 (incorporated herein
by reference to Exhibit 4.10 to the Annual Report on Form 10-K
of Echostar. Commission File No. 0-26176).
4.11* Escrow and Disbursement Agreement between ESB and First Trust
(incorporated herein by reference to Exhibit 4.11 to the
Annual Report on Form 10-K of EchoStar. Commission File No.
0-26176).
4.12* Pledge Agreement of ESB in favor of First Trust, as Trustee
under the Indenture filed as Exhibit 4.9 (incorporated herein
by reference to Exhibit 4.12 to the Annual Report on Form 10-K
of EchoStar, Commission File No. 0-26176).
4.13* Pledge Agreement of EchoStar in favor of First Trust, as
Trustee under the Indenture filed as Exhibit 4.9 (incorporated
herein by reference to Exhibit 4.13 to the Annual Report on Form
10-K of EchoStar. Commission File No. 0-26176).
4.15* Registration Rights Agreement by and between ESB, EchoStar,
Dish, Ltd., New DBSC and Donald, Lufkin & Jenrette Securities
Corporation (incorporated herein by reference to Exhibit
4.14 to the Annual Report on Form 10-K of EchoStar,
Commission File No. 0-26176).
10.1(a)* Satellite Construction Contract, dated as of February 6, 1990,
between EchoStar Satellite Corporation ("ESC") and Martin
Marietta Corporation as successor to General Electric EchoStar,
Astro-Space Division ("General Electric") (incorporated herein by
reference to the Registration Statement on Form S-1 of
Dish, Ltd. Registration No. 33-76450).
10.1(b)* First Amendment to the Satellite Construction Contract, dated
as of October 2, 1992, between ESC and Martin Marietta
as successor to General Electric (incorporated herein by
reference to the Registration Statement on Form S-1 of Dish,
Ltd. Registration No. 33-76450).
10.1(c)* Second Amendment to the Satellite Construction Contract, dated
as of October 30, 1992, between ESC and Martin Marietta as
successor to General Electric (incorporated herein by
reference to the Registration Statement on Form S-1 of Dish,
Ltd. Registration No. 33-76450).
10.1(d)* Third Amendment to the Satellite Construction Contract, dated as
of April 1, 1993, between ESC and Martin Marietta
(incorporated herein by reference to the Registration
Statement on Form S-1 of Dish, Ltd. Registration No. 33-76450).
10.1(e)* Fourth Amendment to the Satellite Construction Contract, dated
as of August 19, 1993, between ESC and Martin Marietta
(incorporated herein by reference to the Registration Statement
on Form S-1 of Dish, Ltd. Registration No. 33-76450).
10.1(f)* Form of Fifth Amendment to the Satellite Construction Contract,
between ESC and Martin Marietta (incorporated herein by
reference to the Registration Statement on Form S-8 of EchoStar,
Registration No. 33-81234).
10.1(g)* Sixth Amendment to the Satellite Construction Contract, dated as
of June 7, 1994, between ESC and Martin Marietta
(incorporated herein by reference to the Registration
Statement on Form S-8 of EchoStar, Registration No. 33-81234).
21
<PAGE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.2* Satellite Launch Contract, dated as of September 27, 1993,
between ESC and the China Great Wall Industry Corporation
(incorporated herein by reference to the Registration Statement
on Form S-1 of Dish, Ltd. Registration No. 33-76450).
10.3* Distributor Agreement, dated as of July 30, 1993, between
Echosphere Corporation ("Echosphere") and Thomson Consumer
Electronics, Inc. (incorporated herein by reference to the
Registration Statement on Form S-1 of Dish, Ltd. Registration No.
33-76450).
10.4* Master Purchase and License Agreement, dated as of August
12, 1986, between Houston Tracker Systems, Inc. ("HTS") and
Cable/Home Communications Corp. (a subsidiary of General
Instruments Corporation) (incorporated herein by reference to
the Registration Statement on Form S-1 of Dish, Ltd.
Registration No. 33-76450).
10.5* Master Purchase and License Agreement, dated as of June
18, 1986, between Echosphere and Cable/Home Communications
Corp. (a subsidiary of General Instruments Corporation)
(incorporated herein by reference to the Registration
Statement on Form S-1 of Dish, Ltd. Registration No. 33-76450).
10.6* Merchandising Financing Agreement, dated as of June 29,
1989, between Echo Acceptance Corporation ("EAC") and Household
Retail Services, Inc. (incorporated herein by reference to
the Registration Statement on Form S-1 of Dish, Ltd.
Registration No. 33-76450).
10.7* Key Employee Bonus Plan, dated as of January 1, 1994
(incorporated herein by reference to the Registration Statement
on Form S-1 of Dish, Ltd. Registration No. 33-76450).
10.8* Consulting Agreement, dated as of February 17, 1994, between
ESC and Telesat Canada (incorporated herein by reference to the
Registration Statement on Form S-1 of Dish, Ltd. Registration No.
33-76450).
10.9* Form of Satellite Launch Insurance Declarations (incorporated
herein by reference to the Registration Statement on Form S-1
of Dish, Ltd. Registration No. 33-76450).
10.10* Dish 1994 Stock Incentive Plan (incorporated herein by
reference to the Registration Statement on Form S-1 of Dish,
Ltd. Registration No. 33-76450).
10.11* Form of Tracking, Telemetry and Control Contract between
AT&T Corp. and ESC (incorporated herein by reference to the
Registration Statement on Form S-8 of EchoStar, Registration
No. 33-81234).
10.12* Manufacturing Agreement, dated as of March 22, 1995,
between HTS and SCI Technology (incorporated herein by
reference to Exhibit 10.12 to the Registration Statement as Form
S-1 of Dish, Ltd. Commission File No. 33-81234).
10.13* Manufacturing Agreement dated as of April 14, 1995 by and
between ESC and Sagem Group (incorporated herein by reference
to Exhibit 10.13 to the Registration Statement on Form S-1 of
EchoStar, Registration No. 33-91276).
10.14* Statement of Work, dated January 31, 1995 from EchoStar Satellite
Corporation Inc. to Divicom Inc. (incorporated herein by
reference to Exhibit 10.14 to the Registration Statement on
Form S-1, Registration No. 33-91276).
22
<PAGE>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
10.15* Launch Services Contract, dated as of June 2, 1995, by and
between EchoStar Satellite Corporation and
Lockheed-Khrunichev-Energia International, Inc. (incorporated
herein by reference to Exhibit 10.15 to the Registration
Statement on Form S-1, Registration No. 33-91276).
10.16* EchoStar 1995 Stock Incentive Plan (incorporated herein by
reference to Exhibit 10.16 to the Registration Statement on Form
S-1, Registration No. 33-91276).
27 Financial Data Schedule
- --------------------------
* Incorporated by reference pursuant to Rule 12D-32 under the Securities
and Exchange Act of 1934, as amended.
(b) REPORTS ON FORM 8-K.
No current reports on Form 8-K were filed by EchoStar during the
period covered by this Quarterly Report on Form 10-Q.
23
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dish, Ltd.
Date: May 13, 1996 /s/ Steven B. Schaver
-------------------------------
Steven B. Schaver
Vice President and Chief Financial Officer
/s/ Steven B. Schaver
-------------------------------
Steven B. Schaver
Principal Financial Officer
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONSOLIDATED BALANCE SHEET OF DISH, LTD. AND SUBSIDIARIES AS OF
MARCH 31, 1996 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THOSE FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,155
<SECURITIES> 212
<RECEIVABLES> 14,747
<ALLOWANCES> (1,616)
<INVENTORY> 27,298
<CURRENT-ASSETS> 64,144
<PP&E> 346,810
<DEPRECIATION> (13,579)
<TOTAL-ASSETS> 548,034
<CURRENT-LIABILITIES> 31,167
<BONDS> 432,537
0
0
<COMMON> 0
<OTHER-SE> 85,323
<TOTAL-LIABILITY-AND-EQUITY> 548,034
<SALES> 40,654<F1>
<TOTAL-REVENUES> 41,026
<CGS> 36,033<F2>
<TOTAL-COSTS> 49,934
<OTHER-EXPENSES> 3,234
<LOSS-PROVISION> 610
<INTEREST-EXPENSE> 4,941
<INCOME-PRETAX> (12,142)
<INCOME-TAX> 4,852
<INCOME-CONTINUING> (7,290)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,290)
<EPS-PRIMARY> (7,290)
<EPS-DILUTED> (7,290)
<FN>
<F1>INCLUDES SALES OF PROGRAMMING.
<F2>INCLUDES THE COST OF PROVIDING PROGRAMMING.
</FN>
</TABLE>
