Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investment Securities

9 Months Ended

Sep. 30, 2019

Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investment Securities

Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investment Securities

5. Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investment Securities

Our marketable investment securities, restricted cash and cash equivalents, and other investment securities consisted of the following:

	As of
	September 30,		December 31,
	2019		2018
	(In thousands)
Marketable investment securities:
Current marketable investment securities:
Strategic - available-for-sale	$	185	$	193
Strategic - trading/equity (Note 2)		5		2,370
Other		190,844		1,178,908
Total current marketable investment securities		191,034		1,181,471
Restricted marketable investment securities (1)		390		67,019
Total marketable investment securities		191,424		1,248,490
Restricted cash and cash equivalents (1)		60,461		578
Other investment securities:
Other investment securities		159,590		118,992
Total other investment securities		159,590		118,992
Total marketable investment securities, restricted cash and cash equivalents, and other investment securities	$	411,475	$	1,368,060

(1) Restricted marketable investment securities and restricted cash and cash equivalents are included in “Restricted cash, cash equivalents and marketable investment securities” on our Condensed Consolidated Balance Sheets.

Marketable Investment Securities

Our marketable investment securities portfolio consists of various debt and equity instruments. All debt securities are classified as available-for-sale. Subsequent to the adoption of ASU 2016-01 during the first quarter 2018, all equity securities are carried at fair value, with changes in fair value recognized in “Other, net” within “Other Income (Expense)” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 2 for further information.

Current Marketable Investment Securities – Strategic

Our current strategic marketable investment securities portfolio includes and may include strategic and financial debt and/or equity investments in private and public companies that are highly speculative and have experienced and continue to experience volatility. As of September 30, 2019, this portfolio consisted of securities of a small number of issuers, and as a result the value of that portfolio depends, among other things, on the performance of those issuers. The fair value of certain of the debt and equity securities in this portfolio can be adversely impacted by, among other things, the issuers’ respective performance and ability to obtain any necessary additional financing on acceptable terms, or at all.

Current Marketable Investment Securities - Other

Our current other marketable investment securities portfolio includes investments in various debt instruments including, among others, commercial paper, corporate securities and United States treasury and/or agency securities.

Commercial paper consists mainly of unsecured short-term, promissory notes issued primarily by corporations with maturities ranging up to 365 days. Corporate securities consist of debt instruments issued by corporations with various maturities normally less than 18 months. U.S. Treasury and agency securities consist of debt instruments issued by the federal government and other government agencies.

Restricted Cash, Cash Equivalents and Marketable Investment Securities

As of September 30, 2019 and December 31, 2018, our restricted marketable investment securities, together with our restricted cash and cash equivalents, included amounts required as collateral for our letters of credit and trusts.

Other Investment Securities

We have strategic investments in certain debt and/or equity securities that are included in noncurrent “Other investment securities” on our Condensed Consolidated Balance Sheets. Our debt securities are classified as available-for-sale and our equity securities are accounted for using the equity method of accounting or recorded at fair value. Certain of our equity method investments are detailed below.

NagraStar L.L.C. As a result of the completion of the share exchange on February 28, 2017, we own a 50% interest in NagraStar L.L.C. (“NagraStar”), a joint venture that is our primary provider of encryption and related security systems intended to assure that only authorized customers have access to our programming.

Invidi Technologies Corporation. In November 2016, we, DIRECTV, LLC, a wholly-owned indirect subsidiary of AT&T Inc., and Cavendish Square Holding B.V., an affiliate of WPP plc, entered into a series of agreements to acquire Invidi Technologies Corporation (“Invidi”), an entity that provides proprietary software for the addressable advertising market. The transaction closed in January 2017.

TerreStar Solutions, Inc.  In March 2019, we closed a transaction with TerreStar Solutions, Inc. (“TSI”) to acquire additional equity securities of TSI, an entity that holds certain 2 GHz wireless spectrum licenses in Canada, in exchange for certain Canadian assets, including, among other things, a portion of the satellite capacity on our T1 satellite, which we had acquired from TerreStar Networks, Inc. in 2012. 

Our ability to realize value from our strategic investments in securities that are not publicly traded depends on the success of the issuers’ businesses and their ability to obtain sufficient capital, on acceptable terms or at all, and 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.

Unrealized Gains (Losses) on Marketable Investment Securities

As of September 30, 2019 and December 31, 2018, we had accumulated net unrealized gains of less than $1 million and accumulated net unrealized losses of $1 million, respectively. These amounts, net of related tax effect, were accumulated net unrealized gains of less than $1 million and accumulated net unrealized losses of $1 million, respectively. All of these amounts are included in “Accumulated other comprehensive income (loss)” within “Total stockholders’ equity (deficit).” The components of our available-for-sale investments are summarized in the table below.

	As of September 30, 2019								As of December 31, 2018
	Marketable								Marketable
	Investment		Unrealized						Investment		Unrealized
	Securities		Gains		Losses		Net		Securities		Gains		Losses		Net
	(In thousands)
Debt securities (including restricted):
U.S. Treasury and agency securities	$	22,254	$	69	$	—	$	69	$	66,823	$	40	$	(19)	$	21
Commercial paper		140,000		—		—		—		367,488		—		—		—
Corporate securities		28,254		33		—		33		805,259		91		(899)		(808)
Other		911		55		(8)		47		6,550		56		(2)		54
Total	$	191,419	$	157	$	(8)	$	149	$	1,246,120	$	187	$	(920)	$	(733)

As of September 30, 2019, restricted and non-restricted marketable investment securities included debt securities of $191 million with contractual maturities within one year. Actual maturities may differ from contractual maturities as a result of our ability to sell these securities prior to maturity.

Fair Value Measurements

Our investments measured at fair value on a recurring basis were as follows:

	As of
	September 30, 2019								December 31, 2018
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(In thousands)
Cash equivalents (including restricted)	$	1,384,935	$	518,453	$	866,482	$	—	$	859,220	$	30,858	$	828,362	$	—
Debt securities (including restricted):
U.S. Treasury and agency securities	$	22,254	$	22,254	$	—	$	—	$	66,823	$	66,823	$	—	$	—
Commercial paper		140,000		—		140,000		—		367,488		—		367,488		—
Corporate securities		28,254		—		28,254		—		805,259		—		805,259		—
Other		911		—		726		185		6,550		—		6,357		193
Equity securities		5		5		—		—		2,370		2,370		—		—
Total	$	191,424	$	22,259	$	168,980	$	185	$	1,248,490	$	69,193	$	1,179,104	$	193

During the nine months ended September 30, 2019, we had no transfers in or out of Level 1 and Level 2 fair value measurements.

Gains and Losses on Sales and Changes in Carrying Amounts of Investments

“Other, net” within “Other Income (Expense)” included on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) is as follows:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
Other, net:	2019		2018		2019		2018
	(In thousands)
Marketable investment securities - realized and unrealized gains (losses)	$	1,346	$	23,574	$	5,240	$	8,865
Costs related to early redemption of debt		(44)		—		(483)		(2,716)
Gain (loss) on sale of subsidiary		—		7,004		—		7,004
Equity in earnings of affiliates		(5,467)		(5,369)		(4,476)		(3,164)
Other		2,369		264		9,843		2,108
Total	$	(1,796)	$	25,473	$	10,124	$	12,097