Nevada | 26-1232727 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
100 Inverness Terrace East, Englewood, Colorado | 80112-5308 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer ý | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller | |||
reporting company) |
• | our reliance on our primary customer, DISH Network Corporation and its subsidiaries (“DISH Network”), for a significant portion of our revenue; |
• | our ability to implement our strategic initiatives; |
• | the impact of variable demand and the adverse pricing and regulatory environment for digital set-top boxes; |
• | dependence on our ability to successfully manufacture and sell our digital set-top boxes in increasing volumes on a cost-effective basis and with acceptable quality; |
• | our ability to bring advanced technologies to market to keep pace with our customers and competitors; |
• | risk related to our foreign operations and other uncertainties associated with doing business internationally, including changes in foreign exchange rates between foreign currencies and the United States dollar, economic instability and political disturbances; |
• | significant risks related to the construction, launch and operation of our satellites, such as the risk of material malfunction on one or more of our satellites, risks resulting from delays of launches of our satellites, changes in the space weather environment that could interfere with the operation of our satellites, and our general lack of commercial insurance coverage on our satellites; |
• | our failure to adequately anticipate the need for satellite capacity or the inability to obtain satellite capacity for our Hughes segment; and |
• | the failure of third-party providers of components, manufacturing, installation services and customer support services to appropriately deliver the contracted goods or services. |
As of | ||||||||
September 30, | December 31, | |||||||
2016 | 2015 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 2,215,708 | $ | 924,240 | ||||
Marketable investment securities, at fair value | 803,309 | 612,338 | ||||||
Trade accounts receivable, net of allowance for doubtful accounts of $13,817 and $12,485, respectively | 177,901 | 179,240 | ||||||
Trade accounts receivable - DISH Network, net of allowance for doubtful accounts of zero | 330,300 | 277,159 | ||||||
Inventory | 73,789 | 67,010 | ||||||
Prepaids and deposits | 61,489 | 56,949 | ||||||
Other current assets | 54,993 | 16,723 | ||||||
Total current assets | 3,717,489 | 2,133,659 | ||||||
Noncurrent Assets: | ||||||||
Restricted cash and marketable investment securities | 13,651 | 21,002 | ||||||
Property and equipment, net of accumulated depreciation of $3,303,714 and $2,998,074, respectively | 3,628,379 | 3,412,990 | ||||||
Regulatory authorizations, net | 548,211 | 543,812 | ||||||
Goodwill | 510,630 | 510,630 | ||||||
Other intangible assets, net | 98,366 | 132,653 | ||||||
Investments in unconsolidated entities | 202,272 | 209,264 | ||||||
Other receivable - DISH Network | 90,359 | 90,966 | ||||||
Other noncurrent assets, net | 167,980 | 154,510 | ||||||
Total noncurrent assets | 5,259,848 | 5,075,827 | ||||||
Total assets | $ | 8,977,337 | $ | 7,209,486 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Trade accounts payable | $ | 225,234 | $ | 213,671 | ||||
Trade accounts payable - DISH Network | 1,520 | 24,682 | ||||||
Current portion of long-term debt and capital lease obligations | 37,717 | 35,698 | ||||||
Deferred revenue and prepayments | 62,197 | 61,881 | ||||||
Accrued compensation | 37,083 | 29,767 | ||||||
Accrued royalties | 22,687 | 22,531 | ||||||
Accrued interest | 57,159 | 8,596 | ||||||
Accrued expenses and other | 104,638 | 130,005 | ||||||
Total current liabilities | 548,235 | 526,831 | ||||||
Noncurrent Liabilities: | ||||||||
Long-term debt and capital lease obligations, net of unamortized debt issuance costs | 3,629,973 | 2,156,667 | ||||||
Deferred tax liabilities, net | 724,839 | 650,392 | ||||||
Other noncurrent liabilities | 95,615 | 93,954 | ||||||
Total noncurrent liabilities | 4,450,427 | 2,901,013 | ||||||
Total liabilities | 4,998,662 | 3,427,844 | ||||||
Commitments and Contingencies (Note 14) | ||||||||
Stockholders’ Equity: | ||||||||
Preferred Stock, $.001 par value, 20,000,000 shares authorized: | ||||||||
Hughes Retail Preferred Tracking Stock, $.001 par value, 13,000,000 shares authorized, 6,290,499 issued and outstanding at each of September 30, 2016 and December 31, 2015 | 6 | 6 | ||||||
Common stock, $.001 par value, 4,000,000,000 shares authorized: | ||||||||
Class A common stock, $.001 par value, 1,600,000,000 shares authorized, 51,890,524 shares issued and 46,358,206 shares outstanding at September 30, 2016 and 51,087,839 shares issued and 45,555,521 shares outstanding at December 31, 2015 | 52 | 51 | ||||||
Class B common stock, $.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at each of September 30, 2016 and December 31, 2015 | 48 | 48 | ||||||
Class C common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2016 and December 31, 2015 | — | — | ||||||
Class D common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2016 and December 31, 2015 | — | — | ||||||
Additional paid-in capital | 3,813,841 | 3,776,451 | ||||||
Accumulated other comprehensive loss | (99,167 | ) | (117,233 | ) | ||||
Accumulated earnings | 276,059 | 134,317 | ||||||
Treasury stock, at cost | (98,162 | ) | (98,162 | ) | ||||
Total EchoStar stockholders’ equity | 3,892,677 | 3,695,478 | ||||||
Noncontrolling interest in HSS Tracking Stock | 73,928 | 74,854 | ||||||
Other noncontrolling interests | 12,070 | 11,310 | ||||||
Total stockholders’ equity | 3,978,675 | 3,781,642 | ||||||
Total liabilities and stockholders’ equity | $ | 8,977,337 | $ | 7,209,486 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenue: | ||||||||||||||||
Services and other revenue - DISH Network | $ | 221,867 | $ | 236,601 | $ | 655,793 | $ | 695,358 | ||||||||
Services and other revenue - other | 278,009 | 277,640 | 826,430 | 824,130 | ||||||||||||
Equipment revenue - DISH Network | 156,227 | 157,184 | 590,988 | 577,277 | ||||||||||||
Equipment revenue - other | 86,246 | 89,454 | 243,126 | 256,362 | ||||||||||||
Total revenue | 742,349 | 760,879 | 2,316,337 | 2,353,127 | ||||||||||||
Costs and Expenses: | ||||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 213,621 | 219,686 | 618,271 | 645,691 | ||||||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | 200,986 | 207,989 | 710,724 | 706,835 | ||||||||||||
Selling, general and administrative expenses | 101,541 | 91,830 | 296,377 | 280,462 | ||||||||||||
Research and development expenses | 20,587 | 19,875 | 61,761 | 57,432 | ||||||||||||
Depreciation and amortization | 123,633 | 132,892 | 370,872 | 398,547 | ||||||||||||
Total costs and expenses | 660,368 | 672,272 | 2,058,005 | 2,088,967 | ||||||||||||
Operating income | 81,981 | 88,607 | 258,332 | 264,160 | ||||||||||||
Other Income (Expense): | ||||||||||||||||
Interest income | 6,260 | 2,562 | 13,729 | 7,896 | ||||||||||||
Interest expense, net of amounts capitalized | (37,358 | ) | (28,870 | ) | (80,495 | ) | (96,136 | ) | ||||||||
Loss from partial redemption of debt | — | — | — | (5,044 | ) | |||||||||||
Gains (losses) on marketable investment securities, net | 230 | (3,912 | ) | 8,179 | (5,516 | ) | ||||||||||
Other-than-temporary impairment loss on available-for-sale securities | — | (1,243 | ) | — | (5,892 | ) | ||||||||||
Equity in earnings (losses) of unconsolidated affiliates, net | 5,164 | (2,324 | ) | 11,181 | (2,580 | ) | ||||||||||
Other, net | 645 | 2,115 | 5,900 | (4,078 | ) | |||||||||||
Total other expense, net | (25,059 | ) | (31,672 | ) | (41,506 | ) | (111,350 | ) | ||||||||
Income before income taxes | 56,922 | 56,935 | 216,826 | 152,810 | ||||||||||||
Income tax provision | (19,512 | ) | (28,577 | ) | (75,064 | ) | (65,841 | ) | ||||||||
Net income | 37,410 | 28,358 | 141,762 | 86,969 | ||||||||||||
Less: Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock | 85 | (686 | ) | (926 | ) | (4,020 | ) | |||||||||
Less: Net income attributable to other noncontrolling interests | 524 | 209 | 946 | 1,006 | ||||||||||||
Net income attributable to EchoStar | 36,801 | 28,835 | 141,742 | 89,983 | ||||||||||||
Less: Net income (loss) attributable to Hughes Retail Preferred Tracking Stock (Note 4) | 157 | (1,267 | ) | (1,709 | ) | (7,421 | ) | |||||||||
Net income attributable to EchoStar common stock | $ | 36,644 | $ | 30,102 | $ | 143,451 | $ | 97,404 | ||||||||
Weighted-average common shares outstanding - Class A and B common stock: | ||||||||||||||||
Basic | 93,898 | 92,500 | 93,661 | 92,253 | ||||||||||||
Diluted | 94,401 | 93,493 | 94,189 | 93,480 | ||||||||||||
Earnings per share - Class A and B common stock: | ||||||||||||||||
Basic | $ | 0.39 | $ | 0.33 | $ | 1.53 | $ | 1.06 | ||||||||
Diluted | $ | 0.39 | $ | 0.32 | $ | 1.52 | $ | 1.04 | ||||||||
Comprehensive Income: | ||||||||||||||||
Net income | $ | 37,410 | $ | 28,358 | $ | 141,762 | $ | 86,969 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments | 2,483 | (32,603 | ) | 13,769 | (56,009 | ) | ||||||||||
Recognition of foreign currency translation loss in net income | — | — | — | 1,889 | ||||||||||||
Unrealized gains (losses) on available-for-sale securities and other | 10,180 | (7,373 | ) | 9,695 | (8,208 | ) | ||||||||||
Recognition of other-than-temporary loss on available-for-sale securities in net income | — | 1,243 | — | 5,892 | ||||||||||||
Recognition of realized gains on available-for-sale securities in net income | (10 | ) | (9 | ) | (5,584 | ) | (29 | ) | ||||||||
Total other comprehensive income (loss), net of tax | 12,653 | (38,742 | ) | 17,880 | (56,465 | ) | ||||||||||
Comprehensive income (loss) | 50,063 | (10,384 | ) | 159,642 | 30,504 | |||||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interest in HSS Tracking Stock | 85 | (686 | ) | (926 | ) | (4,020 | ) | |||||||||
Less: Comprehensive income attributable to other noncontrolling interests | 524 | (111 | ) | 760 | 686 | |||||||||||
Comprehensive income attributable to EchoStar | $ | 49,454 | $ | (9,587 | ) | $ | 159,808 | $ | 33,838 |
For the Nine Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 141,762 | $ | 86,969 | ||||
Adjustments to reconcile net income to net cash flows from operating activities: | ||||||||
Depreciation and amortization | 370,872 | 398,547 | ||||||
Equity in losses (earnings) of unconsolidated affiliates, net | (11,181 | ) | 2,580 | |||||
Loss from partial redemption of debt | — | 5,044 | ||||||
Loss (gain) and impairment on marketable investment securities, net | (8,179 | ) | 11,408 | |||||
Stock-based compensation | 11,953 | 16,204 | ||||||
Deferred tax provision | 71,422 | 63,421 | ||||||
Dividends received from unconsolidated entities | 15,000 | 5,000 | ||||||
Proceeds from sale of trading securities | 7,140 | 380 | ||||||
Changes in current assets and current liabilities, net | (47,013 | ) | (274 | ) | ||||
Changes in noncurrent assets and noncurrent liabilities, net | 8,097 | 3,457 | ||||||
Other, net | 14,836 | 15,187 | ||||||
Net cash flows from operating activities | 574,709 | 607,923 | ||||||
Cash Flows from Investing Activities: | ||||||||
Purchases of marketable investment securities | (883,288 | ) | (345,391 | ) | ||||
Sales and maturities of marketable investment securities | 643,865 | 669,393 | ||||||
Purchases of property and equipment | (533,669 | ) | (585,902 | ) | ||||
Refunds and other receipts related to capital expenditures | 24,087 | 105,750 | ||||||
Changes in restricted cash and marketable investment securities | 7,351 | (313 | ) | |||||
Investments in unconsolidated entities | (1,636 | ) | (64,655 | ) | ||||
Acquisition of regulatory authorization | — | (3,428 | ) | |||||
Expenditures for externally marketed software | (17,991 | ) | (16,905 | ) | ||||
Other, net | 1,462 | (50 | ) | |||||
Net cash flows from investing activities | (759,819 | ) | (241,501 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from issuance of long-term debt | 1,500,000 | — | ||||||
Payments of debt issuance costs | (6,275 | ) | — | |||||
Repayment of 6 1/2% Senior Secured Notes Due 2019 and related premium | — | (113,300 | ) | |||||
Repayment of other debt and capital lease obligations | (30,615 | ) | (35,303 | ) | ||||
Net proceeds from Class A common stock options exercised and stock issued under the Employee Stock Purchase Plan | 16,157 | 19,893 | ||||||
Other, net | (3,373 | ) | 1,525 | |||||
Net cash flows from financing activities | 1,475,894 | (127,185 | ) | |||||
Effect of exchange rates on cash and cash equivalents | 684 | (9,185 | ) | |||||
Net increase in cash and cash equivalents | 1,291,468 | 230,052 | ||||||
Cash and cash equivalents, beginning of period | 924,240 | 549,053 | ||||||
Cash and cash equivalents, end of period | $ | 2,215,708 | $ | 779,105 | ||||
Supplemental Disclosure of Cash Flow Information: | ||||||||
Cash paid for interest (including capitalized interest) | $ | 97,044 | $ | 102,335 | ||||
Capitalized interest | $ | 70,386 | $ | 44,335 | ||||
Cash paid for income taxes | $ | 9,187 | $ | 5,185 | ||||
Employee benefits paid in Class A common stock | $ | 11,126 | $ | 10,711 | ||||
Property and equipment financed under capital lease obligations | $ | 7,172 | $ | 5,551 | ||||
Increase (decrease) in capital expenditures included in accounts payable, net | $ | 21,951 | $ | 10,297 | ||||
Reduction of capital lease obligation for AMC-15 and AMC-16 satellites | $ | — | $ | 4,500 |
• | Hughes — which provides broadband satellite technologies and broadband services to home and office customers and network technologies, managed services and communication solutions to domestic and international consumer, enterprise and government customers. The Hughes segment also provides managed services, hardware, and satellite services to large enterprises and government customers, and designs, provides and installs gateway and terminal equipment to customers for other satellite systems. |
• | EchoStar Technologies — which designs, develops and distributes secure end-to-end video technology solutions including digital set-top boxes and related products and technology, primarily for satellite TV service providers and telecommunication companies. Our EchoStar Technologies segment also provides digital broadcast operations, including satellite uplinking/downlinking, transmission services, signal processing, conditional access management, and other services, primarily to DISH Network Corporation and its subsidiaries (“DISH Network”) and Dish Mexico, S. de R.L. de C.V. (“Dish Mexico”), a joint venture we entered into in 2008. In addition, we provide our TV Anywhere technology through Slingbox® units directly to consumers via retail outlets and online, as well as to the pay-TV operator market. Beginning in 2015, this segment also includes Move Networks, our over-the-top (“OTT”), Streaming Video on Demand (“SVOD”) platform business, which primarily provides support services to DISH Network’s Sling TVTM service (“Sling TV”). |
• | EchoStar Satellite Services (“ESS”) — which uses certain of our owned and leased in-orbit satellites and related licenses to provide satellite service operations and video delivery solutions on a full-time and occasional-use basis primarily to DISH Network, Dish Mexico, United States (“U.S.”) government service providers, internet service providers, broadcast news organizations, programmers, and private enterprise customers. |
• | Level 1, defined as observable inputs being quoted prices in active markets for identical assets; |
• | Level 2, defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
• | Level 3, defined as unobservable inputs for which little or no market data exists, consistent with characteristics of the asset or liability that would be considered by market participants in a transaction to purchase or sell the asset or liability. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
Net income attributable to EchoStar | $ | 36,801 | $ | 28,835 | $ | 141,742 | $ | 89,983 | ||||||||
Less: Net loss attributable to EchoStar Tracking Stock | 157 | (1,267 | ) | (1,709 | ) | (7,421 | ) | |||||||||
Net income attributable to EchoStar common stock | $ | 36,644 | $ | 30,102 | $ | 143,451 | $ | 97,404 | ||||||||
Weighted-average common shares outstanding : | ||||||||||||||||
Class A and B common stock: | ||||||||||||||||
Basic | 93,898 | 92,500 | 93,661 | 92,253 | ||||||||||||
Dilutive impact of stock awards outstanding | 503 | 993 | 528 | 1,227 | ||||||||||||
Diluted | 94,401 | 93,493 | 94,189 | 93,480 | ||||||||||||
Earnings per share: | ||||||||||||||||
Class A and B common stock: | ||||||||||||||||
Basic | $ | 0.39 | $ | 0.33 | $ | 1.53 | $ | 1.06 | ||||||||
Diluted | $ | 0.39 | $ | 0.32 | $ | 1.52 | $ | 1.04 |
Accumulated Other Comprehensive Loss Components | Affected Line Item in our Condensed Consolidated Statements of Operations | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
(In thousands) | ||||||||||||||||||
Recognition of realized gains on available-for-sale securities in net income (1) | Gains (losses) on marketable investment securities, net | $ | (10 | ) | $ | (9 | ) | $ | (5,584 | ) | $ | (29 | ) | |||||
Recognition of other-than-temporary impairment loss on available-for-sale securities in net income (2) | Other-than-temporary impairment loss on available-for-sale securities | — | 1,243 | — | 5,892 | |||||||||||||
Recognition of foreign currency translation losses in net income (3) | Other, net | — | — | — | 1,889 | |||||||||||||
Total reclassifications, net of tax and noncontrolling interests | $ | (10 | ) | $ | 1,234 | $ | (5,584 | ) | $ | 7,752 |
(1) | When available-for-sale securities are sold, the related unrealized gains and losses that were previously recognized in other comprehensive income (loss) are reclassified and recognized as “Gains (losses) on marketable investment securities, net” in our condensed consolidated statements of operations and comprehensive income (loss). |
(2) | In June 2015 and September 2015, we recorded other-than-temporary impairment losses on shares of certain common stock included in our strategic equity securities. |
(3) | As a result of the deconsolidation of several of our European subsidiaries in connection with our investment in SmarDTV SA in May 2015, the related cumulative translation adjustments that were previously recognized in other comprehensive income (loss) were reclassified and recognized as a loss within “Other income (expense)” in our condensed consolidated statements of operations and comprehensive income (loss). See Note 6 for further discussion. |
As of | ||||||||
September 30, 2016 | December 31, 2015 | |||||||
(In thousands) | ||||||||
Marketable investment securities—current, at fair value: | ||||||||
Corporate bonds | $ | 711,984 | $ | 562,236 | ||||
Strategic equity securities | 59,653 | 38,864 | ||||||
Other | 31,672 | 11,238 | ||||||
Total marketable investment securities—current | 803,309 | 612,338 | ||||||
Restricted marketable investment securities (1) | 12,970 | 13,227 | ||||||
Total | 816,279 | 625,565 | ||||||
Restricted cash and cash equivalents (1) | 681 | 7,775 | ||||||
Investments in unconsolidated entities—noncurrent: | ||||||||
Cost method | 81,174 | 81,174 | ||||||
Equity method | 121,098 | 128,090 | ||||||
Total investments in unconsolidated entities—noncurrent | 202,272 | 209,264 | ||||||
Total marketable investment securities, restricted cash and cash equivalents, and investments in unconsolidated entities | $ | 1,019,232 | $ | 842,604 |
(1) | Restricted marketable investment securities and restricted cash and cash equivalents are included in “Restricted cash and marketable investment securities” in our condensed consolidated balance sheets. |
Amortized | Unrealized | Estimated | ||||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
As of September 30, 2016 | ||||||||||||||||
Debt securities: | ||||||||||||||||
Corporate bonds | $ | 711,651 | $ | 481 | $ | (148 | ) | $ | 711,984 | |||||||
Other (including restricted) | 40,051 | 17 | — | 40,068 | ||||||||||||
Equity securities - strategic | 43,328 | 11,645 | (833 | ) | 54,140 | |||||||||||
Total | $ | 795,030 | $ | 12,143 | $ | (981 | ) | $ | 806,192 | |||||||
As of December 31, 2015 | ||||||||||||||||
Debt securities: | ||||||||||||||||
Corporate bonds | $ | 562,849 | $ | 10 | $ | (623 | ) | $ | 562,236 | |||||||
Other (including restricted) | 24,495 | — | (30 | ) | 24,465 | |||||||||||
Equity securities - strategic | 20,855 | 7,748 | (82 | ) | 28,521 | |||||||||||
Total | $ | 608,199 | $ | 7,758 | $ | (735 | ) | $ | 615,222 |
As of | ||||||||||||||||
September 30, 2016 | December 31, 2015 | |||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||
(In thousands) | ||||||||||||||||
Less than 12 months | $ | 271,067 | $ | (973 | ) | $ | 364,160 | $ | (609 | ) | ||||||
12 months or more | 1,564 | (8 | ) | 149,889 | (126 | ) | ||||||||||
Total | $ | 272,631 | $ | (981 | ) | $ | 514,049 | $ | (735 | ) |
As of | ||||||||||||||||||||||||
September 30, 2016 | December 31, 2015 | |||||||||||||||||||||||
Total | Level 1 | Level 2 | Total | Level 1 | Level 2 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Cash equivalents (including restricted) | $ | 2,143,205 | $ | 3,052 | $ | 2,140,153 | $ | 840,950 | $ | 38,771 | $ | 802,179 | ||||||||||||
Debt securities: | ||||||||||||||||||||||||
Corporate bonds | $ | 711,984 | $ | — | $ | 711,984 | $ | 562,236 | $ | — | $ | 562,236 | ||||||||||||
Other (including restricted) | 44,642 | 12,956 | 31,686 | 24,465 | 12,078 | 12,387 | ||||||||||||||||||
Equity securities - strategic | 59,653 | 59,653 | — | 38,864 | 38,864 | — | ||||||||||||||||||
Total marketable investment securities | $ | 816,279 | $ | 72,609 | $ | 743,670 | $ | 625,565 | $ | 50,942 | $ | 574,623 |
As of | ||||||||
September 30, 2016 | December 31, 2015 | |||||||
(In thousands) | ||||||||
Trade accounts receivable | $ | 165,532 | $ | 168,714 | ||||
Contracts in process, net | 26,186 | 23,011 | ||||||
Total trade accounts receivable | 191,718 | 191,725 | ||||||
Allowance for doubtful accounts | (13,817 | ) | (12,485 | ) | ||||
Trade accounts receivable - DISH Network | 330,300 | 277,159 | ||||||
Total trade accounts receivable, net | $ | 508,201 | $ | 456,399 |
As of | ||||||||
September 30, 2016 | December 31, 2015 | |||||||
(In thousands) | ||||||||
Finished goods | $ | 56,985 | $ | 52,839 | ||||
Raw materials | 7,697 | 9,042 | ||||||
Work-in-process | 9,107 | 5,129 | ||||||
Total inventory | $ | 73,789 | $ | 67,010 |
Depreciable Life (In Years) | As of | |||||||||
September 30, 2016 | December 31, 2015 | |||||||||
(In thousands) | ||||||||||
Land | — | $ | 42,453 | $ | 41,457 | |||||
Buildings and improvements | 1-40 | 370,417 | 367,947 | |||||||
Furniture, fixtures, equipment and other | 1-12 | 1,329,692 | 1,254,325 | |||||||
Customer rental equipment | 2-4 | 662,994 | 588,430 | |||||||
Satellites - owned | 2-15 | 2,381,120 | 2,381,120 | |||||||
Satellites acquired under capital leases | 10-15 | 782,845 | 665,518 | |||||||
Construction in progress | — | 1,362,572 | 1,112,267 | |||||||
Total property and equipment | 6,932,093 | 6,411,064 | ||||||||
Accumulated depreciation | (3,303,714 | ) | (2,998,074 | ) | ||||||
Property and equipment, net | $ | 3,628,379 | $ | 3,412,990 |
As of | ||||||||
September 30, 2016 | December 31, 2015 | |||||||
(In thousands) | ||||||||
Progress amounts for satellite construction, including prepayments under capital leases and launch services costs | $ | 1,154,066 | $ | 963,103 | ||||
Satellite related equipment | 160,702 | 126,373 | ||||||
Other | 47,804 | 22,791 | ||||||
Construction in progress | $ | 1,362,572 | $ | 1,112,267 |
Satellites | Segment | Expected Launch Date | |||
EchoStar XIX | Other | Fourth quarter of 2016 | |||
EchoStar XXI | Other | Fourth quarter of 2016/ First quarter of 2017 | |||
EchoStar XXIII | Other | Fourth quarter of 2016/ First quarter of 2017 | |||
EchoStar 105/SES-11 | ESS | First half of 2017 | |||
Telesat T19V (“63 West”) (1) | Hughes | Second quarter of 2018 |
(1) | We entered into a satellite services agreement and made prepayments for certain capacity on this satellite once launched, but are not a party to the construction contract. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands) | ||||||||||||||||
Satellites | $ | 46,965 | $ | 51,436 | $ | 140,895 | $ | 149,677 | ||||||||
Furniture, fixtures, equipment and other | 31,162 | 29,104 | 89,247 | 89,504 | ||||||||||||
Customer rental equipment | 28,652 | 30,839 | 86,789 | 91,550 | ||||||||||||
Buildings and improvements | 3,065 | 3,325 | 9,218 | 10,183 | ||||||||||||
Total depreciation expense | $ | 109,844 | $ | 114,704 | $ | 326,149 | $ | 340,914 |
As of December 31, 2015 | Additions | Currency Translation Adjustment | As of September 30, 2016 | |||||||||||||
(In thousands) | ||||||||||||||||
Finite useful lives: | ||||||||||||||||
Cost | $ | 82,007 | $ | — | $ | 8,957 | $ | 90,964 | ||||||||
Accumulated amortization | (9,852 | ) | (3,508 | ) | (1,050 | ) | (14,410 | ) | ||||||||
Net | 72,155 | (3,508 | ) | 7,907 | 76,554 | |||||||||||
Indefinite lives | 471,657 | — | — | 471,657 | ||||||||||||
Total regulatory authorizations, net | $ | 543,812 | $ | (3,508 | ) | $ | 7,907 | $ | 548,211 |
Weighted Average Useful Life (in Years) | As of | |||||||||||||||||||||||||
September 30, 2016 | December 31, 2015 | |||||||||||||||||||||||||
Cost | Accumulated Amortization | Carrying Amount | Cost | Accumulated Amortization | Carrying Amount | |||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Customer relationships | 8 | $ | 293,932 | $ | (232,017 | ) | $ | 61,915 | $ | 293,932 | $ | (213,543 | ) | $ | 80,389 | |||||||||||
Contract-based | 4 | 69,440 | (69,440 | ) | — | 255,366 | (251,493 | ) | 3,873 | |||||||||||||||||
Technology-based | 7 | 137,197 | (122,526 | ) | 14,671 | 137,337 | (111,840 | ) | 25,497 | |||||||||||||||||
Trademark portfolio | 20 | 29,700 | (7,920 | ) | 21,780 | 29,700 | (6,806 | ) | 22,894 | |||||||||||||||||
Total other intangible assets | $ | 530,269 | $ | (431,903 | ) | $ | 98,366 | $ | 716,335 | $ | (583,682 | ) | $ | 132,653 |
Effective Interest Rate | As of | |||||||||||||||||
September 30, 2016 | December 31, 2015 | |||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||
(In thousands) | ||||||||||||||||||
6 1/2% Senior Secured Notes due 2019 | 6.959% | $ | 990,000 | $ | 1,084,674 | $ | 990,000 | $ | 1,071,675 | |||||||||
7 5/8% Senior Unsecured Notes due 2021 | 8.062% | 900,000 | 962,973 | 900,000 | 954,000 | |||||||||||||
5 1/4% Senior Secured Notes due 2026 | 5.317% | 750,000 | 742,500 | — | — | |||||||||||||
6 5/8% Senior Unsecured Notes due 2026 | 6.685% | 750,000 | 726,765 | — | — | |||||||||||||
Other | — | — | 803 | 803 | ||||||||||||||
Less: Unamortized debt issuance costs | (33,616 | ) | — | (31,276 | ) | — | ||||||||||||
Subtotal | 3,356,384 | $ | 3,516,912 | 1,859,527 | $ | 2,026,478 | ||||||||||||
Capital lease obligations | 311,306 | 332,838 | ||||||||||||||||
Total debt and capital lease obligations | 3,667,690 | 2,192,365 | ||||||||||||||||
Less: Current portion | (37,717 | ) | (35,698 | ) | ||||||||||||||
Long-term debt and capital lease obligations, net of unamortized debt issuance costs | $ | 3,629,973 | $ | 2,156,667 |
• | secured obligations of HSS; |
• | secured by security interests in substantially all existing and future tangible and intangible assets of HSS and certain of its subsidiaries on a first priority basis, subject to certain exceptions; |
• | ranked equally and ratably with the existing 2019 Senior Secured Notes; |
• | effectively junior to HSS’ obligations that are secured by assets that are not part of the collateral that secures the 2026 Senior Secured Notes, in each case, to the extent of the value of the collateral securing such obligations; |
• | effectively senior to HSS’ existing and future unsecured obligations to the extent of the value of the collateral securing the 2026 Senior Secured Notes, after giving effect to permitted liens as provided in the 2016 Secured Indenture; |
• | senior in right of payment to all existing and future obligations of HSS that are expressly subordinated to the 2026 Senior Secured Notes; |
• | structurally junior to any existing and future obligations of any of HSS’ subsidiaries that do not guarantee the 2026 Senior Secured Notes; and |
• | unconditionally guaranteed, jointly and severally, on a general senior secured basis by certain of HSS’ subsidiaries, which guarantees rank equally with all of the guarantors’ existing and future unsubordinated indebtedness and effectively senior to such guarantors’ existing and future obligations to the extent of the value of the assets securing the 2026 Senior Secured Notes. |
• | unsecured senior obligations of HSS; |
• | ranked equally with all existing and future unsubordinated indebtedness and effectively junior to any secured indebtedness up to the value of the assets securing such indebtedness; |
• | effectively junior to HSS’ obligations that are secured to the extent of the value of the collateral securing such obligations; |
• | senior in right of payment to all existing and future obligations of HSS that are expressly subordinated to the 2026 Senior Unsecured Notes; |
• | structurally junior to any existing and future obligations of any of HSS’ subsidiaries that do not guarantee the 2026 Senior Unsecured Notes; and |
• | unconditionally guaranteed, jointly and severally, on a general senior secured basis by certain of HSS’ subsidiaries, which guarantees rank equally with all of the guarantors’ existing and future unsubordinated indebtedness, and effectively junior to any secured indebtedness of the guarantors up to the value of the assets securing such indebtedness. |
• | incur additional debt; |
• | pay dividends or make distributions on HSS’ capital stock or repurchase HSS’ capital stock; |
• | make certain investments; |
• | create liens or enter into sale and leaseback transactions; |
• | enter into transactions with affiliates; |
• | merge or consolidate with another company; |
• | transfer and sell assets; and |
• | allow to exist certain restrictions on the ability of certain of HSS’ subsidiaries to pay dividends, make distributions, make other payments, or transfer assets to HSS or its subsidiaries. |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands) | ||||||||||||||||
Research and development expenses | $ | 731 | $ | 1,270 | $ | 2,491 | $ | 3,318 | ||||||||
Selling, general and administrative expenses | 2,894 | 4,646 | 9,462 | 12,886 | ||||||||||||
Total stock-based compensation | $ | 3,625 | $ | 5,916 | $ | 11,953 | $ | 16,204 |
Hughes | EchoStar Technologies | EchoStar Satellite Services | All Other and Eliminations | Consolidated Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
For the Three Months Ended September 30, 2016 | ||||||||||||||||||||
External revenue | $ | 355,090 | $ | 282,865 | $ | 101,308 | $ | 3,086 | $ | 742,349 | ||||||||||
Intersegment revenue | $ | 786 | $ | 187 | $ | 172 | $ | (1,145 | ) | $ | — | |||||||||
Total revenue | $ | 355,876 | $ | 283,052 | $ | 101,480 | $ | 1,941 | $ | 742,349 | ||||||||||
EBITDA | $ | 112,018 | $ | 9,346 | $ | 83,700 | $ | 5,980 | $ | 211,044 | ||||||||||
Capital expenditures | $ | 75,682 | $ | 17,239 | $ | 15,730 | $ | 48,162 | $ | 156,813 | ||||||||||
For the Three Months Ended September 30, 2015 | ||||||||||||||||||||
External revenue | $ | 339,060 | $ | 294,792 | $ | 124,126 | $ | 2,901 | $ | 760,879 | ||||||||||
Intersegment revenue | $ | 669 | $ | 133 | $ | 174 | $ | (976 | ) | $ | — | |||||||||
Total revenue | $ | 339,729 | $ | 294,925 | $ | 124,300 | $ | 1,925 | $ | 760,879 | ||||||||||
EBITDA | $ | 101,582 | $ | 25,946 | $ | 104,200 | $ | (15,116 | ) | $ | 216,612 | |||||||||
Capital expenditures | $ | 72,626 | $ | 8,528 | $ | 32,416 | $ | 9,672 | $ | 123,242 | ||||||||||
For the Nine Months Ended September 30, 2016 | ||||||||||||||||||||
External revenue | $ | 1,019,203 | $ | 982,555 | $ | 305,401 | $ | 9,178 | $ | 2,316,337 | ||||||||||
Intersegment revenue | $ | 2,248 | $ | 560 | $ | 518 | $ | (3,326 | ) | $ | — | |||||||||
Total revenue | $ | 1,021,451 | $ | 983,115 | $ | 305,919 | $ | 5,852 | $ | 2,316,337 | ||||||||||
EBITDA | $ | 317,865 | $ | 57,426 | $ | 255,712 | $ | 23,441 | $ | 654,444 | ||||||||||
Capital expenditures | $ | 261,241 | $ | 31,764 | $ | 50,762 | $ | 165,815 | $ | 509,582 | ||||||||||
For the Nine Months Ended September 30, 2015 | ||||||||||||||||||||
External revenue | $ | 998,564 | $ | 972,591 | $ | 373,726 | $ | 8,246 | $ | 2,353,127 | ||||||||||
Intersegment revenue | $ | 1,630 | $ | 506 | $ | 561 | $ | (2,697 | ) | $ | — | |||||||||
Total revenue | $ | 1,000,194 | $ | 973,097 | $ | 374,287 | $ | 5,549 | $ | 2,353,127 | ||||||||||
EBITDA | $ | 296,269 | $ | 80,764 | $ | 314,177 | $ | (48,599 | ) | $ | 642,611 | |||||||||
Capital expenditures | $ | 207,680 | $ | 32,783 | $ | 84,667 | $ | 155,022 | $ | 480,152 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands) | ||||||||||||||||
EBITDA | $ | 211,044 | $ | 216,612 | $ | 654,444 | $ | 642,611 | ||||||||
Interest income and expense, net | (31,098 | ) | (26,308 | ) | (66,766 | ) | (88,240 | ) | ||||||||
Depreciation and amortization | (123,633 | ) | (132,892 | ) | (370,872 | ) | (398,547 | ) | ||||||||
Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock and other noncontrolling interests | 609 | (477 | ) | 20 | (3,014 | ) | ||||||||||
Income before income taxes | $ | 56,922 | $ | 56,935 | $ | 216,826 | $ | 152,810 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands) | ||||||||||||||||
Digital set-top boxes and related accessories | $ | 7,693 | $ | 19,887 | $ | 40,423 | $ | 45,432 | ||||||||
Satellite services | $ | 5,837 | $ | 5,837 | $ | 17,510 | $ | 17,510 | ||||||||
Uplink services | $ | 1,024 | $ | 1,030 | $ | 3,049 | $ | 3,981 |
• | Revenue of $742.3 million |
• | Operating income of $82.0 million |
• | Net income of $37.4 million |
• | Net income attributable to EchoStar common stock of $36.6 million and basic earnings per share of common stock of $0.39 |
• | EBITDA of $211.0 million (see reconciliation of this non-GAAP measure on page 48) |
• | Total assets of $8.98 billion |
• | Total liabilities of $5.00 billion |
• | Total stockholders’ equity of $3.98 billion |
• | Cash, cash equivalents and current marketable investment securities of $3.02 billion |
For the Three Months Ended September 30, | Variance | ||||||||||||||
Statements of Operations Data (1) | 2016 | 2015 | Amount | % | |||||||||||
(Dollars in thousands) | |||||||||||||||
Revenue: | |||||||||||||||
Services and other revenue - DISH Network | $ | 221,867 | $ | 236,601 | $ | (14,734 | ) | (6.2 | ) | ||||||
Services and other revenue - other | 278,009 | 277,640 | 369 | 0.1 | |||||||||||
Equipment revenue - DISH Network | 156,227 | 157,184 | (957 | ) | (0.6 | ) | |||||||||
Equipment revenue - other | 86,246 | 89,454 | (3,208 | ) | (3.6 | ) | |||||||||
Total revenue | 742,349 | 760,879 | (18,530 | ) | (2.4 | ) | |||||||||
Costs and Expenses: | |||||||||||||||
Cost of sales - services and other | 213,621 | 219,686 | (6,065 | ) | (2.8 | ) | |||||||||
% of Total services and other revenue | 42.7 | % | 42.7 | % | |||||||||||
Cost of sales - equipment | 200,986 | 207,989 | (7,003 | ) | (3.4 | ) | |||||||||
% of Total equipment revenue | 82.9 | % | 84.3 | % | |||||||||||
Selling, general and administrative expenses | 101,541 | 91,830 | 9,711 | 10.6 | |||||||||||
% of Total revenue | 13.7 | % | 12.1 | % | |||||||||||
Research and development expenses | 20,587 | 19,875 | 712 | 3.6 | |||||||||||
% of Total revenue | 2.8 | % | 2.6 | % | |||||||||||
Depreciation and amortization | 123,633 | 132,892 | (9,259 | ) | (7.0 | ) | |||||||||
Total costs and expenses | 660,368 | 672,272 | (11,904 | ) | (1.8 | ) | |||||||||
Operating income | 81,981 | 88,607 | (6,626 | ) | (7.5 | ) | |||||||||
Other Income (Expense): | |||||||||||||||
Interest income | 6,260 | 2,562 | 3,698 | * | |||||||||||
Interest expense, net of amounts capitalized | (37,358 | ) | (28,870 | ) | (8,488 | ) | 29.4 | ||||||||
Gains (losses) and impairment on marketable investment securities, net | 230 | (5,155 | ) | 5,385 | * | ||||||||||
Equity in earnings (losses) of unconsolidated affiliates, net | 5,164 | (2,324 | ) | 7,488 | * | ||||||||||
Other, net | 645 | 2,115 | (1,470 | ) | (69.5 | ) | |||||||||
Total other expense, net | (25,059 | ) | (31,672 | ) | 6,613 | (20.9 | ) | ||||||||
Income before income taxes | 56,922 | 56,935 | (13 | ) | — | ||||||||||
Income tax provision, net | (19,512 | ) | (28,577 | ) | 9,065 | (31.7 | ) | ||||||||
Net income | 37,410 | 28,358 | 9,052 | 31.9 | |||||||||||
Less: Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock | 85 | (686 | ) | 771 | * | ||||||||||
Less: Net income attributable to other noncontrolling interests | 524 | 209 | 315 | * | |||||||||||
Net income attributable to EchoStar | $ | 36,801 | $ | 28,835 | $ | 7,966 | 27.6 | ||||||||
Other Data: | |||||||||||||||
EBITDA (2) | $ | 211,044 | $ | 216,612 | $ | (5,568 | ) | (2.6 | ) | ||||||
Subscribers, end of period | 1,018,000 | 1,025,000 | (7,000 | ) | (0.7 | ) |
(1) | An explanation of our key metrics is included on pages 62 and 63 under the heading “Explanation of Key Metrics and Other Items.” |
(2) | A reconciliation of EBITDA to “Net income,” the most directly comparable GAAP measure in the accompanying financial statements, is included on page 48. For further information on our use of EBITDA see “Explanation of Key Metrics and Other Items” on page 63. |
For the Three Months Ended September 30, | Variance | ||||||||||||||
2016 | 2015 | Amount | % | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net income | $ | 37,410 | $ | 28,358 | $ | 9,052 | 31.9 | ||||||||
Interest income and expense, net | 31,098 | 26,308 | 4,790 | 18.2 | |||||||||||
Income tax provision | 19,512 | 28,577 | (9,065 | ) | (31.7 | ) | |||||||||
Depreciation and amortization | 123,633 | 132,892 | (9,259 | ) | (7.0 | ) | |||||||||
Net (income) loss attributable to noncontrolling interest in HSS Tracking Stock and other noncontrolling interests | (609 | ) | 477 | (1,086 | ) | * | |||||||||
EBITDA | $ | 211,044 | $ | 216,612 | $ | (5,568 | ) | (2.6 | ) |
Hughes | EchoStar Technologies | EchoStar Satellite Services | All Other and Eliminations | Consolidated Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
For the Three Months Ended September 30, 2016 | ||||||||||||||||||||
Total revenue | $ | 355,876 | $ | 283,052 | $ | 101,480 | $ | 1,941 | $ | 742,349 | ||||||||||
Capital expenditures | $ | 75,682 | $ | 17,239 | $ | 15,730 | $ | 48,162 | $ | 156,813 | ||||||||||
EBITDA | $ | 112,018 | $ | 9,346 | $ | 83,700 | $ | 5,980 | $ | 211,044 | ||||||||||
For the Three Months Ended September 30, 2015 | ||||||||||||||||||||
Total revenue | $ | 339,729 | $ | 294,925 | $ | 124,300 | $ | 1,925 | $ | 760,879 | ||||||||||
Capital expenditures | $ | 72,626 | $ | 8,528 | $ | 32,416 | $ | 9,672 | $ | 123,242 | ||||||||||
EBITDA | $ | 101,582 | $ | 25,946 | $ | 104,200 | $ | (15,116 | ) | $ | 216,612 |
For the Three Months Ended September 30, | Variance | |||||||||||||
2016 | 2015 | Amount | % | |||||||||||
(Dollars in thousands) | ||||||||||||||
Total revenue | $ | 355,876 | $ | 339,729 | $ | 16,147 | 4.8 | |||||||
Capital expenditures | $ | 75,682 | $ | 72,626 | $ | 3,056 | 4.2 | |||||||
EBITDA | $ | 112,018 | $ | 101,582 | $ | 10,436 | 10.3 |
For the Three Months Ended September 30, | Variance | ||||||||||||||
2016 | 2015 | Amount | % | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Total revenue | $ | 283,052 | $ | 294,925 | $ | (11,873 | ) | (4.0 | ) | ||||||
Capital expenditures | $ | 17,239 | $ | 8,528 | $ | 8,711 | * | ||||||||
EBITDA | $ | 9,346 | $ | 25,946 | $ | (16,600 | ) | (64.0 | ) |
For the Three Months Ended September 30, | Variance | ||||||||||||||
2016 | 2015 | Amount | % | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Total revenue | $ | 101,480 | $ | 124,300 | $ | (22,820 | ) | (18.4 | ) | ||||||
Capital expenditures | $ | 15,730 | $ | 32,416 | $ | (16,686 | ) | (51.5 | ) | ||||||
EBITDA | $ | 83,700 | $ | 104,200 | $ | (20,500 | ) | (19.7 | ) |
For the Three Months Ended September 30, | Variance | |||||||||||||
2016 | 2015 | Amount | % | |||||||||||
(Dollars in thousands) | ||||||||||||||
Total revenue | $ | 1,941 | $ | 1,925 | $ | 16 | 0.8 | |||||||
Capital expenditures | $ | 48,162 | $ | 9,672 | $ | 38,490 | * | |||||||
EBITDA | $ | 5,980 | $ | (15,116 | ) | $ | 21,096 | * |
For the Nine Months Ended September 30, | Variance | ||||||||||||||
Statements of Operations Data (1) | 2016 | 2015 | Amount | % | |||||||||||
(Dollars in thousands) | |||||||||||||||
Revenue: | |||||||||||||||
Services and other revenue - DISH Network | $ | 655,793 | $ | 695,358 | $ | (39,565 | ) | (5.7 | ) | ||||||
Services and other revenue - other | 826,430 | 824,130 | 2,300 | 0.3 | |||||||||||
Equipment revenue - DISH Network | 590,988 | 577,277 | 13,711 | 2.4 | |||||||||||
Equipment revenue - other | 243,126 | 256,362 | (13,236 | ) | (5.2 | ) | |||||||||
Total revenue | 2,316,337 | 2,353,127 | (36,790 | ) | (1.6 | ) | |||||||||
Costs and Expenses: | |||||||||||||||
Cost of sales - services and other | 618,271 | 645,691 | (27,420 | ) | (4.2 | ) | |||||||||
% of Total services and other revenue | 41.7 | % | 42.5 | % | |||||||||||
Cost of sales - equipment | 710,724 | 706,835 | 3,889 | 0.6 | |||||||||||
% of Total equipment revenue | 85.2 | % | 84.8 | % | |||||||||||
Selling, general and administrative expenses | 296,377 | 280,462 | 15,915 | 5.7 | |||||||||||
% of Total revenue | 12.8 | % | 11.9 | % | |||||||||||
Research and development expenses | 61,761 | 57,432 | 4,329 | 7.5 | |||||||||||
% of Total revenue | 2.7 | % | 2.4 | % | |||||||||||
Depreciation and amortization | 370,872 | 398,547 | (27,675 | ) | (6.9 | ) | |||||||||
Total costs and expenses | 2,058,005 | 2,088,967 | (30,962 | ) | (1.5 | ) | |||||||||
Operating income | 258,332 | 264,160 | (5,828 | ) | (2.2 | ) | |||||||||
Other Income (Expense): | |||||||||||||||
Interest income | 13,729 | 7,896 | 5,833 | 73.9 | |||||||||||
Interest expense, net of amounts capitalized | (80,495 | ) | (96,136 | ) | 15,641 | (16.3 | ) | ||||||||
Loss from partial redemption of debt | — | (5,044 | ) | 5,044 | (100.0 | ) | |||||||||
Gains (losses) and impairment on marketable investment securities, net | 8,179 | (11,408 | ) | 19,587 | * | ||||||||||
Equity in earnings (losses) of unconsolidated affiliates, net | 11,181 | (2,580 | ) | 13,761 | * | ||||||||||
Other, net | 5,900 | (4,078 | ) | 9,978 | * | ||||||||||
Total other expense, net | (41,506 | ) | (111,350 | ) | 69,844 | (62.7 | ) | ||||||||
Income before income taxes | 216,826 | 152,810 | 64,016 | 41.9 | |||||||||||
Income tax provision | (75,064 | ) | (65,841 | ) | (9,223 | ) | 14.0 | ||||||||
Net income | 141,762 | 86,969 | 54,793 | 63.0 | |||||||||||
Less: Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock | (926 | ) | (4,020 | ) | 3,094 | (77.0 | ) | ||||||||
Less: Net income attributable to other noncontrolling interests | 946 | 1,006 | (60 | ) | (6.0 | ) | |||||||||
Net income attributable to EchoStar | $ | 141,742 | $ | 89,983 | $ | 51,759 | 57.5 | ||||||||
Other Data: | |||||||||||||||
EBITDA (2) | $ | 654,444 | $ | 642,611 | $ | 11,833 | 1.8 | ||||||||
Subscribers, end of period | 1,018,000 | 1,025,000 | (7,000 | ) | (0.7 | ) |
(1) | An explanation of our key metrics is included on pages 62 and 63 under the heading “Explanation of Key Metrics and Other Items.” |
(2) | A reconciliation of EBITDA to “Net income,” the most directly comparable GAAP measure in the accompanying financial statements, is included on page 56. For further information on our use of EBITDA see “Explanation of Key Metrics and Other Items” on page 63. |
For the Nine Months Ended September 30, | Variance | ||||||||||||||
2016 | 2015 | Amount | % | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net income | $ | 141,762 | $ | 86,969 | $ | 54,793 | 63.0 | ||||||||
Interest income and expense, net | 66,766 | 88,240 | (21,474 | ) | (24.3 | ) | |||||||||
Income tax provision | 75,064 | 65,841 | 9,223 | 14.0 | |||||||||||
Depreciation and amortization | 370,872 | 398,547 | (27,675 | ) | (6.9 | ) | |||||||||
Net (income) loss attributable to noncontrolling interest in HSS Tracking Stock and other noncontrolling interests | (20 | ) | 3,014 | (3,034 | ) | * | |||||||||
EBITDA | $ | 654,444 | $ | 642,611 | $ | 11,833 | 1.8 |
Hughes | EchoStar Technologies | EchoStar Satellite Services | All Other and Eliminations | Consolidated Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
For the Nine Months Ended September 30, 2016 | ||||||||||||||||||||
Total revenue | $ | 1,021,451 | $ | 983,115 | $ | 305,919 | $ | 5,852 | $ | 2,316,337 | ||||||||||
Capital expenditures | $ | 261,241 | $ | 31,764 | $ | 50,762 | $ | 165,815 | $ | 509,582 | ||||||||||
EBITDA | $ | 317,865 | $ | 57,426 | $ | 255,712 | $ | 23,441 | $ | 654,444 | ||||||||||
For the Nine Months Ended September 30, 2015 | ||||||||||||||||||||
Total revenue | $ | 1,000,194 | $ | 973,097 | $ | 374,287 | $ | 5,549 | $ | 2,353,127 | ||||||||||
Capital expenditures | $ | 207,680 | $ | 32,783 | $ | 84,667 | $ | 155,022 | $ | 480,152 | ||||||||||
EBITDA | $ | 296,269 | $ | 80,764 | $ | 314,177 | $ | (48,599 | ) | $ | 642,611 |
For the Nine Months Ended September 30, | Variance | |||||||||||||
2016 | 2015 | Amount | % | |||||||||||
(Dollars in thousands) | ||||||||||||||
Total revenue | $ | 1,021,451 | $ | 1,000,194 | $ | 21,257 | 2.1 | |||||||
Capital expenditures | $ | 261,241 | $ | 207,680 | $ | 53,561 | 25.8 | |||||||
EBITDA | $ | 317,865 | $ | 296,269 | $ | 21,596 | 7.3 |
For the Nine Months Ended September 30, | Variance | ||||||||||||||
2016 | 2015 | Amount | % | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Total revenue | $ | 983,115 | $ | 973,097 | $ | 10,018 | 1.0 | ||||||||
Capital expenditures | $ | 31,764 | $ | 32,783 | $ | (1,019 | ) | (3.1 | ) | ||||||
EBITDA | $ | 57,426 | $ | 80,764 | $ | (23,338 | ) | (28.9 | ) |
For the Nine Months Ended September 30, | Variance | ||||||||||||||
2016 | 2015 | Amount | % | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Total revenue | $ | 305,919 | $ | 374,287 | $ | (68,368 | ) | (18.3 | ) | ||||||
Capital expenditures | $ | 50,762 | $ | 84,667 | $ | (33,905 | ) | (40.0 | ) | ||||||
EBITDA | $ | 255,712 | $ | 314,177 | $ | (58,465 | ) | (18.6 | ) |
For the Nine Months Ended September 30, | Variance | |||||||||||||
2016 | 2015 | Amount | % | |||||||||||
(Dollars in thousands) | ||||||||||||||
Total revenue | $ | 5,852 | $ | 5,549 | $ | 303 | 5.5 | |||||||
Capital expenditures | $ | 165,815 | $ | 155,022 | $ | 10,793 | 7.0 | |||||||
EBITDA | $ | 23,441 | $ | (48,599 | ) | $ | 72,040 | * |
• | incur additional debt; |
• | pay dividends or make distributions on our capital stock or repurchase HSS’ capital stock; |
• | make certain investments; |
• | create liens or enter into sale and leaseback transactions; |
• | enter into transactions with affiliates; |
• | merge or consolidate with another company; |
• | transfer and sell assets; and |
• | allow to exist certain restrictions on the ability of certain of HSS’ subsidiaries to pay dividends, make distributions, make other payments, or transfer assets to HSS or its subsidiaries. |
Exhibit No. | Description | |
31.1(H) | Section 302 Certification of Chief Executive Officer. | |
31.2(H) | Section 302 Certification of Chief Financial Officer. | |
32.1(I) | Section 906 Certifications of Chief Executive Officer and Chief Financial Officer. | |
99.1(H) | Unaudited Condensed Attributed Financial Information and Notes for Hughes Retail Group. | |
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
(H) | Filed herewith. |
(I) | Furnished herewith |
* | Incorporated by reference. |
** | Constitutes a management contract or compensatory plan or arrangement. |
ECHOSTAR CORPORATION | ||
Date: November 8, 2016 | By: | /s/ Michael T. Dugan |
Michael T. Dugan | ||
Chief Executive Officer, President and Director | ||
(Principal Executive Officer) | ||
Date: November 8, 2016 | By: | /s/ David J. Rayner |
David J. Rayner | ||
Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer | ||
(Principal Financial and Accounting Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of EchoStar Corporation; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
Date: November 8, 2016 | ||
By: | /s/ Michael T. Dugan | |
Name: | Michael T. Dugan | |
Title: | Chief Executive Officer, President and Director | |
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of EchoStar Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 8, 2016 | ||
By: | /s/ David J. Rayner | |
Name: | David J. Rayner | |
Title: | Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer | |
(Principal Financial and Accounting Officer) |
(i) | the Quarterly Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and |
(ii) | the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 8, 2016 | ||
By: | /s/ Michael T. Dugan | |
Name: | Michael T. Dugan | |
Title: | Chief Executive Officer, President and Director | |
(Principal Executive Officer) | ||
By: | /s/ David J. Rayner | |
Name: | David J. Rayner | |
Title: | Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer | |
(Principal Financial and Accounting Officer) |
Attributed As of September 30, 2016 | Attributed As of December 31, 2015 | |||||||||||||||||||||||||||||||
Hughes Retail Group | EchoStar Group | Inter-Group Eliminations | EchoStar Consolidated | Hughes Retail Group | EchoStar Group | Inter-Group Eliminations | EchoStar Consolidated | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||||||||||||
Cash, cash equivalents and marketable investment securities | $ | — | $ | 3,019,017 | $ | — | $ | 3,019,017 | $ | — | $ | 1,536,578 | $ | — | $ | 1,536,578 | ||||||||||||||||
Trade accounts receivable, net | 26,942 | 150,959 | — | 177,901 | 27,094 | 152,146 | — | 179,240 | ||||||||||||||||||||||||
Trade accounts receivable - DISH Network, net | — | 330,300 | — | 330,300 | — | 277,159 | — | 277,159 | ||||||||||||||||||||||||
Inventory | 5,688 | 69,434 | (1,333 | ) | 73,789 | 6,699 | 61,878 | (1,567 | ) | 67,010 | ||||||||||||||||||||||
Prepaids and deposits | 543 | 60,946 | — | 61,489 | 990 | 55,959 | — | 56,949 | ||||||||||||||||||||||||
Inter-group advances | 1,711 | — | (1,711 | ) | — | — | 30,398 | (30,398 | ) | — | ||||||||||||||||||||||
Other current assets | — | 54,993 | — | 54,993 | — | 16,723 | — | 16,723 | ||||||||||||||||||||||||
Total current assets | 34,884 | 3,685,649 | (3,044 | ) | 3,717,489 | 34,783 | 2,130,841 | (31,965 | ) | 2,133,659 | ||||||||||||||||||||||
Noncurrent Assets: | ||||||||||||||||||||||||||||||||
Restricted cash and marketable investment securities | — | 13,651 | — | 13,651 | — | 21,002 | — | 21,002 | ||||||||||||||||||||||||
Property and equipment, net | 148,298 | 3,497,490 | (17,409 | ) | 3,628,379 | 162,497 | 3,266,315 | (15,822 | ) | 3,412,990 | ||||||||||||||||||||||
Regulatory authorizations, net | — | 548,211 | — | 548,211 | — | 543,812 | — | 543,812 | ||||||||||||||||||||||||
Goodwill | 260,000 | 250,630 | — | 510,630 | 260,000 | 250,630 | — | 510,630 | ||||||||||||||||||||||||
Other intangible assets, net | 19,423 | 78,943 | — | 98,366 | 31,488 | 101,165 | — | 132,653 | ||||||||||||||||||||||||
Economic interest in Hughes Retail Group | — | 88,481 | (88,481 | ) | — | — | 89,140 | (89,140 | ) | — | ||||||||||||||||||||||
Investments in unconsolidated entities | — | 202,272 | — | 202,272 | — | 209,264 | — | 209,264 | ||||||||||||||||||||||||
Other receivable - DISH Network | — | 90,359 | — | 90,359 | — | 90,966 | — | 90,966 | ||||||||||||||||||||||||
Deferred tax assets | 33,927 | 6,993 | (33,927 | ) | 6,993 | 19,685 | 4,041 | (19,685 | ) | 4,041 | ||||||||||||||||||||||
Other noncurrent assets, net | 31,513 | 130,032 | (558 | ) | 160,987 | 35,277 | 115,859 | (667 | ) | 150,469 | ||||||||||||||||||||||
Total noncurrent assets | 493,161 | 4,907,062 | (140,375 | ) | 5,259,848 | 508,947 | 4,692,194 | (125,314 | ) | 5,075,827 | ||||||||||||||||||||||
Total assets | $ | 528,045 | $ | 8,592,711 | $ | (143,419 | ) | $ | 8,977,337 | $ | 543,730 | $ | 6,823,035 | $ | (157,279 | ) | $ | 7,209,486 | ||||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||||||||||
Trade accounts payable | $ | 12,559 | $ | 212,675 | $ | — | $ | 225,234 | $ | 12,023 | $ | 201,648 | $ | — | $ | 213,671 | ||||||||||||||||
Trade accounts payable - DISH Network | — | 1,520 | — | 1,520 | — | 24,682 | — | 24,682 | ||||||||||||||||||||||||
Current portion of long-term debt and capital lease obligations | — | 37,717 | — | 37,717 | — | 35,698 | — | 35,698 | ||||||||||||||||||||||||
Deferred revenue and prepayments | 28,198 | 33,999 | — | 62,197 | 26,636 | 35,245 | — | 61,881 | ||||||||||||||||||||||||
Accrued compensation | — | 37,083 | — | 37,083 | — | 29,767 | — | 29,767 | ||||||||||||||||||||||||
Accrued royalties | — | 22,687 | — | 22,687 | — | 22,531 | — | 22,531 | ||||||||||||||||||||||||
Accrued interest | — | 57,159 | — | 57,159 | — | 8,596 | — | 8,596 | ||||||||||||||||||||||||
Inter-group advances | — | 1,711 | (1,711 | ) | — | 30,398 | — | (30,398 | ) | — | ||||||||||||||||||||||
Accrued expenses and other | 39,580 | 65,058 | — | 104,638 | 26,399 | 103,606 | — | 130,005 | ||||||||||||||||||||||||
Total current liabilities | 80,337 | 469,609 | (1,711 | ) | 548,235 | 95,456 | 461,773 | (30,398 | ) | 526,831 | ||||||||||||||||||||||
Noncurrent Liabilities: | ||||||||||||||||||||||||||||||||
Long-term debt and capital lease obligations, net of unamortized debt issuance costs | — | 3,629,973 | — | 3,629,973 | — | 2,156,667 | — | 2,156,667 | ||||||||||||||||||||||||
Deferred tax liabilities | — | 758,766 | (33,927 | ) | 724,839 | — | 670,077 | (19,685 | ) | 650,392 | ||||||||||||||||||||||
Other noncurrent liabilities | 5,305 | 90,310 | — | 95,615 | 2,576 | 91,378 | — | 93,954 | ||||||||||||||||||||||||
Total noncurrent liabilities | 5,305 | 4,479,049 | (33,927 | ) | 4,450,427 | 2,576 | 2,918,122 | (19,685 | ) | 2,901,013 | ||||||||||||||||||||||
Total liabilities | 85,642 | 4,948,658 | (35,638 | ) | 4,998,662 | 98,032 | 3,379,895 | (50,083 | ) | 3,427,844 | ||||||||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||||||||||||||||||
Equity/Attributed net assets | 442,403 | 3,558,055 | (107,781 | ) | 3,892,677 | 445,698 | 3,356,976 | (107,196 | ) | 3,695,478 | ||||||||||||||||||||||
Noncontrolling interest in HSS Tracking Stock | — | 73,928 | — | 73,928 | — | 74,854 | — | 74,854 | ||||||||||||||||||||||||
Other noncontrolling interests | — | 12,070 | — | 12,070 | — | 11,310 | — | 11,310 | ||||||||||||||||||||||||
Equity/Attributed net assets | 442,403 | 3,644,053 | (107,781 | ) | 3,978,675 | 445,698 | 3,443,140 | (107,196 | ) | 3,781,642 | ||||||||||||||||||||||
Total liabilities and equity/attributed net assets | $ | 528,045 | $ | 8,592,711 | $ | (143,419 | ) | $ | 8,977,337 | $ | 543,730 | $ | 6,823,035 | $ | (157,279 | ) | $ | 7,209,486 |
Attributed For the Three Months Ended September 30, 2016 | Attributed For the Three Months Ended September 30, 2015 | |||||||||||||||||||||||||||||||
Hughes Retail Group | EchoStar Group | Inter-Group Eliminations | EchoStar Consolidated | Hughes Retail Group | EchoStar Group | Inter-Group Eliminations | EchoStar Consolidated | |||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||
Services and equipment revenue - DISH Network | $ | — | $ | 378,094 | $ | — | $ | 378,094 | $ | — | $ | 393,785 | $ | — | $ | 393,785 | ||||||||||||||||
Services and equipment revenue - other | 162,257 | 283,390 | (81,392 | ) | 364,255 | 157,706 | 292,384 | (82,996 | ) | 367,094 | ||||||||||||||||||||||
Total revenue | 162,257 | 661,484 | (81,392 | ) | 742,349 | 157,706 | 686,169 | (82,996 | ) | 760,879 | ||||||||||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||||||||||
Cost of sales (exclusive of depreciation and amortization) | 94,730 | 399,287 | (79,410 | ) | 414,607 | 91,530 | 415,772 | (79,627 | ) | 427,675 | ||||||||||||||||||||||
Selling, general and administrative expenses | 33,954 | 67,587 | — | 101,541 | 34,822 | 57,008 | — | 91,830 | ||||||||||||||||||||||||
Research and development expenses | — | 20,587 | — | 20,587 | — | 19,875 | — | 19,875 | ||||||||||||||||||||||||
Depreciation and amortization | 33,073 | 92,708 | (2,148 | ) | 123,633 | 35,365 | 99,026 | (1,499 | ) | 132,892 | ||||||||||||||||||||||
Total costs and expenses | 161,757 | 580,169 | (81,558 | ) | 660,368 | 161,717 | 591,681 | (81,126 | ) | 672,272 | ||||||||||||||||||||||
Operating income (loss) | 500 | 81,315 | 166 | 81,981 | (4,011 | ) | 94,488 | (1,870 | ) | 88,607 | ||||||||||||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||||||||||
Interest income | — | 6,263 | (3 | ) | 6,260 | — | 2,601 | (39 | ) | 2,562 | ||||||||||||||||||||||
Interest expense, net of amounts capitalized | (3 | ) | (37,358 | ) | 3 | (37,358 | ) | (39 | ) | (28,870 | ) | 39 | (28,870 | ) | ||||||||||||||||||
Loss from partial redemption of debt | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Gains (losses) and impairment on marketable investment securities, net | — | 230 | — | 230 | — | (5,155 | ) | — | (5,155 | ) | ||||||||||||||||||||||
Economic interest in earnings (loss) of Hughes Retail Group | — | 60 | (60 | ) | — | — | (488 | ) | 488 | — | ||||||||||||||||||||||
Other, net | — | 5,809 | — | 5,809 | — | (209 | ) | — | (209 | ) | ||||||||||||||||||||||
Total other income (expense), net | (3 | ) | (24,996 | ) | (60 | ) | (25,059 | ) | (39 | ) | (32,121 | ) | 488 | (31,672 | ) | |||||||||||||||||
Income (loss) before income taxes | 497 | 56,319 | 106 | 56,922 | (4,050 | ) | 62,367 | (1,382 | ) | 56,935 | ||||||||||||||||||||||
Income tax benefit (provision), net | (197 | ) | (19,315 | ) | — | (19,512 | ) | 1,610 | (30,187 | ) | — | (28,577 | ) | |||||||||||||||||||
Net income (loss) | 300 | 37,004 | 106 | 37,410 | (2,440 | ) | 32,180 | (1,382 | ) | 28,358 | ||||||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock | — | 85 | — | 85 | — | (686 | ) | — | (686 | ) | ||||||||||||||||||||||
Less: Net income attributable to other noncontrolling interests | — | 524 | — | 524 | — | 209 | — | 209 | ||||||||||||||||||||||||
Net income (loss) attributable to EchoStar | $ | 300 | $ | 36,395 | $ | 106 | $ | 36,801 | $ | (2,440 | ) | $ | 32,657 | $ | (1,382 | ) | $ | 28,835 |
Attributed For the Nine Months Ended September 30, 2016 | Attributed For the Nine Months Ended September 30, 2015 | |||||||||||||||||||||||||||||||
Hughes Retail Group | EchoStar Group | Inter-Group Eliminations | EchoStar Consolidated | Hughes Retail Group | EchoStar Group | Inter-Group Eliminations | EchoStar Consolidated | |||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||
Services and equipment revenue - DISH Network | $ | — | $ | 1,246,781 | $ | — | $ | 1,246,781 | $ | — | $ | 1,272,635 | $ | — | $ | 1,272,635 | ||||||||||||||||
Services and equipment revenue - other | 480,747 | 835,153 | (246,344 | ) | 1,069,556 | 455,692 | 870,594 | (245,794 | ) | 1,080,492 | ||||||||||||||||||||||
Total revenue | 480,747 | 2,081,934 | (246,344 | ) | 2,316,337 | 455,692 | 2,143,229 | (245,794 | ) | 2,353,127 | ||||||||||||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||||||||||
Cost of sales (exclusive of depreciation and amortization) | 278,859 | 1,289,200 | (239,064 | ) | 1,328,995 | 267,737 | 1,320,686 | (235,897 | ) | 1,352,526 | ||||||||||||||||||||||
Selling, general and administrative expenses | 107,436 | 188,941 | — | 296,377 | 107,038 | 173,424 | — | 280,462 | ||||||||||||||||||||||||
Research and development expenses | — | 61,761 | — | 61,761 | — | 57,432 | — | 57,432 | ||||||||||||||||||||||||
Depreciation and amortization | 99,857 | 277,050 | (6,035 | ) | 370,872 | 104,477 | 297,828 | (3,758 | ) | 398,547 | ||||||||||||||||||||||
Total costs and expenses | 486,152 | 1,816,952 | (245,099 | ) | 2,058,005 | 479,252 | 1,849,370 | (239,655 | ) | 2,088,967 | ||||||||||||||||||||||
Operating income (loss) | (5,405 | ) | 264,982 | (1,245 | ) | 258,332 | (23,560 | ) | 293,859 | (6,139 | ) | 264,160 | ||||||||||||||||||||
Other Income (Expense): | ||||||||||||||||||||||||||||||||
Interest income | — | 13,776 | (47 | ) | 13,729 | — | 8,012 | (116 | ) | 7,896 | ||||||||||||||||||||||
Interest expense, net of amounts capitalized | (47 | ) | (80,495 | ) | 47 | (80,495 | ) | (116 | ) | (96,136 | ) | 116 | (96,136 | ) | ||||||||||||||||||
Loss from partial redemption of debt | — | — | — | — | — | (5,044 | ) | — | (5,044 | ) | ||||||||||||||||||||||
Gains (losses) and impairment on marketable investment securities, net | — | 8,179 | — | 8,179 | — | (11,408 | ) | — | (11,408 | ) | ||||||||||||||||||||||
Economic interest in earnings (loss) of Hughes Retail Group | — | (659 | ) | 659 | — | — | (2,860 | ) | 2,860 | — | ||||||||||||||||||||||
Other, net | — | 17,081 | — | 17,081 | — | (6,658 | ) | — | (6,658 | ) | ||||||||||||||||||||||
Total other income (expense), net | (47 | ) | (42,118 | ) | 659 | (41,506 | ) | (116 | ) | (114,094 | ) | 2,860 | (111,350 | ) | ||||||||||||||||||
Income (loss) before income taxes | (5,452 | ) | 222,864 | (586 | ) | 216,826 | (23,676 | ) | 179,765 | (3,279 | ) | 152,810 | ||||||||||||||||||||
Income tax benefit (provision), net | 2,157 | (77,221 | ) | — | (75,064 | ) | 9,376 | (75,217 | ) | — | (65,841 | ) | ||||||||||||||||||||
Net income (loss) | (3,295 | ) | 145,643 | (586 | ) | 141,762 | (14,300 | ) | 104,548 | (3,279 | ) | 86,969 | ||||||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock | — | (926 | ) | — | (926 | ) | — | (4,020 | ) | — | (4,020 | ) | ||||||||||||||||||||
Less: Net income attributable to other noncontrolling interests | — | 946 | — | 946 | — | 1,006 | — | 1,006 | ||||||||||||||||||||||||
Net income (loss) attributable to EchoStar | $ | (3,295 | ) | $ | 145,623 | $ | (586 | ) | $ | 141,742 | $ | (14,300 | ) | $ | 107,562 | $ | (3,279 | ) | $ | 89,983 |
Attributed For the Nine Months Ended September 30, 2016 | Attributed For the Nine Months Ended September 30, 2015 | |||||||||||||||||||||||||||||||
Hughes Retail Group | EchoStar Group | Inter-Group Eliminations | EchoStar Consolidated | Hughes Retail Group | EchoStar Group | Inter-Group Eliminations | EchoStar Consolidated | |||||||||||||||||||||||||
Cash Flows from Operating Activities: | ||||||||||||||||||||||||||||||||
Net income (loss) | $ | (3,295 | ) | $ | 145,643 | $ | (586 | ) | $ | 141,762 | $ | (14,300 | ) | $ | 104,548 | $ | (3,279 | ) | $ | 86,969 | ||||||||||||
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||||||||||||||||||||||||||||||||
Depreciation and amortization | 99,857 | 277,050 | (6,035 | ) | 370,872 | 104,477 | 297,828 | (3,758 | ) | 398,547 | ||||||||||||||||||||||
Equity in losses (earnings) of unconsolidated affiliates, net | — | (11,181 | ) | — | (11,181 | ) | — | 2,580 | — | 2,580 | ||||||||||||||||||||||
Loss from partial redemption of debt | — | — | — | — | — | 5,044 | — | 5,044 | ||||||||||||||||||||||||
Economic interest in loss (earnings) of Hughes Retail Group | — | 659 | (659 | ) | — | — | 2,860 | (2,860 | ) | — | ||||||||||||||||||||||
Loss (gain) and impairment on marketable investment securities, net | — | (8,179 | ) | — | (8,179 | ) | — | 11,408 | — | 11,408 | ||||||||||||||||||||||
Dividends received from unconsolidated entities | — | 15,000 | — | 15,000 | — | 5,000 | — | 5,000 | ||||||||||||||||||||||||
Proceeds from sale of trading securities | — | 7,140 | — | 7,140 | — | 380 | — | 380 | ||||||||||||||||||||||||
Stock-based compensation | — | 11,953 | — | 11,953 | — | 16,204 | — | 16,204 | ||||||||||||||||||||||||
Deferred tax provision (benefit) | (14,242 | ) | 85,664 | — | 71,422 | (19,463 | ) | 82,884 | — | 63,421 | ||||||||||||||||||||||
Changes in current assets and current liabilities, net | 16,889 | (63,668 | ) | (234 | ) | (47,013 | ) | 8,974 | (9,079 | ) | (169 | ) | (274 | ) | ||||||||||||||||||
Changes in noncurrent assets and noncurrent liabilities, net | 6,493 | 1,713 | (109 | ) | 8,097 | 2,222 | 1,191 | 44 | 3,457 | |||||||||||||||||||||||
Other, net | — | 14,836 | — | 14,836 | — | 15,187 | — | 15,187 | ||||||||||||||||||||||||
Net cash flows from operating activities | 105,702 | 476,630 | (7,623 | ) | 574,709 | 81,910 | 536,035 | (10,022 | ) | 607,923 | ||||||||||||||||||||||
Cash Flows from Investing Activities: | ||||||||||||||||||||||||||||||||
Purchases of marketable investment securities | — | (883,288 | ) | — | (883,288 | ) | — | (345,391 | ) | — | (345,391 | ) | ||||||||||||||||||||
Sales and maturities of marketable investment securities | — | 643,865 | — | 643,865 | — | 669,393 | — | 669,393 | ||||||||||||||||||||||||
Purchases of property and equipment | (73,593 | ) | (467,699 | ) | 7,623 | (533,669 | ) | (92,949 | ) | (502,975 | ) | 10,022 | (585,902 | ) | ||||||||||||||||||
Refunds and other receipts related to capital expenditures | — | 24,087 | — | 24,087 | — | 105,750 | — | 105,750 | ||||||||||||||||||||||||
Changes in restricted cash and marketable investment securities | — | 7,351 | — | 7,351 | — | (313 | ) | — | (313 | ) | ||||||||||||||||||||||
Investments in unconsolidated entities | — | (1,636 | ) | — | (1,636 | ) | — | (64,655 | ) | — | (64,655 | ) | ||||||||||||||||||||
Acquisition of regulatory authorization | — | — | — | — | — | (3,428 | ) | — | (3,428 | ) | ||||||||||||||||||||||
Expenditures for externally marketed software | — | (17,991 | ) | — | (17,991 | ) | — | (16,905 | ) | — | (16,905 | ) | ||||||||||||||||||||
Inter-group advances | (1,711 | ) | 30,398 | (28,687 | ) | — | — | (11,039 | ) | 11,039 | — | |||||||||||||||||||||
Other, net | — | 1,462 | — | 1,462 | — | (50 | ) | — | (50 | ) | ||||||||||||||||||||||
Net cash flows from investing activities | (75,304 | ) | (663,451 | ) | (21,064 | ) | (759,819 | ) | (92,949 | ) | (169,613 | ) | 21,061 | (241,501 | ) | |||||||||||||||||
Cash Flows from Financing Activities: | ||||||||||||||||||||||||||||||||
Proceeds from issuance of long-term debt | — | 1,500,000 | — | 1,500,000 | — | — | — | — | ||||||||||||||||||||||||
Payments of debt issuance costs | — | (6,275 | ) | — | (6,275 | ) | — | — | — | — | ||||||||||||||||||||||
Repayment of 6 1/2% Senior Secured Notes Due 2019 and related premium | — | — | — | — | — | (113,300 | ) | — | (113,300 | ) | ||||||||||||||||||||||
Repayment of other debt and capital lease obligations | — | (30,615 | ) | — | (30,615 | ) | — | (35,303 | ) | — | (35,303 | ) | ||||||||||||||||||||
Net proceeds from Class A common stock options exercised and stock issued under the Employee Stock Purchase Plan | — | 16,157 | — | 16,157 | — | 19,893 | — | 19,893 | ||||||||||||||||||||||||
Inter-group advances | (30,398 | ) | 1,711 | 28,687 | — | 11,039 | — | (11,039 | ) | — | ||||||||||||||||||||||
Other, net | — | (3,373 | ) | — | (3,373 | ) | — | 1,525 | — | 1,525 | ||||||||||||||||||||||
Net cash flows from financing activities | (30,398 | ) | 1,477,605 | 28,687 | 1,475,894 | 11,039 | (127,185 | ) | (11,039 | ) | (127,185 | ) | ||||||||||||||||||||
Effect of exchange rates on cash and cash equivalents | — | 684 | — | 684 | — | (9,185 | ) | — | (9,185 | ) | ||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | 1,291,468 | — | 1,291,468 | — | 230,052 | — | 230,052 | ||||||||||||||||||||||||
Cash and cash equivalents, beginning of period | — | 924,240 | — | 924,240 | — | 549,053 | — | 549,053 | ||||||||||||||||||||||||
Cash and cash equivalents, end of period | $ | — | $ | 2,215,708 | $ | — | $ | 2,215,708 | $ | — | $ | 779,105 | $ | — | $ | 779,105 |
Depreciable | As of | |||||||||
Life (In Years) | September 30, 2016 | December 31, 2015 | ||||||||
(In thousands) | ||||||||||
Customer rental equipment | 2-4 | $ | 657,680 | $ | 584,086 | |||||
Accumulated depreciation | (509,382 | ) | (421,589 | ) | ||||||
Property and equipment, net | $ | 148,298 | $ | 162,497 |
As of | ||||||||||||||||||||||||
September 30, 2016 | December 31, 2015 | |||||||||||||||||||||||
Cost | Accumulated Amortization | Carrying Amount | Cost | Accumulated Amortization | Carrying Amount | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Customer relationships | $ | 145,100 | $ | (138,276 | ) | $ | 6,824 | $ | 145,100 | $ | (129,660 | ) | $ | 15,440 | ||||||||||
Technology-based | 23,500 | (20,889 | ) | 2,611 | 23,500 | (17,951 | ) | 5,549 | ||||||||||||||||
Trademark portfolio | 13,620 | (3,632 | ) | 9,988 | 13,620 | (3,121 | ) | 10,499 | ||||||||||||||||
Total other intangible assets | $ | 182,220 | $ | (162,797 | ) | $ | 19,423 | $ | 182,220 | $ | (150,732 | ) | $ | 31,488 |
As of | ||||||||
September 30, 2016 | December 31, 2015 | |||||||
(In thousands) | ||||||||
Attributed paid-in capital | $ | 456,122 | $ | 456,122 | ||||
Attributed accumulated earnings (deficit): | ||||||||
Periods prior to March 1, 2014 | 33,395 | 33,395 | ||||||
Periods beginning March 1, 2014 | (47,114 | ) | (43,819 | ) | ||||
Total | (13,719 | ) | (10,424 | ) | ||||
Total equity/attributed net assets | $ | 442,403 | $ | 445,698 |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 31, 2016 |
|
Entity Registrant Name | EchoStar CORP | |
Entity Central Index Key | 0001415404 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Class A common stock | ||
Entity Common Stock, Shares Outstanding | 46,413,453 | |
Class B common stock | ||
Entity Common Stock, Shares Outstanding | 47,687,039 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) |
Sep. 30, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
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6 1/2% Senior Secured Notes due 2019 | |||
Interest rate | 6.50% | 6.50% | 6.50% |
Organization and Business Activities |
9 Months Ended | ||||||||||||
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Sep. 30, 2016 | |||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||
Organization and Business Activities | Organization and Business Activities Principal Business EchoStar Corporation (which, together with its subsidiaries, is referred to as “EchoStar,” the “Company,” “we,” “us” and/or “our”) is a holding company that was organized in October 2007 as a corporation under the laws of the State of Nevada. We are a global provider of satellite service operations, video delivery solutions, digital set-top boxes, broadband satellite technologies and broadband services for home and office customers. We deliver innovative network technologies, managed services, and various communications solutions for enterprise and government customers. Our Class A common stock is publicly traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “SATS.” We currently operate in the following three business segments:
Our operations also include real estate and other activities that have not been assigned to our operating segments, including costs incurred in certain satellite development programs and other business development activities, expenses of various corporate departments, and our centralized treasury operations, including income from our investment portfolio and interest expense on our debt. In 2008, DISH Network completed its distribution to us of its digital set-top box business, certain infrastructure, and other assets and related liabilities, including certain of its satellites, uplink and satellite transmission assets, and real estate (the “Spin-off”). Since the Spin-off, EchoStar and DISH Network have operated as separate publicly-traded companies. However, as a result of the Satellite and Tracking Stock Transaction described in Note 4 below and in our most recent Annual Report on Form 10-K, DISH Network owns Hughes Retail Preferred Tracking Stock representing an aggregate 80.0% economic interest in the residential retail satellite broadband business of our Hughes segment. The tracking stock is an equity security and the rights of DISH Network, as the holder of the tracking stock, in our assets are subject to the claims of our creditors. In addition, a substantial majority of the voting power of the shares of EchoStar and DISH Network is owned beneficially by Charles W. Ergen, our Chairman, and by certain trusts established by Mr. Ergen for the benefit of his family. |
Summary of Significant Accounting Policies |
9 Months Ended | ||||||||||||
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Sep. 30, 2016 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in conformity with GAAP. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Our results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2015. Principles of Consolidation We consolidate all entities in which we have a controlling financial interest. We are deemed to have a controlling financial interest in variable interest entities where we are the primary beneficiary. We are deemed to have a controlling financial interest in other entities when we own more than 50 percent of the outstanding voting shares and other shareholders do not have substantive rights to participate in management. For entities we control but do not wholly own, we record a noncontrolling interest within stockholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests. As of September 30, 2016 and December 31, 2015, noncontrolling interests consist primarily of HSS Tracking Stock owned by DISH Network, as described in Note 4 below. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, the reported amounts of revenue and expense for each reporting period, and certain information disclosed in the notes to our condensed consolidated financial statements. Estimates are used in accounting for, among other things, amortization periods for deferred subscriber acquisition costs, revenue recognition using the percentage-of-completion method, allowances for doubtful accounts, allowances for sales returns and rebates, warranty obligations, self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair value of financial instruments, fair value of stock-based compensation awards, fair value of assets and liabilities acquired in business combinations, lease classifications, asset impairment testing, useful lives and methods for depreciation and amortization of long-lived assets, and certain royalty obligations. We base our estimates and assumptions on historical experience, observable market inputs and on various other factors that we believe to be relevant under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results may differ from previously estimated amounts, and such differences may be material to our condensed consolidated financial statements. Changing economic conditions may increase the inherent uncertainty in the estimates and assumptions indicated above. We review our estimates and assumptions periodically and the effects of revisions are reflected in the period they occur or prospectively if the revised estimate affects future periods. Fair Value Measurements We determine fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. We utilize the highest level of inputs available according to the following hierarchy in determining fair value:
Transfers between levels in the fair value hierarchy are considered to occur at the beginning of the quarterly accounting period. There were no transfers between levels for each of the nine months ended September 30, 2016 or 2015. As of September 30, 2016 and December 31, 2015, the carrying amounts of our cash and cash equivalents, trade accounts receivable, net of allowance for doubtful accounts, accounts payable and accrued liabilities were equal to or approximated fair value due to their short-term nature or proximity to current market rates. Fair values of our current marketable investment securities are based on a variety of observable market inputs. For our investments in publicly traded equity securities and U.S. government securities, fair value ordinarily is determined based on a Level 1 measurement that reflects quoted prices for identical securities in active markets. Fair values of our investments in other marketable debt securities generally are based on Level 2 measurements as the markets for such debt securities are less active. Trades of identical debt securities on or near the measurement date are considered a strong indication of fair value. Matrix pricing techniques that consider par value, coupon rate, credit quality, maturity and other relevant features also may be used to determine fair value of our investments in marketable debt securities. Fair values for our publicly traded debt are based on quoted market prices in less active markets and are categorized as Level 2 measurements. The fair values of our privately held debt are Level 2 measurements and are estimated to approximate their carrying amounts based on the proximity of their interest rates to current market rates. As of September 30, 2016 and December 31, 2015, the fair values of our in-orbit incentive obligations, based on measurements categorized within Level 2 of the fair value hierarchy, approximated their carrying amounts of $75.2 million and $79.3 million, respectively. We use fair value measurements from time to time in connection with impairment testing and the assignment of purchase consideration to assets and liabilities of acquired companies. Those fair value measurements typically include significant unobservable inputs and are categorized within Level 3 of the fair value hierarchy. Research and Development Costs incurred in research and development activities generally are expensed as incurred. A significant portion of our research and development costs are incurred in connection with the specific requirements of a customer’s order. In such instances, the amounts for these customer funded development efforts are included in cost of sales. Cost of sales includes research and development costs incurred in connection with customer’s orders of approximately $22.6 million and $15.2 million for the three months ended September 30, 2016 and 2015, respectively, and $48.9 million and $45.7 million for the nine months ended September 30, 2016 and 2015, respectively. In addition, we incurred other research and development expenses of approximately $20.6 million and $19.9 million for the three months ended September 30, 2016 and 2015, respectively, and $61.8 million and $57.4 million for the nine months ended September 30, 2016 and 2015, respectively. Capitalized Software Costs Costs related to the procurement and development of software for internal-use and externally marketed software are capitalized and amortized using the straight-line method over the estimated useful life of the software, not in excess of five years. Capitalized costs of internal-use software are included in “Property and equipment, net” and capitalized costs of externally marketed software are included in “Other noncurrent assets, net” in our condensed consolidated balance sheets. Externally marketed software is generally installed in the equipment we sell to customers. We conduct software program reviews for externally marketed capitalized software costs at least annually, or as events and circumstances warrant such a review, to determine if capitalized software development costs are recoverable and to ensure that costs associated with programs that are no longer generating revenue are expensed. As of September 30, 2016 and December 31, 2015, the net carrying amount of externally marketed software was $73.6 million and $62.8 million, respectively, of which $45.6 million and $32.6 million, respectively is under development and not yet placed in service. We capitalized costs related to the development of externally marketed software of $6.2 million and $5.3 million for the three months ended September 30, 2016 and 2015, respectively, and $18.5 million and $17.0 million for the nine months ended September 30, 2016 and 2015, respectively. We recorded amortization expense relating to the development of externally marketed software of $2.5 million and $2.2 million for the three months ended September 30, 2016 and 2015, respectively, and $7.2 million and $6.1 million for the nine months ended September 30, 2016 and 2015, respectively. The weighted average useful life of our externally marketed software was approximately three years as of September 30, 2016. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). It outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In August 2015, the FASB issued Accounting Standards Update No. 2015-14, which deferred the mandatory effective date of ASU 2014-09 by one year. As a result, public entities are required to adopt the new revenue standard in annual periods beginning after December 15, 2017 and in interim periods within those annual periods. The standard may be applied either retrospectively to prior periods or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted, but not before annual periods beginning after December 15, 2016. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Identifying Performance Obligations and Licensing, which amends guidance on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Narrow-Scope Improvements and Practical Expedients, which addresses collectibility, noncash consideration, completed contracts at transition, a practical expedient for contract modifications at transition, and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. We have not determined when we will adopt the new revenue standard or selected the transition method that we will apply upon adoption. We continue to evaluate the impact of the new standard and available adoption methods on our consolidated financial statements. We are in the process of evaluating arrangements with customers and identifying differences in accounting between new and old standards. In February 2015, the FASB issued Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). This standard amends the consolidation guidance for variable interest entities and general partners’ investments in limited partnerships and similar entities. ASU 2015-02 was effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, and required either a retrospective or a modified retrospective approach as of the beginning of the fiscal year of adoption. We adopted ASU 2015-02 in the first quarter of 2016. The adoption of the standard did not impact our consolidated financial statements. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). This standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. ASU 2015-03 was effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, and required a retrospective approach to adoption. We adopted ASU 2015-03 in the first quarter of 2016. Upon adoption, we presented unamortized debt issuance cost previously reported in “Other noncurrent assets, net” with a carrying amount of $31.3 million as of December 31, 2015, as a reduction of our “Long-term debt and capital lease obligations, net of unamortized debt issuance costs”. In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This update substantially revises standards for the recognition, measurement and presentation of financial instruments, including requiring all equity investments to be measured at fair value with changes in the fair value recognized through net income. It also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted for certain requirements. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”). This standard requires lessees to recognize assets and liabilities for all leases with lease terms more than 12 months, including leases classified as operating leases. The standard also modifies the definition of a lease and the criteria for classifying leases as operating leases or financing leases. ASU 2016-02 is effective for annual periods beginning after December 15, 2018 and interim periods within those periods. Early adoption is permitted. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies the accounting for share-based payment awards. This update requires all excess tax benefits and deficiencies to be recognized as income tax expense or benefit and permits an entity to make an entity-wide policy election to either estimate forfeitures or recognize forfeitures as they occur. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those periods. The update specifies requirements for retrospective, modified retrospective or prospective application for the various amendments contained in the update. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those periods. Early adoption is permitted. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for annual periods beginning after December 15, 2017 and interim periods within those periods. Early adoption is permitted. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. |
Earnings per Share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share We present basic earnings per share (“EPS”) and diluted EPS for our Class A and Class B common stock. The EchoStar Tracking Stock (see Note 4 for definitions and a further discussion of the preferred tracking stock, the EchoStar Group and the Hughes Retail Group) is a participating security that shares in our consolidated earnings and therefore, we apply the two-class method to calculate EPS. Under the two-class method, we allocate net income or loss attributable to EchoStar between common stock and the EchoStar Tracking Stock considering both dividends declared on each class of stock and the participation rights of each class of stock in undistributed earnings. Based on the 51.89% economic interest in the Hughes Retail Group, represented by the EchoStar Tracking Stock, we allocate undistributed earnings to the EchoStar Tracking Stock based on 51.89% of the attributed net income or loss of the Hughes Retail Group. Moreover, because the reported amount of “Net income attributable to EchoStar” in our condensed consolidated statements of operations and comprehensive income (loss) excludes DISH Network’s 28.11% economic interest (represented by the HSS Tracking Stock) in the net loss of the Hughes Retail Group (reported as a noncontrolling interest), the amount of consolidated net income or loss allocated to holders of Class A and Class B common stock effectively excludes an aggregate 80.0% of the attributed net loss of the Hughes Retail Group. Basic EPS for our Class A and Class B common stock excludes potential dilution and is computed by dividing “Net income attributable to EchoStar common stock” by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if our common stock awards were exercised or vested. The potential dilution from common stock awards was computed using the treasury stock method based on the average market value of our Class A common stock during the period. The calculation of our diluted weighted-average common shares outstanding excluded options to purchase shares of our Class A common stock, whose effect would be anti-dilutive, of 3.6 million shares for each of the three and nine months ended September 30, 2016, and 3.1 million shares and 2.0 million shares for the three and nine months ended September 30, 2015, respectively. The following table presents basic and diluted EPS amounts for all periods and the corresponding weighted-average shares outstanding used in the calculations.
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Hughes Retail Preferred Tracking Stock |
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Sep. 30, 2016 | |
Hughes Retail Preferred Tracking Stock | |
Hughes Retail Preferred Tracking Stock | Hughes Retail Preferred Tracking Stock Satellite and Tracking Stock Transaction In February 2014, EchoStar entered into agreements with certain subsidiaries of DISH Network pursuant to which, effective March 1, 2014, (i) EchoStar issued shares of its newly authorized Hughes Retail Preferred Tracking Stock (the “EchoStar Tracking Stock”) and Hughes Satellite Systems Corporation (“HSS”), a subsidiary of EchoStar, also issued shares of its newly authorized Hughes Retail Preferred Tracking Stock (the “HSS Tracking Stock” and together with the EchoStar Tracking Stock, the “Tracking Stock”) to DISH Network in exchange for five satellites (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI, and EchoStar XIV), including the assumption of related in-orbit incentive obligations, and $11.4 million in cash and (ii) DISH Network began receiving certain satellite services on these five satellites from us (the “Satellite and Tracking Stock Transaction”). The Tracking Stock tracks the economic performance of the residential retail satellite broadband business of our Hughes segment, including certain operations, assets and liabilities attributed to such business (collectively, the “Hughes Retail Group” or “HRG”). The shares of the Tracking Stock issued to DISH Network represent an aggregate 80.0% economic interest in the Hughes Retail Group (the shares issued as EchoStar Tracking Stock represent a 51.89% economic interest in the Hughes Retail Group and the shares issued as HSS Tracking Stock represent a 28.11% economic interest in the Hughes Retail Group.) In addition to the remaining 20.0% economic interest in the Hughes Retail Group, EchoStar retains all economic interest in the wholesale satellite broadband business and other businesses of EchoStar. The Satellite and Tracking Stock Transaction was consistent with the long-term strategy of the Company to increase the scale of its satellite services business, which provides high-margin revenues, while continuing to benefit from the growth of the satellite broadband business. As a result of the additional satellites received in the Satellite and Tracking Stock Transaction, EchoStar increased short-term cash flow that it believes better positions it to achieve its strategic objectives. EchoStar and HSS have adopted policy statements (the “Policy Statements”) setting forth management and allocation policies for purposes of attributing all of the business and operations of EchoStar to either the Hughes Retail Group or the “EchoStar Group,” which is defined as all other operations of EchoStar, including all existing and future businesses, other than the Hughes Retail Group. Among other things, the Policy Statements govern how assets, liabilities, revenue and expenses are attributed or allocated between HRG and the EchoStar Group. Such attributions and allocations generally do not affect the amounts reported in our consolidated financial statements, except for the attribution of stockholders’ equity and net income or loss between the holders of Tracking Stock and common stock. The Policy Statements also do not significantly affect the way that management assesses operating performance and allocates resources within our Hughes segment. We provide unaudited attributed financial information for HRG and the EchoStar Group in an exhibit to our periodic reports on Form 10-Q and Annual Report on Form 10-K. For a description of the Tracking Stock and the initial recording of the Satellite and Tracking Stock Transaction in our consolidated financial statements, as well as the purpose and effect of the transaction on the Company and the Company’s Class A common stock, see Note 4 to the consolidated financial statements in our most recent Annual Report on Form 10-K. As of September 30, 2016, DISH Network held 6.3% and 7.5% of the aggregate number of outstanding shares of EchoStar and HSS capital stock, respectively. |
Other Comprehensive Income (Loss) and Related Tax Effects |
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Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Income (Loss) and Related Tax Effects | Other Comprehensive Income (Loss) and Related Tax Effects We have not recognized any tax effects on foreign currency translation adjustments because they are not expected to result in future taxable income or deductions. We have not recognized any tax effects on unrealized gains or losses on available-for-sale securities because such gains or losses would affect the amount of existing capital loss carryforwards for which the related deferred tax asset has been fully offset by a valuation allowance. Accumulated other comprehensive loss includes cumulative foreign currency translation losses of $110.3 million and $124.3 million as of September 30, 2016 and December 31, 2015, respectively. Reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2016 and 2015 were as follows:
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Investment Securities |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | Investment Securities Our marketable investment securities, restricted cash and cash equivalents, and investments in unconsolidated entities consisted of the following:
Marketable Investment Securities Our marketable investment securities portfolio consists of various debt and equity instruments, which generally are classified as available-for-sale or trading securities depending on our investment strategy for those securities. The value of our investment portfolio depends on the value of such securities and other instruments comprising the portfolio. Corporate Bonds Our corporate bond portfolio includes debt instruments issued by individual corporations, primarily in the industrial and financial services industries. Strategic Equity Securities Our strategic investment portfolio consists of investments in shares of common stock of public companies, which are highly speculative and have experienced and continue to experience volatility. We did not receive any dividend income for the three and nine months ended September 30, 2016 or 2015. For the three and nine months ended September 30, 2016, “Gains (losses) on marketable investment securities, net” included losses of zero and $1.0 million, respectively, related to trading securities that we held as of September 30, 2016. For each of the three and nine months ended September 30, 2015, “Gains (losses) on marketable investment securities, net” included losses of$3.9 million and $5.5 million, respectively, related to trading securities that we held as of September 30, 2015. Other Our other current marketable investment securities portfolio includes investments in various debt instruments, including U.S. government bonds and mutual funds. Restricted Cash and Marketable Investment Securities As of September 30, 2016 and December 31, 2015, our restricted marketable investment securities, together with our restricted cash, included amounts required as collateral for our letters of credit or surety bonds. Unrealized Gains (Losses) on Available-for-Sale Securities The components of our available-for-sale investments are summarized in the table below.
As of September 30, 2016, restricted and non-restricted available-for-sale securities included debt securities of $684.4 million with contractual maturities of one year or less and $67.7 million with contractual maturities greater than one year. We may realize proceeds from certain investments prior to their contractual maturity as a result of our ability to sell these securities prior to their contractual maturity. Available-for-Sale Securities in a Loss Position The following table reflects the length of time that our available-for-sale securities have been in an unrealized loss position. We do not intend to sell these securities before they recover or mature, and it is more likely than not that we will hold these securities until they recover or mature. We believe that changes in the estimated fair values of these securities are primarily related to temporary market conditions.
Sales of Marketable Investment Securities We recognized gains from the sales of our available-for-sale securities of de minimis and $5.6 million for the three and nine months ended September 30, 2016, respectively, and de minimis gains for each of the three and nine months ended September 30, 2015. We recognized de minimis losses from the sales of our available-for-sale securities for each of the three and nine months ended September 30, 2016 and 2015. Proceeds from sales of our available-for-sale securities totaled $4.0 million for each of the three months ended September 30, 2016 and 2015, and $35.8 million and $94.2 million for the nine months ended September 30, 2016 and 2015, respectively. Fair Value Measurements Our current marketable investment securities are measured at fair value on a recurring basis as summarized in the table below. As of September 30, 2016 and December 31, 2015, we did not have investments that were categorized within Level 3 of the fair value hierarchy.
Investments in Unconsolidated Entities — Noncurrent We have several strategic investments in certain non-publicly traded equity securities that are accounted for using either the equity or the cost method of accounting. Our ability to realize value from our strategic investments in companies that are not publicly traded depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them. We recorded cash distributions from certain of our investments accounted for using the equity method of $5.0 million and $15.0 million for the three and nine months ended September 30, 2016, respectively. We recorded cash distributions from certain of our investments accounted for using the equity method of $5.0 million for each of the three and nine months ended September 30, 2015. These cash distributions were determined to be a return on investment and reported in cash flows from operating activities in our condensed consolidated statement of cash flows. In June 2015, we made an equity investment in WorldVu Satellites Limited (“OneWeb”), a global low-earth orbit satellite service company. OneWeb plans to develop and operate a global network of low-earth orbit Ku-band satellites to provide internet access to fixed and mobile terminals. We do not exercise significant influence over the management of OneWeb; accordingly, we account for the investment using the cost method. In May 2015, we acquired a 22.5% interest in the equity and subordinated debt of SmarDTV SA (“SmarDTV”), a Swiss subsidiary of Kudelski SA that offers set-top boxes and conditional access modules, in exchange for cash of $13.9 million and the contribution of several of our European subsidiaries to SmarDTV. We recorded our initial investment in SmarDTV at $20.0 million, representing our estimate of the investment’s fair value using discounted cash flow techniques. Our estimate included significant unobservable inputs related to SmarDTV’s future operations and is categorized within Level 3 of the fair value hierarchy. As of the acquisition date, we deconsolidated the contributed entities and recognized a $2.6 million loss within “Other income (expense)” in our condensed consolidated statements of operations and comprehensive income (loss), consisting of: (i) a $0.7 million loss resulting from our initial investment (at fair value) being less than the sum of our $13.9 million cash payment and the carrying amount of the net assets of the deconsolidated entities and (ii) the reclassification from accumulated other comprehensive loss of $1.9 million in foreign currency translation adjustments related to the deconsolidated entities. The net assets of the deconsolidated entities included property and equipment of $6.7 million and cash of $0.8 million. We have the ability to exercise significant influence over SmarDTV and therefore account for our investment using the equity method. We and SmarDTV also entered into a services agreement pursuant to which our EchoStar Technologies segment purchases certain engineering services from SmarDTV. See Note 16 for information about our related party transactions with SmarDTV subsequent to the date of our initial investment. |
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Trade Accounts Receivable | Trade Accounts Receivable Our trade accounts receivable consisted of the following:
As of September 30, 2016 and December 31, 2015, progress billings offset against contracts in process amounted to $3.9 million and $2.9 million, respectively. |
Inventory |
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Inventory | Inventory Our inventory consisted of the following:
As a result of our decision in July 2016 not to proceed with our direct-to-consumer security and home automation solution product offering and associated services, “Selling, general and administrative expenses” of our EchoStar Technologies segment for the three and nine months ended September 30, 2016 includes a $9.1 million adjustment to reduce inventory to its estimated net realizable value. |
Property and Equipment |
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Property and Equipment | Property and Equipment Property and equipment consisted of the following:
Construction in progress consisted of the following:
Construction in progress included the following owned and leased satellites under construction or undergoing in-orbit testing as of September 30, 2016.
Depreciation expense associated with our property and equipment consisted of the following:
Satellites As of September 30, 2016, we utilized in support of our operations, 18 of our owned and leased satellites in geosynchronous orbit, approximately 22,300 miles above the equator. We depreciate our owned satellites on a straight-line basis over the estimated useful life of each satellite. Three of our satellites are accounted for as capital leases and are depreciated on a straight-line basis over their respective lease terms. We utilized one satellite that is accounted for as an operating lease and not included in property and equipment as of September 30, 2016. Recent Developments Eutelsat 65 West A. The Eutelsat 65 West A satellite was launched in March 2016 and our Hughes segment began to offer consumer broadband services in Brazil using our leased Ka-band payload on the satellite in July 2016. EchoStar XXI and EchoStar XXIII. Due to anomalies experienced by our launch providers, the expected launch dates of our EchoStar XXI and EchoStar XXIII satellites have been delayed; however, we currently expect to launch both satellites in the fourth quarter of 2016 or the first quarter of 2017. We are in the process of evaluating the implications of these delays, including, without limitation, potential increased costs, regulatory and contractual milestone compliance and other satellite resource allocations. We have regulatory obligations to meet certain milestones by the fourth quarter of 2016 regarding the operations of the EchoStar XXI satellite across the European Union. We may need to seek extensions of certain of these requirements, which may or may not be granted and, if granted, may be subject to penalties, additional conditions or requirements. We also have regulatory obligations to meet certain in-service milestones by the second quarter of 2017 for our Brazilian license at 45 west longitude for the Ka, Ku, and S-band frequency bands. While we expect the EchoStar XXIII satellite to meet our regulatory milestone for the Ku-band, if we do miss our milestone, we may be subject to the imposition of penalties, additional conditions or other requirements. EchoStar 105/SES-11. Due to anomalies experienced by our launch provider, the expected launch date of our EchoStar 105/SES-11 satellite has been delayed until the first half of 2017. Our Ku-band payload on the EchoStar 105/SES-11 satellite will replace our current capacity on the AMC-15 satellite. Satellite Anomalies Our satellites may experience anomalies from time to time, some of which may have a significant adverse impact on their remaining useful lives, the commercial operation of the satellites or our operating results. We are not aware of any anomalies with respect to our owned or leased satellites that have had any such material adverse effect during the nine months ended September 30, 2016. There can be no assurance, however, that anomalies will not have any such adverse impacts in the future. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail. |
Goodwill, Regulatory Authorizations and Other Intangible Assets |
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Goodwill, Regulatory Authorizations and Other Intangible Assets | Goodwill, Regulatory Authorizations and Other Intangible Assets Goodwill The excess of the cost of an acquired business over the fair values of net tangible and identifiable intangible assets at the time of the acquisition is recorded as goodwill. Goodwill is assigned to the reporting units within our operating segments and is subject to impairment testing annually, or more frequently when events or changes in circumstances indicate the fair value of a reporting unit is more likely than not less than its carrying amount. As of September 30, 2016 and December 31, 2015, approximately $504.2 million of our goodwill was assigned to reporting units of our Hughes segment and $6.4 million was assigned to the Move Networks reporting unit of our EchoStar Technologies segment. We test this goodwill for impairment annually in the second quarter and third quarter, respectively. Based on our qualitative assessment of impairment of our Hughes segment goodwill in the second quarter of 2016, we determined that it was not more likely than not that the fair values of the Hughes segment reporting units were less than the corresponding carrying amounts, including goodwill. Regulatory Authorizations Regulatory authorizations included amounts with finite and indefinite useful lives, as follows:
Other Intangible Assets Our other intangible assets, which are subject to amortization, consisted of the following:
Customer relationships are amortized predominantly in relation to the expected contribution of cash flow to the business over the life of the intangible asset. Other intangible assets are amortized on a straight-line basis over the periods the assets are expected to contribute to our cash flows. Intangible asset amortization expense, including amortization of regulatory authorizations with finite lives and externally marketed capitalized software, was $13.8 million and $18.2 million for the three months ended September 30, 2016 and 2015, respectively, and $44.7 million and $57.6 million for the nine months ended September 30, 2016 and 2015, respectively. |
Debt and Capital Lease Obligations |
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Debt and Capital Lease Obligations | Debt and Capital Lease Obligations The following table summarizes the carrying amounts and fair values of our debt:
The fair values of our debt are estimates categorized within Level 2 of the fair value hierarchy. On May 6, 2016, HSS offered to repurchase for cash all or any part of its outstanding 6 1/2% Senior Secured Notes due 2019 (the “2019 Senior Secured Notes”) and its outstanding 7 5/8% Senior Notes due 2021 (the “2021 Senior Unsecured Notes”) at a purchase price equal to 101% of the aggregate principal amount thereof, together with accrued and unpaid interest thereon to the date of repurchase. The Change of Control Offers expired on June 6, 2016, with none of the 2019 Senior Secured Notes or the 2021 Senior Unsecured Notes tendered for repurchase. Issuance of Secured and Unsecured Notes On July 27, 2016, HSS issued $750 million aggregate principal amount of 5.250% Senior Secured Notes due August 1, 2026 (the “2026 Senior Secured Notes”) pursuant to an Indenture dated July 27, 2016 (the “2016 Secured Indenture”) at an issue price of 100% of their aggregate principal amount and $750 million aggregate principal amount of 6.625% Senior Unsecured Notes due August 1, 2026 (the “2026 Senior Unsecured Notes” and together with the 2026 Senior Secured Notes, the “2026 Notes”) pursuant to an Indenture dated July 27, 2016 (the “2016 Unsecured Indenture” and together with the 2016 Secured Indenture, the “2016 Indentures”) at an issue price of 100% of their aggregate principal amount. Interest on the 2026 Notes will be payable semi-annually on February 1 and August 1 of each year commencing February 1, 2017. The 2026 Notes are redeemable, in whole or in part at any time at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption and a “make-whole” premium calculated under the 2016 Indentures. HSS may also redeem up to 10% of the outstanding 2026 Senior Secured Notes per year prior to August 1, 2020 at a redemption price equal to 103% of the principal amount thereof plus accrued and unpaid interest to the date of redemption. In addition, HSS may, at any time prior to August 1, 2019, with the net cash proceeds from certain equity offerings or capital contributions, redeem up to 35% of the 2026 Senior Secured Notes, at 105.25% of the principal amount, and up to 35% of the 2026 Senior Unsecured Notes, at a redemption price equal to 106.625% of the principal amount plus, in each case, accrued and unpaid interest on the 2026 Notes being redeemed to the date of redemption. The 2026 Senior Secured Notes are:
The 2026 Senior Unsecured Notes are:
The 2026 Notes are guaranteed by the same HSS subsidiary guarantors that currently guarantee the 2019 Senior Secured Notes and the 2021 Senior Unsecured Notes. Subject to certain exceptions, the 2016 Indentures contain restrictive covenants that, among other things, impose limitations on HSS’ ability and, in certain instances, the ability of certain of HSS’ subsidiaries to:
In the event of a Change of Control, as defined in the 2016 Indentures, HSS would be required to make an offer to repurchase all or any part of a holder’s 2026 Notes at a purchase price equal to 101.0% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of repurchase. The 2016 Indentures provide for customary events of default, including, among other things, nonpayment, breach of the covenants in the 2016 Indentures, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. If any event of default occurs and is continuing, the trustee or the holders of at least 25% in principal amount of the applicable then outstanding 2026 Notes may declare all the applicable 2026 Notes to be due and payable immediately, together with any accrued and unpaid interest. As discussed above, HSS and certain of its subsidiaries have granted a first priority security interest in substantially all of their assets, subject to certain exceptions and permitted liens, to secure HSS’ obligations under the 2019 Senior Secured Notes and the 2026 Senior Secured Notes. Under the terms of a registration rights agreement, HSS has agreed to register notes having substantially identical terms as the 2026 Notes with the SEC as part of an offer to exchange freely tradable exchange notes for the 2026 Notes. |
Income Taxes |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant volatility due to several factors, including income and losses from investments for which we have a full valuation allowance, changes in tax laws and relative changes in unrecognized tax benefits. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower. Income tax expense was approximately $75.1 million and $65.8 million for the nine months ended September 30, 2016 and 2015, respectively. Our estimated effective income tax rate was 34.6% and 43.1% for the nine months ended September 30, 2016 and 2015, respectively. The variations in our current year effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2016 were primarily due to research and experimentation credits, partially offset by various permanent tax differences. The variations in our effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2015 were primarily due to the increase in our valuation allowance associated with certain foreign losses and realized and unrealized losses that are capital in nature, partially offset by research and experimentation tax credits. |
Stock-Based Compensation |
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Stock-Based Compensation | Stock-Based Compensation We maintain stock incentive plans to attract and retain officers, directors and key employees. Stock awards under these plans include both performance based and non-performance based stock incentives. We granted stock options and other incentive awards to our employees and nonemployee directors to acquire 137,470 shares and 27,990 shares of our Class A common stock for the three months ended September 30, 2016 and 2015, respectively, and 722,350 shares and 911,970 shares of our Class A common stock for the nine months ended September 30, 2016 and 2015, respectively. In 2015, we granted 100,000 restricted stock units (“RSUs”). The RSUs vested based on the attainment of certain quarterly company performance criteria for the second, third and fourth quarters of 2015. In 2015, 66,666 of the RSUs vested and in February 2016 the remaining 33,334 RSUs vested. Total non-cash, stock-based compensation expense for all of our employees is shown in the following table for the three and nine months ended September 30, 2016 and 2015 and was assigned to the same expense categories as the base compensation for such employees:
As of September 30, 2016, total unrecognized stock-based compensation cost, net of estimated forfeitures, related to our unvested stock awards was $29.7 million. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Commitments As of September 30, 2016, our satellite-related obligations were approximately $786.0 million. Our satellite-related obligations primarily include payments pursuant to agreements for the construction of the EchoStar XIX, EchoStar XXI, EchoStar XXIII, and EchoStar 105/SES-11 satellites; payments pursuant to launch services contracts and regulatory authorizations; executory costs for our capital lease satellites; costs under satellite service agreements; and in-orbit incentives relating to certain satellites, as well as commitments for long-term satellite operating leases and satellite service arrangements. Contingencies Patents and Intellectual Property Many entities, including some of our competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer. We may not be aware of all patents and other intellectual property rights that our products and services may potentially infringe. Damages in patent infringement cases can be substantial, and in certain circumstances can be trebled. Further, we cannot estimate the extent to which we may be required in the future to obtain licenses with respect to intellectual property rights held by others and the availability and cost of any such licenses. Various parties have asserted patent and other intellectual property rights with respect to components within our direct broadcast satellite (“DBS”) products and services. We cannot be certain that these persons do not own the rights they claim, that these rights are not valid or that our products and services do not infringe on these rights. Further, we cannot be certain that we would be able to obtain licenses from these persons on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products and services to avoid infringement. Separation Agreement In connection with the Spin-off, we entered into a separation agreement with DISH Network that provides, among other things, for the division of certain liabilities, including liabilities resulting from litigation. Under the terms of the separation agreement, we have assumed certain liabilities that relate to our business, including certain designated liabilities for acts or omissions that occurred prior to the Spin-off. Certain specific provisions govern intellectual property related claims under which, generally, we will only be liable for our acts or omissions following the Spin-off and DISH Network will indemnify us for any liabilities or damages resulting from intellectual property claims relating to the period prior to the Spin-off, as well as DISH Network’s acts or omissions following the Spin-off. Litigation We are involved in a number of legal proceedings (including those described below) concerning matters arising in connection with the conduct of our business activities. Many of these proceedings are at preliminary stages and/or seek an indeterminate amount of damages. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss or an additional loss may have been incurred and to determine if accruals are appropriate. We record an accrual for litigation and other loss contingencies when we determine that a loss is probable and the amount of the loss can be reasonably estimated. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. There can be no assurance that legal proceedings against us will be resolved in amounts that will not differ from the amounts of our recorded accruals. Legal fees and other costs of defending litigation are charged to expense as incurred. For certain cases described below, management is unable to predict with any degree of certainty the outcome or provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii) damages have not been sought or specified; (iii) damages are unsupported, indeterminate and/or exaggerated in management’s opinion; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties are involved (as with many patent-related cases). For these cases, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material adverse effect on our financial condition, operating results or cash flows, though there is no assurance that the resolution and outcomes of these proceedings, individually or in the aggregate, will not be material to our financial condition, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period. We intend to vigorously defend the proceedings against us. In the event that a court ultimately rules against us, we may be subject to adverse consequences, including, without limitation, substantial damages, which may include treble damages, fines, penalties, compensatory damages and/or other equitable or injunctive relief that could require us to materially modify our business operations or certain products or services that we offer to our consumers. In addition, adverse decisions against DISH Network in the proceedings described below could decrease the number of products and components we sell to DISH Network, which could have a material adverse effect on our business operations and our financial condition, results of operation and cash flows. California Institute of Technology On October 1, 2013, the California Institute of Technology (“Caltech”) filed suit against two of our subsidiaries, Hughes Communications, Inc. and Hughes Network Systems, LLC (“HNS”), as well as against DISH Network, DISH Network L.L.C., and dishNET Satellite Broadband L.L.C., in the United States District Court for the Central District of California alleging infringement of United States Patent Nos. 7,116,710; 7,421,032; 7,916,781; and 8,284,833, each of which is entitled “Serial Concatenation of Interleaved Convolutional Codes forming Turbo-Like Codes.” Caltech asserted that encoding data as specified by the DVB-S2 standard infringes each of the asserted patents. In the operative Amended Complaint, served on March 6, 2014, Caltech claims that the HopperTM set-top box that we design and sell to DISH Network, as well as certain of our Hughes segment’s satellite broadband products and services, infringe the asserted patents by implementing the DVB-S2 standard. On February 17, 2015, Caltech filed a second complaint in the same district against the same defendants alleging that HNS’ Gen4 HT1000 and HT1100 products infringe the same patents asserted in the first case. On May 25, 2016, we, the DISH Network defendants and Caltech entered into a settlement agreement pursuant to which the Court dismissed with prejudice all of the claims in these actions on May 31, 2016. ClearPlay, Inc. On March 13, 2014, ClearPlay, Inc. (“ClearPlay”) filed a complaint against EchoStar Corporation and our subsidiary, EchoStar Technologies L.L.C., as well as against DISH Network and DISH Network L.L.C. in the United States District Court for the District of Utah. The complaint alleges infringement of United States Patent Nos. 6,898,799, entitled “Multimedia Content Navigation and Playback”; 7,526,784, entitled “Delivery of Navigation Data for Playback of Audio and Video Content”; 7,543,318, entitled “Delivery of Navigation Data for Playback of Audio and Video Content”; 7,577,970, entitled “Multimedia Content Navigation and Playback”; and 8,117,282, entitled “Media Player Configured to Receive Playback Filters From Alternative Storage Mediums.” ClearPlay alleges that the AutoHopTM feature of the HopperTM set-top box infringes the asserted patents. On February 11, 2015, the Court stayed the case pending various third-party challenges before the United States Patent and Trademark Office regarding the validity of certain of the patents ClearPlay asserted in the case. In those third-party challenges, the United States Patent and Trademark Office found that all claims of the 282 patent are unpatentable and that certain claims of the 784 patent and 318 patent are unpatentable. ClearPlay appealed as to the 784 and 318 patents, and on August 23, 2016, the United States Court of Appeals for the Federal Circuit affirmed the findings of the United States Patent and Trademark Office. CRFD Research, Inc. (a subsidiary of Marathon Patent Group, Inc.) On January 17, 2014, CRFD Research, Inc. (“CRFD”) filed a complaint against EchoStar Corporation and our subsidiary, EchoStar Technologies L.L.C., as well as against DISH Network, DISH DBS Corporation and DISH Network L.L.C., in United States District Court for the District of Delaware, alleging infringement of United States Patent No. 7,191,233 (the “233 patent”). The 233 patent is entitled “System for Automated, Mid-Session, User-Directed, Device-to-Device Session Transfer System,” and relates to transferring an ongoing software session from one device to another. CRFD alleges that certain of our set-top boxes infringe the 233 patent. On the same day, CRFD filed patent infringement complaints against AT&T Inc.; Comcast Corp.; DirecTV; Time Warner Cable Inc.; Cox Communications, Inc.; Level 3 Communications, Inc.; Akamai Technologies, Inc.; Cablevision Systems Corp. and Limelight Networks, Inc. On January 26, 2015, we and DISH Network filed a petition before the United States Patent and Trademark Office challenging the validity of certain claims of the 233 patent, which was subsequently instituted along with two third-party petitions also challenging the validity of certain claims of the 233 patent. On June 4, 2015, the litigation in the District Court was ordered stayed pending resolution of our petition before the United States Patent and Trademark Office, and on January 16, 2016, the United States Patent and Trademark Office held oral arguments on the merits of the petition. On June 1, 2016, the Patent and Trademark Office found that four of the challenged thirty claims were unpatentable. On July 5, 2016, CRFD filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. CRFD is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. Elbit On January 23, 2015, Elbit Systems Land and C4I LTD and Elbit Systems of America Ltd. (together referred to as “Elbit”) filed a complaint against our subsidiary HNS, as well as against Black Elk Energy Offshore Operations, LLC, Bluetide Communications, Inc. and Helm Hotels Group, in the United States District Court for the Eastern District of Texas, alleging infringement of United States Patent Nos. 6,240,073 (the “073 patent”) and 7,245,874 (“874 patent”). The 073 patent is entitled “Reverse Link for a Satellite Communication Network” and the 874 patent is entitled “Infrastructure for Telephony Network.” Elbit alleges that the 073 patent is infringed by broadband satellite systems that practice the Internet Protocol Over Satellite standard. Elbit alleges that the 874 patent is infringed by the manufacture and sale of broadband satellite systems that provide cellular backhaul service via connections to E1 or T1 interfaces at cellular backhaul base stations. On April 2, 2015, Elbit filed an amended complaint removing Helm Hotels Group as a defendant, but making similar allegations against a new defendant, Country Home Investments, Inc. On November 3 and 4, 2015, and January 22, 2016, the defendants filed petitions before the United States Patent and Trademark Office challenging the validity of the patents in suit, which the Patent and Trademark Office subsequently declined to institute. On April 13, 2016, the defendants answered Elbit’s complaint. Trial is scheduled to commence on July 31, 2017. The Hopper Litigation On May 24, 2012, DISH Network L.L.C., filed suit in the United States District Court for the Southern District of New York against American Broadcasting Companies, Inc. (“ABC”), CBS Corporation (“CBS”), Fox Entertainment Group, Inc., Fox Television Holdings, Inc., Fox Cable Network Services, L.L.C. (collectively, “Fox”) and NBCUniversal Media, LLC (“NBC”). The lawsuit sought a declaratory judgment that DISH Network L.L.C is not infringing any defendant’s copyright, or breaching any defendant’s retransmission consent agreement, by virtue of the PrimeTime AnytimeTM and AutoHopTM features of the HopperTM set-top boxes we design and sell to DISH Network. A consumer can use the PrimeTime Anytime feature at his or her option, to record certain primetime programs airing on ABC, CBS, Fox, and/or NBC up to every night, and to store those recordings for up to eight days. A consumer can use the AutoHop feature at his or her option, to watch certain recordings the subscriber made with our PrimeTime Anytime feature, commercial-free, if played back at a certain point after the show’s original airing. Later on May 24, 2012, (i) Fox Broadcasting Company, Twentieth Century Fox Film Corp. and Fox Television Holdings, Inc. filed a lawsuit against DISH Network and DISH Network L.L.C. (collectively, “DISH”) in the United States District Court for the Central District of California, alleging that the PrimeTime Anytime feature, the AutoHop feature, as well as DISH’s use of Slingbox unit’s placeshifting functionality infringe their copyrights and breach their retransmission consent agreements, (ii) NBC Studios LLC, Universal Network Television, LLC, Open 4Business Productions LLC and NBCUniversal Media, LLC filed a lawsuit against DISH in the United States District Court for the Central District of California, alleging that the PrimeTime Anytime feature and the AutoHop feature infringe their copyrights, and (iii) CBS Broadcasting Inc., CBS Studios Inc. and Survivor Productions LLC filed a lawsuit against DISH in the United States District Court for the Central District of California, alleging that the PrimeTime Anytime feature and the AutoHop feature infringe their copyrights. As a result of certain parties’ competing counterclaims and venue-related motions brought in both the New York and California actions, as described below, and certain networks filing various amended complaints, the claims proceeded in the following venues: (1) the copyright and contract claims regarding the ABC and CBS parties in New York; and (2) the copyright and contract claims regarding the Fox and NBC parties in California. California Actions. On August 17, 2012, the NBC plaintiffs filed a first amended complaint in their California action adding EchoStar Corporation and our subsidiary EchoStar Technologies L.L.C. to the NBC litigation, alleging various claims of copyright infringement. Pursuant to a settlement agreement between the parties, on June 16, 2016, the parties filed a stipulation to dismiss with prejudice the NBC action, which was granted on June 20, 2016. In addition, on February 21, 2013, the Fox plaintiffs filed a second motion for preliminary injunction against: (i) DISH Network, seeking to enjoin the Hopper TransfersTM feature in the second-generation Hopper set-top box, alleging breach of a retransmission consent agreement; and (ii) EchoStar Technologies L.L.C. and DISH Network, seeking to enjoin the Slingbox unit’s placeshifting functionality in the second-generation Hopper set-top box, alleging copyright infringement by both defendants, and breach of the earlier-mentioned retransmission consent agreement by DISH Network. On January 12, 2015, the Court entered an order ruling on the parties’ respective summary judgment motions, holding that: (a) the Slingbox unit’s placeshifting functionality and the PrimeTime Anytime, AutoHop and Hopper Transfers features do not violate copyright law; (b) certain quality assurance copies (which were discontinued in November 2012) did violate copyright law; and (c) the Slingbox unit’s placeshifting functionality, the Hopper Transfers feature and certain quality assurance copies breach DISH’s retransmission consent agreement with Fox. Pursuant to a settlement agreement between us, DISH Network and the Fox plaintiffs, on February 10, 2016, we, DISH Network and the Fox plaintiffs filed a stipulation to dismiss with prejudice all of our respective claims pending in the California Court. That motion was granted on February 11, 2016. New York Actions. On October 9, 2012, the ABC plaintiffs filed copyright counterclaims in the New York action against EchoStar Technologies, L.L.C., with the CBS plaintiffs filing similar copyright counterclaims in the New York action against EchoStar Technologies L.L.C. on October 12, 2012. Additionally, the CBS plaintiffs filed a counterclaim alleging that DISH Network fraudulently concealed the AutoHop feature when negotiating the renewal of its CBS retransmission consent agreement. Pursuant to a settlement between us and the ABC parties, during March 2014, the ABC parties withdrew their appeal to the United States Court of Appeals for the Second Circuit; we and the ABC parties filed a stipulation on March 4, 2014 to dismiss without prejudice all of our respective claims pending in the United States District Court for the Southern District of New York; and the ABC parties granted a covenant not to sue. The Court ordered such dismissal on March 6, 2014. Pursuant to a settlement between us and the CBS parties, on December 10, 2014, we and the CBS parties filed a stipulation to dismiss with prejudice all of our respective claims pending in the New York Court. The Court ordered such dismissal on December 10, 2014. These matters related to the Hopper litigation are now concluded. Michael Heskiaoff, Marc Langenohl, and Rafael Mann On July 10, 2015, Messrs. Michael Heskiaoff and Marc Langenohl, purportedly on behalf of themselves and all others similarly situated, filed suit against our subsidiary Sling Media, Inc. in the United States District Court for the Southern District of New York. The complaint alleges that Sling Media Inc.’s display of advertising to its customers violates a number of state statutes dealing with consumer deception. On September 25, 2015, the plaintiffs filed an amended complaint, and Mr. Rafael Mann, purportedly on behalf of himself and all others similarly situated, filed an additional complaint alleging similar causes of action. On November 16, 2015, the cases were consolidated. On August 12, 2016, the Court dismissed the consolidated case due to plaintiffs’ failure to state a claim. On September 12, 2016, the plaintiffs moved the Court for leave to file an amended complaint. Realtime Data LLC On May 8, 2015, Realtime Data LLC (“Realtime”) filed suit against EchoStar Corporation and our subsidiary HNS in the United States District Court for the Eastern District of Texas alleging infringement of United States Patent Nos. 7,378,992, entitled “Content Independent Data Compression Method and System”; 7,415,530, entitled “System and Methods for Accelerated Data Storage and Retrieval”; and 8,643,513, entitled “Data Compression System and Methods.” On September 14, 2015, Realtime amended its complaint, additionally alleging infringement of United States Patent No. 9,116,908, entitled “System and Methods for Accelerated Data Storage and Retrieval.” Realtime generally alleges that the asserted patents are infringed by certain HNS data compression products and services. Over April 29, 2016 and May 5, 2016, the defendants filed petitions before the United States Patent and Trademark Office challenging the validity of the asserted patents. The United States Patent and Trademark Office has instituted proceedings on each of those petitions. Realtime is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. Shareholder Derivative Litigation On December 5, 2012, Greg Jacobi, purporting to sue derivatively on behalf of EchoStar Corporation, filed suit (the “Jacobi Litigation”) against Charles W. Ergen, Michael T. Dugan, R. Stanton Dodge, Tom A. Ortolf, C. Michael Schroeder, Joseph P. Clayton, David K. Moskowitz, and EchoStar Corporation in the United States District Court for the District of Nevada. The complaint alleges that a March 2011 attempted grant of 1.5 million stock options to Charles Ergen breached defendants’ fiduciary duties, resulted in unjust enrichment, and constituted a waste of corporate assets. On December 18, 2012, Chester County Employees’ Retirement Fund, derivatively on behalf of EchoStar Corporation, filed a suit (the “Chester County Litigation”) against Charles W. Ergen, Michael T. Dugan, R. Stanton Dodge, Tom A. Ortolf, C. Michael Schroeder, Anthony M. Federico, Pradman P. Kaul, Joseph P. Clayton, and EchoStar Corporation in the United States District Court for the District of Colorado. The complaint similarly alleges that the March 2011 attempted grant of 1.5 million stock options to Charles Ergen breached defendants’ fiduciary duties, resulted in unjust enrichment, and constituted a waste of corporate assets. On February 22, 2013, the Chester County Litigation was transferred to the District of Nevada, and on April 3, 2013, the Chester County Litigation was consolidated into the Jacobi Litigation. Oral argument on a motion to dismiss the Jacobi Litigation was held February 21, 2014. On April 11, 2014, the Chester County Litigation was stayed pending resolution of the motion to dismiss. On March 30, 2015, the Court dismissed the Jacobi Litigation, with leave for Jacobi to amend his complaint by April 20, 2015. On April 20, 2015, Jacobi filed an amended complaint, which on June 12, 2015, we moved to dismiss. On March 17, 2016, the Court dismissed the amended Jacobi Litigation, and on July 25, 2016, Jacobi filed an appeal brief with the United States Court of Appeals for the Ninth Circuit. Our answering brief was filed on September 22, 2016. Of the attempted grant of 1.5 million options to Mr. Ergen in 2011, only 800,000 were validly granted and remain outstanding. Technology Development and Licensing, LLC On January 22, 2009, Technology Development and Licensing, LLC (“TDL”) filed suit against EchoStar Corporation and DISH Network in the United States District Court for the Northern District of Illinois alleging infringement of United States Patent No. Re. 35,952, which relates to certain favorite channel features. TDL is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. The case has been stayed since July 2009, pending two reexamination petitions before the United States Patent and Trademark Office, which concluded in August 2015 resulting in 42 out of the 53 claims of the 952 patent being invalidated. As a result, the case resumed in August 2015. A trial date has not been set. TQ Beta LLC On June 30, 2014, TQ Beta LLC (“TQ Beta”) filed suit against DISH Network, DISH DBS Corporation, DISH Network L.L.C., as well as EchoStar Corporation and our subsidiaries, EchoStar Technologies, L.L.C, HSS, and Sling Media, Inc., in the United States District Court for the District of Delaware, alleging infringement of United States Patent No. 7,203,456 (the “456 patent”), which is entitled “Method and Apparatus for Time and Space Domain Shifting of Broadcast Signals.” TQ Beta alleges that the Hopper, Hopper with Sling, ViP 722 and ViP 722k DVR devices, as well as the DISH Anywhere service and DISH Anywhere mobile application, infringe the 456 patent, but has not specified the amount of damages that it seeks. TQ Beta is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. During August 2015, EchoStar Corporation and DISH Network L.L.C. filed petitions before the United States Patent and Trademark Office challenging the validity of certain claims of the 456 patent, and in February 2016, the United States Patent and Trademark Office agreed to institute proceedings on our petitions. On February 25, 2016, the case was stayed pending resolution of these proceedings before the United States Patent and Trademark Office, and the Court vacated all pending court dates and deadlines. TQ Delta LLC On July 17, 2015, TQ Delta, LLC (“TQ Delta”) filed a complaint against DISH Network, DISH DBS Corporation and DISH Network L.L.C. in the United States District Court for the District of Delaware. On May 16, 2016, TQ Delta filed a second amended complaint that added EchoStar Corporation and EchoStar Technologies L.L.C. as defendants. That complaint alleges infringement of United States Patent No. 6,961,369 (the “369 patent”), which is entitled “System and Method for Scrambling the Phase of the Carriers in a Multicarrier Communications System”; United States Patent No. 8,718,158 (the “158 patent”), which is entitled “System and Method for Scrambling the Phase of the Carriers in a Multicarrier Communications System”; United States Patent No. 9,014,243 (the “243 patent”), which is entitled “System and Method for Scrambling Using a Bit Scrambler and a Phase Scrambler”; United States Patent No.7,835,430 (the “430 patent”), which is entitled “Multicarrier Modulation Messaging for Frequency Domain Received Idle Channel Noise Information”; United States Patent No. 8,238,412 (the “412 patent”), which is entitled “Multicarrier Modulation Messaging for Power Level per Subchannel Information”; United States Patent No. 8,432,956 (the “956 patent”), which is entitled “Multicarrier Modulation Messaging for Power Level per Subchannel Information”; and United States Patent No. 8,611,404 (the “404 patent”), which is entitled “Multicarrier Transmission System with Low Power Sleep Mode and Rapid-On Capability”; and United States Patent No. 9,094,268 (the “268 patent”), which is entitled “Multicarrier Transmission System with Low Power Sleep Mode and Rapid-On Capability.” TQ Delta alleges that satellite TV services, Internet services, set-top boxes, gateways, routers, modems, adapters and networks that operate in accordance with one or more Multimedia over Coax Alliance Standards infringe the asserted patents. TQ Delta has filed actions in the same court alleging infringement of the same patents against Comcast Corp., Cox Communications, Inc., DirecTV, Time Warner Cable Inc. and Verizon Communications, Inc. TQ Delta is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. Trial has been set for November 13, 2017. On July 14, 2016, TQ Delta stipulated to dismiss with prejudice all claims related to the 369 patent and the 956 patent. On July 20, 2016, DISH Network filed petitions with the United States Patent and Trademark Office challenging the validity of all of the patent claims of the 404 patent and 268 patent asserted against it, and other parties have also filed petitions with the United States Patent and Trademark Office challenging the validity of all of the patent claims asserted in the action. Two-Way Media Ltd. On February 17, 2016, Two-Way Media Ltd. (“TWM”) filed a complaint against EchoStar Corporation and our subsidiaries, EchoStar Technologies L.L.C., EchoStar Satellite Services L.L.C., and Sling Media, Inc., as well as against DISH Network Corporation, DISH DBS Corporation, DISH Network L.L.C., DISH Network Service L.L.C., Sling TV Holding L.L.C., Sling TV L.L.C., and Sling TV Purchasing L.L.C. TWM brought the suit in the United States District Court for the District of Colorado, alleging infringement of United States Patent Nos. 5,778,187; 5,983,005; 6,434,622; and 7,266,686, each entitled “Multicasting Method and Apparatus”; and 9,124,607, entitled “Methods and Systems for Playing Media.” TWM alleges that the Sling TV, Sling International, DISH Anywhere, and DISHWorld services, as well as the Slingbox units and DISH DVRs incorporating Slingbox technology, infringe the asserted patents. TWM is an entity that seeks to license a patent portfolio without itself practicing any of the claims recited therein. Other In addition to the above actions, we are subject to various other legal proceedings and claims, which arise in the ordinary course of our business. As part of our ongoing operations, the Company is subject to various inspections, audits, inquiries, investigations and similar actions by third parties, as well as by governmental/regulatory authorities responsible for enforcing the laws and regulations to which the Company may be subject. Further, under the federal False Claims Act, private parties have the right to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the federal government. Some states have adopted similar state whistleblower and false claims provisions. In addition, the Company from time to time receives inquiries from federal, state and foreign agencies regarding compliance with various laws and regulations. In our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial position, results of operations or cash flows, though the resolutions and outcomes, individually or in the aggregate, could be material to our financial position, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period. The Company indemnifies its directors, officers and employees for certain liabilities that might arise from the performance of their responsibilities for the Company. Additionally, in the normal course of its business, the Company enters into contracts pursuant to which the Company may make a variety of representations and warranties and indemnify the counterparty for certain losses. The Company’s possible exposure under these arrangements cannot be reasonably estimated as this involves the resolution of claims made, or future claims that may be made, against the Company or its officers, directors or employees, the outcomes of which are unknown and not currently predictable or estimable. |
Segment Reporting |
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Segment Reporting | Segment Reporting Operating segments are business components of an enterprise for which separate financial information is available and regularly evaluated by the chief operating decision maker (“CODM”), who for EchoStar is the Company’s Chief Executive Officer. Under this definition, we operate in three primary business segments, Hughes, EchoStar Technologies and EchoStar Satellite Services as described in Note 1 of these condensed consolidated financial statements. The primary measure of segment profitability that is reported regularly to our CODM is earnings before interest, taxes, depreciation and amortization, or EBITDA. Our segment operating results do not include real estate and other activities, costs incurred in certain satellite development programs and other business development activities, expenses of various corporate departments and our centralized treasury operations, including income from our investment portfolio and interest expense on our debt. These activities are accounted for in the “All Other and Eliminations” column in the table below. Total assets by segment have not been reported herein because the information is not provided to our CODM on a regular basis. The Hughes Retail Group is included in our Hughes segment and our CODM reviews separate HRG financial information only to the extent such information is included in our periodic filings with the SEC. Therefore, we do not consider HRG to be a separate operating segment. Transactions between segments were not significant for the three and nine months ended September 30, 2016 or 2015. The following table presents revenue, EBITDA, and capital expenditures for each of our operating segments.
The following table reconciles total consolidated EBITDA to reported “Income before income taxes” in our condensed consolidated statements of operations and comprehensive income (loss):
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Related Party Transactions | Related Party Transactions DISH Network Following the Spin-off, we and DISH Network have operated as separate publicly-traded companies. However, pursuant to the Satellite and Tracking Stock Transaction, described in Note 4 and below, DISH Network owns Hughes Retail Preferred Tracking Stock representing an aggregate 80.0% economic interest in the residential retail satellite broadband business of our Hughes segment. The tracking stock is an equity security and the rights of DISH Network, as the holder of the tracking stock, in our assets are subject to the claims of our creditors. In addition, a substantial majority of the voting power of the shares of EchoStar and DISH Network is owned beneficially by Charles W. Ergen, our Chairman, and by certain trusts established by Mr. Ergen for the benefit of his family. In connection with and following the Spin-off, we and DISH Network have entered into certain agreements pursuant to which we obtain certain products, services and rights from DISH Network; DISH Network obtains certain products, services and rights from us; and we and DISH Network have indemnified each other against certain liabilities arising from our respective businesses. We also may enter into additional agreements with DISH Network in the future. Generally, the amounts DISH Network pays for products and services provided under the agreements are based on our cost plus a fixed margin (unless noted differently below or in our most recent Annual Report on Form 10-K), which varies depending on the nature of the products and services provided. The following is a summary of the terms of our principal agreements with DISH Network that may have an impact on our financial condition and results of operations. “Equipment revenue — DISH Network” Receiver Agreement. Effective January 2012, we and DISH Network entered into a receiver agreement (the “2012 Receiver Agreement”), pursuant to which DISH Network has the right, but not the obligation, to purchase digital set-top boxes, related accessories, and other equipment from us for the period from January 2012 through December 2014. The 2012 Receiver Agreement replaced the receiver agreement we entered into with DISH Network in connection with the Spin-off. The 2012 Receiver Agreement allows DISH Network to purchase digital set-top boxes, related accessories, and other equipment from us either: (i) at cost (decreasing as we reduce costs and increasing as costs increase) plus a dollar mark-up which will depend upon the cost of the product subject to a collar on our mark-up; or (ii) at cost plus a fixed margin, which will depend on the nature of the equipment purchased. Under the 2012 Receiver Agreement, our margins will be increased if we are able to reduce the costs of our digital set-top boxes and our margins will be reduced if these costs increase. We provide DISH Network with standard manufacturer warranties for the goods sold under the 2012 Receiver Agreement. Additionally, the 2012 Receiver Agreement includes an indemnification provision, whereby the parties indemnify each other for certain intellectual property matters. DISH Network is able to terminate the 2012 Receiver Agreement for any reason upon at least 60 days’ notice to us. We are able to terminate the 2012 Receiver Agreement if certain entities acquire DISH Network. In May 2014, we received DISH Network’s notice to extend the 2012 Receiver Agreement for one year through December 2015, and in November 2015, we amended the 2012 Receiver Agreement with DISH Network to extend the term of the 2012 Receiver Agreement for one year through December 2016. In November 2016, we and DISH Network amended this agreement to extend its term for one year through December 2017. “Services and other revenue — DISH Network” Broadcast Agreement. Effective January 2012, we and DISH Network entered into a broadcast agreement (the “2012 Broadcast Agreement”) pursuant to which we provide certain broadcast services to DISH Network, including teleport services such as transmission and downlinking, channel origination services, and channel management services, for the period from January 2012 through December 2016. In November 2016, we and DISH Network amended the 2012 Broadcast Agreement to extend the term for one year through December 2017. The 2012 Broadcast Agreement replaced the broadcast agreement that we entered into with DISH Network in connection with the Spin-off. The fees for the services provided under the 2012 Broadcast Agreement are calculated at either: (a) our cost of providing the relevant service plus a fixed dollar fee, which is subject to certain adjustments; or (b) our cost of providing the relevant service plus a fixed margin, which depends on the nature of the services provided. DISH Network has the ability to terminate channel origination services and channel management services for any reason and without any liability upon at least 60 days’ notice to us. If DISH Network terminates the teleport services provided under the 2012 Broadcast Agreement for a reason other than our breach, DISH Network generally is obligated to reimburse us for any direct costs we incur related to any such termination that we cannot reasonably mitigate. Broadcast Agreement for Certain Sports Related Programming. In May 2010, we and DISH Network entered into a broadcast agreement pursuant to which we provide certain broadcast services to DISH Network in connection with its carriage of certain sports related programming. The term of this agreement is ten years. If DISH Network terminates this agreement for a reason other than our breach, DISH Network generally is obligated to reimburse us for any direct costs we incur related to any such termination that we cannot reasonably mitigate. The fees for the broadcast services provided under this agreement depend, among other things, upon the cost to develop and provide such services. RUS Implementation Agreement. In September 2010, DISH Broadband L.L.C. (“DISH Broadband”), DISH Network’s indirect, wholly-owned subsidiary, was selected by the Rural Utilities Service (“RUS”) of the United States Department of Agriculture to receive up to approximately $14.1 million in broadband stimulus grant funds (the “Grant Funds”). Effective November 2011, HNS and DISH Broadband entered into a RUS Implementation Agreement (the “RUS Agreement”) pursuant to which HNS provided certain portions of the equipment and broadband service used to implement DISH Broadband’s RUS program. While the RUS Agreement expired in June 2013 when the Grant Funds were exhausted, HNS is required to continue providing services to DISH Broadband’s customers activated prior to the expiration of the RUS Agreement in accordance with the terms and conditions of the RUS Agreement. Satellite Services Provided to DISH Network. Since the Spin-off, we have entered into certain satellite service agreements pursuant to which DISH Network receives satellite services on certain satellites owned or leased by us. The fees for the services provided under these satellite service agreements depend, among other things, upon the orbital location of the applicable satellite, the number of transponders that are providing services on the applicable satellite, and the length of the service arrangements. The terms of each service arrangement is set forth below: EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV. As part of the Satellite and Tracking Stock Transaction discussed in Note 4, in March 2014, we began providing certain satellite services to DISH Network on the EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV satellites. The term of each satellite services agreement generally terminates upon the earlier of: (i) the end of life of the satellite; (ii) the date the satellite fails; or (iii) a certain date, which depends upon, among other things, the estimated useful life of the satellite. DISH Network generally has the option to renew each satellite service agreement on a year-to-year basis through the end of the respective satellite’s life. There can be no assurance that any options to renew such agreements will be exercised. DISH Network elected not to renew the satellite services agreement relative to the EchoStar I satellite. The agreement for the EchoStar I satellite expired pursuant to its terms effective November 2015. In December 2015, DISH Network renewed the satellite services agreement relative to the EchoStar VII satellite for one year to June 2017. EchoStar VIII. In May 2013, DISH Network began receiving satellite services from us on the EchoStar VIII satellite as an in-orbit spare. Effective March 2014, this satellite services arrangement converted to a month-to-month service agreement with both parties having the right to terminate upon 30 days’ notice. The agreement terminated in accordance with its terms effective November 2015. EchoStar IX. Effective January 2008, DISH Network began receiving satellite services from us on the EchoStar IX satellite. Subject to availability, DISH Network generally has the right to continue to receive satellite services from us on the EchoStar IX satellite on a month-to-month basis. EchoStar XII. DISH Network receives satellite services from us on the EchoStar XII satellite. The term of the satellite services agreement terminates upon the earlier of: (i) the end of life of the satellite; (ii) the date the satellite fails or the date the transponder(s) on which the service was being provided under the agreement fails; or (iii) September 2017. DISH Network generally has the option to renew the agreement on a year-to-year basis through the end of the satellite’s life. There can be no assurance that any options to renew this agreement will be exercised. EchoStar XVI. In December 2009, we entered into an initial ten-year transponder service agreement with DISH Network, pursuant to which DISH Network has received satellite services from us on the EchoStar XVI satellite since January 2013. Effective December 2012, we and DISH Network amended the transponder service agreement to, among other things, change the initial term to generally expire upon the earlier of: (i) the end-of-life or replacement of the satellite; (ii) the date the satellite fails; (iii) the date the transponder(s) on which service is being provided under the agreement fails; or (iv) four years following the actual service commencement date. In July 2016, we and DISH Network further amended the transponder service agreement to, among other things, extend the initial term by one additional year and to reduce the term of the first renewal option by one year. Prior to expiration of the initial term, we, upon certain conditions, and DISH Network have the option to renew for an additional five-year period. If either we or DISH Network exercise our respective five-year renewal options, DISH Network has the option to renew for an additional five-year period prior to expiration of the then-current term. There can be no assurance that any option to renew this agreement will be exercised. In the event that we or DISH Network does not exercise the first five-year renewal option or DISH Network does not exercise the second five-year renewal option, DISH Network has the option to purchase the EchoStar XVI satellite for a certain price. If DISH Network does not elect to purchase the EchoStar XVI satellite at that time, we may sell the EchoStar XVI satellite to a third party and DISH Network is required to pay us a certain amount in the event we are not able to sell the EchoStar XVI satellite for more than a certain amount. Nimiq 5 Agreement. In September 2009, we entered into a fifteen-year satellite service agreement with Telesat Canada (“Telesat”) to receive service on all 32 DBS transponders on the Nimiq 5 satellite at the 72.7 degree west longitude orbital location (the “Telesat Transponder Agreement”). In September 2009, we also entered into a satellite service agreement (the “DISH Nimiq 5 Agreement”) with DISH Network, pursuant to which DISH Network receives satellite services from us on all 32 of the DBS transponders covered by the Telesat Transponder Agreement. Under the terms of the DISH Nimiq 5 Agreement, DISH Network makes certain monthly payments to us that commenced in September 2009, when the Nimiq 5 satellite was placed into service, and continue through the service term. Unless earlier terminated under the terms and conditions of the DISH Nimiq 5 Agreement, the service term will expire ten years following the date the Nimiq 5 satellite was placed into service. Upon expiration of the initial term, DISH Network has the option to renew the DISH Nimiq 5 Agreement on a year-to-year basis through the end of life of the Nimiq 5 satellite. Upon in-orbit failure or end of life of the Nimiq 5 satellite, and in certain other circumstances, DISH Network has certain rights to receive service from us on a replacement satellite. There can be no assurance that any options to renew the DISH Nimiq 5 Agreement will be exercised or that DISH Network will exercise its option to receive service on a replacement satellite. QuetzSat-1 Agreement. In November 2008, we entered into a ten-year satellite service agreement with SES Latin America, which provides, among other things, for the provision by SES Latin America to us of service on 32 DBS transponders on the QuetzSat-1 satellite. Concurrently, in 2008, we entered into a transponder service agreement with DISH Network, pursuant to which DISH Network receives satellite services on 24 of the DBS transponders on the QuetzSat-1 satellite. The QuetzSat-1 satellite was launched in September 2011 and was placed into service in November 2011 at the 67.1 degree west longitude orbital location. In February 2013, we and DISH Network entered into an agreement pursuant to which we receive certain satellite services from DISH Network on five DBS transponders on the QuetzSat-1 satellite. In January 2013, the QuetzSat-1 satellite was moved to the 77 degree west longitude orbital location and DISH Network commenced commercial operations at such location in February 2013. Under the terms of our contractual arrangements with DISH Network, we began to provide service to DISH Network on the QuetzSat-1 satellite in February 2013 and will continue to provide service through the remainder of the service term. Unless extended or earlier terminated under the terms and conditions of our agreement with DISH Network for the QuetzSat-1 satellite, the initial service term will expire in November 2021. Upon expiration of the initial service term, DISH Network has the option to renew the agreement for the QuetzSat-1 satellite on a year-to-year basis through the end of life of the QuetzSat-1 satellite. Upon an in-orbit failure or end of life of the QuetzSat-1 satellite, and in certain other circumstances, DISH Network has certain rights to receive service from us on a replacement satellite. There can be no assurance that any options to renew this agreement will be exercised or that DISH Network will exercise its option to receive service on a replacement satellite. 103 Degree Orbital Location/SES-3. In May 2012, we entered into a spectrum development agreement (the “103 Spectrum Development Agreement”) with Ciel Satellite Holdings Inc. (“Ciel”) to develop certain spectrum rights at the 103 degree west longitude orbital location (the “103 Spectrum Rights”). In June 2013, we and DISH Network entered into a spectrum development agreement (the “DISH 103 Spectrum Development Agreement”) pursuant to which DISH Network may use and develop the 103 Spectrum Rights. Unless earlier terminated under the terms and conditions of the DISH 103 Spectrum Development Agreement, the term generally will continue for the duration of the 103 Spectrum Rights. In connection with the 103 Spectrum Development Agreement, in May 2012, we also entered into a ten-year service agreement with Ciel pursuant to which we receive certain satellite services from Ciel on the SES-3 satellite at the 103 degree orbital location. In June 2013, we and DISH Network entered into an agreement pursuant to which DISH Network receives certain satellite services from us on the SES-3 satellite (the “DISH 103 Service Agreement”). Under the terms of the DISH 103 Service Agreement, DISH Network makes certain monthly payments to us through the service term. Unless earlier terminated under the terms and conditions of the DISH 103 Service Agreement, the initial service term will expire on the earlier of: (i) the date the SES-3 satellite fails; (ii) the date the transponder(s) on which service was being provided under the agreement fails; or (iii) June 2023. Upon in-orbit failure or end of life of the SES-3 satellite, and in certain other circumstances, DISH Network has certain rights to receive service from us on a replacement satellite. There can be no assurance that DISH Network will exercise its option to receive service on a replacement satellite. Satellite and Tracking Stock Transaction. In February 2014, we entered into agreements with DISH Network to implement a transaction pursuant to which, among other things: (i) in March 2014, EchoStar and HSS issued shares of the Tracking Stock to DISH Network in exchange for five satellites owned by DISH Network (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV) (including assumption of related in-orbit incentive obligations) and approximately $11.4 million in cash; and (ii) in March 2014, DISH Network began receiving certain satellite services on these five satellites from us. See Note 4 herein and in our most recent Form 10-K for further information. TT&C Agreement. Effective January 2012, we entered into a telemetry, tracking and control (“TT&C”) agreement pursuant to which we provide TT&C services to DISH Network for a period ending in December 2016 (the “2012 TT&C Agreement”). In November 2016, we and DISH Network amended the 2012 TT&C Agreement to extend the term for one year through December 2017. The 2012 TT&C Agreement replaced the TT&C agreement we entered into with DISH Network in connection with the Spin-off. The fees for services provided under the 2012 TT&C Agreement are calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which will vary depending on the nature of the services provided. DISH Network is able to terminate the 2012 TT&C Agreement for any reason upon 60 days’ notice. In connection with the Satellite and Tracking Stock Transaction, in February 2014, we amended the TT&C Agreement to cease the provision of TT&C services to DISH Network for the EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV satellites. Effective March 2014, we provide TT&C services for the D-1 and EchoStar XV satellites; however, for the period that we received satellite services on the EchoStar XV satellite from DISH Network, we waived the fees for the TT&C services on the EchoStar XV satellite. Effective August 2016, we provide TT&C services to DISH Network for the EchoStar XVIII satellite. Real Estate Lease Agreements. We have entered into lease agreements pursuant to which DISH Network leases certain real estate from us. The rent on a per square foot basis for each of the leases is comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease, and DISH Network is responsible for its portion of the taxes, insurance, utilities and maintenance of the premises. The term of each of the leases is set forth below: Inverness Lease Agreement. The lease for certain space at 90 Inverness Circle East in Englewood, Colorado is for a period ending in December 2016. This agreement can be terminated by either party upon six months’ prior notice. This agreement may be extended by mutual consent, in which case this agreement will be converted to a month-to-month lease agreement. Upon such extension, both parties have the right to terminate this agreement upon 30 days’ notice. In February 2016, DISH Network terminated this lease effective in August 2016. Meridian Lease Agreement. The lease for all of 9601 S. Meridian Blvd. in Englewood, Colorado is for a period ending in December 2016. This agreement may be extended by mutual consent, in which case this agreement will be converted to a month-to-month lease agreement. Upon extension, both parties have the right to terminate this agreement upon 30 days’ notice. Santa Fe Lease Agreement. The lease for all of 5701 S. Santa Fe Dr. in Littleton, Colorado is for a period ending in December 2016. This agreement may be extended by mutual consent, in which case this agreement will be converted to a month-to-month lease agreement. Upon extension, both parties have the right to terminate this agreement upon 30 days’ notice. Atlanta Sublease Agreement. The sublease for certain space at 211 Perimeter Center in Atlanta, Georgia is for a period that ended in October 2016. Gilbert Lease Agreement. The original lease for certain space at 801 N. DISH Dr. in Gilbert, Arizona was a month to month lease and could be terminated by either party upon 30 days’ prior notice. The original lease was terminated in May 2014. Effective August 2014, we began leasing this space to DISH Network under a new lease for a period ending in July 2016. Effective November 2016, we and DISH Network amended this lease to extend the term for one year through July 2017. Cheyenne Lease Agreement. The lease for certain space at 530 EchoStar Drive in Cheyenne, Wyoming is for a period ending in December 2031. This agreement may be extended by mutual consent, in which case this agreement will be converted to a month-to-month lease agreement. Upon extension, both parties have the right to terminate this agreement upon 30 days’ notice. Product Support Agreement. In connection with the Spin-off, we entered into a product support agreement pursuant to which DISH Network has the right, but not the obligation, to receive product support from us (including certain engineering and technical support services) for all set-top boxes and related accessories that we have previously sold and in the future may sell to DISH Network. The fees for the services provided under the product support agreement are calculated at cost plus a fixed margin, which varies depending on the nature of the services provided. The term of the product support agreement is the economic life of such set-top boxes and related accessories, unless terminated earlier. DISH Network may terminate the product support agreement for any reason upon at least 60 days’ notice. In the event of an early termination of this agreement, DISH Network is entitled to a refund of any unearned fees paid to us for the services. DISHOnline.com Services Agreement. Effective January 2010, DISH Network entered into a two-year agreement with us pursuant to which DISH Network receives certain services associated with an online video portal. The fees for the services provided under this services agreement depend, among other things, upon the cost to develop and operate such services. DISH Network has the option to renew this agreement for successive one year terms and the agreement may be terminated by DISH Network for any reason upon at least 120 days’ notice to us. In October 2014, DISH Network exercised its right to renew this agreement for a one-year period ending in December 2015, and in November 2015, DISH Network exercised its right to renew this agreement for an additional one-year period ending in December 2016. DISH Remote Access Services Agreement. Effective February 2010, we entered into an agreement with DISH Network pursuant to which DISH Network receives, among other things, certain remote digital video recorder (“DVR”) management services. The fees for the services provided under this services agreement depend, among other things, upon the cost to develop and operate such services. This agreement had an initial term of five years with automatic renewal for successive one year terms. This agreement will automatically renew in February 2017 for an additional one-year period until February 2018. The agreement may be terminated by DISH Network for any reason upon at least 120 days’ notice to us. SlingService Services Agreement. Effective February 2010, we entered into an agreement with DISH Network pursuant to which DISH Network receives certain services related to placeshifting. The fees for the services provided under this services agreement depend, among other things, upon the cost to develop and operate such services. This agreement had an initial term of five years with automatic renewal for successive one year terms. This agreement will automatically renew in February 2017 for an additional one-year period until February 2018. The agreement may be terminated by DISH Network for any reason upon at least 120 days’ notice to us. TerreStar Agreement. In March 2012, DISH Network completed its acquisition of substantially all the assets of TerreStar Networks Inc. (“TerreStar”). Prior to DISH Network’s acquisition of substantially all the assets of TerreStar and our completion of the Hughes Acquisition, TerreStar and HNS entered into various agreements pursuant to which our Hughes segment provides, among other things, warranty, operations and maintenance and hosting services for TerreStar’s ground-based communications equipment. TerreStar generally has the right to continue to receive warranty services from us for one of our products on a month-to-month basis. The provision of warranty services for our other product will automatically renew in March 2017 for an additional one-year period until March 2018, unless terminated by TerreStar upon at least 60 days’ written notice to us prior to the end of the term. The provision of operations and maintenance services will automatically renew in April 2017 for an additional one-year period until April 2018, unless terminated by TerreStar or us upon at least 90 days’ written notice prior to the end of the term. The provision of hosting services will automatically renew in May 2017 for an additional five-year period until May 2022, unless terminated by TerreStar upon at least 180 days’ written notice to us prior to the end of the term. In addition, TerreStar generally may terminate such services for convenience subject to providing us with prior notice and/or payment of termination charges. Hughes Broadband Distribution Agreement. Effective October 2012, HNS and dishNET Satellite Broadband L.L.C. (“dishNET”), a wholly-owned subsidiary of DISH Network, entered into a distribution agreement (the “Distribution Agreement”) pursuant to which dishNET has the right, but not the obligation, to market, sell and distribute the Hughes satellite internet service (the “Hughes service”). dishNET pays HNS a monthly per subscriber wholesale service fee for the Hughes service based upon a subscriber’s service level and based upon certain volume subscription thresholds. The Distribution Agreement also provides that dishNET has the right, but not the obligation, to purchase certain broadband equipment from us to support the sale of the Hughes service. The Distribution Agreement had an initial term of five years with automatic renewal for successive one year terms unless terminated by either party with a written notice at least 180 days before the expiration of the then-current term. In February 2014, HNS and dishNET entered into an amendment to the Distribution Agreement which, among other things, extended the initial term of the Distribution Agreement until March 2024. Upon expiration or termination of the Distribution Agreement, the parties will continue to provide the Hughes service to the then-current dishNET subscribers pursuant to the terms and conditions of the Distribution Agreement. Set-Top Box Application Development Agreement. In November 2012, we and DISH Network entered into a set-top box application development agreement (the “Application Development Agreement”) pursuant to which we provide DISH Network with certain services relating to the development of web-based applications for set-top boxes for the period ending in February 2016. The Application Development Agreement automatically renewed in February 2016 for a one-year period ending in February 2017, and renews automatically for successive one-year periods thereafter, unless terminated earlier by us or DISH Network at any time upon at least 90 days’ notice. The fees for services provided under the Application Development Agreement are calculated at our cost of providing the relevant service plus a fixed margin, which will depend on the nature of the services provided. XiP Encryption Agreement. In July 2012, we entered into an encryption agreement with DISH Network for our whole-home HD DVR line of set-top boxes (the “XiP Encryption Agreement”) pursuant to which we provide certain security measures on our whole-home HD DVR line of set-top boxes to encrypt the content delivered to the set-top box via a smart card and secure the content between set-top boxes. The XiP Encryption Agreement’s term ends on the same day as the 2012 Receiver Agreement and therefore was automatically extended through December 2017 when we and DISH Network extended the 2012 Receiver Agreement. We and DISH Network each have the right to terminate the XiP Encryption Agreement for any reason upon at least 180 days’ notice and 30 days’ notice, respectively. The fees for the services provided under the XiP Encryption Agreement are calculated on a monthly basis based on the number of receivers utilizing such security measures each month. DBSD North America Agreement. In March 2012, DISH Network completed its acquisition of 100% of the equity of reorganized DBSD North America, Inc. (“DBSD North America”). Prior to DISH Network’s acquisition of DBSD North America and our completion of the Hughes Acquisition, DBSD North America and HNS entered into various agreements pursuant to which our Hughes segment provides, among other things, warranty, operations and maintenance and hosting services of DBSD North America’s gateway and ground-based communications equipment. The provision of warranty services will terminate in February 2017. The provision of operations and maintenance services will automatically renew in April 2017 for an additional one-year period until April 2018, unless terminated by DBSD North America upon at least 120 days’ written notice to us prior to the end of the term. The provision of hosting services will automatically renew in February 2017 for an additional five-year period until February 2022. In addition, DBSD North America generally may terminate such services for convenience, subject to providing us with prior notice and/or payment of termination charges. Sling TV Holding L.L.C. (formerly DISH Digital Holding L.L.C.) (“Sling TV Holding”). Effective July 2012, we and DISH Network formed Sling TV Holding, which was owned two-thirds by DISH Network and one-third by us. Sling TV Holding was formed to develop and commercialize certain advanced technologies. At that time, we, DISH Network and Sling TV Holding entered into the following agreements with respect to Sling TV Holding: (i) a contribution agreement pursuant to which we and DISH Network contributed certain assets in exchange for our respective ownership interests in Sling TV Holding; (ii) a limited liability company operating agreement (“Operating Agreement”), which provides for the governance of Sling TV Holding; and (iii) a commercial agreement (“Commercial Agreement”) pursuant to which, among other things, Sling TV Holding had: (a) certain rights and corresponding obligations with respect to its business; and (b) the right, but not the obligation, to receive certain services from us and DISH Network, respectively. Effective August 2014, we and Sling TV Holding entered into an exchange agreement (“Exchange Agreement”) pursuant to which, among other things, Sling TV Holding distributed certain assets to us and we reduced our interest in Sling TV Holding to a 10.0% non-voting interest. As a result, DISH Network has a 90.0% equity interest and a 100% voting interest in Sling TV Holding. In addition, we, DISH Network and Sling TV Holding amended and restated the Operating Agreement, primarily to reflect the changes implemented by the Exchange Agreement. Finally, we, DISH Network and Sling TV Holding amended and restated the Commercial Agreement, pursuant to which, among other things, Sling TV Holding: (1) continues to have certain rights and corresponding obligations with respect to its business; (2) continues to have the right, but not the obligation, to receive certain services from us and DISH Network; and (3) has a license from us to use certain of the assets distributed to us as part of the Exchange Agreement. Cost of sales — equipment and services and other — DISH Network Remanufactured Receiver and Services Agreement. In connection with the Spin-off, we entered into a remanufactured receiver and services agreement with DISH Network pursuant to which we have the right, but not the obligation, to purchase remanufactured receivers and related components from DISH Network at cost plus a fixed margin, which varies depending on the nature of the equipment purchased. In November 2014, we and DISH Network extended this agreement for a one-year period ending in December 2015, and in November 2015, we and DISH Network extended this agreement for a one-year period ending in December 2016. In November 2016, we and DISH Network further amended the remanufactured receiver and services agreement to extend its term for a one-year period through December 2017. We may terminate the remanufactured receiver and services agreement for any reason upon at least 60 days’ notice to DISH Network. DISH Network may also terminate this agreement if certain entities acquire DISH Network. Satellite Services Received from DISH Network - EchoStar XV. In May 2013, we began receiving satellite services from DISH Network on the EchoStar XV satellite and relocated the satellite to the 45 degree west longitude orbital location for testing pursuant to our Brazilian authorization. Effective March 2014, this satellite services agreement converted to a month-to-month service agreement with both parties having the right to terminate this agreement upon 30 days’ notice. In October 2015, we provided DISH Network a notice to terminate this agreement effective in November 2015, and the agreement was terminated according to its terms in November 2015. General and administrative expenses — DISH Network Professional Services Agreement. In connection with the Spin-off, we entered into various agreements with DISH Network including the Transition Services Agreement, Satellite Procurement Agreement and Services Agreement, which all expired in January 2010 and were replaced by a Professional Services Agreement. In January 2010, we and DISH Network agreed that we shall continue to have the right, but not the obligation, to receive the following services from DISH Network, among others, certain of which were previously provided under the Transition Services Agreement: information technology, travel and event coordination, internal audit, legal, accounting and tax, benefits administration, program acquisition services and other support services. Mr. Vivek Khemka, who remains employed as DISH Network’s Executive Vice President and Chief Technology Officer, currently also provides services to us pursuant to the Professional Services Agreement as President - EchoStar Technologies L.L.C. Additionally, we and DISH Network agreed that DISH Network would continue to have the right, but not the obligation, to engage us to manage the process of procuring new satellite capacity for DISH Network (previously provided under the Satellite Procurement Agreement), receive logistics, procurement and quality assurance services from us (previously provided under the Services Agreement) and other support services. The Professional Services Agreement will automatically renew in January 2017 for an additional one-year period until January 2018 and renews automatically for successive one-year periods thereafter, unless terminated earlier by either party upon at least 60 days’ notice. However, either party may terminate the Professional Services Agreement in part with respect to any particular service it receives for any reason upon at least 30 days’ notice. Real Estate Lease Agreements. We have entered into a lease agreement pursuant to which we lease certain real estate from DISH Network. The rent on a per square foot basis is comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease, and we are responsible for our portion of the taxes, insurance, utilities and maintenance of the premises. The lease agreement is for certain space at 1285 Joe Battle Blvd., El Paso, Texas, was for an initial period ending in August 2015, and provided us with renewal options for four consecutive three year terms. Effective August 2015, we exercised our first renewal option for a period ending in August 2018. Other agreements — DISH Network Intellectual Property Matters Agreement. We entered into an Intellectual Property Matters Agreement with DISH Network in connection with the Spin-off. The Intellectual Property Matters Agreement governs our relationship with DISH Network with respect to patents, trademarks and other intellectual property. The Intellectual Property Matters Agreement will continue in perpetuity. Pursuant to the Intellectual Property Matters Agreement, DISH Network irrevocably assigned to us all right, title and interest in certain patents, trademarks and other intellectual property necessary for the operation of our set-top box business. In addition, the agreement permits us to use, in the operation of our set-top box business, certain other intellectual property currently owned or licensed by DISH Network. In addition, DISH Network may not use the “EchoStar” name as a trademark, except in certain limited circumstances. Similarly, the Intellectual Property Matters Agreement provides that we will not make any use of the name or trademark “DISH Network” or any other trademark owned by DISH Network, except in certain circumstances. Tax Sharing Agreement. In connection with the Spin-off, we entered into a tax sharing agreement with DISH Network which governs our respective rights, responsibilities and obligations after the Spin-off with respect to taxes for the periods ending on or before the Spin-off. Generally, all pre-Spin-off taxes, including any taxes that are incurred as a result of restructuring activities undertaken to implement the Spin-off, are borne by DISH Network, and DISH Network will indemnify us for such taxes. However, DISH Network is not liable for and will not indemnify us for any taxes that are incurred as a result of the Spin-off or certain related transactions failing to qualify as tax-free distributions pursuant to any provision of Section 355 or Section 361 of the Internal Revenue Code of 1986, as amended, because of: (i) a direct or indirect acquisition of any of our stock, stock options or assets; (ii) any action that we take or fail to take; or (iii) any action that we take that is inconsistent with the information and representations furnished to the IRS in connection with the request for the private letter ruling, or to counsel in connection with any opinion being delivered by counsel with respect to the Spin-off or certain related transactions. In such case, we will be solely liable for, and will indemnify DISH Network for, any resulting taxes, as well as any losses, claims and expenses. The tax sharing agreement will only terminate after the later of the full period of all applicable statutes of limitations, including extensions, or once all rights and obligations are fully effectuated or performed. In light of the tax sharing agreement, among other things, and in connection with our consolidated federal income tax returns for certain tax years prior to and for the year of the Spin-off, in September 2013, we and DISH Network agreed upon a supplemental allocation of the tax benefits arising from certain tax items resolved in the course of the IRS’s examination of our consolidated tax returns. Prior to the agreement with DISH Network, the federal tax benefits of $81.9 million were reflected as a deferred tax asset for depreciation and amortization, which was netted in our noncurrent deferred tax liabilities. The agreement requires DISH Network to pay us $81.9 million of the federal tax benefit it receives at such time as we would have otherwise been able to realize such tax benefit, which we currently estimate would be after 2016. Accordingly, we recorded a noncurrent receivable from DISH Network for $81.9 million in “Other receivable — DISH Network” and a corresponding increase in our net noncurrent deferred tax liabilities to reflect the effects of this agreement in September 2013. In addition, in September 2013, we and DISH Network agreed upon a tax sharing arrangement for filing certain combined state income tax returns and a method of allocating the respective tax liabilities between us and DISH Network for such combined returns, through the taxable period ending on December 31, 2017. We and DISH Network file combined income tax returns in certain states. In 2014 and 2015, we earned and recognized a tax benefit for certain state income tax credits that we would be unable to utilize currently if we had filed separately from DISH Network. DISH Network expects to utilize these tax credits to reduce its state income tax payable. We expect to increase additional paid-in capital upon receipt of any consideration paid to us by DISH Network in exchange for these tax credits. TiVo. In April 2011, we and DISH Network entered into a settlement agreement with TiVo, Inc. (“TiVo”). The settlement resolved all pending litigation between us and DISH Network, on the one hand, and TiVo, on the other hand, including litigation relating to alleged patent infringement involving certain DISH Network DVRs. Under the settlement agreement, all pending litigation was dismissed with prejudice and all injunctions that permanently restrain, enjoin or compel any action by us or DISH Network were dissolved. We and DISH Network are jointly responsible for making payments to TiVo in the aggregate amount of $500.0 million, including an initial payment of $300.0 million and the remaining $200.0 million in six equal annual installments between 2012 and 2017. Pursuant to the terms and conditions of the agreements entered into in connection with the Spin-off, DISH Network made the initial payment to TiVo in May 2011, except for the contribution from us totaling approximately $10.0 million, representing an allocation of liability relating to our sales of DVR-enabled receivers to an international customer. Subsequent payments are allocated between us and DISH Network based on historical sales of certain licensed products, with EchoStar being responsible for 5% of each annual payment. Sling Trademark License Agreement. In December 2014, Sling TV Holding entered into an agreement with Sling Media, Inc., our subsidiary, pursuant to which Sling TV Holding has the right, for a fixed fee, to use certain trademarks, domain names and other intellectual property related to the “Sling” trademark through December 2016. gTLD Bidding Agreement. In April 2015, we and DISH Network entered into a gTLD Bidding Agreement whereby, among other things: (i) DISH Network obtained rights from us to participate in a generic top level domain (“gTLD”) auction, assuming all rights and obligations from us related to our application with the Internet Corporation for Assigned Names and Numbers (“ICANN”) for a particular gTLD; (ii) DISH Network agreed to reimburse us for our ICANN application fee and certain out-of-pocket expenses related to the application and the auction; and (iii) we and DISH Network agreed to split equally the net proceeds obtained by DISH Network as the losing bidder in the auction, less such fee reimbursement and out-of-pocket expenses. Patent Cross-License Agreements. In December 2011, we and DISH Network entered into separate patent cross-license agreements with the same third party whereby: (i) we and such third party licensed our respective patents to each other subject to certain conditions; and (ii) DISH Network and such third party licensed their respective patents to each other subject to certain conditions (each, a “Cross-License Agreement”). Each Cross-License Agreement covers patents acquired by the respective party prior to January 2017 and aggregate payments under both Cross-License Agreements total less than $10.0 million. Each Cross-License Agreement also contains an option to extend each Cross-License Agreement to include patents acquired by the respective party prior to January 2022. If both options are exercised, the aggregate additional payments to such third party would total less than $3.0 million. However, we and DISH Network may elect to extend our respective Cross-License Agreement independently of each other. Since the aggregate payments under both Cross-License Agreements were based on the combined annual revenue of us and DISH Network, we and DISH Network agreed to allocate our respective payments to such third party based on our respective percentage of combined total revenue. PMC. In 2008, Personalized Media Communications, Inc. (“PMC”) filed suit against us, DISH Network and Motorola Inc., in the United States District Court for the Eastern District of Texas, alleging infringement of United States Patent Nos. 5,109,414; 4,965,825; 5,233,654; 5,335,277 and 5,887,243, which relate to satellite signal processing. In May 2015, we, DISH Network and PMC entered into a settlement and release agreement that provided, among other things, for a license by PMC to us and DISH Network for certain patents and patent applications and the dismissal of all of PMC’s claims in the action against us and DISH Network with prejudice. In June 2015, the Court dismissed all of PMC’s claims in the action against us and DISH Network with prejudice. In June 2015, we and DISH Network agreed that we would contribute a one-time payment of $5.0 million towards the settlement under the agreements entered into in connection with the Spin-off and the 2012 Receiver Agreement. Caltech. On October 1, 2013, Caltech filed complaints against two of our subsidiaries, Hughes Communications, Inc. and HNS, as well as against DISH Network, DISH Network L.L.C., and dishNET Satellite Broadband L.L.C., in the United States District Court for the Central District of California alleging infringement of United States Patent Nos. 7,116,710; 7,421,032; 7,916,781; and 8,284,833, each of which is entitled “Serial Concatenation of Interleaved Convolutional Codes forming Turbo-Like Codes.” Caltech asserted that encoding data as specified by the DVB-S2 standard infringes each of the asserted patents. Caltech claimed that the HopperTM set-top box that we design and sell to DISH Network, as well as certain of our Hughes segment’s satellite broadband products and services, infringe the asserted patents by implementing the DVB-S2 standard. Pursuant to a settlement agreement among us, DISH Network and Caltech, in May 2016, Caltech dismissed with prejudice all of its claims in these actions. See Note 14 of these condensed consolidated financial statements for further information. Orange, NJ. In October 2016, we and DISH Network sold two parcels of real estate owned separately by us and DISH Network in Orange, NJ to a third party pursuant to a purchase and sale agreement. Pursuant to the agreement, we and DISH Network separately received our respective payments from the buyer. Other Agreements Hughes Systique Corporation (“Hughes Systique”) We contract with Hughes Systique for software development services. In 2008, Hughes Communications, Inc. loaned $1.5 million to Hughes Systique pursuant to a term loan facility. The initial interest rate on the loans was 6%, payable annually, and the accrued and unpaid interest was added to the principal amount in certain circumstances. The loans were convertible into shares of Hughes Systique upon non-payment or an event of default. In May 2014, we amended the term loan facility to increase the interest rate from 6% to 8%, payable annually, to reflect then-current market conditions and extend the maturity date of the loans to May 1, 2015, and in April 2015, we extended the maturity date of the loans to May 1, 2016 on the same terms. In 2015, Hughes Systique repaid $1.5 million of the outstanding principal of the loan facility. In February 2016, Hughes Systique repaid $0.3 million of the outstanding principal of the loan facility. In April 2016, Hughes Systique repaid in full the remaining $0.3 million outstanding principal and interest of the loan facility. As of September 30, 2016, the principal amount outstanding of the loan facility was zero. In addition to our 43.9% ownership in Hughes Systique, Mr. Pradman Kaul, the President of Hughes Communications, Inc. and a member of our board of directors, and his brother, who is the CEO and President of Hughes Systique, in the aggregate, own approximately 25.8%, on an undiluted basis, of Hughes Systique’s outstanding shares as of September 30, 2016. Furthermore, Mr. Pradman Kaul serves on the board of directors of Hughes Systique. Hughes Systique is a variable interest entity and we are considered the primary beneficiary of Hughes Systique due to, among other factors, our ability to direct the activities that most significantly impact the economic performance of Hughes Systique. As a result, we consolidate Hughes Systique’s financial statements in our condensed consolidated financial statements. NagraStar L.L.C. We own 50.0% of NagraStar L.L.C. (“NagraStar”), a joint venture that is our primary provider of encryption and related security technology used in our set-top boxes. We account for our investment in NagraStar using the equity method. We made purchases from NagraStar totaling approximately $2.5 million and $4.4 million for the three months ended September 30, 2016 and 2015, respectively, and $10.1 million and $13.0 million for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016 and December 31, 2015, we had trade accounts payable to NagraStar totaling approximately $0.9 million and $2.6 million, respectively. Dish Mexico We own 49.0% of an entity that provides direct-to-home satellite services in Mexico known as Dish Mexico. We provide certain broadcast services and satellite services and sell hardware such as digital set-top boxes and related equipment to Dish Mexico. The following table summarizes revenue from sales of hardware and services we provided to Dish Mexico.
As of September 30, 2016 and December 31, 2015, “Trade accounts receivable, net” includes amounts due from Dish Mexico of $19.3 million and $32.9 million, respectively. Deluxe/EchoStar LLC We own 50.0% of Deluxe/EchoStar LLC (“Deluxe”), a joint venture that we entered into in 2010 to build an advanced digital cinema satellite distribution network targeting delivery to digitally equipped theaters in the U.S. and Canada. We account for our investment in Deluxe using the equity method. We recognized revenue from Deluxe for transponder services and the sale of broadband equipment of approximately $0.7 million for each of the three months ended September 30, 2016 and 2015 and $2.1 million for each of the nine months ended September 30, 2016 and 2015. As of September 30, 2016 and December 31, 2015, we had trade accounts receivable from Deluxe of approximately $0.6 million and $0.1 million, respectively. SmarDTV In May 2015, we acquired a 22.5% interest in SmarDTV, which we account for using the equity method. Pursuant to our agreements with SmarDTV and its subsidiaries, we purchased engineering services from and paid royalties to SmarDTV and its subsidiaries totaling $1.5 million and $1.7 million for the three months ended September 30, 2016 and 2015, respectively, and $5.2 million and $2.6 million for the nine months ended September 30, 2016 and 2015, respectively. As of September 30, 2016 and December 31, 2015, we had trade accounts payable to SmarDTV of $2.1 million and $0.9 million, respectively, and a current note receivable from SmarDTV of zero and $0.5 million, respectively, arising from a working capital adjustment pursuant to the acquisition agreement. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in conformity with GAAP. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Our results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2015. |
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Principles of Consolidation | Principles of Consolidation We consolidate all entities in which we have a controlling financial interest. We are deemed to have a controlling financial interest in variable interest entities where we are the primary beneficiary. We are deemed to have a controlling financial interest in other entities when we own more than 50 percent of the outstanding voting shares and other shareholders do not have substantive rights to participate in management. For entities we control but do not wholly own, we record a noncontrolling interest within stockholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests. As of September 30, 2016 and December 31, 2015, noncontrolling interests consist primarily of HSS Tracking Stock owned by DISH Network, as described in Note 4 below. All significant intercompany balances and transactions have been eliminated in consolidation. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, the reported amounts of revenue and expense for each reporting period, and certain information disclosed in the notes to our condensed consolidated financial statements. Estimates are used in accounting for, among other things, amortization periods for deferred subscriber acquisition costs, revenue recognition using the percentage-of-completion method, allowances for doubtful accounts, allowances for sales returns and rebates, warranty obligations, self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair value of financial instruments, fair value of stock-based compensation awards, fair value of assets and liabilities acquired in business combinations, lease classifications, asset impairment testing, useful lives and methods for depreciation and amortization of long-lived assets, and certain royalty obligations. We base our estimates and assumptions on historical experience, observable market inputs and on various other factors that we believe to be relevant under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results may differ from previously estimated amounts, and such differences may be material to our condensed consolidated financial statements. Changing economic conditions may increase the inherent uncertainty in the estimates and assumptions indicated above. We review our estimates and assumptions periodically and the effects of revisions are reflected in the period they occur or prospectively if the revised estimate affects future periods. |
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Fair Value Measurements | Fair Value Measurements We determine fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. We utilize the highest level of inputs available according to the following hierarchy in determining fair value:
Transfers between levels in the fair value hierarchy are considered to occur at the beginning of the quarterly accounting period. There were no transfers between levels for each of the nine months ended September 30, 2016 or 2015. As of September 30, 2016 and December 31, 2015, the carrying amounts of our cash and cash equivalents, trade accounts receivable, net of allowance for doubtful accounts, accounts payable and accrued liabilities were equal to or approximated fair value due to their short-term nature or proximity to current market rates. Fair values of our current marketable investment securities are based on a variety of observable market inputs. For our investments in publicly traded equity securities and U.S. government securities, fair value ordinarily is determined based on a Level 1 measurement that reflects quoted prices for identical securities in active markets. Fair values of our investments in other marketable debt securities generally are based on Level 2 measurements as the markets for such debt securities are less active. Trades of identical debt securities on or near the measurement date are considered a strong indication of fair value. Matrix pricing techniques that consider par value, coupon rate, credit quality, maturity and other relevant features also may be used to determine fair value of our investments in marketable debt securities. Fair values for our publicly traded debt are based on quoted market prices in less active markets and are categorized as Level 2 measurements. The fair values of our privately held debt are Level 2 measurements and are estimated to approximate their carrying amounts based on the proximity of their interest rates to current market rates. As of September 30, 2016 and December 31, 2015, the fair values of our in-orbit incentive obligations, based on measurements categorized within Level 2 of the fair value hierarchy, approximated their carrying amounts of $75.2 million and $79.3 million, respectively. We use fair value measurements from time to time in connection with impairment testing and the assignment of purchase consideration to assets and liabilities of acquired companies. Those fair value measurements typically include significant unobservable inputs and are categorized within Level 3 of the fair value hierarchy. |
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Research and Development | Research and Development Costs incurred in research and development activities generally are expensed as incurred. A significant portion of our research and development costs are incurred in connection with the specific requirements of a customer’s order. In such instances, the amounts for these customer funded development efforts are included in cost of sales. |
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Capitalized Software Costs | Capitalized Software Costs Costs related to the procurement and development of software for internal-use and externally marketed software are capitalized and amortized using the straight-line method over the estimated useful life of the software, not in excess of five years. Capitalized costs of internal-use software are included in “Property and equipment, net” and capitalized costs of externally marketed software are included in “Other noncurrent assets, net” in our condensed consolidated balance sheets. Externally marketed software is generally installed in the equipment we sell to customers. We conduct software program reviews for externally marketed capitalized software costs at least annually, or as events and circumstances warrant such a review, to determine if capitalized software development costs are recoverable and to ensure that costs associated with programs that are no longer generating revenue are expensed. |
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New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). It outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In August 2015, the FASB issued Accounting Standards Update No. 2015-14, which deferred the mandatory effective date of ASU 2014-09 by one year. As a result, public entities are required to adopt the new revenue standard in annual periods beginning after December 15, 2017 and in interim periods within those annual periods. The standard may be applied either retrospectively to prior periods or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted, but not before annual periods beginning after December 15, 2016. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Identifying Performance Obligations and Licensing, which amends guidance on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Narrow-Scope Improvements and Practical Expedients, which addresses collectibility, noncash consideration, completed contracts at transition, a practical expedient for contract modifications at transition, and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. We have not determined when we will adopt the new revenue standard or selected the transition method that we will apply upon adoption. We continue to evaluate the impact of the new standard and available adoption methods on our consolidated financial statements. We are in the process of evaluating arrangements with customers and identifying differences in accounting between new and old standards. In February 2015, the FASB issued Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). This standard amends the consolidation guidance for variable interest entities and general partners’ investments in limited partnerships and similar entities. ASU 2015-02 was effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, and required either a retrospective or a modified retrospective approach as of the beginning of the fiscal year of adoption. We adopted ASU 2015-02 in the first quarter of 2016. The adoption of the standard did not impact our consolidated financial statements. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). This standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. ASU 2015-03 was effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, and required a retrospective approach to adoption. We adopted ASU 2015-03 in the first quarter of 2016. Upon adoption, we presented unamortized debt issuance cost previously reported in “Other noncurrent assets, net” with a carrying amount of $31.3 million as of December 31, 2015, as a reduction of our “Long-term debt and capital lease obligations, net of unamortized debt issuance costs”. In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This update substantially revises standards for the recognition, measurement and presentation of financial instruments, including requiring all equity investments to be measured at fair value with changes in the fair value recognized through net income. It also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted for certain requirements. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”). This standard requires lessees to recognize assets and liabilities for all leases with lease terms more than 12 months, including leases classified as operating leases. The standard also modifies the definition of a lease and the criteria for classifying leases as operating leases or financing leases. ASU 2016-02 is effective for annual periods beginning after December 15, 2018 and interim periods within those periods. Early adoption is permitted. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies the accounting for share-based payment awards. This update requires all excess tax benefits and deficiencies to be recognized as income tax expense or benefit and permits an entity to make an entity-wide policy election to either estimate forfeitures or recognize forfeitures as they occur. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those periods. The update specifies requirements for retrospective, modified retrospective or prospective application for the various amendments contained in the update. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those periods. Early adoption is permitted. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for annual periods beginning after December 15, 2017 and interim periods within those periods. Early adoption is permitted. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. |
Earnings per Share (Tables) |
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Schedule of Earnings Per Share, Basic and Diluted | The following table presents basic and diluted EPS amounts for all periods and the corresponding weighted-average shares outstanding used in the calculations.
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Other Comprehensive Income (Loss) and Related Tax Effects (Tables) |
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Schedule of reclassifications out of accumulated other comprehensive loss | Reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2016 and 2015 were as follows:
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Investment Securities (Tables) |
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Schedule of marketable investment securities, restricted cash and cash equivalents, and investments in unconsolidated entities | Our marketable investment securities, restricted cash and cash equivalents, and investments in unconsolidated entities consisted of the following:
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Schedule of unrealized gains (losses) on marketable investment securities | The components of our available-for-sale investments are summarized in the table below.
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Schedule of available-for-sale securities in continuous unrealized loss position by length of time and their fair value | The following table reflects the length of time that our available-for-sale securities have been in an unrealized loss position. We do not intend to sell these securities before they recover or mature, and it is more likely than not that we will hold these securities until they recover or mature. We believe that changes in the estimated fair values of these securities are primarily related to temporary market conditions.
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Schedule of fair value measurements | Our current marketable investment securities are measured at fair value on a recurring basis as summarized in the table below. As of September 30, 2016 and December 31, 2015, we did not have investments that were categorized within Level 3 of the fair value hierarchy.
|
Trade Accounts Receivable (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of trade accounts receivable | Our trade accounts receivable consisted of the following:
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Inventory (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventory | Our inventory consisted of the following:
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Property and Equipment (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment | Property and equipment consisted of the following:
Depreciation expense associated with our property and equipment consisted of the following:
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Schedule of construction in progress | Construction in progress consisted of the following:
Construction in progress included the following owned and leased satellites under construction or undergoing in-orbit testing as of September 30, 2016.
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Goodwill, Regulatory Authorizations and Other Intangible Assets (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of regulatory authorizations with finite and indefinite useful lives | Regulatory authorizations included amounts with finite and indefinite useful lives, as follows:
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Schedule of other intangible assets subject to amortization | Our other intangible assets, which are subject to amortization, consisted of the following:
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Debt and Capital Lease Obligations (Tables) |
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt and Capital Lease Obligations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of carrying amounts and fair values of the entity's debt | The following table summarizes the carrying amounts and fair values of our debt:
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Stock-Based Compensation (Tables) |
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Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of allocated non-cash, stock-based compensation expense for all employees | Total non-cash, stock-based compensation expense for all of our employees is shown in the following table for the three and nine months ended September 30, 2016 and 2015 and was assigned to the same expense categories as the base compensation for such employees:
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Segment Reporting (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of revenue, EBITDA, and capital expenditures by operating segments | The following table presents revenue, EBITDA, and capital expenditures for each of our operating segments.
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Schedule of reconciliation of EBITDA to reported income before income taxes | The following table reconciles total consolidated EBITDA to reported “Income before income taxes” in our condensed consolidated statements of operations and comprehensive income (loss):
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Related Party Transactions (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dish Mexico | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related party transactions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party transactions | The following table summarizes revenue from sales of hardware and services we provided to Dish Mexico.
As of September 30, 2016 and December 31, 2015, “Trade accounts receivable, net” includes amounts due from Dish Mexico of $19.3 million and $32.9 million, respectively. |
Organization and Business Activities (Details) - segment |
9 Months Ended | |
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Mar. 02, 2014 |
Sep. 30, 2016 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Number of business segments | 3 | |
DISH Network | Hughes Retail Preferred Tracking Stock | ||
Principal Business | ||
Percentage of economic interest held | 80.00% | |
Hughes Retail Group | DISH Network | Satellite and Tracking Stock Transaction | Hughes Retail Preferred Tracking Stock | ||
Principal Business | ||
Percentage of economic interest held | 80.00% | 80.00% |
Earnings per Share (Details 2) - shares shares in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Stock awards | ||||
Antidilutive Securities Excluded From Computation Of Earnings Per Share | ||||
Anti-dilutive securities excluded from computation of earnings per share (in shares) | 3.6 | 3.1 | 3.6 | 2.0 |
Earnings per Share (Details 3) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Net income attributable to EchoStar | ||||
Net income attributable to EchoStar | $ 36,801 | $ 28,835 | $ 141,742 | $ 89,983 |
Less: Net loss attributable to EchoStar Tracking Stock | 157 | (1,267) | (1,709) | (7,421) |
Net income attributable to EchoStar common stock | $ 36,644 | $ 30,102 | $ 143,451 | $ 97,404 |
Weighted-average common shares outstanding - Class A and B common stock: | ||||
Basic (in shares) | 93,898 | 92,500 | 93,661 | 92,253 |
Dilutive impact of stock awards outstanding (in shares) | 503 | 993 | 528 | 1,227 |
Diluted (in shares) | 94,401 | 93,493 | 94,189 | 93,480 |
Earnings per share - Class A and B common stock: | ||||
Basic (in dollars per share) | $ 0.39 | $ 0.33 | $ 1.53 | $ 1.06 |
Diluted (in dollars per share) | $ 0.39 | $ 0.32 | $ 1.52 | $ 1.04 |
Investment Securities (Details 2) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Unrealized Gains (Losses) on Marketable Investment Securities | ||
Amortized Cost | $ 795,030 | $ 608,199 |
Unrealized Gains | 12,143 | 7,758 |
Unrealized Losses | (981) | (735) |
Estimated Fair Value | 806,192 | 615,222 |
Corporate bonds | ||
Unrealized Gains (Losses) on Marketable Investment Securities | ||
Amortized Cost | 711,651 | 562,849 |
Unrealized Gains | 481 | 10 |
Unrealized Losses | (148) | (623) |
Estimated Fair Value | 711,984 | 562,236 |
Other (including restricted) | ||
Unrealized Gains (Losses) on Marketable Investment Securities | ||
Amortized Cost | 40,051 | 24,495 |
Unrealized Gains | 17 | 0 |
Unrealized Losses | 0 | (30) |
Estimated Fair Value | 40,068 | 24,465 |
Equity securities - strategic | ||
Unrealized Gains (Losses) on Marketable Investment Securities | ||
Amortized Cost | 43,328 | 20,855 |
Unrealized Gains | 11,645 | 7,748 |
Unrealized Losses | (833) | (82) |
Estimated Fair Value | $ 54,140 | $ 28,521 |
Investment Securities (Details 3) $ in Millions |
Sep. 30, 2016
USD ($)
|
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Available-for-sale Securities, Debt Maturities [Abstract] | |
Debt securities with contractual maturities of one year or less | $ 684.4 |
Debt securities with contractual maturities exceeding one year | $ 67.7 |
Investment Securities (Details 4) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
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Fair Value | |||||
Less than 12 months | $ 271,067 | $ 271,067 | $ 364,160 | ||
12 months or more | 1,564 | 1,564 | 149,889 | ||
Total | 272,631 | 272,631 | 514,049 | ||
Unrealized Losses | |||||
Less than 12 months | (973) | (973) | (609) | ||
12 months or more | (8) | (8) | (126) | ||
Total | (981) | (981) | $ (735) | ||
Sales of Marketable Investment Securities | |||||
Gains from sales of available-for-sale securities | 5,600 | ||||
Proceeds from sales of available-for-sale securities | $ 4,000 | $ 4,000 | $ 35,800 | $ 94,200 |
Trade Accounts Receivable (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Trade Accounts Receivable | ||
Total trade accounts receivable | $ 191,718 | $ 191,725 |
Allowance for doubtful accounts | (13,817) | (12,485) |
Trade accounts receivable - DISH Network | 330,300 | 277,159 |
Total trade accounts receivable, net | 508,201 | 456,399 |
Progress billings offset against contracts in process | 3,900 | 2,900 |
Trade accounts receivables | ||
Trade Accounts Receivable | ||
Total trade accounts receivable | 165,532 | 168,714 |
Contracts in process, net | ||
Trade Accounts Receivable | ||
Total trade accounts receivable | $ 26,186 | $ 23,011 |
Inventory (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Inventory, Net [Abstract] | |||
Finished goods | $ 56,985 | $ 56,985 | $ 52,839 |
Raw materials | 7,697 | 7,697 | 9,042 |
Work-in-process | 9,107 | 9,107 | 5,129 |
Total inventory | 73,789 | 73,789 | $ 67,010 |
Adjustment to reduce inventory to its estimated net realizable value | $ 9,100 | $ 9,100 |
Property and Equipment (Details 2) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Property and equipment | ||
Construction in progress | $ 1,362,572 | $ 1,112,267 |
Progress amounts for satellite construction, including prepayments under capital leases and launch services costs | ||
Property and equipment | ||
Construction in progress | 1,154,066 | 963,103 |
Satellite related equipment | ||
Property and equipment | ||
Construction in progress | 160,702 | 126,373 |
Other | ||
Property and equipment | ||
Construction in progress | $ 47,804 | $ 22,791 |
Property and Equipment (Details 3) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Depreciation expense | ||||
Total depreciation expense | $ 109,844 | $ 114,704 | $ 326,149 | $ 340,914 |
Satellites | ||||
Depreciation expense | ||||
Total depreciation expense | 46,965 | 51,436 | 140,895 | 149,677 |
Furniture, fixtures, equipment and other | ||||
Depreciation expense | ||||
Total depreciation expense | 31,162 | 29,104 | 89,247 | 89,504 |
Customer rental equipment | ||||
Depreciation expense | ||||
Total depreciation expense | 28,652 | 30,839 | 86,789 | 91,550 |
Buildings and improvements | ||||
Depreciation expense | ||||
Total depreciation expense | $ 3,065 | $ 3,325 | $ 9,218 | $ 10,183 |
Property and Equipment (Details 4) - Satellites |
9 Months Ended |
---|---|
Sep. 30, 2016
satellite
mi
| |
Property and equipment | |
Number of satellites utilized in geostationary orbit approximately 22,300 miles above the equator | 18 |
Length of satellites utilized in geosynchronous orbit above the equator (in miles) | mi | 22,300 |
Number of satellites utilized under capital lease | 3 |
Number of satellites utilized under operating lease | 1 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ (19,512) | $ (28,577) | $ (75,064) | $ (65,841) |
Effective income tax rate | 34.60% | 43.10% |
Stock-Based Compensation (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|---|
Feb. 29, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
|
Stock-Based Compensation | ||||||
Allocated share-based compensation expense | $ 3,625 | $ 5,916 | $ 11,953 | $ 16,204 | ||
Research and development expenses | ||||||
Stock-Based Compensation | ||||||
Allocated share-based compensation expense | 731 | 1,270 | 2,491 | 3,318 | ||
Selling, general and administrative expenses | ||||||
Stock-Based Compensation | ||||||
Allocated share-based compensation expense | $ 2,894 | $ 4,646 | $ 9,462 | $ 12,886 | ||
Stock Options | ||||||
Stock-Based Compensation | ||||||
Stock options and other incentive awards granted (in shares) | 137,470 | 27,990 | 722,350 | 911,970 | ||
Restricted Stock Units | Vesting Based On Performance | ||||||
Stock-Based Compensation | ||||||
Granted (in shares) | 100,000 | |||||
Vested (in shares) | 33,334 | 66,666 | ||||
Non-Performance Based Stock Awards | ||||||
Stock-Based Compensation | ||||||
Unrecognized stock-based compensation cost, net of estimated forfeiture | $ 29,700 | $ 29,700 |
Commitments and Contingencies (Details) $ in Millions |
Sep. 30, 2016
USD ($)
|
---|---|
Satellite-related obligations | |
Other Commitments [Line Items] | |
Satellite-related obligations | $ 786.0 |
Commitments and Contingencies (Details 2) shares in Millions |
1 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jan. 26, 2015
petition
|
Aug. 31, 2015
claim
|
Mar. 31, 2011
shares
|
Dec. 31, 2011
shares
|
Sep. 30, 2016
shares
|
Jun. 01, 2016
claim
|
Oct. 01, 2013
subsidiary
|
Jul. 31, 2009
petition
|
|
Caltech | ||||||||
Commitment and Contingencies | ||||||||
Number of subsidiaries against which lawsuit was filed | subsidiary | 2 | |||||||
CRFD | ||||||||
Commitment and Contingencies | ||||||||
Number of petitions challenging the validity of a patent | petition | 2 | |||||||
Number of Unpatentable Claims | 4 | |||||||
Total number of claims | 30 | |||||||
Breach of fiduciary duties | ||||||||
Commitment and Contingencies | ||||||||
Stock option grants attempted (in shares) | shares | 1.5 | |||||||
Stock option grants (in shares) | shares | 0.8 | |||||||
Stock options outstanding (in shares) | shares | 0.8 | |||||||
Technology Development and Licensing, LLC | ||||||||
Commitment and Contingencies | ||||||||
Total number of claims | 53 | |||||||
Number of reexamination petitions pending before the United States Patent and Trademark Office | petition | 2 | |||||||
Number of claims cancelled | 42 |
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