(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
(Address of principal executive offices) | (Zip Code) | |||
Not Applicable | ||||
(Registrant’s telephone number, including area code) | (Former name, former address and former fiscal year, if changed since last report) |
Large accelerated filer | ☐ | Accelerated filer | ☐ | Emerging growth company | |
☒ | Smaller reporting company |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | * |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | * |
Item 3. | Defaults Upon Senior Securities | * |
• | significant risks related to the construction and operation of our satellites, such as the risk of not being able to timely complete the construction of or material malfunction on one or more of our satellites, risks resulting from potentially missing our regulatory milestones, 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 ability to implement and/or realize benefits of our domestic and/or international investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions including, without limitation, the pending BSS Transaction (as defined herein); |
• | lawsuits relating to the BSS Transaction could result in substantial costs and may delay or prevent the BSS Transaction from being consummated at all or on the terms provided for in the Master Transaction Agreement (as defined herein); |
• | the possibility that the BSS Transaction will not be consummated on the terms or timeline currently contemplated, or at all. We have and will continue to expend time and resources of management related to the BSS Transaction regardless of whether the BSS Transaction is consummated; |
• | uncertainty regarding the BSS Transaction may cause customers, suppliers or strategic partners to delay or defer decisions concerning us and adversely affect our ability to effectively manage our business; |
• | if the BSS Transaction is not consummated, our reliance on DISH Network Corporation and its subsidiaries (“DISH Network”) for a significant portion of our revenue; |
• | our ability to realize the anticipated benefits of our current satellites and any future satellite we may construct or acquire; |
• | risks 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; |
• | the failure of third-party providers of components, manufacturing, installation services and customer support services to appropriately deliver the contracted goods or services; and |
• | our ability to bring advanced technologies to market to keep pace with our customers and competitors. |
As of | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
Assets | (Unaudited) | (Audited) | ||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Marketable investment securities, at fair value | ||||||||
Trade accounts receivable and contract assets, net (Note 3) | ||||||||
Trade accounts receivable - DISH Network | ||||||||
Inventory | ||||||||
Prepaids and deposits | ||||||||
Advances to affiliates, net | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Noncurrent assets: | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use assets | — | |||||||
Goodwill | ||||||||
Regulatory authorizations | ||||||||
Other intangible assets, net | ||||||||
Investments in unconsolidated entities | ||||||||
Advances to affiliates | ||||||||
Other noncurrent assets, net | ||||||||
Total noncurrent assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | $ | ||||||
Trade accounts payable - DISH Network | ||||||||
Current portion of long-term debt and finance lease obligations | ||||||||
Advances from affiliates, net | ||||||||
Contract liabilities | ||||||||
Accrued interest | ||||||||
Accrued compensation | ||||||||
Accrued taxes | ||||||||
Accrued expenses and other | ||||||||
Total current liabilities | ||||||||
Noncurrent liabilities: | ||||||||
Long-term debt and finance lease obligations, net | ||||||||
Deferred tax liabilities, net | ||||||||
Operating lease liabilities | — | |||||||
Advances from affiliates, net | ||||||||
Other noncurrent liabilities | ||||||||
Total noncurrent liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 13) | ||||||||
Shareholders’ equity: | ||||||||
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding at each of June 30, 2019 and December 31, 2018 | ||||||||
Common stock, $0.01 par value; 1,000,000 shares authorized, 1,078 shares issued and outstanding at each of June 30, 2019 and December 31, 2018 | ||||||||
Additional paid-in capital | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Accumulated earnings | ||||||||
Total HSS shareholders’ equity | ||||||||
Noncontrolling interests | ||||||||
Total shareholders’ equity | ||||||||
Total liabilities and shareholders’ equity | $ | $ |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue: | ||||||||||||||||
Services and other revenue - DISH Network | $ | $ | $ | |||||||||||||
Services and other revenue - other | ||||||||||||||||
Equipment revenue | ||||||||||||||||
Total revenue | ||||||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | ||||||||||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | ||||||||||||||||
Selling, general and administrative expenses | ||||||||||||||||
Research and development expenses | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Total costs and expenses | ||||||||||||||||
Operating income | ||||||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | ||||||||||||||||
Interest expense, net of amounts capitalized | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Gains (losses) on investments, net | ( | ) | ( | ) | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates, net | ( | ) | ( | ) | ||||||||||||
Other, net | ( | ) | ||||||||||||||
Total other expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income (loss) before income taxes | ( | ) | ||||||||||||||
Income tax benefit (provision), net | ( | ) | ( | ) | ( | ) | ||||||||||
Net income | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | ||||||||||||||||
Net income attributable to HSS | $ | $ | $ | $ | ||||||||||||
Comprehensive income: | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
Unrealized gains (losses) on available-for-sale securities and other | ( | ) | ( | ) | ||||||||||||
Amounts reclassified to net income: | ||||||||||||||||
Realized gains on available-for-sale securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total other comprehensive income (loss), net of tax | ( | ) | ( | ) | ||||||||||||
Comprehensive income | ||||||||||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | ( | ) | ||||||||||||||
Comprehensive income attributable to HSS | $ | $ | $ | $ |
Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Earnings | Noncontrolling Interests | Total | ||||||||||||||||
Balance, March 31, 2018 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Stock-based compensation | — | — | — | |||||||||||||||||
Other comprehensive loss | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||
Net income | — | — | ||||||||||||||||||
Other, net | ( | ) | ( | ) | — | — | ( | ) | ||||||||||||
Balance, June 30, 2018 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Balance, March 31, 2019 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Stock-based compensation | — | — | — | |||||||||||||||||
Other comprehensive income | — | — | — | |||||||||||||||||
Net income | — | — | ||||||||||||||||||
Other, net | ( | ) | — | — | — | ( | ) | |||||||||||||
Balance, June 30, 2019 | $ | $ | ( | ) | $ | $ | $ |
Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Earnings | Noncontrolling Interests | Total | ||||||||||||||||
Balance, December 31, 2017 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Cumulative effect of accounting changes as of January 1, 2018 | — | — | ||||||||||||||||||
Balance, January 1, 2018 | ( | ) | ||||||||||||||||||
Stock-based compensation | — | — | — | |||||||||||||||||
Capital contributions from EchoStar Corporation | — | — | — | |||||||||||||||||
Other comprehensive loss | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||
Net income | — | — | ||||||||||||||||||
Other, net | ( | ) | ( | ) | — | — | ( | ) | ||||||||||||
Balance, June 30, 2018 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Balance, December 31, 2018 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Stock-based compensation | — | — | — | |||||||||||||||||
Purchase of noncontrolling interest | ( | ) | — | — | ( | ) | ( | ) | ||||||||||||
Other comprehensive income | — | — | — | |||||||||||||||||
Net income | — | — | ||||||||||||||||||
Other, net | ( | ) | — | — | — | ( | ) | |||||||||||||
Balance, June 30, 2019 | $ | $ | ( | ) | $ | $ | $ |
For the six months ended June 30, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | $ | ||||||
Adjustments to reconcile net income to net cash flows from operating activities: | ||||||||
Depreciation and amortization | ||||||||
Equity in (earnings) losses of unconsolidated affiliates, net | ( | ) | ||||||
Amortization of debt issuance costs | ||||||||
(Gains) losses on investments, net | ( | ) | ||||||
Stock-based compensation | ||||||||
Deferred tax provision | ||||||||
Dividend received from unconsolidated entity | ||||||||
Changes in current assets and current liabilities, net: | ||||||||
Trade accounts receivable, net | ( | ) | ||||||
Advances to and from affiliates, net | ( | ) | ||||||
Trade accounts receivable - DISH Network | ||||||||
Inventory | ||||||||
Other current assets | ( | ) | ( | ) | ||||
Trade accounts payable | ||||||||
Trade accounts payable - DISH Network | ( | ) | ||||||
Accrued expenses and other | ||||||||
Changes in noncurrent assets and noncurrent liabilities, net | ( | ) | ||||||
Other, net | ( | ) | ||||||
Net cash flows from operating activities | ||||||||
Cash flows from investing activities: | ||||||||
Purchases of marketable investment securities | ( | ) | ( | ) | ||||
Sales and maturities of marketable investment securities | ||||||||
Expenditures for property and equipment | ( | ) | ( | ) | ||||
Refunds and other receipts related to property and equipment | ||||||||
Expenditures for externally marketed software | ( | ) | ( | ) | ||||
Payment for satellite launch services | ( | ) | ||||||
Net cash flows from investing activities | ( | ) | ||||||
Cash flows from financing activities: | ||||||||
Repayment of debt and finance lease obligations | ( | ) | ( | ) | ||||
Repurchase and maturity of debt | ( | ) | ||||||
Purchase of noncontrolling interest | ( | ) | ||||||
Repayment of in-orbit incentive obligations | ( | ) | ( | ) | ||||
Capital contribution from EchoStar Corporation | ||||||||
Proceeds from issuance of debt | ||||||||
Net cash flows from financing activities | ( | ) | ( | ) | ||||
Effect of exchange rates on cash and cash equivalents | ( | ) | ||||||
Net increase (decrease) in cash and cash equivalents, including restricted amounts | ( | ) | ||||||
Cash and cash equivalents, including restricted amounts, beginning of period | ||||||||
Cash and cash equivalents, including restricted amounts, end of period | $ | $ | ||||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest, net of amounts capitalized | $ | $ | ||||||
Cash paid for income taxes | $ | $ |
• | Hughes — which provides broadband satellite technologies and broadband internet services to domestic and international home and small office customers and broadband network technologies, managed services, equipment, hardware, satellite services and communication solutions to domestic and international consumers and aeronautical, enterprise and government customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers. |
• | EchoStar Satellite Services (“ESS”) — which uses certain of our owned and leased in-orbit satellites and related licenses to provide satellite operations and satellite services on a full-time and/or occasional-use basis primarily to DISH Network, Dish Mexico, S. de R.L. de C.V., a joint venture EchoStar entered into in 2008 (“Dish Mexico”), United States (“U.S.”) government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. |
As Reported December 31,2018 | Adoption of ASC 842 Increase (Decrease) | Balance January 1, 2019 | ||||||||||
Prepaids and deposits | $ | $ | ( | ) | $ | |||||||
Operating lease right-of-use assets | $ | — | $ | $ | ||||||||
Other noncurrent assets, net | $ | $ | ( | ) | $ | |||||||
Total assets | $ | $ | $ | |||||||||
Accrued expenses and other | $ | $ | $ | |||||||||
Operating lease liabilities | $ | — | $ | $ | ||||||||
Other noncurrent liabilities | $ | $ | ( | ) | $ | |||||||
Total liabilities | $ | $ | $ | |||||||||
Total liabilities and shareholders’ equity | $ | $ | $ |
As of | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
Trade accounts receivable: | ||||||||
Sales and services | $ | $ | ||||||
Leasing | ||||||||
Total | ||||||||
Contract assets | ||||||||
Allowance for doubtful accounts | ( | ) | ( | ) | ||||
Total trade accounts receivable and contract assets, net | $ | $ | ||||||
Trade accounts receivable - DISH Network: | ||||||||
Sales and services | $ | $ | ||||||
Leasing | ||||||||
Total trade accounts receivable - DISH Network, net | $ | $ | ||||||
Contract liabilities: | ||||||||
Current | $ | $ | ||||||
Noncurrent | ||||||||
Total contract liabilities | $ | $ |
Hughes | ESS | Corporate and Other | Consolidated Total | |||||||||||||
For the three months ended June 30, 2019 | ||||||||||||||||
North America | $ | $ | $ | $ | ||||||||||||
South and Central America | ||||||||||||||||
All other | ||||||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
For the three months ended June 30, 2018 | ||||||||||||||||
North America | $ | $ | $ | $ | ||||||||||||
South and Central America | ||||||||||||||||
All other | ||||||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
For the six months ended June 30, 2019 | ||||||||||||||||
North America | $ | $ | $ | $ | ||||||||||||
South and Central America | ||||||||||||||||
All other | ||||||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
For the six months ended June 30, 2018 | ||||||||||||||||
North America | $ | $ | $ | $ | ||||||||||||
South and Central America | ||||||||||||||||
All other | ||||||||||||||||
Total revenue | $ | $ | $ | $ |
Hughes | ESS | Corporate and Other | Consolidated Total | |||||||||||||
For the three months ended June 30, 2019 | ||||||||||||||||
Equipment | $ | $ | $ | $ | ||||||||||||
Services | ||||||||||||||||
Design, development and construction services | ||||||||||||||||
Revenue from sales and services | ||||||||||||||||
Lease revenue | ||||||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
For the three months ended June 30, 2018 | ||||||||||||||||
Equipment | $ | $ | $ | $ | ||||||||||||
Services | ||||||||||||||||
Design, development and construction services | ||||||||||||||||
Revenue from sales and services | ||||||||||||||||
Lease revenue | ||||||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
For the six months ended June 30, 2019 | ||||||||||||||||
Equipment | $ | $ | $ | $ | ||||||||||||
Services | ||||||||||||||||
Design, development and construction services | ||||||||||||||||
Revenue from sales and services | ||||||||||||||||
Lease revenue | ||||||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
For the six months ended June 30, 2018 | ||||||||||||||||
Equipment | $ | $ | $ | $ | ||||||||||||
Services | ||||||||||||||||
Design, development and construction services | ||||||||||||||||
Revenue from sales and services | ||||||||||||||||
Lease revenue | ||||||||||||||||
Total revenue | $ | $ | $ | $ |
As of June 30, 2019 | ||||
Right-of-use assets: | ||||
Operating | $ | |||
Finance | ||||
Total right-of-use assets | $ | |||
Lease liabilities: | ||||
Current: | ||||
Operating | $ | |||
Finance | ||||
Noncurrent: | ||||
Operating | ||||
Finance | ||||
Total lease liabilities | $ |
For the three months ended June 30, 2019 | For the six months ended June 30, 2019 | |||||||
Lease cost: | ||||||||
Operating lease cost | $ | $ | ||||||
Finance lease cost: | ||||||||
Amortization of right-of-use assets | ||||||||
Interest on lease liabilities | ||||||||
Short-term lease cost | ||||||||
Variable lease cost | ||||||||
Total lease cost | $ | $ |
As of June 30, 2019 | |||
Lease term and discount rate: | |||
Weighted average remaining lease term (in years): | |||
Finance leases | |||
Operating leases | |||
Weighted average discount rate: | |||
Finance leases | % | ||
Operating leases | % |
For the three months ended June 30, 2019 | For the six months ended June 30, 2019 | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows from operating leases | $ | $ | ||||||
Operating cash flows from finance leases | $ | $ | ||||||
Financing cash flows from finance leases | $ | $ |
Operating Leases | Finance Leases | Total | ||||||||||
Year ending December 31, | ||||||||||||
2019 (remainder) | $ | $ | $ | |||||||||
2020 | ||||||||||||
2021 | ||||||||||||
2022 | ||||||||||||
2023 | ||||||||||||
After 2023 | ||||||||||||
Total lease payments | ||||||||||||
Less: Interest | ( | ) | ( | ) | ( | ) | ||||||
Present value of lease liabilities | $ | $ | $ |
Amounts | ||||
Year ending December 31, | ||||
2019 | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
Thereafter | ||||
Total | $ |
For the three months ended June 30, 2019 | For the six months ended June 30, 2019 | |||||||
Sales-type lease revenue: | ||||||||
Revenue at lease commencement | $ | $ | ||||||
Interest income | ||||||||
Operating lease revenue | ||||||||
Total lease revenue | $ | $ |
Amounts | ||||
Year ending December 31, | ||||
2019 (remainder) | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
After 2023 | ||||
Total lease payments | $ |
As of June 30, 2019 | For the three months ended June 30, 2019 | For the six months ended June 30, 2019 | ||||||||||||||||||
Cost | Accumulated Depreciation | Net | Depreciation Expense | |||||||||||||||||
Customer premises equipment | $ | $ | $ | $ | $ | |||||||||||||||
Satellites | ||||||||||||||||||||
Real estate | ||||||||||||||||||||
Total | $ | $ | $ | $ | $ |
Cumulative Foreign Currency Translation Losses | Unrealized Gain (Loss) On Available-For-Sale Securities | Other | Accumulated Other Comprehensive Loss | |||||||||||||
Balance, December 31, 2017 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Cumulative effect of accounting changes as of January 1, 2018 | ||||||||||||||||
Balance, January 1, 2018 | ( | ) | ( | ) | ( | ) | ||||||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ( | ) | ( | ) | ||||||||||
Amounts reclassified to net income | ( | ) | ( | ) | ||||||||||||
Other comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
Balance, June 30, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Balance, December 31, 2018 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Other comprehensive income (loss) before reclassifications | ( | ) | ||||||||||||||
Amounts reclassified to net income | ( | ) | ( | ) | ||||||||||||
Other comprehensive income (loss) | ( | ) | ||||||||||||||
Balance, June 30, 2019 | $ | ( | ) | $ | $ | $ | ( | ) |
As of | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
Marketable investment securities: | ||||||||
Debt securities: | ||||||||
Corporate bonds | $ | $ | ||||||
Other debt securities | ||||||||
Total debt securities | ||||||||
Equity securities | ||||||||
Total marketable investment securities | $ | $ |
Amortized | Unrealized | Estimated | ||||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
As of June 30, 2019 | ||||||||||||||||
Corporate bonds | $ | $ | $ | ( | ) | $ | ||||||||||
Other debt securities | ||||||||||||||||
Total available-for-sale debt securities | $ | $ | $ | ( | ) | $ | ||||||||||
As of December 31, 2018 | ||||||||||||||||
Corporate bonds | $ | $ | $ | ( | ) | $ | ||||||||||
Other debt securities | ||||||||||||||||
Total available-for-sale debt securities | $ | $ | $ | ( | ) | $ |
As of | ||||||||||||||||||||||||
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||||
Level 1 | Level 2 | Total | Level 1 | Level 2 | Total | |||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||
Corporate bonds | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Other debt securities | ||||||||||||||||||||||||
Total debt securities | ||||||||||||||||||||||||
Equity securities | ||||||||||||||||||||||||
Total marketable investment securities | $ | $ | $ | $ | $ | $ |
As of | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
Raw materials | $ | $ | ||||||
Work-in-process | ||||||||
Finished goods | ||||||||
Total inventory | $ | $ |
Depreciable Life In Years | As of | |||||||||
June 30, 2019 | December 31, 2018 | |||||||||
Land | — | $ | $ | |||||||
Buildings and improvements | 1 to 40 | |||||||||
Furniture, fixtures, equipment and other | 1 to 12 | |||||||||
Customer premises equipment | 2 to 4 | |||||||||
Satellites - owned | 2 to 15 | |||||||||
Satellites - acquired under finance leases | 10 to 15 | |||||||||
Construction in progress | — | |||||||||
Total property and equipment | ||||||||||
Accumulated depreciation | ( | ) | ( | ) | ||||||
Property and equipment, net | $ | $ |
As of | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
Progress amounts for satellite construction | $ | $ | ||||||
Satellite related equipment | ||||||||
Other | ||||||||
Construction in progress | $ | $ |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Buildings and improvements | $ | $ | $ | $ | ||||||||||||
Furniture, fixtures, equipment and other | ||||||||||||||||
Customer premises equipment | ||||||||||||||||
Satellites | ||||||||||||||||
Total depreciation expense | $ | $ | $ | $ |
As of | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
Investments in unconsolidated entities: | ||||||||
Equity method | $ | $ | ||||||
Other equity investments without a readily determinable fair value | ||||||||
Total investments in unconsolidated entities | $ | $ |
Effective Interest Rate | As of | |||||||||||||||||
June 30, 2019 | December 31, 2018 | |||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||
Senior Secured Notes: | ||||||||||||||||||
6 1/2% Senior Secured Notes due 2019 | $ | $ | $ | $ | ||||||||||||||
5 1/4% Senior Secured Notes due 2026 | ||||||||||||||||||
Senior Unsecured Notes: | ||||||||||||||||||
7 5/8% Senior Unsecured Notes due 2021 | ||||||||||||||||||
6 5/8% Senior Unsecured Notes due 2026 | ||||||||||||||||||
Less: Unamortized debt issuance costs | ( | ) | — | ( | ) | — | ||||||||||||
Subtotal | $ | $ | ||||||||||||||||
Finance lease obligations | ||||||||||||||||||
Total debt and finance lease obligations | ||||||||||||||||||
Less: Current portion | ( | ) | ( | ) | ||||||||||||||
Long-term debt and finance lease obligations, net | $ | $ |
Hughes | ESS | Corporate and Other | Consolidated Total | |||||||||||||
For the three months ended June 30, 2019 | ||||||||||||||||
External revenue | $ | $ | $ | $ | ||||||||||||
Intersegment revenue | ( | ) | — | |||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
EBITDA | $ | $ | $ | ( | ) | $ | ||||||||||
Capital expenditures | $ | $ | $ | $ | ||||||||||||
For the three months ended June 30, 2018 | ||||||||||||||||
External revenue | $ | $ | $ | $ | ||||||||||||
Intersegment revenue | ( | ) | — | |||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
EBITDA | $ | $ | $ | $ | ||||||||||||
Capital expenditures | $ | $ | $ | $ | ||||||||||||
For the six months ended June 30, 2019 | ||||||||||||||||
External revenue | $ | $ | $ | $ | ||||||||||||
Intersegment revenue | ( | ) | — | |||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
EBITDA | $ | $ | $ | ( | ) | $ | ||||||||||
Capital expenditures | $ | $ | $ | $ | ||||||||||||
For the six months ended June 30, 2018 | ||||||||||||||||
External revenue | $ | $ | $ | $ | ||||||||||||
Intersegment revenue | ( | ) | — | |||||||||||||
Total revenue | $ | $ | $ | $ | ||||||||||||
EBITDA | $ | $ | $ | ( | ) | $ | ||||||||||
Capital expenditures | $ | $ | ( | ) | $ | $ |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
EBITDA | $ | $ | $ | $ | ||||||||||||
Interest income and expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Depreciation and amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net income attributable to noncontrolling interests | ||||||||||||||||
Income (loss) before income taxes | $ | ( | ) | $ | $ | $ |
HSS | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
Marketable investment securities, at fair value | ||||||||||||||||||||
Trade accounts receivable and contract assets | ||||||||||||||||||||
Trade accounts receivable - DISH Network | ||||||||||||||||||||
Inventory | ||||||||||||||||||||
Advances to affiliates, net | ( | ) | ||||||||||||||||||
Other current assets | ||||||||||||||||||||
Total current assets | ( | ) | ||||||||||||||||||
Property and equipment, net | ||||||||||||||||||||
Operating lease right-of-use assets | ||||||||||||||||||||
Goodwill | ||||||||||||||||||||
Regulatory authorizations | ||||||||||||||||||||
Other intangible assets, net | ||||||||||||||||||||
Investments in unconsolidated entities | ||||||||||||||||||||
Investment in subsidiaries | ( | ) | ||||||||||||||||||
Advances to affiliates | ( | ) | ||||||||||||||||||
Deferred tax asset | ( | ) | ||||||||||||||||||
Other noncurrent assets, net | ||||||||||||||||||||
Total assets | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||
Trade accounts payable | $ | $ | $ | $ | $ | |||||||||||||||
Trade accounts payable - DISH Network | ||||||||||||||||||||
Current portion of long-term debt and finance lease obligations | ||||||||||||||||||||
Advances from affiliates, net | ( | ) | ||||||||||||||||||
Accrued expenses and other | ||||||||||||||||||||
Total current liabilities | ( | ) | ||||||||||||||||||
Long-term debt and finance lease obligations, net | ||||||||||||||||||||
Deferred tax liabilities, net | ( | ) | ||||||||||||||||||
Operating lease liabilities | ||||||||||||||||||||
Advances from affiliates, net | ( | ) | ||||||||||||||||||
Other noncurrent liabilities | ||||||||||||||||||||
Total HSS shareholders’ equity | ( | ) | ||||||||||||||||||
Noncontrolling interests | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | $ | $ | $ | ( | ) | $ |
HSS | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
Marketable investment securities, at fair value | ||||||||||||||||||||
Trade accounts receivable and contract assets | ||||||||||||||||||||
Trade accounts receivable - DISH Network | ||||||||||||||||||||
Inventory | ||||||||||||||||||||
Advances to affiliates, net | ( | ) | ||||||||||||||||||
Other current assets | ( | ) | ||||||||||||||||||
Total current assets | ( | ) | ||||||||||||||||||
Property and equipment, net | ||||||||||||||||||||
Goodwill | ||||||||||||||||||||
Regulatory authorizations | ||||||||||||||||||||
Other intangible assets, net | ||||||||||||||||||||
Investments in unconsolidated entities | ||||||||||||||||||||
Investment in subsidiaries | ( | ) | ||||||||||||||||||
Advances to affiliates | ( | ) | ||||||||||||||||||
Deferred tax asset | ( | ) | ||||||||||||||||||
Other noncurrent assets, net | ||||||||||||||||||||
Total assets | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||
Trade accounts payable | $ | $ | $ | $ | $ | |||||||||||||||
Trade accounts payable - DISH Network | ||||||||||||||||||||
Current portion of long-term debt and finance lease obligations | ||||||||||||||||||||
Advances from affiliates, net | ( | ) | ||||||||||||||||||
Accrued expenses and other | ( | ) | ||||||||||||||||||
Total current liabilities | ( | ) | ||||||||||||||||||
Long-term debt and finance lease obligations, net | ||||||||||||||||||||
Deferred tax liabilities, net | ( | ) | ||||||||||||||||||
Advances from affiliates, net | ( | ) | ||||||||||||||||||
Other noncurrent liabilities | ||||||||||||||||||||
Total HSS shareholders’ equity | ( | ) | ||||||||||||||||||
Noncontrolling interests | ||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | $ | $ | $ | ( | ) | $ |
HSS | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||
Revenue: | ||||||||||||||||||||
Services and other revenue - DISH Network | $ | $ | $ | $ | $ | |||||||||||||||
Services and other revenue - other | ( | ) | ||||||||||||||||||
Equipment revenue | ( | ) | ||||||||||||||||||
Total revenue | ( | ) | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | ( | ) | ||||||||||||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | ( | ) | ||||||||||||||||||
Selling, general and administrative expenses | ( | ) | ||||||||||||||||||
Research and development expenses | ||||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||
Total costs and expenses | ( | ) | ||||||||||||||||||
Operating income (loss) | ( | ) | ( | ) | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | ( | ) | ||||||||||||||||||
Interest expense, net of amounts capitalized | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Gains (losses) on investments, net | ( | ) | ( | ) | ||||||||||||||||
Equity in losses of unconsolidated affiliates, net | ( | ) | ( | ) | ||||||||||||||||
Equity in earnings (losses) of subsidiaries, net | ( | ) | ( | ) | ||||||||||||||||
Other, net | ( | ) | ||||||||||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Income tax benefit (provision) | ( | ) | ( | ) | ||||||||||||||||
Net income (loss) | ( | ) | ( | ) | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | ||||||||||||||||||||
Net income (loss) attributable to HSS | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Comprehensive income (loss): | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustments | ||||||||||||||||||||
Unrealized gains on available-for-sale securities and other | ( | ) | ( | ) | ( | ) | ||||||||||||||
Equity in other comprehensive income (loss) of subsidiaries, net | ( | ) | ||||||||||||||||||
Amounts reclassified to net income (loss): | ||||||||||||||||||||
Realized gains on available-for-sale securities | ( | ) | ( | ) | ||||||||||||||||
Total other comprehensive income (loss), net of tax | ( | ) | ||||||||||||||||||
Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests | ||||||||||||||||||||
Comprehensive income (loss) attributable to HSS | $ | $ | $ | ( | ) | $ | ( | ) | $ |
HSS | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||
Revenue: | ||||||||||||||||||||
Services and other revenue - DISH Network | $ | $ | $ | $ | $ | |||||||||||||||
Services and other revenue - other | ( | ) | ||||||||||||||||||
Equipment revenue | ( | ) | ||||||||||||||||||
Total revenue | ( | ) | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | ( | ) | ||||||||||||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | ( | ) | ||||||||||||||||||
Selling, general and administrative expenses | ( | ) | ||||||||||||||||||
Research and development expenses | ||||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||
Total costs and expenses | ( | ) | ||||||||||||||||||
Operating income (loss) | ( | ) | ||||||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | ( | ) | ||||||||||||||||||
Interest expense, net of amounts capitalized | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Gains (losses) on investments, net | ||||||||||||||||||||
Equity in earnings of unconsolidated affiliates, net | ||||||||||||||||||||
Equity in earnings (losses) of subsidiaries, net | ( | ) | ( | ) | ||||||||||||||||
Other, net | ( | ) | ||||||||||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||||||
Income tax benefit (provision) | ( | ) | ( | ) | ||||||||||||||||
Net income (loss) | ( | ) | ( | ) | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | ||||||||||||||||||||
Net income (loss) attributable to HSS | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Comprehensive income (loss): | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||||||
Unrealized gains on available-for-sale securities and other | ( | ) | ||||||||||||||||||
Equity in other comprehensive income (loss) of subsidiaries, net | ( | ) | ( | ) | ||||||||||||||||
Amounts reclassified to net income (loss): | ||||||||||||||||||||
Realized gains on available-for-sale securities | ( | ) | ( | ) | ||||||||||||||||
Total other comprehensive income (loss), net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||||||
Less: Comprehensive loss attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||
Comprehensive income (loss) attributable to HSS | $ | $ | $ | ( | ) | $ | ( | ) | $ |
HSS | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||
Revenue: | ||||||||||||||||||||
Services and other revenue - DISH Network | $ | $ | $ | $ | $ | |||||||||||||||
Services and other revenue - other | ( | ) | ||||||||||||||||||
Equipment revenue | ( | ) | ||||||||||||||||||
Total revenue | ( | ) | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | ( | ) | ||||||||||||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | ( | ) | ||||||||||||||||||
Selling, general and administrative expenses | ( | ) | ||||||||||||||||||
Research and development expenses | ||||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||
Total costs and expenses | ( | ) | ||||||||||||||||||
Operating income (loss) | ( | ) | ( | ) | ||||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | ( | ) | ||||||||||||||||||
Interest expense, net of amounts capitalized | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Gains (losses) on investments, net | ( | ) | ( | ) | ||||||||||||||||
Equity in losses of unconsolidated affiliates, net | ( | ) | ( | ) | ||||||||||||||||
Equity in earnings (losses) of subsidiaries, net | ( | ) | ( | ) | ||||||||||||||||
Other, net | ( | ) | ( | ) | ||||||||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||||||
Income tax benefit (provision) | ( | ) | ( | ) | ( | ) | ||||||||||||||
Net income (loss) | ( | ) | ( | ) | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | ||||||||||||||||||||
Net income (loss) attributable to HSS | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Comprehensive income (loss): | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustments | ||||||||||||||||||||
Unrealized gains (losses) on available-for-sale securities and other | ( | ) | ||||||||||||||||||
Equity in other comprehensive income (loss) of subsidiaries, net | ( | ) | ||||||||||||||||||
Amounts reclassified to net income (loss): | ||||||||||||||||||||
Realized gains on available-for-sale securities | ( | ) | ( | ) | ||||||||||||||||
Total other comprehensive income (loss), net of tax | ( | ) | ||||||||||||||||||
Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests | ||||||||||||||||||||
Comprehensive income (loss) attributable to HSS | $ | $ | $ | ( | ) | $ | ( | ) | $ |
HSS | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||
Revenue: | ||||||||||||||||||||
Services and other revenue - DISH Network | $ | $ | $ | $ | $ | |||||||||||||||
Services and other revenue - other | ( | ) | ||||||||||||||||||
Equipment revenue | ( | ) | ||||||||||||||||||
Total revenue | ( | ) | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | ( | ) | ||||||||||||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | ( | ) | ||||||||||||||||||
Selling, general and administrative expenses | ( | ) | ||||||||||||||||||
Research and development expenses | ||||||||||||||||||||
Depreciation and amortization | ||||||||||||||||||||
Total costs and expenses | ( | ) | ||||||||||||||||||
Operating income (loss) | ( | ) | ||||||||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | ( | ) | ||||||||||||||||||
Interest expense, net of amounts capitalized | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Gains (losses) on investments, net | ||||||||||||||||||||
Equity in earnings of unconsolidated affiliates, net | ||||||||||||||||||||
Equity in earnings (losses) of subsidiaries, net | ( | ) | ( | ) | ||||||||||||||||
Other, net | ( | ) | ( | ) | ||||||||||||||||
Total other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||||||
Income tax benefit (provision) | ( | ) | ( | ) | ||||||||||||||||
Net income (loss) | ( | ) | ( | ) | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | ||||||||||||||||||||
Net income (loss) attributable to HSS | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Comprehensive income (loss): | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||||||
Unrealized gains (losses) on available-for-sale securities and other | ( | ) | ( | ) | ||||||||||||||||
Equity in other comprehensive income (loss) of subsidiaries, net | ( | ) | ( | ) | ||||||||||||||||
Amounts reclassified to net income (loss): | ||||||||||||||||||||
Realized gains on available-for-sale securities | ( | ) | ( | ) | ||||||||||||||||
Total other comprehensive income (loss), net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||||||
Less: Comprehensive income attributable to noncontrolling interests | ||||||||||||||||||||
Comprehensive income (loss) attributable to HSS | $ | $ | $ | ( | ) | $ | ( | ) | $ |
HSS | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Adjustments to reconcile net income (loss) to net cash flows from operating activities | ( | ) | ||||||||||||||||||
Net cash flows from operating activities | ( | ) | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Purchases of marketable investment securities | ( | ) | ( | ) | ||||||||||||||||
Sales and maturities of marketable investment securities | ( | ) | ||||||||||||||||||
Expenditures for property and equipment | ( | ) | ( | ) | ( | ) | ||||||||||||||
Expenditures for externally marketed software | ( | ) | ( | ) | ||||||||||||||||
Distributions (contributions) and advances from (to) subsidiaries, net | ( | ) | ( | ) | ||||||||||||||||
Net cash flows from investing activities | ( | ) | ( | ) | ( | ) | ||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Repayment of debt and finance lease obligations | ( | ) | ( | ) | ( | ) | ||||||||||||||
Repurchase and maturity of debt | ( | ) | ( | ) | ||||||||||||||||
Purchase of noncontrolling interest | ( | ) | ( | ) | ( | ) | ||||||||||||||
Repayment of in-orbit incentive obligations | ( | ) | ( | ) | ||||||||||||||||
Contributions (distributions) and advances (to) from parent, net | ( | ) | ||||||||||||||||||
Proceeds from issuance of debt | ||||||||||||||||||||
Net cash flows from financing activities | ( | ) | ( | ) | ( | ) | ||||||||||||||
Effect of exchange rates on cash and cash equivalents | ||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents, including restricted amounts | ( | ) | ||||||||||||||||||
Cash and cash equivalents, including restricted amounts, beginning of period | ||||||||||||||||||||
Cash and cash equivalents, including restricted amounts, end of period | $ | $ | $ | $ | $ |
HSS | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Total | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income (loss) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||
Adjustments to reconcile net income (loss) to net cash flows from operating activities | ( | ) | ||||||||||||||||||
Net cash flows from operating activities | ( | ) | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Purchases of marketable investment securities | ( | ) | ( | ) | ||||||||||||||||
Sales and maturities of marketable investment securities | ||||||||||||||||||||
Expenditures for property and equipment | ( | ) | ( | ) | ( | ) | ||||||||||||||
Refunds and other receipts related to property and equipment | ||||||||||||||||||||
Expenditures for externally marketed software | ( | ) | ( | ) | ||||||||||||||||
Payment for satellite launch services | ( | ) | ( | ) | ||||||||||||||||
Distributions (contributions) and advances from (to) subsidiaries, net | ( | ) | ( | ) | ||||||||||||||||
Net cash flows from investing activities | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Repayment of debt and finance lease obligations | ( | ) | ( | ) | ( | ) | ||||||||||||||
Repayment of in-orbit incentive obligations | ( | ) | ( | ) | ||||||||||||||||
Capital contribution from EchoStar Corporation | ||||||||||||||||||||
Contributions (distributions) and advances (to) from parent, net | ( | ) | ||||||||||||||||||
Net cash flows from financing activities | ( | ) | ( | ) | ||||||||||||||||
Effect of exchange rates on cash and cash equivalents | ( | ) | ( | ) | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents, including restricted amounts | ( | ) | ( | ) | ( | ) | ||||||||||||||
Cash and cash equivalents, including restricted amounts, beginning of period | ||||||||||||||||||||
Cash and cash equivalents, including restricted amounts, end of period | $ | $ | $ | $ | $ |
For the six months ended June 30, | ||||||||
2019 | 2018 | |||||||
Increase (decrease) in capital expenditures included in accounts payable, net | $ | ( | ) | $ | ( | ) |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Cost of sales | $ | $ | $ | $ | ||||||||||||
Research and development | $ | $ | $ | $ |
• | Revenue of $1.1 billion |
• | Operating income of $129 million |
• | Net income of $25 million |
• | Net income attributable to HSS of $23 million |
• | Earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $415 million (see reconciliation of this non-GAAP measure on page 58) |
• | Total assets of $6.1 billion |
• | Total liabilities of $3.7 billion |
• | Total shareholders’ equity of $2.4 billion |
• | Cash, cash equivalents and current marketable investment securities of $1.7 billion |
As of | |||||||||
June 30, 2019 | March 31, 2019 | December 31, 2018 | |||||||
Broadband subscribers | 1,415,000 | 1,388,000 | 1,361,000 |
For the three months ended | ||||||
June 30, 2019 | March 31, 2019 | |||||
Net additions | 26,000 | 28,000 |
For the six months ended June 30, | Variance | ||||||||||||||
Statements of Operations Data (1) | 2019 | 2018 | Amount | % | |||||||||||
Revenue: | |||||||||||||||
Services and other revenue - DISH Network | $ | 163,919 | $ | 197,754 | $ | (33,835 | ) | (17.1 | ) | ||||||
Services and other revenue - other | 797,606 | 739,449 | 58,157 | 7.9 | |||||||||||
Equipment revenue | 109,359 | 93,288 | 16,071 | 17.2 | |||||||||||
Total revenue | 1,070,884 | 1,030,491 | 40,393 | 3.9 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of sales - services and other | 304,194 | 297,878 | 6,316 | 2.1 | |||||||||||
% of total services and other revenue | 31.6 | % | 31.8 | % | |||||||||||
Cost of sales - equipment | 91,556 | 80,936 | 10,620 | 13.1 | |||||||||||
% of total equipment revenue | 83.7 | % | 86.8 | % | |||||||||||
Selling, general and administrative expenses | 244,212 | 188,025 | 56,187 | 29.9 | |||||||||||
% of total revenue | 22.8 | % | 18.2 | % | |||||||||||
Research and development expenses | 13,276 | 13,784 | (508 | ) | (3.7 | ) | |||||||||
% of total revenue | 1.2 | % | 1.3 | % | |||||||||||
Depreciation and amortization | 288,276 | 270,426 | 17,850 | 6.6 | |||||||||||
Total costs and expenses | 941,514 | 851,049 | 90,465 | 10.6 | |||||||||||
Operating income | 129,370 | 179,442 | (50,072 | ) | (27.9 | ) | |||||||||
Other income (expense): | |||||||||||||||
Interest income | 35,041 | 25,665 | 9,376 | 36.5 | |||||||||||
Interest expense, net of amounts capitalized | (129,626 | ) | (128,535 | ) | 1,091 | 0.8 | |||||||||
Gains (losses) on investments, net | (360 | ) | 117 | (477 | ) | * | |||||||||
Other, net | (920 | ) | 2,584 | (3,504 | ) | * | |||||||||
Total other expense, net | (95,865 | ) | (100,169 | ) | 4,304 | (4.3 | ) | ||||||||
Income before income taxes | 33,505 | 79,273 | (45,768 | ) | (57.7 | ) | |||||||||
Income tax provision, net | (8,864 | ) | (18,199 | ) | 9,335 | (51.3 | ) | ||||||||
Net income | 24,641 | 61,074 | (36,433 | ) | (59.7 | ) | |||||||||
Less: Net income attributable to noncontrolling interests | 1,438 | 842 | 596 | 70.8 | |||||||||||
Net income attributable to HSS | $ | 23,203 | $ | 60,232 | $ | (37,029 | ) | (61.5 | ) | ||||||
Other data: | |||||||||||||||
EBITDA (2) | $ | 414,928 | $ | 451,727 | $ | (36,799 | ) | (8.1 | ) | ||||||
Subscribers, end of period | 1,415,000 | 1,298,000 | 117,000 | 9.0 |
(1) | An explanation of our key metrics is included on pages 60 and 61 under the heading Explanation of Key Metrics and Other Items. |
(2) | A reconciliation of EBITDA to Net income, the most directly comparable generally accepted accounting principles (“U.S. GAAP”) measure in the accompanying financial statements, is included on page 58. For further information on our use of EBITDA, see Explanation of Key Metrics and Other Items on page 61. |
Amounts | ||||
Net income attributable to HSS for the six months ended June 30, 2018 | $ | 60,232 | ||
Decrease in operating income, including depreciation and amortization | (50,072 | ) | ||
Decrease in gains on investments, net | (477 | ) | ||
Decrease in other income | (3,504 | ) | ||
Increase in interest income | 9,376 | |||
Increase in interest expense, net of amounts capitalized | (1,091 | ) | ||
Decrease in income tax provision | 9,335 | |||
Increase in net income attributable to noncontrolling interests | (596 | ) | ||
Net income attributable to HSS for the six months ended June 30, 2019 | $ | 23,203 |
For the six months ended June 30, | Variance | ||||||||||||||
2019 | 2018 | Amount | % | ||||||||||||
Net income | $ | 24,641 | $ | 61,074 | $ | (36,433 | ) | (59.7 | ) | ||||||
Interest income and expense, net | 94,585 | 102,870 | (8,285 | ) | (8.1 | ) | |||||||||
Income tax provision, net | 8,864 | 18,199 | (9,335 | ) | (51.3 | ) | |||||||||
Depreciation and amortization | 288,276 | 270,426 | 17,850 | 6.6 | |||||||||||
Net income attributable to noncontrolling interests | (1,438 | ) | (842 | ) | (596 | ) | (70.8 | ) | |||||||
EBITDA | $ | 414,928 | $ | 451,727 | $ | (36,799 | ) | (8.1 | ) |
Hughes | ESS | Corporate and Other | Consolidated Total | |||||||||||||
For the six months ended June 30, 2019 | ||||||||||||||||
Total revenue | $ | 897,184 | $ | 162,220 | $ | 11,480 | $ | 1,070,884 | ||||||||
Capital expenditures | $ | 147,911 | $ | 244 | $ | — | $ | 148,155 | ||||||||
EBITDA | $ | 292,897 | $ | 136,891 | $ | (14,860 | ) | $ | 414,928 | |||||||
For the six months ended June 30, 2018 | ||||||||||||||||
Total revenue | $ | 827,124 | $ | 192,178 | $ | 11,189 | $ | 1,030,491 | ||||||||
Capital expenditures | $ | 174,802 | $ | (76,682 | ) | $ | — | $ | 98,120 | |||||||
EBITDA | $ | 288,847 | $ | 166,633 | $ | (3,753 | ) | $ | 451,727 |
For the six months ended June 30, | Variance | ||||||||||||||
2019 | 2018 | Amount | % | ||||||||||||
Total revenue | $ | 897,184 | $ | 827,124 | $ | 70,060 | 8.5 | ||||||||
Capital expenditures | $ | 147,911 | $ | 174,802 | $ | (26,891 | ) | (15.4 | ) | ||||||
EBITDA | $ | 292,897 | $ | 288,847 | $ | 4,050 | 1.4 |
For the six months ended June 30, | Variance | ||||||||||||||
2019 | 2018 | Amount | % | ||||||||||||
Total revenue | $ | 162,220 | $ | 192,178 | $ | (29,958 | ) | (15.6 | ) | ||||||
Capital expenditures | $ | 244 | $ | (76,682 | ) | $ | 76,926 | * | |||||||
EBITDA | $ | 136,891 | $ | 166,633 | $ | (29,742 | ) | (17.8 | ) |
For the six months ended June 30, | Variance | |||||||||||||
2019 | 2018 | Amount | % | |||||||||||
Total revenue | $ | 11,480 | $ | 11,189 | $ | 291 | 2.6 | |||||||
EBITDA | $ | (14,860 | ) | $ | (3,753 | ) | $ | (11,107 | ) | * |
• | the required governmental consents having been received and the required governmental notices that are required to be submitted prior to the closing having been filed; |
• | the absence of any governmental action or proceeding (a) challenging or seeking to make illegal or otherwise prohibit, directly or indirectly, the consummation of the BSS Transaction, or (b) directly involving EchoStar, BSS Corp., DISH or Merger Sub or any of their affiliates that would reasonably be expected to materially impair DISH or Merger Sub’s ability to own or operate the BSS Business and conduct the business as currently conducted; |
• | the absence of any governmental order prohibiting the consummation of the BSS Transaction; |
• | the absence of any laws or orders enjoining the consummation of the BSS Transaction; |
• | the DISH registration statement having become effective under the Securities Act of 1933, as amended, and a prospectus or any other required SEC filings having been disseminated to EchoStar stockholders; |
• | DISH Network having filed with the NASDAQ a notification form for the listing of all DISH Common Stock to be issued to BSS Corp. stockholders in the Merger, and NASDAQ not having objected to the listing of such DISH Common Stock; |
• | certain consents with respect to the operation of the EchoStar XXIII satellite having been obtained; and |
• | other customary conditions. |
Exhibit No. | Description | |
101.INS | XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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. |
* | Incorporated by reference. |
** | Constitutes a management contract or compensatory plan or arrangement. |
HUGHES SATELLITE SYSTEMS CORPORATION | ||
Date: August 8, 2019 | By: | /s/ Michael T. Dugan |
Michael T. Dugan | ||
Chief Executive Officer, President and Director | ||
(Principal Executive Officer) | ||
Date: August 8, 2019 | By: | /s/ David J. Rayner |
David J. Rayner | ||
Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer | ||
(Principal Financial and Accounting Officer) |
AMERICAS 99681479 |
Page | ||
ARTICLE I ECHOSTAR PRE-CLOSING RESTRUCTURING; TRANSFERRED ASSETS AND RETAINED ASSETS; PRE-CLOSING DISTRIBUTION OF NEWCO SHARES | 2 | |
Section 1.1 The EchoStar Pre-Closing Restructuring | 2 | |
Section 1.2 Implementation | 2 | |
Section 1.3 Transactions To Be Effected Prior to the Closing | 2 | |
Section 1.4 Transferred Assets; Retained Assets | 3 | |
Section 1.5 Assumed Liabilities; Excluded Liabilities | 4 | |
Section 1.6 Assumed and Excluded Liabilities | 6 | |
Section 1.7 Asset Reallocation or Adjustment | 6 | |
Section 1.8 Consents | 7 | |
Section 1.9 Distribution of Newco Shares to Existing EchoStar Stockholders | 8 | |
ARTICLE II THE MERGER | 10 | |
Section 2.1 Closing Date | 10 | |
Section 2.2 The Closing | 10 | |
Section 2.3 Effective Time | 10 | |
Section 2.4 Closing Deliverables | 10 | |
Section 2.5 Tax Consequences | 11 | |
ARTICLE III CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION | 11 | |
Section 3.1 Certificate of Incorporation | 11 | |
Section 3.2 The By-laws | 11 | |
Section 3.3 Directors | 11 | |
Section 3.4 Officers | 11 | |
ARTICLE IV EFFECT OF THE MERGER ON CAPITAL STOCK | 11 | |
Section 4.1 Effect on Capital Stock of Newco | 11 | |
Section 4.2 Exchange of Certificates and Book Entry Shares | 12 | |
Section 4.3 Appraisal Rights | 14 | |
Section 4.4 Adjustments | 14 | |
ARTICLE V REPRESENTATIONS AND WARRANTIES | 15 | |
Section 5.1 Representations and Warranties of the EchoStar Parties | 15 | |
Section 5.2 Representations and Warranties of the DISH Parties | 28 | |
ARTICLE VI COVENANTS | 32 | |
Section 6.1 Access to Information | 32 | |
Section 6.2 Conduct of the BSS Business Pending the Closing | 33 | |
Section 6.3 Conduct of DISH Pending the Closing | 36 |
Section 6.4 Third Party Consents; Government Actions and Authorizations | 37 | |
Section 6.5 Information Statement; Registration Statement | 40 | |
Section 6.6 Newco Stockholder Written Consent | 42 | |
Section 6.7 Stock Exchange Listing | 42 | |
Section 6.8 Further Assurances | 42 | |
Section 6.9 Confidentiality | 43 | |
Section 6.10 Preservation of Records | 44 | |
Section 6.11 Publicity | 44 | |
Section 6.12 Intercompany Arrangements; Payables and Receivables | 44 | |
Section 6.13 Books and Records | 45 | |
Section 6.14 Notice of Developments | 45 | |
Section 6.15 Completion of the Pre-Closing Restructuring and Distribution | 45 | |
Section 6.16 Transfer of Newco Common Stock | 46 | |
Section 6.17 Tax Matters | 46 | |
Section 6.18 EchoStar Credit Support Obligations | 46 | |
ARTICLE VII CONDITIONS TO CLOSING | 46 | |
Section 7.1 Mutual Conditions to Closing | 46 | |
Section 7.2 Conditions Precedent to Obligations of the DISH Parties | 47 | |
Section 7.3 Conditions Precedent to Obligations of the EchoStar Parties | 48 | |
ARTICLE VIII INDEMNIFICATION | 49 | |
Section 8.1 Indemnification Obligations of EchoStar | 49 | |
Section 8.2 Indemnification Obligations of DISH | 50 | |
Section 8.3 Limitations on Indemnity | 50 | |
Section 8.4 Method of Asserting Claims | 50 | |
Section 8.5 Exclusive Remedy; Survival | 51 | |
ARTICLE IX TERMINATION | 52 | |
Section 9.1 Termination of Agreement | 52 | |
Section 9.2 Procedure Upon Termination | 52 | |
Section 9.3 Effect of Termination | 53 | |
ARTICLE X MISCELLANEOUS | 53 | |
Section 10.1 Notices | 53 | |
Section 10.2 Amendment; Waiver | 54 | |
Section 10.3 Counterparts; Signatures | 54 | |
Section 10.4 Assignment and Binding Effect | 54 | |
Section 10.5 Entire Agreement | 55 | |
Section 10.6 Severability | 55 | |
Section 10.7 Headings | 55 |
Section 10.8 No Third Party Beneficiaries | 55 | |
Section 10.9 Governing Law | 55 | |
Section 10.10 Expenses | 55 | |
Section 10.11 Dispute Resolution | 56 | |
Section 10.12 Limited Liability | 58 | |
ARTICLE XI DEFINITIONS | 58 | |
Section 11.1 Certain Definitions | 58 | |
Section 11.2 Terms Defined Elsewhere in this Agreement | 71 | |
Section 11.3 Other Definitional and Interpretive Matters | 73 |
Term | Section |
AAA | Section 10.11(c)(i) |
Agent | Section 1.9(b)(i) |
Aggregate Merger Consideration | Section 4.1(a) |
Agreement | Preamble |
Amended Professional Services Agreement | Section 6.8(c) |
Anti-Corruption Laws | Section 5.1(i)(iii) |
Applicable Date | Section 5.1(g)(i) |
Assumed Liabilities | Section 1.5(a) |
Book Entry DISH Shares | Section 4.2(a) |
Book Entry Newco Shares | Section 4.1(a) |
By-laws | Section 3.2 |
Certificate | Section 4.1(a) |
Certificate of Merger | Section 2.3 |
Charter | Section 3.1 |
Closing | Section 2.1 |
Closing Date | Section 2.1 |
Confidential Information | Section 6.9(b) |
Confidentiality Agreement | Section 6.9(a) |
DGCL | Section 2.2 |
DISH | Preamble |
DISH Common Stock | Recitals |
DISH Disclosure Letter | Section 5.2 |
DISH Indemnified Persons | Section 8.1 |
DISH Reports | Section 5.2(g) |
DISH Shares | Recitals |
Term | Section |
Dispute | Section 10.11(b)(i) |
Dispute Notice | Section 10.11(b)(i) |
Distribution | Section 1.9(b)(ii) |
EchoStar | Preamble |
EchoStar Common Stock | Section 1.9(b)(ii) |
EchoStar Credit Support Obligations | Section 6.18 |
EchoStar Disclosure Letter | Section 5.1 |
EchoStar Indemnified Persons | Section 8.2 |
EchoStar Related Party | Section 5.1(r) |
EchoStar Reports | Section 5.1(g)(i) |
Effective Time | Section 2.3 |
Exchange Fund | Section 4.2(a) |
Exchange Ratio | Section 4.1(a) |
Excluded Liabilities | Section 1.5(b) |
Excluded Shares | Section 4.1(a) |
Indemnified Party | Section 8.4 |
Indemnifying Party | Section 8.4 |
Joint Information Statement/Prospectus | Section 6.5(a) |
Leased Satellite Consents | Section 5.1(e) |
Losses | Section 8.1 |
Merger | Recitals |
Merger Sub | Preamble |
Merger Sub Common Stock | Section 4.1(c) |
Merger Sub Shares | Section 4.1(c) |
NASDAQ | Section 4.2(d) |
Newco | Preamble |
Newco Common Stock | Recitals |
Newco Shares | Recitals |
Notice Period | Section 8.4 |
Party, Parties | Preamble |
Patents | Section 11.1 (in Intellectual Property definition) |
Per Share Merger Consideration | Section 4.1(a) |
Pre-Closing Restructuring | Section 1.3 |
Record Holders | Section 1.9(b)(ii) |
Relevant EchoStar Subsidiaries | Section 5.1(a) |
Representative | Section 6.1(a) |
Required Governmental Applications | Section 6.4(c) |
Required Governmental Notices | Section 6.4(c) |
Requisite Stockholder Approval | Section 5.1(b) |
Response | Section 10.11(b)(i) |
Retained Assets | Section 1.4(b) |
Term | Section |
S-4 Registration Statement | Section 6.5(a) |
Sanctions | Section 5.1(i)(iv) |
Senior Party Representatives | Section 10.11(b)(i) |
Separated IP Assets | Section 5.1(k)(ii) |
Separated IT Assets | Section 5.1(k)(vii) |
Separated Registered IP Assets | Section 5.1(k)(i) |
Surviving Corporation | Section 2.2 |
Takeover Statute | Section 5.1(t) |
Termination Date | Section 9.1(b) |
Third Party Claim | Section 8.1 |
Trade Secrets | Section 11.1 (in Intellectual Property definition) |
Transferred Assets | Section 1.4(a) |
Transferred Real Property Leases | Section 5.1(q)(i) |
Transition Services Agreement(s) | Section 6.8(c) |
TT&C Agreement(s) | Section 6.8(c) |
DISH NETWORK CORPORATION | ||
By: | /s/ W. ERIK CARLSON | |
Name: W. Erik Carlson | ||
Title: President and Chief Executive Officer | ||
BSS MERGER SUB INC. | ||
By: | /s/ TIMOTHY A. MESSNER | |
Name: Timothy A. Messner | ||
Title: Executive Vice President and General Counsel | ||
ECHOSTAR CORPORATION | ||
By: | /s/ DEAN A. MANSON | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel and Secretary | ||
ECHOSTAR BSS CORPORATION | ||
By: | /s/ DEAN A. MANSON | |
Name: Dean A. Manson | ||
Title: President, Secretary and Treasurer | ||
ECHOSTAR BSS CORPORATION |
100 Inverness Terrace East |
Englewood, Colorado 80112 |
ECHOSTAR FSS L.L.C. |
100 Inverness Terrace East |
Englewood, Colorado 80112 |
2 |
ECHOSTAR BSS CORPORATION | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: President, Secretary and Treasurer | ||
ECHOSTAR FSS L.L.C. | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel and Secretary | ||
HUGHES SATELLITE SYSTEMS CORPORATION | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary | ||
ECHOSTAR 77 CORPORATION ECHOSTAR SATELLITE SERVICES L.L.C. ECHOSTAR ORBITAL L.L.C. ECHOSTAR GOVERNMENT SERVICES L.L.C. ECHOSTAR SATELLITE OPERATING CORPORATION, HUGHES COMMUNICATIONS, INC., HUGHES NETWORK SYSTEMS, LLC, HUGHES NETWORK SYSTEMS INTERNATIONAL SERVICE COMPANY, HNS-INDIA VSAT, INC., HNS REAL ESTATE, LLC, HNS LICENSE SUB, LLC, ECHOSTAR XI HOLDING L.L.C., ECHOSTAR XIV HOLDING L.L.C., as Guarantors | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary | ||
CHEYENNE DATA CENTER L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Secretary | ||
HNS AMERICAS, L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Vice President, General Counsel & Secretary | ||
HNS AMERICAS II, L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Vice President, General Counsel & Secretary |
ECHOSTAR BSS CORPORATION, | ||
as a Supplemental Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: President, Secretary and Treasurer | ||
ECHOSTAR FSS L.L.C., | ||
as a Supplemental Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary |
U.S. BANK NATIONAL ASSOCIATION, as Trustee | ||
By: | /s/ Richard Prokosch | |
Name: Richard Prokosch | ||
Title: Vice President | ||
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Collateral Agent | ||
By: | /s/ Alexander Pabon | |
Name: Alexander Pabon | ||
Title: Assistant Vice President |
HUGHES SATELLITE SYSTEMS CORPORATION | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary | ||
ECHOSTAR 77 CORPORATION ECHOSTAR SATELLITE SERVICES L.L.C. ECHOSTAR ORBITAL L.L.C. ECHOSTAR GOVERNMENT SERVICES L.L.C. ECHOSTAR SATELLITE OPERATING CORPORATION, HUGHES COMMUNICATIONS, INC., HUGHES NETWORK SYSTEMS, LLC, HUGHES NETWORK SYSTEMS INTERNATIONAL SERVICE COMPANY, HNS-INDIA VSAT, INC., HNS REAL ESTATE, LLC, HNS LICENSE SUB, LLC, ECHOSTAR XI HOLDING L.L.C., ECHOSTAR XIV HOLDING L.L.C., as Guarantors | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary | ||
CHEYENNE DATA CENTER L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Secretary | ||
HNS AMERICAS, L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Vice President, General Counsel & Secretary | ||
HNS AMERICAS II, L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Vice President, General Counsel & Secretary |
ECHOSTAR BSS CORPORATION, | ||
as a Supplemental Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: President, Secretary and Treasurer | ||
ECHOSTAR FSS L.L.C., | ||
as a Supplemental Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary |
U.S. BANK NATIONAL ASSOCIATION, as Trustee | ||
By: | /s/ Richard Prokosch | |
Name: Richard Prokosch | ||
Title: Vice President |
HUGHES SATELLITE SYSTEMS CORPORATION | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary | ||
ECHOSTAR 77 CORPORATION ECHOSTAR SATELLITE SERVICES L.L.C. ECHOSTAR ORBITAL L.L.C. ECHOSTAR GOVERNMENT SERVICES L.L.C. ECHOSTAR SATELLITE OPERATING CORPORATION, HUGHES COMMUNICATIONS, INC., HUGHES NETWORK SYSTEMS, LLC, HUGHES NETWORK SYSTEMS INTERNATIONAL SERVICE COMPANY, HNS-INDIA VSAT, INC., HNS REAL ESTATE, LLC, HNS LICENSE SUB, LLC, ECHOSTAR XI HOLDING L.L.C., ECHOSTAR XIV HOLDING L.L.C., as Guarantors | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary | ||
CHEYENNE DATA CENTER L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Secretary | ||
HNS AMERICAS, L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Vice President, General Counsel & Secretary | ||
HNS AMERICAS II, L.L.C., as a Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Vice President, General Counsel & Secretary |
ECHOSTAR BSS CORPORATION, | ||
as a Supplemental Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: President, Secretary and Treasurer | ||
ECHOSTAR FSS L.L.C., | ||
as a Supplemental Guarantor | ||
By: | /s/ Dean A. Manson | |
Name: Dean A. Manson | ||
Title: Executive Vice President, General Counsel & Secretary |
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee | ||
By: | /s/ Alexander Pabon | |
Name: Alexander Pabon | ||
Title: Assistant Vice President |
1. | I have reviewed this Quarterly Report on Form 10-Q of Hughes Satellite Systems 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 |
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 |
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: August 8, 2019 | ||
By: | /s/ Michael T. Dugan | |
Name: | Michael T. Dugan | |
Title: | Chief Executive Officer, President and Director | |
(Principal Executive Officer) |
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): |
Date: August 8, 2019 | ||
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: August 8, 2019 | ||
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) |
• | Consolidated revenues of $537 million. |
• | Consolidated net loss of $5 million, consolidated net loss attributable to EchoStar common stock of $6 million, and diluted loss per share of $0.06. |
• | Consolidated Adjusted EBITDA of $199 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below). |
• | Consolidated revenues of $1,068 million. |
• | Consolidated net income of $10 million, consolidated net income attributable to EchoStar common stock of $9 million, and diluted earnings per share of $0.09. |
• | Consolidated Adjusted EBITDA of $404 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below). |
• | Approximately 1,415,000 total Hughes broadband subscribers as of June 30, 2019 including approximately 169,000 subscribers in Central and South America. |
• | Cash, cash equivalents and current marketable investment securities of $2.5 billion as of June 30, 2019. |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue | ||||||||||||||||
Hughes | $ | 451,847 | $ | 426,306 | $ | 897,184 | $ | 827,124 | ||||||||
EchoStar Satellite Services | 80,961 | 95,425 | 162,220 | 192,178 | ||||||||||||
Corporate & Other | 4,316 | 4,226 | 8,802 | 8,447 | ||||||||||||
Total | $ | 537,124 | $ | 525,957 | $ | 1,068,206 | $ | 1,027,749 | ||||||||
Adjusted EBITDA | ||||||||||||||||
Hughes | $ | 156,298 | $ | 151,628 | $ | 318,161 | $ | 288,737 | ||||||||
EchoStar Satellite Services | 68,174 | 82,483 | 136,891 | 166,633 | ||||||||||||
Corporate & Other: | ||||||||||||||||
Corporate overhead, operating and other | (22,336 | ) | (21,266 | ) | (42,968 | ) | (39,137 | ) | ||||||||
Equity in earnings (losses) of unconsolidated affiliates, net | (2,898 | ) | (2,058 | ) | (7,725 | ) | (3,067 | ) | ||||||||
Sub-total | (25,234 | ) | (23,324 | ) | (50,693 | ) | (42,204 | ) | ||||||||
Total | $ | 199,238 | $ | 210,787 | $ | 404,359 | $ | 413,166 | ||||||||
Net income (loss) | $ | (5,060 | ) | $ | 77,684 | $ | 9,948 | $ | 56,513 | |||||||
Expenditures for property and equipment | $ | 107,478 | $ | 119,592 | $ | 219,440 | $ | 170,574 |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income (loss) | $ | (5,060 | ) | $ | 77,684 | $ | 9,948 | $ | 56,513 | |||||||
Interest income and expense, net | 36,950 | 42,281 | 72,403 | 89,397 | ||||||||||||
Income tax provision, net | 922 | 17,802 | 9,102 | 12,399 | ||||||||||||
Depreciation and amortization | 155,410 | 148,449 | 309,631 | 294,003 | ||||||||||||
Net income attributable to noncontrolling interests | (632 | ) | (462 | ) | (1,438 | ) | (842 | ) | ||||||||
EBITDA | 187,590 | 285,754 | 399,646 | 451,470 | ||||||||||||
(Gains) losses on investments, net | (12,856 | ) | (65,396 | ) | (19,791 | ) | (28,733 | ) | ||||||||
Litigation expense | 24,504 | — | 24,504 | — | ||||||||||||
Vendor settlement | — | (9,571 | ) | — | (9,571 | ) | ||||||||||
Adjusted EBITDA | $ | 199,238 | $ | 210,787 | $ | 404,359 | $ | 413,166 |
EchoStar Investor Relations | EchoStar Media Relations |
Deepak V. Dutt Phone: +1 301-428-1686 Email: deepak.dutt@echostar.com | Sharyn Nerenberg Phone: +1 301-428-7124 Email: sharyn.nerenberg@echostar.com |
As of | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
Assets | (Unaudited) | (Audited) | ||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,298,005 | $ | 928,306 | ||||
Marketable investment securities, at fair value | 1,203,308 | 2,282,152 | ||||||
Trade accounts receivable and contract assets, net (Note 3) | 201,561 | 201,096 | ||||||
Trade accounts receivable - DISH Network | 13,943 | 14,200 | ||||||
Inventory | 73,345 | 75,379 | ||||||
Prepaids and deposits | 65,589 | 61,177 | ||||||
Other current assets | 19,857 | 18,539 | ||||||
Total current assets | 2,875,608 | 3,580,849 | ||||||
Noncurrent assets: | ||||||||
Property and equipment, net | 3,329,794 | 3,414,908 | ||||||
Operating lease right-of-use assets | 113,643 | — | ||||||
Goodwill | 504,173 | 504,173 | ||||||
Regulatory authorizations, net | 493,661 | 495,654 | ||||||
Other intangible assets, net | 36,869 | 44,231 | ||||||
Investments in unconsolidated entities | 225,582 | 262,473 | ||||||
Other receivables - DISH Network | 96,733 | 95,114 | ||||||
Other noncurrent assets, net | 274,028 | 263,892 | ||||||
Total noncurrent assets | 5,074,483 | 5,080,445 | ||||||
Total assets | $ | 7,950,091 | $ | 8,661,294 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 105,929 | $ | 121,437 | ||||
Trade accounts payable - DISH Network | 1,113 | 1,698 | ||||||
Current portion of long-term debt and finance lease obligations | 42,682 | 959,577 | ||||||
Contract liabilities | 106,308 | 72,284 | ||||||
Accrued interest | 42,835 | 47,416 | ||||||
Accrued compensation | 44,829 | 54,242 | ||||||
Accrued taxes | 16,221 | 16,013 | ||||||
Accrued expenses and other | 111,745 | 72,470 | ||||||
Total current liabilities | 471,662 | 1,345,137 | ||||||
Noncurrent liabilities: | ||||||||
Long-term debt and finance lease obligations, net | 2,553,352 | 2,573,204 | ||||||
Deferred tax liabilities, net | 472,872 | 465,933 | ||||||
Operating lease liabilities | 94,979 | — | ||||||
Other noncurrent liabilities | 114,275 | 121,546 | ||||||
Total noncurrent liabilities | 3,235,478 | 3,160,683 | ||||||
Total liabilities | 3,707,140 | 4,505,820 | ||||||
Commitments and contingencies (Note 15) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at each of June 30, 2019 and December 31, 2018 | — | — | ||||||
Common stock, $0.001 par value, 4,000,000,000 shares authorized: | ||||||||
Class A common stock, $0.001 par value, 1,600,000,000 shares authorized, 56,189,672 shares issued and 49,704,751 shares outstanding at June 30, 2019 and 54,142,566 shares issued and 47,657,645 shares outstanding at December 31, 2018 | 56 | 54 | ||||||
Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at each of June 30, 2019 and December 31, 2018 | 48 | 48 | ||||||
Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of June 30, 2019 and December 31, 2018 | — | — | ||||||
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of June 30, 2019 and December 31, 2018 | — | — | ||||||
Additional paid-in capital | 3,777,499 | 3,702,522 | ||||||
Accumulated other comprehensive loss | (119,500 | ) | (125,100 | ) | ||||
Accumulated earnings | 704,236 | 694,129 | ||||||
Treasury stock, at cost | (131,454 | ) | (131,454 | ) | ||||
Total EchoStar Corporation stockholders’ equity | 4,230,885 | 4,140,199 | ||||||
Noncontrolling interests | 12,066 | 15,275 | ||||||
Total stockholders’ equity | 4,242,951 | 4,155,474 | ||||||
Total liabilities and stockholders’ equity | $ | 7,950,091 | $ | 8,661,294 |
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue: | ||||||||||||||||
Services and other revenue - DISH Network | $ | 85,057 | $ | 100,171 | $ | 170,945 | $ | 203,976 | ||||||||
Services and other revenue - other | 394,422 | 375,445 | 787,902 | 730,485 | ||||||||||||
Equipment revenue | 57,645 | 50,341 | 109,359 | 93,288 | ||||||||||||
Total revenue | 537,124 | 525,957 | 1,068,206 | 1,027,749 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 153,198 | 151,157 | 306,769 | 299,902 | ||||||||||||
Cost of sales - equipment (exclusive of depreciation and amortization) | 46,549 | 41,865 | 91,556 | 80,936 | ||||||||||||
Selling, general and administrative expenses | 152,629 | 103,074 | 264,763 | 206,349 | ||||||||||||
Research and development expenses | 6,388 | 6,647 | 13,276 | 13,784 | ||||||||||||
Depreciation and amortization | 155,410 | 148,449 | 309,631 | 294,003 | ||||||||||||
Total costs and expenses | 514,174 | 451,192 | 985,995 | 894,974 | ||||||||||||
Operating income | 22,950 | 74,765 | 82,211 | 132,775 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 23,213 | 19,253 | 47,642 | 34,888 | ||||||||||||
Interest expense, net of amounts capitalized | (60,163 | ) | (61,534 | ) | (120,045 | ) | (124,285 | ) | ||||||||
Gains (losses) on investments, net | 12,856 | 65,396 | 19,791 | 28,733 | ||||||||||||
Equity in losses of unconsolidated affiliates, net | (4,754 | ) | (2,058 | ) | (11,107 | ) | (3,067 | ) | ||||||||
Other, net | 1,760 | (336 | ) | 558 | (132 | ) | ||||||||||
Total other income (expense), net | (27,088 | ) | 20,721 | (63,161 | ) | (63,863 | ) | |||||||||
Income (loss) before income taxes | (4,138 | ) | 95,486 | 19,050 | 68,912 | |||||||||||
Income tax provision, net | (922 | ) | (17,802 | ) | (9,102 | ) | (12,399 | ) | ||||||||
Net income (loss) | (5,060 | ) | 77,684 | 9,948 | 56,513 | |||||||||||
Less: Net income attributable to noncontrolling interests | 632 | 462 | 1,438 | 842 | ||||||||||||
Net income (loss) attributable to EchoStar Corporation common stock | $ | (5,692 | ) | $ | 77,222 | $ | 8,510 | $ | 55,671 | |||||||
Earnings per share - Class A and B common stock: | ||||||||||||||||
Basic earnings (loss) per share | $ | (0.06 | ) | $ | 0.80 | $ | 0.09 | $ | 0.58 | |||||||
Diluted earnings (loss) per share | $ | (0.06 | ) | $ | 0.80 | $ | 0.09 | $ | 0.57 |
For the six months ended June 30, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 9,948 | $ | 56,513 | ||||
Adjustments to reconcile net income to net cash flows from operating activities: | ||||||||
Depreciation and amortization | 309,631 | 294,003 | ||||||
Equity in losses of unconsolidated affiliates, net | 11,107 | 3,067 | ||||||
Amortization of debt issuance costs | 3,872 | 3,905 | ||||||
(Gains) losses on investments, net | (19,791 | ) | (28,674 | ) | ||||
Stock-based compensation | 4,833 | 5,110 | ||||||
Deferred tax provision | 7,014 | 10,231 | ||||||
Dividend received from unconsolidated entity | — | 5,000 | ||||||
Changes in current assets and current liabilities, net: | ||||||||
Trade accounts receivable, net | 167 | (3,061 | ) | |||||
Trade accounts receivable - DISH Network | 257 | 17,262 | ||||||
Inventory | 2,114 | 238 | ||||||
Other current assets | (2,500 | ) | (5,430 | ) | ||||
Trade accounts payable | (225 | ) | 2,364 | |||||
Trade accounts payable - DISH Network | (585 | ) | (3,360 | ) | ||||
Accrued expenses and other | 51,409 | 7,749 | ||||||
Changes in noncurrent assets and noncurrent liabilities, net | 1,374 | (17,200 | ) | |||||
Other, net | 2,149 | 5,822 | ||||||
Net cash flows from operating activities | 380,774 | 353,539 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of marketable investment securities | (504,264 | ) | (1,632,930 | ) | ||||
Sales and maturities of marketable investment securities | 1,621,481 | 841,638 | ||||||
Expenditures for property and equipment | (219,440 | ) | (248,098 | ) | ||||
Refunds and other receipts related to property and equipment | — | 77,524 | ||||||
Expenditures for externally marketed software | (15,329 | ) | (15,000 | ) | ||||
Net cash flows from investing activities | 882,448 | (976,866 | ) | |||||
Cash flows from financing activities: | ||||||||
Repayment of debt and finance lease obligations | (21,180 | ) | (18,417 | ) | ||||
Repurchase and maturity of debt | (920,923 | ) | — | |||||
Purchase of noncontrolling interest | (7,313 | ) | — | |||||
Repayment of in-orbit incentive obligations | (3,778 | ) | (3,272 | ) | ||||
Net proceeds from Class A common stock options exercised | 61,503 | 4,064 | ||||||
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan | 5,074 | 4,886 | ||||||
Other, net | 905 | (401 | ) | |||||
Net cash flows from financing activities | (885,712 | ) | (13,140 | ) | ||||
Effect of exchange rates on cash and cash equivalents | 121 | (1,941 | ) | |||||
Net increase (decrease) in cash and cash equivalents, including restricted amounts | 377,631 | (638,408 | ) | |||||
Cash and cash equivalents, including restricted amounts, beginning of period | 929,495 | 2,432,249 | ||||||
Cash and cash equivalents, including restricted amounts, end of period | $ | 1,307,126 | $ | 1,793,841 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest, net of amounts capitalized | $ | 120,625 | $ | 122,017 | ||||
Cash paid for income taxes | $ | 1,217 | $ | 2,574 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Common stock, shares issued (in shares) | 1,078 | 1,078 |
Common stock, shares outstanding (in shares) | 1,078 | 1,078 |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHARESHOLDERS' EQUITY - USD ($) $ in Thousands |
Total |
Additional Paid-In Capital |
Accumulated Other Comprehensive Loss |
Accumulated Earnings |
Noncontrolling Interests |
---|---|---|---|---|---|
Beginning balance at Dec. 31, 2017 | $ 2,299,244 | $ 1,754,561 | $ (52,822) | $ 582,683 | $ 14,822 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation | 2,683 | 2,683 | |||
Capital contributions from EchoStar Corporation | 7,125 | 7,125 | |||
Other comprehensive income (loss) | (30,258) | (29,459) | (799) | ||
Net income | 61,074 | 60,232 | 842 | ||
Other, net | (479) | (238) | (241) | ||
Ending balance at Jun. 30, 2018 | 2,357,597 | 1,764,131 | (82,089) | 660,690 | 14,865 |
Beginning balance at Mar. 31, 2018 | 2,347,688 | 1,762,927 | (50,686) | 620,459 | 14,988 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation | 1,384 | 1,384 | |||
Other comprehensive income (loss) | (31,847) | (31,262) | (585) | ||
Net income | 40,693 | 40,231 | 462 | ||
Other, net | (321) | (180) | (141) | ||
Ending balance at Jun. 30, 2018 | 2,357,597 | 1,764,131 | (82,089) | 660,690 | 14,865 |
Beginning balance at Dec. 31, 2018 | 2,392,495 | 1,767,037 | (83,774) | 693,957 | 15,275 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation | 2,856 | 2,856 | |||
Purchase of noncontrolling interest | (7,313) | (2,666) | (4,647) | ||
Other comprehensive income (loss) | 4,225 | 4,225 | |||
Net income | 24,641 | 23,203 | 1,438 | ||
Other, net | (585) | (585) | |||
Ending balance at Jun. 30, 2019 | 2,416,319 | 1,766,642 | (79,549) | 717,160 | 12,066 |
Beginning balance at Mar. 31, 2019 | 2,410,487 | 1,765,481 | (82,611) | 716,183 | 11,434 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock-based compensation | 1,423 | 1,423 | |||
Other comprehensive income (loss) | 3,062 | 3,062 | |||
Net income | 1,609 | 977 | 632 | ||
Other, net | (262) | (262) | |||
Ending balance at Jun. 30, 2019 | $ 2,416,319 | $ 1,766,642 | $ (79,549) | $ 717,160 | $ 12,066 |
Organization and Business Activities |
6 Months Ended | ||||||||
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Jun. 30, 2019 | |||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||
ORGANIZATION AND BUSINESS ACTIVITIES | ORGANIZATION AND BUSINESS ACTIVITIES Principal Business Hughes Satellite Systems Corporation (which, together with its subsidiaries, is referred to as “HSS,” the “Company,” “we,” “us” and/or “our”) is a holding company and a subsidiary of EchoStar Corporation (“EchoStar”). We are a global provider of broadband satellite technologies, broadband internet services for home and small office customers, satellite operations and satellite services. We also deliver innovative network technologies, managed services and various communications solutions for aeronautical, enterprise and government customers. We primarily operate in the following two business segments:
Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Real Estate, Accounting and Legal) and other activities that have not been assigned to our operating segments such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other in our segment reporting. During 2017, EchoStar and certain of its and our subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries. EchoStar, and certain of its and our subsidiaries, received all of the shares of the Hughes Retail Preferred Tracking Stock previously issued by EchoStar and us (together, the “Tracking Stock”) in exchange for 100% of the equity interests of certain of EchoStar’s subsidiaries that held substantially all of EchoStar’s former EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Following the consummation of the Share Exchange, EchoStar no longer operates its former EchoStar Technologies businesses, the Tracking Stock was retired and is no longer outstanding, and all agreements, arrangements and policy statements with respect to the Tracking Stock terminated. Pending Transactions In May 2019, EchoStar and one of our subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), entered into a master transaction agreement (the “Master Transaction Agreement”) with DISH Network Corporation (“DISH”) and a wholly-owned subsidiary of DISH (“Merger Sub”). Pursuant to the terms of the Master Transaction Agreement; (i) EchoStar and its subsidiaries and we and our subsidiaries will transfer to BSS Corp. certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily relating to the portion of our ESS satellite services business that manages, markets and provides (1) broadcast satellite services primarily to DISH Network and Dish Mexico and its subsidiaries and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of EchoStar’s and our other businesses (collectively, the “BSS Business”); (ii) EchoStar will distribute to each holder of shares of EchoStar Class A and Class B common stock an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to one share of BSS Common Stock for each share of EchoStar Class A and Class B common stock owned by such EchoStar stockholder on the record date for the distribution (the “Distribution”), which date has not yet been determined; and (iii) immediately after the Distribution, (1) Merger Sub will merge with and into BSS Corp. (the “Merger”), such that, at the effective time of the Merger (the “Effective Time”), BSS Corp. will become a wholly-owned subsidiary of DISH and DISH will own and operate the BSS Business and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders will be converted into a number of shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”), equal to 22,937,188 divided by the total number of shares of EchoStar Class A and Class B common stock outstanding on the record date for the Distribution ((i) - (iii) collectively, the “BSS Transaction”). If the BSS Transaction is consummated, we will no longer operate a substantial portion of our ESS segment. The Master Transaction Agreement contains customary representations and warranties by the parties, including EchoStar’s representations relating to the assets, liabilities and financial condition of the BSS Business, and representations by DISH Network relating to its financial condition and liabilities. Prior to closing, EchoStar has agreed to conduct the BSS Business in the ordinary course and not to undertake specified actions without the written consent of DISH. Completion of the BSS Transaction is subject to the satisfaction or waiver of various closing conditions, including receipt of consents, regulatory approvals and tax opinions. EchoStar and DISH Network have agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. The Master Transaction Agreement provides for certain termination rights of EchoStar and DISH Network, including the right of either party to terminate the Master Transaction Agreement if the BSS Transaction has not been consummated by February 19, 2020, or if the mutual closing conditions become incapable of being satisfied, or is there is an incurable breach of the Master Transaction Agreement by the other party. In connection with the BSS Transaction, EchoStar and DISH and certain of our, EchoStar’s and DISH’s subsidiaries, as applicable, will enter into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property, transition services and certain TT&C satellite services. In July 2019, a putative class action lawsuit was filed by a purported EchoStar stockholder naming as defendants the members of EchoStar’s board of directors, EchoStar, certain of EchoStar’s officers, DISH and certain of DISH Network’s and EchoStar’s affiliates. If the plaintiff obtains an injunction or order prohibiting or delaying the completion of the BSS Transaction, then such injunction or order may prevent the BSS Transaction from being completed, or from being completed within the expected timeframe or on the terms provided for in the Master Transaction Agreement. If the litigation delays the BSS Transaction or prevents the BSS Transaction from closing, our business, financial position and results of operation could be adversely affected. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the BSS Transaction is consummated, or any adverse final disposition, may adversely affect our respective business, financial condition, results of operations and cash flows. See Note 13 for further information. The BSS Transaction, which is intended to be generally tax-free to EchoStar and EchoStar’s stockholders for U.S. federal income tax purposes, is expected to be completed during the second half of 2019, but there can be no assurance that the BSS Transaction will be consummated on the terms or within the time frame disclosed, or at all.
|
Summary of Significant Accounting Policies |
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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. (“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 U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, 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, 2018. 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% 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 shareholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests. All significant intercompany balances and transactions have been eliminated in consolidation. Reclassification Certain prior period amounts have been reclassified to conform with the current period presentation. Recently Adopted Accounting Pronouncements Leases We adopted Accounting Standard Update (“ASU”) No. 2016-02 - Leases (Topic 842), as amended, or Accounting Standard Codification (“ASC 842”), as of January 1, 2019. The primary impact of ASC 842 on our consolidated financial statements is the recognition of right-of-use assets and related liabilities on our consolidated balance sheet for operating leases where we are the lessee. We have elected to initially apply the requirements of the new standard on January 1, 2019 and we have not restated our consolidated financial statements for prior periods. Consequently, certain amounts reported in our Condensed Consolidated Balance Sheet as of June 30, 2019 are not comparable to those reported as of December 31, 2018 or earlier dates. Our adoption of ASC 842 did not have a material impact on the results of our operations or on our cash flows for the three and six months ended June 30, 2019. Under ASC 842, leases are classified either as operating leases or finance leases. The lease classification affects the recognition of lease expense by lessees in the statement of operations. Consistent with prior accounting standards, operating lease expense is included in operating expenses, while finance lease expense is split between depreciation expense and interest expense. ASC 842 does not fundamentally change the lessor accounting model, which requires leases to be classified as operating leases or sales-type leases. Operating lease revenue generally is recognized over the lease term, while sales-type lease revenue is recognized primarily upon lease commencement, except for amounts representing interest on related accounts receivable. Except for the new requirement to recognize assets and liabilities on the balance sheet for operating leases where we are the lessee, under our ASC 842 transition method we continue to apply prior accounting standards to leases that commenced prior to 2019. We fully apply ASC 842 requirements only to leases that commenced or were modified on or after January 1, 2019. We elected certain practical expedients under our transition method, including elections to not reassess (i) whether a contract is or contains a lease and (ii) the classification of existing leases. We also elected not to apply hindsight in determining whether optional renewal periods should be included in the lease term, which in some instances may impact the initial measurement of the lease liability and the calculation of straight-line expense over the lease term for operating leases. As a result of our transition elections, there was no change in our recognition of revenue and expense for leases that commenced prior to 2019. In addition, the application of ASC 842 requirements to new and modified leases did not materially affect our recognition of revenue or expenses for the three and six months ended June 30, 2019. Our adoption of ASC 842 resulted in the following adjustments to our Condensed Consolidated Balance Sheet as of December 31, 2018 (amounts in thousands):
Our accounting policies under ASC 842 are summarized below. Additional disclosures required by the new standard are included in Note 4. Lessee Accounting We lease real estate, satellite capacity and equipment in the conduct of our business operations. For contracts entered into on or after January 1, 2019, we assess at contract inception whether the contract is, or contains, a lease. Generally, we determine that a lease exists when (i) the contract involves the use of a distinct identified asset, (ii) we obtain the right to substantially all economic benefits from use of the asset and (iii) we have the right to direct the use of the asset. A lease is classified as a finance lease when one or more of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset or (v) the asset is of a specialized nature and there is not expected to be an alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any of these criteria. At the lease commencement date, we recognize a right-of-use asset and a lease liability for all leases, except short-term leases with an original term of 12 months or less. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any prepayments to the lessor and initial direct costs such as brokerage commissions, less any lease incentives received. All right-of-use assets are periodically reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the lease payments, discounted using an estimate of our incremental borrowing rate for a collateralized loan with the same term as the underlying lease. The incremental borrowing rates used for the initial measurement of lease liabilities as of January 1, 2019 were based on the original lease terms. Lease payments included in the measurement of lease liabilities consist of (i) fixed lease payments for the noncancelable lease term, (ii) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (iii) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. Certain of our real estate lease agreements require payments for non-lease costs such as utilities and common area maintenance. We have elected an accounting policy, as permitted by ASC 842, not to account for such payments separately from the related lease payments. Our policy election results in a higher initial measurement of lease liabilities when such non-lease payments are fixed amounts. Certain of our real estate lease agreements require variable lease payments that do not depend on an underlying index or rate, such as sales and value-added taxes and our proportionate share of actual property taxes, insurance and utilities. Such payments and changes in payments based on a rate or index are recognized in operating expenses when incurred. Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense on the lease liability based on the discount rate at lease commencement. For both operating and finance leases, lease payments are allocated between a reduction of the lease liability and interest expense. Amortization of the right-of-use asset for operating leases reflects amortization of the lease liability, any differences between straight-line expense and related lease payments during the accounting period, and any impairments. Lessor Accounting We lease satellite capacity, communications equipment and real estate to certain of our customers, including DISH Network. We identify and determine the classification of such leases as operating leases or sales-type leases based on the criteria discussed above for lessees. A lease is classified as a sales-type lease if it meets the above criteria for a finance lease; otherwise it is classified as an operating lease. Some of our leases are embedded in contracts with customers that include non-lease performance obligations. For such contracts, except where we have elected otherwise as discussed below, we allocate consideration in the contract between lease and non-lease components based on their relative standalone selling prices. We have elected an accounting policy, as permitted by ASC 842, to not separate the lease of equipment from related services in our HughesNet satellite internet service (the “HughesNet service”) contracts with consumers. We account for all revenue from such contracts as non-lease service revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Our accounting for revenue from operating leases and sales-type leases was not substantially changed by our adoption of ASC 842. However, we anticipate that certain leases that would have been classified as operating leases under prior accounting standards may be classified as sales-type leases under ASC 842. Operating lease revenue generally is recognized on a straight-line basis over the lease term. Sales-type lease revenue and a corresponding receivable generally are recognized at lease commencement based on the present value of the future lease payments and related interest income on the receivable is recognized over the lease term. Payments under sales-type leases generally are discounted at the interest rate implicit in the lease. Recently Issued Accounting Pronouncements Not Yet Adopted Credit Losses In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses instead of incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the impact of adopting this new accounting standard on our Consolidated Financial Statements and related disclosures.
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION | REVENUE RECOGNITION Information About Contract Balances The following table provides information about our contract balances with customers, including amounts for certain embedded leases (amounts in thousands):
For the six months ended June 30, 2019, we recognized revenue of $48 million that was previously included in the contract liability balance at December 31, 2018. Our bad debt expense was $15 million and $2 million for the three months ended June 30, 2019 and 2018, respectively, and $19 million and $7 million for the six months ended June 30, 2019 and 2018, respectively. Transaction Price Allocated to Remaining Performance Obligations As of June 30, 2019, the remaining performance obligations for our customer contracts with original expected durations of more than one year was $1.0 billion. We expect to recognize approximately 35.7% of our remaining performance obligations of these contracts as revenue in the next twelve months. This amount excludes agreements with consumer customers in our Hughes segment and our leasing arrangements. Disaggregation of Revenue In the following tables, revenue is disaggregated by segment, primary geographic market, nature of the products and services and transactions with major customers. See Note 4 for additional information about revenue associated with leases. Geographic Information The following table disaggregates revenue from customer contracts attributed to our North America (the U.S. and its territories, Mexico and Canada), South and Central America and other foreign locations (Asia, Africa, Australia, Europe, and the Middle East) as well as by segment, based on the location where the goods or services are provided (amounts in thousands):
Nature of Products and Services The following table disaggregates revenue based on the nature of products and services and by segment (amounts in thousands):
Effective January 1, 2019, we account for and report revenue from leases of Hughes consumer broadband equipment as services revenue under ASC 606 rather than lease revenue due to our election to not separate lease and non-lease components in consumer broadband service contracts in connection with our adoption of ASC 842 (see Note 2). In addition, our lease revenue from the ESS segment decreased primarily resulting from the expiration of DISH Network’s agreement to lease satellite capacity from us on the EchoStar VII satellite at the end of June 2018 (see Note 15).
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Leases |
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LEASES | LEASES Lessee Disclosures Our operating leases consist primarily of leases for office space, data centers and satellite ground facilities. We recognized right-of-use assets and lease liabilities for such leases in connection with our adoption of ASC 842 as of January 1, 2019 (see Note 2). We report operating lease right-of-use assets in Operating lease right-of-use assets and we report the current and noncurrent portions of our operating lease liabilities in Accrued expenses and other and Operating lease liabilities, respectively. Our finance leases consist primarily of leases of satellite capacity. We report finance lease right-of-use assets in Property and equipment, net and we report the current and noncurrent portions of our finance lease liabilities in Current portion of long-term debt and finance lease obligations and Long-term debt and finance lease obligations, net, respectively. Our Condensed Consolidated Balance Sheets includes the following amounts for right-of-use assets and lease liabilities as of June 30, 2019 (amounts in thousands):
Finance lease assets are reported net of accumulated amortization of $511 million as of June 30, 2019. The following tables detail components of lease cost and weighted average lease terms and discount rates for operating leases and finance leases (amounts in thousands):
The following table details cash flows for operating leases and finance leases (amounts in thousands):
We obtained right-of-use assets in exchange for lease liabilities of de minimis and $1 million upon commencement of operating leases for the three and six months ended June 30, 2019, respectively. The following table presents maturities of our lease liabilities as of June 30, 2019 (amounts in thousands):
As of December 31, 2018, our future minimum rental payments under noncancelable operating leases were as follows (amounts in thousands):
Lessor Disclosures We report revenue from sales-type leases at the commencement date in Equipment revenue and we report periodic interest income on sales-type lease receivables in Services and other revenue. We report operating lease revenue in Services and other revenue. The following table details our lease revenue as follows (amounts in thousands):
Substantially all of our net investment in sales-type leases consisted of lease receivables totaling $4 million as of June 30, 2019. The following table presents maturities of our operating lease payments as of June 30, 2019 (amounts in thousands):
Property and equipment, net as of June 30, 2019 and Depreciation and amortization for the three and six months then ended included the following amounts for assets subject to operating leases (amounts in thousands):
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LEASES | LEASES Lessee Disclosures Our operating leases consist primarily of leases for office space, data centers and satellite ground facilities. We recognized right-of-use assets and lease liabilities for such leases in connection with our adoption of ASC 842 as of January 1, 2019 (see Note 2). We report operating lease right-of-use assets in Operating lease right-of-use assets and we report the current and noncurrent portions of our operating lease liabilities in Accrued expenses and other and Operating lease liabilities, respectively. Our finance leases consist primarily of leases of satellite capacity. We report finance lease right-of-use assets in Property and equipment, net and we report the current and noncurrent portions of our finance lease liabilities in Current portion of long-term debt and finance lease obligations and Long-term debt and finance lease obligations, net, respectively. Our Condensed Consolidated Balance Sheets includes the following amounts for right-of-use assets and lease liabilities as of June 30, 2019 (amounts in thousands):
Finance lease assets are reported net of accumulated amortization of $511 million as of June 30, 2019. The following tables detail components of lease cost and weighted average lease terms and discount rates for operating leases and finance leases (amounts in thousands):
The following table details cash flows for operating leases and finance leases (amounts in thousands):
We obtained right-of-use assets in exchange for lease liabilities of de minimis and $1 million upon commencement of operating leases for the three and six months ended June 30, 2019, respectively. The following table presents maturities of our lease liabilities as of June 30, 2019 (amounts in thousands):
As of December 31, 2018, our future minimum rental payments under noncancelable operating leases were as follows (amounts in thousands):
Lessor Disclosures We report revenue from sales-type leases at the commencement date in Equipment revenue and we report periodic interest income on sales-type lease receivables in Services and other revenue. We report operating lease revenue in Services and other revenue. The following table details our lease revenue as follows (amounts in thousands):
Substantially all of our net investment in sales-type leases consisted of lease receivables totaling $4 million as of June 30, 2019. The following table presents maturities of our operating lease payments as of June 30, 2019 (amounts in thousands):
Property and equipment, net as of June 30, 2019 and Depreciation and amortization for the three and six months then ended included the following amounts for assets subject to operating leases (amounts in thousands):
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LEASES | LEASES Lessee Disclosures Our operating leases consist primarily of leases for office space, data centers and satellite ground facilities. We recognized right-of-use assets and lease liabilities for such leases in connection with our adoption of ASC 842 as of January 1, 2019 (see Note 2). We report operating lease right-of-use assets in Operating lease right-of-use assets and we report the current and noncurrent portions of our operating lease liabilities in Accrued expenses and other and Operating lease liabilities, respectively. Our finance leases consist primarily of leases of satellite capacity. We report finance lease right-of-use assets in Property and equipment, net and we report the current and noncurrent portions of our finance lease liabilities in Current portion of long-term debt and finance lease obligations and Long-term debt and finance lease obligations, net, respectively. Our Condensed Consolidated Balance Sheets includes the following amounts for right-of-use assets and lease liabilities as of June 30, 2019 (amounts in thousands):
Finance lease assets are reported net of accumulated amortization of $511 million as of June 30, 2019. The following tables detail components of lease cost and weighted average lease terms and discount rates for operating leases and finance leases (amounts in thousands):
The following table details cash flows for operating leases and finance leases (amounts in thousands):
We obtained right-of-use assets in exchange for lease liabilities of de minimis and $1 million upon commencement of operating leases for the three and six months ended June 30, 2019, respectively. The following table presents maturities of our lease liabilities as of June 30, 2019 (amounts in thousands):
As of December 31, 2018, our future minimum rental payments under noncancelable operating leases were as follows (amounts in thousands):
Lessor Disclosures We report revenue from sales-type leases at the commencement date in Equipment revenue and we report periodic interest income on sales-type lease receivables in Services and other revenue. We report operating lease revenue in Services and other revenue. The following table details our lease revenue as follows (amounts in thousands):
Substantially all of our net investment in sales-type leases consisted of lease receivables totaling $4 million as of June 30, 2019. The following table presents maturities of our operating lease payments as of June 30, 2019 (amounts in thousands):
Property and equipment, net as of June 30, 2019 and Depreciation and amortization for the three and six months then ended included the following amounts for assets subject to operating leases (amounts in thousands):
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LEASES | LEASES Lessee Disclosures Our operating leases consist primarily of leases for office space, data centers and satellite ground facilities. We recognized right-of-use assets and lease liabilities for such leases in connection with our adoption of ASC 842 as of January 1, 2019 (see Note 2). We report operating lease right-of-use assets in Operating lease right-of-use assets and we report the current and noncurrent portions of our operating lease liabilities in Accrued expenses and other and Operating lease liabilities, respectively. Our finance leases consist primarily of leases of satellite capacity. We report finance lease right-of-use assets in Property and equipment, net and we report the current and noncurrent portions of our finance lease liabilities in Current portion of long-term debt and finance lease obligations and Long-term debt and finance lease obligations, net, respectively. Our Condensed Consolidated Balance Sheets includes the following amounts for right-of-use assets and lease liabilities as of June 30, 2019 (amounts in thousands):
Finance lease assets are reported net of accumulated amortization of $511 million as of June 30, 2019. The following tables detail components of lease cost and weighted average lease terms and discount rates for operating leases and finance leases (amounts in thousands):
The following table details cash flows for operating leases and finance leases (amounts in thousands):
We obtained right-of-use assets in exchange for lease liabilities of de minimis and $1 million upon commencement of operating leases for the three and six months ended June 30, 2019, respectively. The following table presents maturities of our lease liabilities as of June 30, 2019 (amounts in thousands):
As of December 31, 2018, our future minimum rental payments under noncancelable operating leases were as follows (amounts in thousands):
Lessor Disclosures We report revenue from sales-type leases at the commencement date in Equipment revenue and we report periodic interest income on sales-type lease receivables in Services and other revenue. We report operating lease revenue in Services and other revenue. The following table details our lease revenue as follows (amounts in thousands):
Substantially all of our net investment in sales-type leases consisted of lease receivables totaling $4 million as of June 30, 2019. The following table presents maturities of our operating lease payments as of June 30, 2019 (amounts in thousands):
Property and equipment, net as of June 30, 2019 and Depreciation and amortization for the three and six months then ended included the following amounts for assets subject to operating leases (amounts in thousands):
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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 The changes in the balances of Accumulated other comprehensive loss by component were as follows (amounts in thousands):
The amounts reclassified to net income related to unrealized gain (loss) on available-for-sale securities in the table above are included in Gains (losses) on investments, net in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Except in unusual circumstances, we do not recognize tax effects on foreign currency translation adjustments because they are not expected to result in future taxable income or deductions.
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Marketable Investment Securities |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
MARKETABLE INVESTMENT SECURITIES | MARKETABLE INVESTMENT SECURITIES Overview Our marketable investment securities portfolio consists of various debt and equity instruments summarized in the table below(amounts in thousands):
Debt Securities Our corporate bond portfolio includes debt instruments issued by individual corporations, primarily in the industrial and financial services industries. Our other debt securities portfolio includes investments in various debt instruments, including U.S. government bonds and commercial paper. A summary of our available-for-sale debt securities is presented in the table below (amounts in thousands):
As of June 30, 2019, we have $690 million of available-for-sale debt securities with contractual maturities of one year or less and $144 million with contractual maturities greater than one year. Equity Securities Our marketable equity securities consist primarily of shares of common stock of public companies. Gains (losses) on investments, net related to equity securities that we held each period were de minimis in net loss and net gains of $1 million for the three months ended June 30, 2019 and 2018, respectively, and net loss of $1 million and de minimis in net gains for the six months ended June 30, 2019 and 2018, respectively. Sales of Available-for-Sale Securities Proceeds from sales of our available-for-sale securities were nil and $312 million for the three and six months ended June 30, 2019, respectively. We did not sell any of our available-for-sale securities during the three and six months ended June 30, 2018. Fair Value Measurements Our marketable investment securities are measured at fair value on a recurring basis as summarized in the table below (amounts in thousands). As of June 30, 2019 and December 31, 2018, we did not have investments that were categorized within Level 3 of the fair value hierarchy.
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Inventory |
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Inventory, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORY | INVENTORY Our inventory consisted of the following (amounts in thousands):
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Property and Equipment |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | PROPERTY AND EQUIPMENT Property and equipment consisted of the following (amounts in thousands):
Construction in progress consisted of the following (amounts in thousands):
We recorded capitalized interest related to our satellites, satellite payloads and related ground facilities under construction of de minimis and $2 million for the three months ended June 30, 2019 and 2018, respectively, and de minimis and $4 million for the six months ended June 30, 2019 and 2018, respectively. Depreciation expense associated with our property and equipment consisted of the following (amounts in thousands):
Satellites depreciation expense includes amortization of satellites under finance lease agreements of $20 million and $18 million for the three months ended June 30, 2019 and 2018, respectively, and $41 million and $36 million for the six months ended June 30, 2019 and 2018, respectively. Satellites As of June 30, 2019, our satellite fleet consisted of 15 satellites, 10 of which are owned and five of which are leased. They are all 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. We depreciate our leased satellites on a straight-line basis over their respective lease terms. If the BSS Transaction is consummated, six of our owned satellites and the leases for two of our leased satellites will be transferred to DISH Network. Recent Developments EchoStar XII. We expect to remove the EchoStar XII satellite from its orbital location and retire it from commercial service in the third quarter of 2019. The retirement of this satellite is not expected to have a material impact on our results of operations or financial position. Satellite Anomalies and Impairments Our satellites may experience anomalies from time to time, some of which may have a significant adverse effect on their remaining useful lives, the commercial operation of the satellites or our operating results or financial position. We are not aware of any anomalies with respect to our owned or leased satellites that have had any such significant adverse effect during the six months ended June 30, 2019. There can be no assurance, however, that anomalies will not have any such adverse effects 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 satellites were to fail. We historically have not carried in-orbit insurance on our satellites because we have assessed that the cost of insurance is not economical relative to the risk of failures. Therefore, we generally bear the risk of any in-orbit failures. Pursuant to the terms of the agreements governing certain portions of our indebtedness, we are required, subject to certain limitations on coverage, to maintain in-orbit insurance for our SPACEWAY 3, EchoStar XVI and EchoStar XVII satellites. Our other satellites, either in orbit or under construction, are not covered by launch or in-orbit insurance. We will continue to assess circumstances going forward and make insurance decisions on a case-by-case basis. We evaluate our satellites for impairment and test for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Certain of the anomalies previously disclosed may be considered to represent a significant adverse change in the physical condition of a particular satellite. However, based on the redundancy designed within each satellite, certain of these anomalies are not necessarily considered to be significant events that would require a test of recoverability.
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Goodwill, Regulatory Authorizations and Other Intangible Assets |
6 Months Ended |
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Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
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 June 30, 2019 and December 31, 2018, all of our goodwill was assigned to reporting units of our Hughes segment. We test this goodwill for impairment annually in the second quarter. Based on our impairment testing in the second quarter of 2019, our goodwill is considered to be not impaired. Regulatory Authorizations Regulatory authorizations included amounts with indefinite useful lives. As of both June 30, 2019 and December 31, 2018, regulatory authorization balances, net of accumulated amortization, were $466 million. If the BSS Transaction is consummated, we expect that the carrying amounts of our regulatory authorizations will be reduced by the rights associated with the orbital slot located at 61.5 degrees west longitude that will be transferred to DISH Network. Other Intangible Assets As of June 30, 2019 and December 31, 2018, accumulated amortization for our other intangible assets was $315 million and $307 million, respectively.
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Investment in Unconsolidated Entities |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS IN UNCONSOLIDATED ENTITIES | INVESTMENTS IN UNCONSOLIDATED ENTITIES We have strategic investments in certain non-publicly traded equity securities that do not have a readily determinable fair value. Our investments in these unconsolidated entities consisted of the following (amounts in thousands):
We measure our equity securities without a readily determinable fair value, other than those accounted for using the equity method, at cost adjusted for changes resulting from impairments, if any, and observable price changes in orderly transactions for the identical or similar securities of the same issuer. For the six months ended June 30, 2019 and 2018, we did not identify any observable price changes requiring an adjustment to our investments. |
Long-Term Debt and Finance Lease Obligations |
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Debt and Lease Obligation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS | LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS The following table summarizes the carrying amounts and fair values of our long-term debt and finance lease obligations (amounts in thousands):
During the three and six months ended June 30, 2019, we repurchased $4 million and $12 million, respectively, of our 6 1/2% Senior Secured Notes due 2019 in open market trades. The outstanding balance of the 6 1/2% Senior Secured Notes due 2019 matured in June 2019.
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Income Taxes |
6 Months Ended |
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Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Provision For Income Taxes Our income 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 interim income tax provision and our interim estimate of our annual effective tax rate are influenced by several factors, including foreign losses and capital gains and losses for which related deferred tax assets are offset by a valuation allowance, changes in tax laws and relative changes in unrecognized tax benefits. Additionally, our effective tax rate can be affected by the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income or loss is lower. Our income tax benefit was $3 million for the three months ended June 30, 2019 compared to an income tax provision of $10 million for the three months ended June 30, 2018. Our estimated effective income tax rate was 254.0% and 20.5% for the three months ended June 30, 2019 and 2018, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended June 30, 2019 were primarily due to the change in net unrealized gains that are capital in nature, various permanent tax differences, the impact of state and local taxes, and increase in our valuation allowance associated with certain foreign losses. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended June 30, 2018 were primarily due to the change in our valuation allowance associated with unrealized losses that are capital in nature. |
Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Commitments As of June 30, 2019 and December 31, 2018, our satellite-related obligations were $440 million and $482 million, respectively. Our satellite-related obligations primarily include payments pursuant to regulatory authorizations; non-lease costs associated with our finance lease satellites; and in-orbit incentives relating to certain satellites; as well as commitments for satellite service arrangements. Contingencies Patents and Intellectual Property Many entities, including some of our competitors, have or may have in the future 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 tripled. 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 our products and services. We cannot be certain that these parties 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 parties 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. Pending BSS Transaction In connection with the pending BSS Transaction, on May 19, 2019, EchoStar and one of our subsidiaries entered into the Master Transaction Agreement with DISH Network that provides, among other things, that if the BSS Transaction is consummated, DISH Network will generally assume liabilities primarily associated with the ownership and operation of the BSS Business. The Master Transaction Agreement also provides that EchoStar and DISH Network will indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. Separation Agreement and Share Exchange In connection with EchoStar’s spin-off from DISH in 2008 (the “Spin-off”), EchoStar 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, EchoStar assumed certain liabilities that relate to its and 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, EchoStar will only be liable for its acts or omissions following the Spin-off and DISH Network will indemnify EchoStar 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. Additionally, in connection with the Share Exchange, EchoStar entered into the Share Exchange Agreement and other agreements which provide, among other things, for the division of certain liabilities, including liabilities relating to taxes, intellectual property and employees and liabilities resulting from litigation and the assumption of certain liabilities that relate to the transferred businesses and assets. These agreements also contain additional indemnification provisions between EchoStar and us and DISH Network for certain pre-existing liabilities and legal proceedings. Litigation We are involved in a number of legal proceedings 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 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, 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 trials, 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). Except as described below, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material 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 or jury 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. 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 Hughes Network Systems, L.L.C. (“HNS”), as well as against Black Elk Energy Offshore Operations, LLC, Bluetide Communications, Inc. and Helm Hotels Group, in the U.S. District Court for the Eastern District of Texas, alleging infringement of U.S. 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 (“USPTO”) challenging the validity of the patents in suit, which the USPTO subsequently declined to institute. On April 13, 2016, the defendants answered Elbit’s complaint. At Elbit’s request, on June 26, 2017, the court dismissed Elbit’s claims of infringement against all parties other than HNS. Trial commenced on July 31, 2017. On August 7, 2017, the jury returned a verdict that the 073 patent was valid and infringed, and awarded Elbit $21 million. The jury also found that such infringement of the 073 patent was not willful and that the 874 patent was not infringed. On March 30, 2018, the court ruled on post-trial motions, upholding the jury’s findings and awarding Elbit attorneys’ fees in an amount that has not yet been specified. Elbit has requested an award of $14 million of attorneys’ fees. On April 27, 2018, HNS filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit. Oral argument was held on May 8, 2019. On June 25, 2019, the Federal Circuit issued an Opinion and Order affirming the court’s judgment and holding that it did not yet have jurisdiction to review the court’s decision to award attorney’s fees. On August 8, 2019, HNS filed a combined petition for panel rehearing or rehearing en banc with the Federal Circuit. As a result of the Federal Circuit’s rulings, as of June 30, 2019, we have recorded an accrual of $32 million, reflecting the $21 million jury verdict and $11 million of pre- and post-judgment interest, costs, attorney’s fees, pre-verdict supplemental damages and post-verdict damages through the 073 patent’s expiration. As of December 31, 2018, we have recorded an accrual of $3 million with respect to this liability. Any eventual payments made with respect to the ultimate outcome of this matter may be different from our accruals and such differences could be significant. Realtime Data LLC On May 8, 2015, Realtime Data LLC (“Realtime”) filed suit against EchoStar Corporation and our subsidiary HNS in the U.S. District Court for the Eastern District of Texas alleging infringement of U.S. Patent Nos. 7,378,992 (the “992 patent”), entitled “Content Independent Data Compression Method and System;” 7,415,530 (the “530 patent”), entitled “System and Methods for Accelerated Data Storage and Retrieval,” and 8,643,513 (the “513 patent”), entitled “Data Compression System and Methods.” On September 14, 2015, Realtime amended its complaint, additionally alleging infringement of U.S. Patent No. 9,116,908 (the “908 patent”), entitled “System and Methods for Accelerated Data Storage and Retrieval.” On February 14, 2017, Realtime filed a second suit against EchoStar Corporation and our subsidiary HNS in the same District Court, alleging infringement of four additional U.S. Patents, Nos. 7,358,867 (the “867 patent”), entitled “Content Independent Data Compression Method and System;” 8,502,707 (the “707 patent”), entitled “Data Compression Systems and Methods;” 8,717,204 (the “204 patent”), entitled “Methods for Encoding and Decoding Data;” and 9,054,728 (the “728 patent”), entitled “Data Compression System and Methods.” On February 13, 2018, we filed petitions before the USPTO challenging the validity of all claims asserted against us from the 707 patent, as well as one of the asserted claims of the 728 patent. On September 5, 2018, the USPTO declined to institute proceedings for the petition that we had filed against the 728 patent. On September 12, 2018, the USPTO instituted proceedings to review the validity of the asserted claims of the 707 patent. In a stipulation filed on October 24, 2018, Realtime voluntarily elected not to pursue any previously asserted claims from the 992, 530, 513, 908, 867 and 204 patents. Realtime is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. In February 2019, we entered into a settlement agreement with Realtime and the case was dismissed with prejudice. Shareholder Litigation On July 2, 2019, the City of Hallandale Beach Police Officers’ and Firefighters’ Personnel Retirement Trust, purporting to sue on behalf of a class of EchoStar’s shareholders, filed a complaint in the District Court of Clark County, Nevada against EchoStar’s directors, Charles W. Ergen, R. Stanton Dodge, Anthony M. Federico, Pradman P. Kaul, C. Michael Schroeder, Jeffrey R. Tarr, William D. Wade, and Michael T. Dugan, EchoStar’s officer, David J. Rayner, EchoStar, Hughes Satellite Systems Corporation and our subsidiary BSS Corp. and DISH and its subsidiary Merger Sub. The complaint alleges that Mr. Ergen, the other members of EchoStar’s board of directors and the officer defendants breached their fiduciary duties to EchoStar’s stockholders by approving the pending BSS Transaction for inadequate consideration and pursuant to an unfair and conflicted process and that EchoStar, DISH, Hughes Satellite Systems Corporation and the officer and other entity defendants aided and abetted such breaches. The plaintiffs seek equitable relief, including the issuance of additional DISH Common Stock, and monetary relief and other costs and disbursements, including attorneys’ fees on behalf of the purported class. We intend to vigorously defend this case. We cannot predict its outcome with any degree of certainty. Other In addition to the above actions, we are subject to various other legal proceedings and claims, which arise in the ordinary course of business. As part of our ongoing operations, we are 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 we 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, we from time to time receive 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 other 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. We also indemnify our directors, officers and employees for certain liabilities that might arise from the performance of their responsibilities for us. Additionally, in the normal course of its business, we enter into contracts pursuant to which we may make a variety of representations and warranties and indemnify the counterparty for certain losses. Our 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 us or our officers, directors or employees, the outcomes of which are unknown and not currently predictable or estimable.
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Segment Reporting |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | SEGMENT REPORTING Operating segments are business components of an enterprise for which separate financial information is available and regularly evaluated by our chief operating decision maker (“CODM”), who is our Chief Executive Officer. We primarily operate in two business segments, Hughes and ESS, as described in Note 1. If the BSS Transaction is consummated, we will no longer operate a substantial portion of our ESS business segment. The primary measure of segment profitability that is reported regularly to our CODM is earnings before interest, taxes, depreciation and amortization and net income (loss) attributable to noncontrolling interests, or EBITDA. Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Real Estate, Accounting and Legal) and other activities that have not been assigned to our operating segments such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other in the tables below or in the reconciliation of EBITDA below. Total assets by segment have not been reported herein because the information is not provided to our CODM on a regular basis. The following table presents revenue, EBITDA and capital expenditures for each of our operating segments (amounts in thousands):
The following table reconciles total consolidated EBITDA to reported Income (loss) before income taxes in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (amounts in thousands):
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Related Party Transactions |
6 Months Ended |
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Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS EchoStar We and EchoStar, including EchoStar’s other subsidiaries, have agreed that we shall each have the right, but not the obligation, to receive from the other certain shared corporate services, including among other things: treasury, tax, accounting and reporting, risk management, cybersecurity, legal, internal audit, human resources, and information technology. These shared corporate services are generally provided at cost. Effective March 2017, and as a result of the Share Exchange, we implemented a new methodology for determining the cost of these shared corporate services. We and EchoStar, including EchoStar’s other subsidiaries, may each terminate a particular shared corporate service for any reason upon at least 30 days’ notice. We recorded net expenses for shared corporate services received from EchoStar and its other subsidiaries of $2 million and $5 million for the three months ended June 30, 2019 and 2018, respectively, and $5 million and $10 million for the six months ended June 30, 2019 and 2018, respectively. We also reimburse EchoStar and its other subsidiaries from time to time for amounts paid by EchoStar and its other subsidiaries for costs and expenses attributable to us, and EchoStar and its other subsidiaries similarly reimburse us from time to time for amounts paid by us for costs and expenses attributable to EchoStar and its other subsidiaries. We report net payments under these arrangements in Advances to affiliates, net within current assets and we report net receipts under these arrangements in Advances from affiliates, net within current liabilities in our Condensed Consolidated Balance Sheets. No repayment schedule for these net advances has been determined. In addition, we occupy certain office space in buildings owned or leased by EchoStar and its other subsidiaries and pay a portion of the taxes, insurance, utilities and maintenance of the premises in accordance with the percentage of the space we occupy. EchoStar and certain of its other subsidiaries have also provided cash advances to certain of our foreign subsidiaries to fund certain expenditures pursuant to loan agreements that mature in 2021 and 2022. Advances under these agreements bear interest at annual rates ranging from one to three percent, subject to periodic adjustment based on the one-year U.S. LIBOR rate. We report amounts payable under these agreements in Advances from affiliates, net within noncurrent liabilities in our Condensed Consolidated Balance Sheets. Pending BSS Transaction. Pursuant to the pre-closing restructuring contemplated by the Master Transaction Agreement, and as part of the BSS Transaction, we and our subsidiaries will transfer certain of the BSS Business to BSS Corp., and we will distribute all of the shares of BSS Corp. to EchoStar as a dividend. Completion of the BSS Transaction is subject to the satisfaction or waiver of various closing conditions. See Note 1 for further information. Contribution of EchoStar XIX Satellite. On February 1, 2017, EchoStar contributed the EchoStar XIX satellite and assigned the related construction contract with the satellite manufacturer to us. We recorded a $349 million increase in Additional paid-in capital, reflecting EchoStar’s $514 million carrying amount of the satellite, including capitalized interest that was previously charged to expense in our consolidated financial statements, less related deferred taxes of $165 million. EchoStar XXI and EchoStar XXIII Launch Facilitation and Operational Control Agreements. As part of applying for launch licenses for the EchoStar XXI and XXIII satellites through the UK Space Agency, we and a subsidiary of EchoStar, EchoStar Operating L.L.C. (“EOC”), entered into agreements in June 2015 and March 2016 to transfer to us EOC’s launch service contracts for the EchoStar XXI and EchoStar XXIII satellites, respectively, and to grant us certain rights to control the in-orbit operations of these satellites. EOC retained ownership of the satellites and agreed to make additional payments to us for amounts that we are required to pay under both launch service contracts. In 2016, we recorded additions to Other noncurrent assets, net and corresponding increases in Additional paid-in capital in our Condensed Consolidated Balance Sheet to reflect EOC’s cumulative payments under the launch service contracts prior to the transfer dates and to reflect EOC’s funding of additional cash payments to the launch service provider. The EchoStar XXIII and the EchoStar XXI satellites were successfully launched in March 2017 and June 2017, respectively. We recorded decreases in Other noncurrent assets, net and Additional paid-in capital of $62 million and $83 million, respectively, representing the carrying amounts of the launch service contracts at the time of launch to reflect the consumption of the contracts’ economic benefits by EOC, the owner of the satellites. If the BSS Transaction is consummated, the agreement relating to the EchoStar XXIII satellite will be terminated. Share Exchange Agreement. Prior to consummation of the Share Exchange, EchoStar was required to complete steps necessary for the transferring of certain assets and liabilities to DISH and certain of its subsidiaries. As part of these steps, subsidiaries of EchoStar that, prior to the consummation of the Share Exchange, owned EchoStar’s business of providing online video delivery and satellite video delivery for broadcasters and pay-TV operators, including satellite uplinking/downlinking, transmission services, signal processing, conditional access management and other services and related assets and liabilities were contributed to one of our subsidiaries in consideration for additional shares of HSS’ common stock that were then issued to a subsidiary of EchoStar. Certain data center assets that were included in the contribution of certain assets and liabilities to one of our subsidiaries were not included in the Share Exchange and continue to be owned by us and are pledged as collateral to support our obligations under the indentures relating to our 5 1/4% Senior Secured Notes due August 1, 2026 (the “Secured Notes”). EchoStar Mobile Limited Service Agreements. We provide services and lease equipment to support the business of EchoStar Mobile Limited, a subsidiary of EchoStar that is licensed by the European Union and its member states (“EU”) to provide mobile satellite services and complementary ground component services covering the entire EU using S-band spectrum. Generally, the amounts EchoStar’s subsidiaries pay for these services are based on cost plus a fixed margin. We have converted the receivables for certain of these services into loans, bearing an annual interest rate of 5%, that mature in 2023. We recorded revenue in Services and other revenue - other of $5 million and $5 million for the three months ended June 30, 2019 and 2018, respectively, and $10 million and $9 million for the six months ended June 30, 2019 and 2018, respectively, related to these services. DBS Transponder Lease. EchoStar leases satellite capacity from us on eight DBS transponders on the QuetzSat-1 satellite through November 2021, after which EchoStar has certain options to renew the agreement on a year-to year basis through the end of life of the QuetzSat-1 satellite. We recorded revenue in connection with this agreement of approximately $6 million for both the three months ended June 30, 2019 and 2018 and $12 million for both the six months ended June 30, 2019 and 2018. As of both June 30, 2019 and December 31, 2018, we had related trade accounts receivable of approximately $6 million. If the BSS Transaction is consummated, this lease will transfer to DISH Network. Construction Management Services for EchoStar XXIV satellite. In August 2017, a subsidiary of EchoStar entered into a contract with Space Systems Loral, LLC for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite, with a planned 2021 launch. We provide construction management services to EchoStar’s subsidiary for the construction of the EchoStar XXIV satellite. We charged EchoStar and reduced our operating expenses by the costs of such services of de minimis for both the three months ended June 30, 2019 and 2018, respectively, and $1 million for both the six months ended June 30, 2019 and 2018, respectively. DISH Network EchoStar and DISH have operated as separate publicly-traded companies since 2008. In addition, prior to the consummation of the Share Exchange in February 2017, DISH Network owned the Tracking Stock, which represented an aggregate 80.0% economic interest in the residential retail satellite broadband business of our Hughes segment. Following the consummation of the Share Exchange, the Tracking Stock was retired. A substantial majority of the voting power of the shares of each of EchoStar and DISH is owned beneficially by Charles W. Ergen, our Chairman, and by certain entities established by Mr. Ergen for the benefit of his family. In connection with and following both the Spin-off and the Share Exchange, EchoStar, we and certain other of EchoStar’s subsidiaries and DISH Network entered into certain agreements pursuant to which we and EchoStar and its other subsidiaries obtain certain products, services and rights from DISH Network; DISH Network obtains certain products, services and rights from us and EchoStar and its other subsidiaries; and such entities indemnify each other against certain liabilities arising from the respective businesses. If the BSS Transaction is consummated, we expect that certain of the transactions described below will be terminated and that we will enter into agreements for new transactions with DISH Network, including agreements pursuant to which we obtain certain products, services and rights from DISH Network, and DISH Network obtains certain products, services and rights from us. Generally, the amounts we and/or EchoStar or DISH Network pay for products and services provided under the agreements are based on cost plus a fixed margin (unless noted differently below), which varies depending on the nature of the products and services provided. We and/or EchoStar also may enter into additional agreements with DISH Network in the future. 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. Services and Other Revenue — DISH Network Satellite Capacity Leased to DISH Network. We have entered into certain agreements to lease satellite capacity pursuant to which we provide satellite services to DISH Network on certain satellites owned or leased by us. The fees for the services provided under these 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 VII, EchoStar X, EchoStar XI and EchoStar XIV. In March 2014, we began leasing certain satellite capacity to DISH Network on the EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV satellites. These agreements to lease satellite capacity generally terminate 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 agreement to lease satellite capacity 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. The agreement to lease satellite capacity on the EchoStar VII satellite expired at the end of June 2018. If the BSS Transaction is consummated, DISH Network will own the EchoStar VII, X, XI, and XIV satellites and these agreements will transfer to DISH Network. EchoStar IX. Effective January 2008, DISH Network began leasing satellite capacity from us on the EchoStar IX satellite. Subject to availability, DISH Network generally has the right to continue leasing satellite capacity from us on the EchoStar IX satellite on a month-to-month basis. EchoStar XII. DISH Network leased satellite capacity from us on the EchoStar XII satellite. The agreement to lease satellite capacity expired at the end of September 2017. If the BSS Transaction is consummated, DISH Network will own the EchoStar XII satellite and this agreement will transfer to DISH Network. EchoStar XVI. In December 2009, we entered into an initial ten-year agreement to lease satellite capacity to DISH Network, pursuant to which DISH Network has leased satellite capacity from us on the EchoStar XVI satellite since January 2013. Effective December 2012, we and DISH Network amended the 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 agreement to, among other things, extend the initial term by one additional year through January 2018 and to reduce the term of the first renewal option by one year. In May 2017, DISH Network renewed the agreement through January 2023. DISH Network has the option to renew for an additional five-year period prior to expiration of the current term. There can be no assurance that such option to renew this agreement will be exercised. In the event that DISH Network does not exercise its 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. We and DISH Network have amended the agreement to allow DISH Network to place and use certain satellites at the 61.5 degree west longitude orbital location. If the BSS Transaction is consummated, DISH Network will own the EchoStar XVI satellite and this agreement will transfer to DISH Network. Nimiq 5 Agreement. In September 2009, we entered into a fifteen-year agreement with Telesat Canada to lease satellite capacity from Telesat Canada on all 32 direct broadcast satellite (“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 an agreement with DISH Network, pursuant to which DISH Network leases satellite capacity from us on all 32 of the DBS transponders covered by the Telesat Transponder Agreement (the “DISH Nimiq 5 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 in October 2019. 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 lease satellite capacity 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 lease satellite capacity on a replacement satellite. If the BSS Transaction is consummated, the Telesat Transponder Agreement for the Nimiq 5 satellite will be transferred to DISH Network (from July 2019 until September 2024). QuetzSat-1 Agreement. In November 2008, we entered into a ten-year agreement to lease satellite capacity from SES Latin America, which provides, among other things, for the provision by SES Latin America to us of leased satellite capacity on 32 DBS transponders on the QuetzSat-1 satellite. Concurrently, in 2008, we entered into an agreement pursuant to which DISH Network leases from us satellite capacity 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 January 2013, the QuetzSat-1 satellite was moved to the 77 degree west longitude orbital location. In February 2013, EchoStar and DISH Network entered into an agreement pursuant to which EchoStar leases back from DISH Network certain satellite capacity on five DBS transponders on the QuetzSat-1 satellite through November 2021, unless extended or earlier terminated under the terms and conditions of our agreement. If the BSS Transaction is consummated, the transponder agreement for the QuetzSat-1 satellite will be transferred to DISH Network. Under the terms of our contractual arrangements with DISH Network, we began leasing satellite capacity to DISH Network on the QuetzSat-1 satellite in February 2013 and will continue leasing such capacity through November 2021, unless extended or earlier terminated under the terms and conditions of our agreement with DISH Network for the QuetzSat-1 satellite. 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 lease satellite capacity 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 lease satellite capacity on a replacement satellite. If the BSS Transaction is consummated, DISH Network will assume the ten-year satellite service agreement with SES Latin America for service on 32 DBS transponders on the QuetzSat-1 satellite (from July 2019 until October 2021). 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. Effective in March 2018, DISH Network exercised its right to terminate the DISH 103 Spectrum Development Agreement and we exercised our right to terminate the 103 Spectrum Development Agreement. In connection with the 103 Spectrum Development Agreement, in May 2012, we also entered into a ten-year agreement with Ciel pursuant to which we leased certain satellite capacity from Ciel on the SES-3 satellite at the 103 degree west longitude orbital location (the “Ciel 103 Agreement”). In June 2013, we and DISH Network entered into an agreement pursuant to which DISH Network leased certain satellite capacity from us on the SES-3 satellite (the “DISH 103 Agreement”). Under the terms of the DISH 103 Agreement, DISH Network made certain monthly payments to us through the service term. Effective in March 2018, DISH Network exercised its right to terminate the DISH 103 Agreement and we exercised our right to terminate the Ciel 103 Agreement. TT&C Agreement. Effective January 2012, we entered into a TT&C agreement pursuant to which we provided TT&C services to DISH Network for a period ending in December 2016 (the “TT&C Agreement”). We and DISH Network have amended the TT&C Agreement over time to, among other things, extend the term through February 2023. The fees for services provided under the 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 TT&C Agreement for any reason upon 12 months’ notice. If the BSS Transaction is consummated, the TT&C Agreement will be assigned to BSS Corp. and DISH Network will provide TT&C services to us. Real Estate Lease. Prior to the Share Exchange, EchoStar leased to DISH Network certain space at 530 EchoStar Drive, Cheyenne, Wyoming. In connection with the Share Exchange, EchoStar transferred ownership of a portion of this property to DISH Network and contributed a portion to us and we amended the agreement to (i) terminate the lease for the transferred space and (ii) provide for a continued lease to DISH Network of the portion of the property contributed to us for a period ending in December 2031. The rent on a per square foot basis for the lease 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. After December 2031, this agreement may be converted by mutual consent to a month-to-month lease agreement with either party having the right to terminate upon 30 days’ notice. If the BSS Transaction is consummated, DISH Network will own the Cheyenne Data Center and this lease will be amended to provide us with certain space at the Cheyenne Data Center. 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 EchoStar’s completion of the acquisition of Hughes Communications, Inc. and its subsidiaries (the “Hughes Acquisition”), TerreStar and HNS entered into various agreements pursuant to which we provide, among other things, warranty, operations and maintenance and hosting services for TerreStar’s ground-based communications equipment. In December 2017, we and DISH Network amended these agreements, effective as of January 1, 2018, to reduce certain pricing terms through December 31, 2023 and to modify certain termination provisions. DISH Network generally has the right to continue to receive warranty services from us for our products on a month-to-month basis unless terminated by DISH Network upon at least 21 days’ written notice to us. DISH Network generally has the right to continue to receive operations and maintenance services from us on a quarter-to-quarter basis unless operations and maintenance services are terminated by DISH Network upon at least 90 days’ written notice to us. The provision of hosting services will continue until May 2022. In addition, DISH Network generally may terminate any and all services for convenience subject to providing us with prior notice and/or payment of termination charges. Hughes Broadband Distribution Agreement. Effective October 2012, we and DISH Network, entered into a distribution agreement (the “Distribution Agreement”) pursuant to which DISH Network has the right, but not the obligation, to market, sell and distribute our HughesNet service. DISH Network pays us a monthly per subscriber wholesale service fee for the HughesNet service based upon a subscriber’s service level and based upon certain volume subscription thresholds. The Distribution Agreement also provides that DISH Network has the right, but not the obligation, to purchase certain broadband equipment from us to support the sale of the HughesNet 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, we and DISH Network 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, we and DISH Network will continue to provide our HughesNet service to the then-current DISH Network subscribers pursuant to the terms and conditions of the Distribution Agreement. DBSD North America Agreement. In March 2012, DISH Network completed its acquisition of all of the equity of reorganized DBSD North America, Inc. (“DBSD North America”). Prior to DISH Network’s acquisition of DBSD North America and EchoStar’s completion of the Hughes Acquisition, DBSD North America and HNS entered into various agreements pursuant to which we provide, among other things, warranty, operations and maintenance and hosting services of DBSD North America’s gateway and ground-based communications equipment. In December 2017, we and DBSD North America amended these agreements, effective as of January 1, 2018, to reduce certain pricing terms through December 31, 2023 and to modify certain termination provisions. DBSD North America has the right to continue to receive operations and maintenance services from us on a quarter-to-quarter basis, unless terminated by DBSD North America upon at least 120 days’ written notice to us. In February 2019, we further amended these agreements to provide DBSD North America with the right to continue to receive warranty services from us on a month-to-month basis until December 2023, unless terminated by DBSD North America upon at least 21 days’ written notice to us. The provision of hosting services will continue until February 2022 and will automatically renew for an additional five-year period until February 2027 unless terminated by DBSD North America upon at least 180 days’ written notice to us. In addition, DBSD North America generally may terminate any and all such services for convenience, subject to providing us with prior notice and/or payment of termination charges. Hughes Equipment and Services Agreement. In February 2019, we and DISH Network entered into an agreement pursuant to which we will sell to DISH Network our HughesNet Service and HughesNet equipment that has been modified to meet DISH Network’s internet-of-things specifications for the transfer of data to DISH Network’s network operations centers. This agreement has an initial term of five years expiring February 2024 with automatic renewal for successive one-year terms unless terminated by DISH Network with at least 180 days’ written notice to us or by us with at least 365 days’ written notice to DISH Network. General and Administrative Expenses — DISH Network Amended and Restated Professional Services Agreement. In connection with the Spin-off, EchoStar entered into various agreements with DISH Network including a transition services agreement, satellite procurement agreement and services agreement, which all expired in January 2010 and were replaced by a professional services agreement (the “Professional Services Agreement”). In January 2010, EchoStar and DISH Network agreed that EchoStar and its subsidiaries 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 a transition services agreement: information technology, travel and event coordination, internal audit, legal, accounting and tax, benefits administration, program acquisition services and other support services. Additionally, EchoStar and DISH Network agreed that DISH Network would continue to have the right, but not the obligation, to engage EchoStar and its subsidiaries to manage the process of procuring new satellite capacity for DISH Network (previously provided under a satellite procurement agreement), receive logistics, procurement and quality assurance services from EchoStar and its subsidiaries (previously provided under a services agreement) and provide other support services. In connection with the consummation of the Share Exchange, EchoStar and DISH amended and restated the Professional Services Agreement (the “Amended and Restated Professional Services Agreement”) to provide that EchoStar and its subsidiaries and DISH Network shall have the right to receive additional services that either EchoStar and its subsidiaries or DISH Network may require as a result of the Share Exchange, including access to antennas owned by DISH Network for our use in performing TT&C services and maintenance and support services for our antennas. A portion of these costs and expenses have been allocated to us in the manner described above under the caption “EchoStar.” The term of the Amended and Restated Professional Services Agreement is through January 2020 and renews automatically for successive one-year periods thereafter, unless the agreement is terminated earlier by either party upon at least 60 days’ notice. However, either party may generally terminate the Amended and Restated Professional Services Agreement in part with respect to any particular service it receives for any reason upon at least 30 days’ notice, unless the statement of work for particular services states otherwise. Certain services being provided for under the Amended and Restated Professional Services Agreement may survive the termination of the agreement. If the BSS Transaction is consummated, this agreement will be amended to include any additional services identified by either DISH Network or EchoStar and its subsidiaries to be provided to the other due to the BSS Transaction. Real Estate Lease from DISH Network. Effective March 2017, we subleased from DISH Network certain space at 796 East Utah Valley Drive in American Fork, Utah for a period ending in August 2017. We exercised our option to renew this sublease for a five-year period ending in August 2022. We and DISH Network amended this sublease to, among other things, terminate this sublease in March 2019. The rent on a per square foot basis for the lease was comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease, and we were responsible for our portion of the taxes, insurance, utilities and maintenance of the premises. Collocation and Antenna Space Agreements. We and DISH Network have entered into an agreement pursuant to which DISH Network provides us with collocation space in El Paso, Texas. This agreement was for an initial period ending in August 2015, and provides us with renewal options for four consecutive years. Effective August 2015, we exercised our first renewal option for a period ending in August 2018 and in April 2018 we exercised our second renewal option for a period ending in August 2021. In connection with the Share Exchange, effective March 2017, we also entered into certain agreements pursuant to which DISH Network provides collocation and antenna space to EchoStar through February 2022 at the following locations: Cheyenne, Wyoming; Gilbert, Arizona; New Braunfels, Texas; Monee, Illinois; Spokane, Washington; and Englewood, Colorado. In August 2017, we and DISH Network also entered into certain other agreements pursuant to which DISH Network provides additional collocation and antenna space to EchoStar in Monee, Illinois and Spokane, Washington through August 2022. We generally may renew our collocation and antenna space agreements for three-year periods by providing DISH Network with prior written notice no more than 120 days but no less than 90 days prior to the end of the then-current term. We may terminate certain of these agreements with 180 days’ prior written notice. The fees for the services provided under these agreements depend on the number of racks leased at the location. Other Agreements — DISH Network Master Transaction Agreement. In May 2019, EchoStar and one of our subsidiaries entered into the Master Transaction Agreement with DISH Network with respect to the BSS Transaction. Pursuant to the terms of the Master Transaction Agreement, (i) EchoStar and its subsidiaries and we and our subsidiaries will transfer the BSS Business to BSS Corp., (ii) EchoStar will distribute to each holder of shares of EchoStar Class A and Class B common stock an amount of BSS Common Stock equal to one share of BSS Common Stock for each share of EchoStar Class A and Class B common stock owned by such EchoStar stockholder on the record date for the Distribution, which date has not yet been determined, and (iii) immediately after the Distribution, (1) BSS Corp. will become a wholly-owned subsidiary of DISH and DISH will own and operate the BSS Business and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders will be converted into a number of shares of DISH Common Stock equal to 22,937,188 divided by the total number of shares of EchoStar Class A and Class B common stock outstanding on the record date for the Distribution. If the BSS Transaction is consummated, we will no longer operate a substantial portion of our ESS segment. The Master Transaction Agreement contains customary representations and warranties by the parties, including EchoStar’s representations relating to the assets, liabilities and financial condition of the BSS Business, and representations by DISH Network relating to its financial condition and liabilities. EchoStar and DISH Network have agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. See Note 1 for further information. Satellite and Tracking Stock Transaction. In February 2014, we and EchoStar entered into agreements with DISH Network to implement a transaction pursuant to which, among other things: (i) in March 2014, EchoStar and Hughes Satellite Systems Corporation, issued 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 $11 million in cash; and (ii) in March 2014, DISH Network began receiving certain satellite services from us as discussed above on these five satellites (collectively, the “Satellite and Tracking Stock Transaction.”) The Tracking Stock was retired in March 2017 and is no longer outstanding and all agreements, arrangements and policy statements with respect to such Tracking Stock terminated and are of no further effect. Share Exchange Agreement. On January 31, 2017, EchoStar and certain of its subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries, pursuant to which, on February 28, 2017, EchoStar and its subsidiaries received all of the shares of the Tracking Stock in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of EchoStar’s EchoStar Technologies businesses and certain other assets. Following consummation of the Share Exchange on February 28, 2017, EchoStar no longer operates the transferred EchoStar Technologies businesses and the Tracking Stock was retired and is no longer outstanding and all agreements, arrangements and policy statements with respect to such Tracking Stock terminated and are of no further effect. Pursuant to the Share Exchange Agreement, EchoStar transferred certain assets, investments in joint ventures, spectrum licenses and real estate properties and DISH Network assumed certain liabilities relating to the transferred assets and businesses. The Share Exchange Agreement contained customary representations and warranties by the parties, including representations by EchoStar related to the transferred assets, assumed liabilities and the financial condition of the transferred businesses. EchoStar and DISH Network also agreed to customary indemnification provisions whereby each party indemnifies the other against certain losses with respect to breaches of representations, warranties or covenants and certain liabilities and if certain actions undertaken by EchoStar or DISH causes the transaction to be taxable to the other party after closing. See Note 1 for further information. Hughes Broadband Master Services Agreement. In March 2017, we and DISH Network entered into a master service agreement (the “Hughes Broadband MSA”) pursuant to which DISH Network, among other things: (i) has the right, but not the obligation, to market, promote and solicit orders and upgrades for our HughesNet service and related equipment and other telecommunication services and (ii) installs HughesNet service equipment with respect to activations generated by DISH Network. Under the Hughes Broadband MSA, we and DISH Network make certain payments to each other relating to sales, upgrades, purchases and installation services. The Hughes Broadband MSA has an initial term of five years until March 2022 with automatic renewal for successive one-year terms. Either party has the ability to terminate the Hughes Broadband MSA, in whole or in part, for any reason upon at least 90 days’ notice to the other party. Upon expiration or termination of the Hughes Broadband MSA, we will continue to provide our HughesNet service to subscribers and make certain payments to DISH Network pursuant to the terms and conditions of the Hughes Broadband MSA. We incurred sales incentives and other costs under the Hughes Broadband MSA totaling $5 million and $6 million for the three months ended June 30, 2019 and 2018, respectively, and $10 million and $20 million for the six months ended June 30, 2019 and 2018, respectively. Intellectual Property and Technology License Agreement. Effective March 2017 in connection with the Share Exchange, EchoStar and one of its other subsidiaries and DISH Network entered into an intellectual property and technology license agreement (“IPTLA”) pursuant to which we, EchoStar and its other subsidiaries and DISH Network license to each other certain intellectual property and technology. The IPTLA will continue in perpetuity, unless mutually terminated by the parties. Pursuant to the IPTLA, we, EchoStar and its other subsidiaries granted to DISH Network a license to our and their intellectual property and technology for use by DISH Network, among other things, in connection with its continued operation of the businesses acquired pursuant to the Share Exchange, including a limited license to use the “ECHOSTAR” trademark during a transition period. EchoStar retains full ownership of the “ECHOSTAR” trademark. In addition, DISH Network granted a license back to us, EchoStar and its other subsidiaries, among other things, for the continued use of all intellectual property and technology that is used in our EchoStar and its other subsidiaries’ retained businesses but the ownership of which was transferred to DISH Network pursuant to the Share Exchange. Tax Matters Agreement. Effective March 2017, in connection with the Share Exchange, EchoStar and DISH entered into a tax matters agreement. This agreement governs certain rights, responsibilities and obligations of EchoStar and its subsidiaries with respect to taxes of the transferred businesses pursuant to the Share Exchange. Generally, EchoStar is responsible for all tax returns and tax liabilities for the transferred businesses and assets for periods prior to the Share Exchange and DISH Network is responsible for all tax returns and tax liabilities for the transferred businesses and assets from and after the Share Exchange. Both EchoStar and DISH Network made certain tax-related representations and are subject to various tax-related covenants after the consummation of the Share Exchange. Both EchoStar and DISH Network have agreed to indemnify each other if there is a breach of any such tax representation or violation of any such tax covenant and that breach or violation results in the Share Exchange not qualifying for tax free treatment for the other party. In addition, DISH Network has agreed to indemnify EchoStar if the transferred businesses are acquired, either directly or indirectly (e.g., via an acquisition of DISH Network), by one or more persons and such acquisition results in the Share Exchange not qualifying for tax free treatment. The tax matters agreement supplements the Tax Sharing Agreement outlined below, which continues in full force and effect. Tax Sharing Agreement. Effective December 2007, EchoStar and DISH Network entered into a tax sharing agreement (the “Tax Sharing Agreement”) in connection with the Spin-off. This agreement governs EchoStar and DISH and their respective subsidiaries’ 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 indemnifies EchoStar and its subsidiaries for such taxes. However, DISH Network is not liable for and does not indemnify EchoStar or its subsidiaries 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 (the “Code”), because of: (i) a direct or indirect acquisition of any of EchoStar’s stock, stock options or assets; (ii) any action that EchoStar or its subsidiaries take or fail to take; or (iii) any action that EchoStar or its subsidiaries 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, EchoStar and its subsidiaries 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 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 EchoStar’s consolidated federal income tax returns for certain tax years prior to and for the year of the Spin-off, in September 2013, EchoStar 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 EchoStar’s consolidated tax returns. As a result, DISH Network agreed to pay EchoStar an amount of that includes the federal tax benefit DISH received as a result of our operations. In August 2018, EchoStar and DISH Network amended the Tax Sharing Agreement and the 2013 agreements (the “Tax Sharing Amendment”). Under the Tax Sharing Amendment, DISH Network is required to compensate EchoStar for certain past and future excess California research and development tax credits generated by EchoStar and its subsidiaries and used by DISH Network. Other Agreements Hughes Systique Corporation (“Hughes Systique”) We contract with Hughes Systique for software development services. In addition to our approximately 43% ownership in Hughes Systique, Mr. Pradman Kaul, the President of Hughes Communications, Inc. and a member of EchoStar’s board of directors, and his brother, who is the Chief Executive Officer and President of Hughes Systique, in the aggregate, own approximately 25%, on an undiluted basis, of Hughes Systique’s outstanding shares as of June 30, 2019. 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 accompanying Condensed Consolidated Financial Statements. Deluxe/EchoStar LLC We own 50.0% of 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 $1 million for each of the three months ended June 30, 2019 and 2018 and $2 million for both the six months ended June 30, 2019 and 2018. As of both June 30, 2019 and December 31, 2018, we had trade accounts receivable from Deluxe of $1 million. See Note 10 for additional information about our investments in unconsolidated entities. Broadband Connectivity Solutions In August 2018, we entered into an agreement with Yahsat to establish a new entity, BCS, to provide commercial Ka-band satellite broadband services across Africa, the Middle East and southwest Asia operating over Yahsat’s Al Yah 2 and Al Yah 3 Ka-band satellites. The transaction was consummated in December 2018 when we invested $100 million in cash in exchange for a 20% interest in BCS. Under the terms of the agreement, we may also acquire, for further cash investments, additional ownership interests in BCS in the future provided certain conditions are met. We supply network operations and management services and equipment to BCS. We recognized revenue from BCS for such services and equipment of $2 million and $4 million for the three and six months ended June 30, 2019, respectively. As of both June 30, 2019 and December 31, 2018, we had $3 million trade accounts receivable from BCS. See Note 10 for additional information about our investments in unconsolidated entities. AsiaSat We contract with AsiaSat Telecommunications Inc. (“AsiaSat”) for the use of transponder capacity on one of AsiaSat’s satellites. Mr. William David Wade, who joined EchoStar’s board of directors in February 2017, served as the Chief Executive Officer of AsiaSat in 2016 and as a senior advisor to the Chief Executive Officer of AsiaSat through March 2017. We incurred expenses payable to AsiaSat under this agreement of nil for both the three and six months ended June 30, 2019 and 2018, respectively. Global IP In May 2017, we entered into an agreement with Global-IP Cayman (“Global IP”) providing for the sale of certain equipment and services to Global IP. Mr. William David Wade, a member of EchoStar’s board of directors, served as a member of the board of directors of Global IP from September 2017 until April 2019 and continues to serve as an executive advisor to the Chief Executive Officer of Global IP. In August 2018, we and Global IP amended the agreement to (i) change certain of the equipment and services to be provided to Global IP; (ii) modify certain payment terms; (iii) provide Global IP an option to use one of our test lab facilities; and (iv) effectuate the assignment of the agreement from Global IP to one of its wholly-owned subsidiaries. In February 2019, we terminated the agreement as a result of Global IP’s defaults resulting from its failure to make payments to us as required under the terms of the agreement and we reserved our rights and remedies against Global IP under the agreement. We recognized revenue under this agreement of nil for both the three and six months ended June 30, 2019, respectively, and $1 million for both the three and six months ended June 30, 2018, respectively. As of both June 30, 2019 and December 31, 2018, we are owed $7.5 million from Global IP. TerreStar Solutions DISH Network owns more than 15% of TerreStar Solutions, Inc. (“TSI”). In May 2018, we and TSI entered into an equipment and services agreement pursuant to which we design, manufacture and install upgraded ground communications network equipment for TSI’s network and provide, among other things, warranty and support services. We recognized revenue of $3 million and de minimis for the three months ended June 30, 2019 and 2018, respectively, and $8 million and de minimis for the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019 and December 31, 2018, we had trade accounts receivable from TSI of $1 million and $2 million, respectively. Maxar Technologies Inc. Mr. Jeffrey Tarr, who joined EchoStar’s board of directors in March 2019, served as a consultant and advisor to Maxar and its subsidiaries (“Maxar Tech”) through May 2019. We previously entered into agreements with Maxar Tech for the manufacture of our EchoStar IX, EchoStar XI, EchoStar XIV, EchoStar XVI, EchoStar XVII, EchoStar XIX, EchoStar XXI and EchoStar XXIII satellites and for the timely manufacture and delivery and certain other services for our EchoStar XXIV satellite with an expected launch date in 2021. Maxar Tech provides us with anomaly support for these satellites once launched pursuant to the terms of the agreements. Maxar Tech also provides a warranty on one of these satellites and may be required to pay us certain amounts should the satellite not operate according to certain performance specifications. Our obligations to pay Maxar Tech under these agreements during the design life of the applicable satellites may be reduced if the applicable satellites do not operate according to certain performance specifications. We incurred aggregate costs payable to Maxar Tech under these agreements of $31 million and $67 million for the three and six months ended June 30, 2019, respectively.
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Supplemental Guarantor and Non-Guarantor Financial Information |
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Supplemental Guarantor and Non-Guarantor Financial Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION | SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION Certain of our wholly-owned subsidiaries (together, the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed, on a joint and several basis, the obligations of our Secured Notes, 7 5/8% Senior Unsecured Notes due 2021 and 6 5/8% Senior Unsecured Notes due August 1, 2026 (collectively, the “Notes”). In lieu of separate financial statements of the Guarantor Subsidiaries, accompanying condensed consolidating financial information prepared in accordance with Rule 3-10(f) of Regulation S-X is presented below, including the accompanying condensed balance sheet information, the accompanying condensed statement of operations and comprehensive income (loss) information and the accompanying condensed statement of cash flows information of HSS, the Guarantor Subsidiaries on a combined basis and the non-guarantor subsidiaries of HSS on a combined basis and the eliminations necessary to arrive at the corresponding information of HSS on a consolidated basis. The indentures governing Notes contain restrictive covenants that, among other things, impose limitations on our ability and the ability of certain of our subsidiaries to pay dividends or make distributions, incur additional debt, make certain investments, create liens or enter into sale and leaseback transactions, merge or consolidate with another company, transfer and sell assets, enter into transactions with affiliates or allow to exist certain restrictions on the ability of certain of our subsidiaries to pay dividends, make distributions, make other payments, or transfer assets to us. The accompanying condensed consolidating financial information presented below should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto included herein. Condensed Consolidating Balance Sheet as of June 30, 2019 (Amounts in thousands)
Condensed Consolidating Balance Sheet as of December 31, 2018 (Amounts in thousands)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended June 30, 2019 (Amounts in thousands)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended June 30, 2018 (Amounts in thousands)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Six Months Ended June 30, 2019 (Amounts in thousands)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Six Months Ended June 30, 2018 (Amounts in thousands)
Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2019 (Amounts in thousands)
Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2018 (Amounts in thousands)
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Supplemental Financial Information |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL FINANCIAL INFORMATION | SUPPLEMENTAL FINANCIAL INFORMATION Noncash Investing and Financing Activities The following table presents the noncash investing and financing activities (amounts in thousands):
Restricted Cash and Cash Equivalents The beginning and ending balances of cash and cash equivalents presented in our Condensed Consolidated Statements of Cash Flows included restricted cash and cash equivalents of $1 million for both the three and six months ended June 30, 2019 and 2018, respectively. These amounts are included in Other noncurrent assets, net in our Condensed Consolidated Balance Sheets. Fair Value of In-Orbit Incentives As of June 30, 2019 and December 31, 2018, 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 $91 million and $95 million, respectively. Contract Acquisition and Fulfillment Costs Unamortized contract acquisition costs totaled $114 million and $104 million as of June 30, 2019 and December 31, 2018, respectively, and related amortization expense totaled $24 million and $21 million for the three months ended June 30, 2019 and 2018, respectively, and $47 million and $41 million for the six months ended June 30, 2019 and 2018, respectively. Unamortized contract fulfillment costs totaled $3 million as of June 30, 2019 and December 31, 2018 and related amortization expense was de minimis for the three and six months ended June 30, 2019 and 2018, respectively. Research and Development The table below summarizes the research and development costs incurred in connection with customers’ orders included in cost of sales and other expenses we incurred for research and development (amounts in thousands):
Capitalized Software Costs As of June 30, 2019 and December 31, 2018, the net carrying amount of externally marketed software was $100 million and $97 million, respectively, of which $27 million and $29 million, respectively, is under development and not yet placed in service. We capitalized costs related to the development of externally marketed software of $8 million for both the three months ended June 30, 2019 and 2018 and $15 million for both the six months ended June 30, 2019 and 2018. We recorded amortization expense relating to the development of externally marketed software of $6 million for both the three months ended June 30, 2019 and 2018 and $12 million and $11 million for the six months ended June 30, 2019 and 2018, respectively. The weighted average useful life of our externally marketed software was three years as of June 30, 2019.
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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. (“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 U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, 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, 2018.
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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% 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 shareholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests. All significant intercompany balances and transactions have been eliminated in consolidation.
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Reclassification | Reclassification Certain prior period amounts have been reclassified to conform with the current period presentation. |
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Accounting Pronouncements | Recently Adopted Accounting Pronouncements Leases We adopted Accounting Standard Update (“ASU”) No. 2016-02 - Leases (Topic 842), as amended, or Accounting Standard Codification (“ASC 842”), as of January 1, 2019. The primary impact of ASC 842 on our consolidated financial statements is the recognition of right-of-use assets and related liabilities on our consolidated balance sheet for operating leases where we are the lessee. We have elected to initially apply the requirements of the new standard on January 1, 2019 and we have not restated our consolidated financial statements for prior periods. Consequently, certain amounts reported in our Condensed Consolidated Balance Sheet as of June 30, 2019 are not comparable to those reported as of December 31, 2018 or earlier dates. Our adoption of ASC 842 did not have a material impact on the results of our operations or on our cash flows for the three and six months ended June 30, 2019. Under ASC 842, leases are classified either as operating leases or finance leases. The lease classification affects the recognition of lease expense by lessees in the statement of operations. Consistent with prior accounting standards, operating lease expense is included in operating expenses, while finance lease expense is split between depreciation expense and interest expense. ASC 842 does not fundamentally change the lessor accounting model, which requires leases to be classified as operating leases or sales-type leases. Operating lease revenue generally is recognized over the lease term, while sales-type lease revenue is recognized primarily upon lease commencement, except for amounts representing interest on related accounts receivable. Except for the new requirement to recognize assets and liabilities on the balance sheet for operating leases where we are the lessee, under our ASC 842 transition method we continue to apply prior accounting standards to leases that commenced prior to 2019. We fully apply ASC 842 requirements only to leases that commenced or were modified on or after January 1, 2019. We elected certain practical expedients under our transition method, including elections to not reassess (i) whether a contract is or contains a lease and (ii) the classification of existing leases. We also elected not to apply hindsight in determining whether optional renewal periods should be included in the lease term, which in some instances may impact the initial measurement of the lease liability and the calculation of straight-line expense over the lease term for operating leases. As a result of our transition elections, there was no change in our recognition of revenue and expense for leases that commenced prior to 2019. In addition, the application of ASC 842 requirements to new and modified leases did not materially affect our recognition of revenue or expenses for the three and six months ended June 30, 2019. Our adoption of ASC 842 resulted in the following adjustments to our Condensed Consolidated Balance Sheet as of December 31, 2018 (amounts in thousands):
Our accounting policies under ASC 842 are summarized below. Additional disclosures required by the new standard are included in Note 4. Lessee Accounting We lease real estate, satellite capacity and equipment in the conduct of our business operations. For contracts entered into on or after January 1, 2019, we assess at contract inception whether the contract is, or contains, a lease. Generally, we determine that a lease exists when (i) the contract involves the use of a distinct identified asset, (ii) we obtain the right to substantially all economic benefits from use of the asset and (iii) we have the right to direct the use of the asset. A lease is classified as a finance lease when one or more of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset or (v) the asset is of a specialized nature and there is not expected to be an alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any of these criteria. At the lease commencement date, we recognize a right-of-use asset and a lease liability for all leases, except short-term leases with an original term of 12 months or less. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any prepayments to the lessor and initial direct costs such as brokerage commissions, less any lease incentives received. All right-of-use assets are periodically reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the lease payments, discounted using an estimate of our incremental borrowing rate for a collateralized loan with the same term as the underlying lease. The incremental borrowing rates used for the initial measurement of lease liabilities as of January 1, 2019 were based on the original lease terms. Lease payments included in the measurement of lease liabilities consist of (i) fixed lease payments for the noncancelable lease term, (ii) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (iii) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. Certain of our real estate lease agreements require payments for non-lease costs such as utilities and common area maintenance. We have elected an accounting policy, as permitted by ASC 842, not to account for such payments separately from the related lease payments. Our policy election results in a higher initial measurement of lease liabilities when such non-lease payments are fixed amounts. Certain of our real estate lease agreements require variable lease payments that do not depend on an underlying index or rate, such as sales and value-added taxes and our proportionate share of actual property taxes, insurance and utilities. Such payments and changes in payments based on a rate or index are recognized in operating expenses when incurred. Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense on the lease liability based on the discount rate at lease commencement. For both operating and finance leases, lease payments are allocated between a reduction of the lease liability and interest expense. Amortization of the right-of-use asset for operating leases reflects amortization of the lease liability, any differences between straight-line expense and related lease payments during the accounting period, and any impairments. Lessor Accounting We lease satellite capacity, communications equipment and real estate to certain of our customers, including DISH Network. We identify and determine the classification of such leases as operating leases or sales-type leases based on the criteria discussed above for lessees. A lease is classified as a sales-type lease if it meets the above criteria for a finance lease; otherwise it is classified as an operating lease. Some of our leases are embedded in contracts with customers that include non-lease performance obligations. For such contracts, except where we have elected otherwise as discussed below, we allocate consideration in the contract between lease and non-lease components based on their relative standalone selling prices. We have elected an accounting policy, as permitted by ASC 842, to not separate the lease of equipment from related services in our HughesNet satellite internet service (the “HughesNet service”) contracts with consumers. We account for all revenue from such contracts as non-lease service revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Our accounting for revenue from operating leases and sales-type leases was not substantially changed by our adoption of ASC 842. However, we anticipate that certain leases that would have been classified as operating leases under prior accounting standards may be classified as sales-type leases under ASC 842. Operating lease revenue generally is recognized on a straight-line basis over the lease term. Sales-type lease revenue and a corresponding receivable generally are recognized at lease commencement based on the present value of the future lease payments and related interest income on the receivable is recognized over the lease term. Payments under sales-type leases generally are discounted at the interest rate implicit in the lease. Recently Issued Accounting Pronouncements Not Yet Adopted Credit Losses In June 2016, the Financial Accounting Standards Board issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses instead of incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the impact of adopting this new accounting standard on our Consolidated Financial Statements and related disclosures.
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Summary of Significant Accounting Policies (Tables) |
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Schedule of new accounting pronouncements and changes in accounting principles | Our adoption of ASC 842 resulted in the following adjustments to our Condensed Consolidated Balance Sheet as of December 31, 2018 (amounts in thousands):
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Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract asset and liabilities | The following table provides information about our contract balances with customers, including amounts for certain embedded leases (amounts in thousands):
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Disaggregation of revenue | The following table disaggregates revenue from customer contracts attributed to our North America (the U.S. and its territories, Mexico and Canada), South and Central America and other foreign locations (Asia, Africa, Australia, Europe, and the Middle East) as well as by segment, based on the location where the goods or services are provided (amounts in thousands):
Nature of Products and Services The following table disaggregates revenue based on the nature of products and services and by segment (amounts in thousands):
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Leases (Tables) |
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Lease assets and liabilities | Our Condensed Consolidated Balance Sheets includes the following amounts for right-of-use assets and lease liabilities as of June 30, 2019 (amounts in thousands):
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Lease cost, weighted average term, discount rates and cash flows | The following tables detail components of lease cost and weighted average lease terms and discount rates for operating leases and finance leases (amounts in thousands):
The following table details cash flows for operating leases and finance leases (amounts in thousands):
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Lease liability maturity | The following table presents maturities of our lease liabilities as of June 30, 2019 (amounts in thousands):
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Lease liability maturity | The following table presents maturities of our lease liabilities as of June 30, 2019 (amounts in thousands):
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Minimum future rental payments | As of December 31, 2018, our future minimum rental payments under noncancelable operating leases were as follows (amounts in thousands):
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Sale-type lease revenue by type | We report revenue from sales-type leases at the commencement date in Equipment revenue and we report periodic interest income on sales-type lease receivables in Services and other revenue. We report operating lease revenue in Services and other revenue. The following table details our lease revenue as follows (amounts in thousands):
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Operating lease revenue by type | We report revenue from sales-type leases at the commencement date in Equipment revenue and we report periodic interest income on sales-type lease receivables in Services and other revenue. We report operating lease revenue in Services and other revenue. The following table details our lease revenue as follows (amounts in thousands):
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Present maturities of operating lease maturities | The following table presents maturities of our operating lease payments as of June 30, 2019 (amounts in thousands):
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Property plant and equipment subject to operating leases | Property and equipment, net as of June 30, 2019 and Depreciation and amortization for the three and six months then ended included the following amounts for assets subject to operating leases (amounts in thousands):
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Other Comprehensive Income (Loss) and Related Tax Effects (Tables) |
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive income (loss) | The changes in the balances of Accumulated other comprehensive loss by component were as follows (amounts in thousands):
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Marketable Investment Securities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of marketable investment securities | Our marketable investment securities portfolio consists of various debt and equity instruments summarized in the table below(amounts in thousands):
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Schedule of unrealized gains (losses) on marketable investment securities | A summary of our available-for-sale debt securities is presented in the table below (amounts in thousands):
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Schedule of fair value measurements | Our marketable investment securities are measured at fair value on a recurring basis as summarized in the table below (amounts in thousands). As of June 30, 2019 and December 31, 2018, we did not have investments that were categorized within Level 3 of the fair value hierarchy.
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Inventory (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventory | Our inventory consisted of the following (amounts in thousands):
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Property and Equipment (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment | Property and equipment consisted of the following (amounts in thousands):
Depreciation expense associated with our property and equipment consisted of the following (amounts in thousands):
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Schedule of construction in progress | Construction in progress consisted of the following (amounts in thousands):
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Investment in Unconsolidated Entities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of investment in unconsolidated Entities | Our investments in these unconsolidated entities consisted of the following (amounts in thousands):
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Long-Term Debt and Finance Lease Obligations (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt and Lease Obligation [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 long-term debt and finance lease obligations (amounts in thousands):
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Segment Reporting (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 (amounts in thousands):
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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 (loss) before income taxes in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (amounts in thousands):
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Supplemental Guarantor and Non-Guarantor Financial Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Guarantor and Non-Guarantor Financial Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of consolidating balance sheet | Condensed Consolidating Balance Sheet as of June 30, 2019 (Amounts in thousands)
Condensed Consolidating Balance Sheet as of December 31, 2018 (Amounts in thousands)
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Schedule of consolidating statement of operations and comprehensive income (loss) | Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended June 30, 2019 (Amounts in thousands)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended June 30, 2018 (Amounts in thousands)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Six Months Ended June 30, 2019 (Amounts in thousands)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Six Months Ended June 30, 2018 (Amounts in thousands)
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Schedule of consolidating statement of cash flows | Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2019 (Amounts in thousands)
Condensed Consolidating Statement of Cash Flows For the Six Months Ended June 30, 2018 (Amounts in thousands)
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Supplemental Financial Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other significant noncash transactions | The following table presents the noncash investing and financing activities (amounts in thousands):
|
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Schedule of cost of sales and research and development costs | The table below summarizes the research and development costs incurred in connection with customers’ orders included in cost of sales and other expenses we incurred for research and development (amounts in thousands):
|
Organization and Business Activities (Details) |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2019
segment
$ / shares
|
May 31, 2019
$ / shares
shares
|
Dec. 31, 2018
$ / shares
|
Dec. 31, 2017 |
Jan. 31, 2017 |
|
Related party transactions | |||||
Number of business segments | segment | 2 | ||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |||
EchoStar Technologies Business | DISH Network | Share Exchange Agreement | |||||
Related party transactions | |||||
Ownership interest acquired by related party | 100.00% | 100.00% | |||
BSS Corp. | Common Stock | |||||
Related party transactions | |||||
Common stock, par value (in dollars per share) | $ 0.001 | ||||
DISH Network | Common Class A | |||||
Related party transactions | |||||
Common stock, par value (in dollars per share) | $ 0.001 | ||||
Stock conversion, numerator (in shares) | shares | 22,937,188 |
Revenue Recognition - Remaining Performance Obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-07-01 $ in Billions |
Jun. 30, 2019
USD ($)
|
---|---|
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 1.0 |
Remaining performance obligation percent recognition in next twelve months | 35.70% |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, expected timing of satisfaction | 1 year |
Leases - Lease Assets and Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
---|---|---|
Right-of-use assets: | ||
Operating | $ 111,678 | $ 117,006 |
Finance | 544,565 | |
Total right-of-use assets | 656,243 | |
Current: | ||
Operating | 13,958 | |
Finance | 42,682 | |
Noncurrent: | ||
Operating | 94,868 | $ 99,133 |
Finance | 166,225 | |
Total lease liabilities | 317,733 | |
Finance lease assets accumulated amortization | $ 511,000 |
Leases - Lease Liability Maturity (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating Leases | ||
2019 (remainder) | $ 10,097 | |
2020 | 19,042 | |
2021 | 16,367 | |
2022 | 14,204 | |
2023 | 13,369 | |
After 2023 | 75,925 | |
Total lease payments | 149,004 | |
Less: Interest | (40,178) | |
Present value of lease liabilities | 108,826 | |
Finance Leases | ||
2019 (remainder) | 31,591 | |
2020 | 63,266 | |
2021 | 59,692 | |
2022 | 41,040 | |
2023 | 40,942 | |
After 2023 | 30,707 | |
Total lease payments | 267,238 | |
Less: Interest | (58,331) | |
Present value of lease liabilities | 208,907 | |
Total | ||
2019 (remainder) | 41,688 | |
2020 | 82,308 | |
2021 | 76,059 | |
2022 | 55,244 | |
2023 | 54,311 | |
After 2023 | 106,632 | |
Total lease payments | 416,242 | |
Less: Interest | (98,509) | |
Total lease liabilities | $ 317,733 | |
Future Minimum Rental Payments Under Non-Cancelable Operating Leases | ||
2019 | $ 17,587 | |
2020 | 16,957 | |
2021 | 13,400 | |
2022 | 9,730 | |
2023 | 8,427 | |
Thereafter | 21,886 | |
Total | $ 87,987 |
Leases - Lease Income By Lease Type (Details) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
|
Sales-type lease revenue: | ||
Revenue at lease commencement | $ 1,188 | $ 1,876 |
Interest income | 258 | 510 |
Operating lease revenue | 95,311 | 190,925 |
Total lease revenue | 96,757 | 193,311 |
Sales-type leases receivable | $ 4,000 | $ 4,000 |
Leases - Lease Income Maturity (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
2019 (remainder) | $ 145,961 |
2020 | 256,469 |
2021 | 224,665 |
2022 | 146,218 |
2023 | 36,190 |
After 2023 | 150,756 |
Total lease payments | $ 960,259 |
Leases - Property Plant and Equipment Subject to Operating Lease (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Property and equipment | |||||
Cost | $ 5,514,197 | $ 5,514,197 | $ 5,380,430 | ||
Accumulated Depreciation | 3,054,613 | 3,054,613 | 2,798,249 | ||
Property and equipment, net | 2,459,584 | 2,459,584 | $ 2,582,181 | ||
Depreciation Expense | 134,739 | $ 127,385 | 268,757 | $ 251,938 | |
Customer premises equipment | |||||
Property and equipment | |||||
Cost | 1,352,413 | 1,352,413 | |||
Accumulated Depreciation | 977,803 | 977,803 | |||
Property and equipment, net | 374,610 | 374,610 | |||
Depreciation Expense | 50,698 | 100,410 | |||
Satellites | |||||
Property and equipment | |||||
Cost | 1,552,245 | 1,552,245 | |||
Accumulated Depreciation | 879,760 | 879,760 | |||
Property and equipment, net | 672,485 | 672,485 | |||
Depreciation Expense | 32,600 | 65,201 | |||
Real estate | |||||
Property and equipment | |||||
Cost | 31,489 | 31,489 | |||
Accumulated Depreciation | 6,677 | 6,677 | |||
Property and equipment, net | 24,812 | 24,812 | |||
Depreciation Expense | 217 | 434 | |||
Assets leased to others | |||||
Property and equipment | |||||
Cost | 2,936,147 | 2,936,147 | |||
Accumulated Depreciation | 1,864,240 | 1,864,240 | |||
Property and equipment, net | 1,071,907 | 1,071,907 | |||
Depreciation Expense | $ 83,515 | $ 166,045 |
Marketable Investment Securities - Schedule of Marketable Investment Securities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Marketable investment securities and other investments | ||
Total debt securities | $ 833,707 | $ 1,608,123 |
Equity securities | 313 | 1,073 |
Total marketable investment securities | 834,020 | 1,609,196 |
Corporate bonds | ||
Marketable investment securities and other investments | ||
Total debt securities | 637,238 | 1,234,017 |
Other debt securities | ||
Marketable investment securities and other investments | ||
Total debt securities | $ 196,469 | $ 374,106 |
Marketable Investment Securities - Schedule of Unrealized Gains (Losses) on Available-for-Sale Securities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Unrealized Gains (Losses) on Available-For-Sale Securities | ||
Amortized Cost | $ 832,882 | $ 1,609,216 |
Unrealized Gains | 923 | 230 |
Unrealized Losses | (98) | (1,323) |
Total debt securities | 833,707 | 1,608,123 |
Corporate bonds | ||
Unrealized Gains (Losses) on Available-For-Sale Securities | ||
Amortized Cost | 636,415 | 1,235,110 |
Unrealized Gains | 921 | 230 |
Unrealized Losses | (98) | (1,323) |
Total debt securities | 637,238 | 1,234,017 |
Other debt securities | ||
Unrealized Gains (Losses) on Available-For-Sale Securities | ||
Amortized Cost | 196,467 | 374,106 |
Unrealized Gains | 2 | 0 |
Unrealized Losses | 0 | 0 |
Total debt securities | $ 196,469 | $ 374,106 |
Marketable Investment Securities - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Gain (Loss) on Securities [Line Items] | ||||
Available-for-sale securities with contractual maturities of one year of less | $ 690 | $ 690 | ||
Available-for-sale securities with contractual maturity of greater than one year | 144 | 144 | ||
Proceeds from sale of available-for-sale securities | 0 | 312 | ||
Gain (Loss) on Investments | Equity securities | ||||
Gain (Loss) on Securities [Line Items] | ||||
Gain (loss) on equity securities | $ 0 | $ 1 | $ (1) | $ 0 |
Inventory (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Inventory, Net [Abstract] | ||
Raw materials | $ 3,901 | $ 4,856 |
Work-in-process | 8,933 | 13,901 |
Finished goods | 60,511 | 56,622 |
Total inventory | $ 73,345 | $ 75,379 |
Property and Equipment - Construction in Progress (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Property and equipment | ||
Construction in progress | $ 35,046 | $ 28,087 |
Progress amounts for satellite construction | ||
Property and equipment | ||
Construction in progress | 587 | 246 |
Satellite related equipment | ||
Property and equipment | ||
Construction in progress | 18,904 | 13,001 |
Other | ||
Property and equipment | ||
Construction in progress | $ 15,555 | $ 14,840 |
Property and Equipment - Depreciation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Depreciation expense | ||||
Total depreciation expense | $ 134,739 | $ 127,385 | $ 268,757 | $ 251,938 |
Buildings and improvements | ||||
Depreciation expense | ||||
Total depreciation expense | 3,503 | 3,967 | 6,613 | 5,265 |
Furniture, fixtures, equipment and other | ||||
Depreciation expense | ||||
Total depreciation expense | 19,686 | 18,633 | 40,040 | 39,407 |
Customer premises equipment | ||||
Depreciation expense | ||||
Total depreciation expense | 47,275 | 42,875 | 93,467 | 86,323 |
Satellites | ||||
Depreciation expense | ||||
Total depreciation expense | $ 64,275 | $ 61,910 | $ 128,637 | $ 120,943 |
Goodwill, Regulatory Authorizations and Other Intangible Assets Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Regulatory authorizations | $ 465,615 | $ 465,658 |
Intangible asset accumulated amortization | $ 315,000 | $ 307,000 |
Investment in Unconsolidated Entities (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Equity Method Investments and Joint Ventures [Abstract] | ||
Equity method | $ 109,030 | $ 110,931 |
Other equity investments without a readily determinable fair value | 15,438 | 15,438 |
Total investments in unconsolidated entities | $ 124,468 | $ 126,369 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax provision (benefit) | $ (2,654) | $ 10,463 | $ 8,864 | $ 18,199 |
Effective income tax rate | 254.00% | 20.50% | 26.50% | 23.00% |
Commitments and Contingencies (Details) $ in Millions |
Mar. 30, 2018
USD ($)
|
Feb. 13, 2018
claim
|
Aug. 07, 2017
USD ($)
|
Feb. 14, 2017
patent
|
Jun. 30, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
---|---|---|---|---|---|---|
Realtime Data LLC | ||||||
Loss Contingency [Abstract] | ||||||
Patents allegedly infringed | patent | 4 | |||||
Subsidiaries | Hughes Network Systems | Elbit | ||||||
Loss Contingency [Abstract] | ||||||
Damages awarded | $ 21 | |||||
Attorney's fees sought | $ 14 | |||||
Estimated litigation liability | $ 32 | |||||
Loss contingency accrual | $ 3 | |||||
Patent 728 | Realtime Data LLC | ||||||
Loss Contingency [Abstract] | ||||||
Pending claims, validity challenged | claim | 1 | |||||
Satellite Related Obligation | ||||||
Other Commitments [Line Items] | ||||||
Satellite-related obligations | 440 | $ 482 | ||||
Jury Verdict | Subsidiaries | Hughes Network Systems | Elbit | ||||||
Loss Contingency [Abstract] | ||||||
Estimated litigation liability | 21 | |||||
Pre and Post Judgment Interest Costs | Subsidiaries | Hughes Network Systems | Elbit | ||||||
Loss Contingency [Abstract] | ||||||
Estimated litigation liability | $ 11 |
Segment Reporting (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2018
USD ($)
|
Jun. 30, 2019
USD ($)
segment
|
Jun. 30, 2018
USD ($)
|
|
Segment Reporting [Abstract] | ||||
Number of business segments | segment | 2 | |||
Segment Reporting | ||||
Revenues | $ 538,459 | $ 527,596 | $ 1,070,884 | $ 1,030,491 |
EBITDA | 191,238 | 237,238 | 414,928 | 451,727 |
Capital expenditures | 74,226 | 87,867 | 148,155 | 98,120 |
Interest income and expense, net | (48,169) | (49,836) | (94,585) | (102,870) |
Depreciation and amortization | (144,746) | (136,708) | (288,276) | (270,426) |
Net income attributable to noncontrolling interests | 632 | 462 | 1,438 | 842 |
Income (loss) before income taxes | (1,045) | 51,156 | 33,505 | 79,273 |
Hughes | ||||
Segment Reporting | ||||
Revenues | 451,847 | 426,306 | 897,184 | 826,765 |
Hughes | Intersegment Elimination | ||||
Segment Reporting | ||||
Revenues | 0 | 0 | 0 | 359 |
Hughes | Operating segments | ||||
Segment Reporting | ||||
Revenues | 451,847 | 426,306 | 897,184 | 827,124 |
EBITDA | 131,765 | 152,134 | 292,897 | 288,847 |
Capital expenditures | 74,090 | 87,511 | 147,911 | 174,802 |
ESS | ||||
Segment Reporting | ||||
Revenues | 80,127 | 94,904 | 160,680 | 191,127 |
ESS | Intersegment Elimination | ||||
Segment Reporting | ||||
Revenues | 834 | 521 | 1,540 | 1,051 |
ESS | Operating segments | ||||
Segment Reporting | ||||
Revenues | 80,961 | 95,425 | 162,220 | 192,178 |
EBITDA | 68,174 | 82,483 | 136,891 | 166,633 |
Capital expenditures | 136 | 356 | 244 | (76,682) |
Corporate and Other | ||||
Segment Reporting | ||||
Revenues | 6,485 | 6,386 | 13,020 | 12,599 |
Corporate and Other | Intersegment Elimination | ||||
Segment Reporting | ||||
Revenues | (834) | (521) | (1,540) | (1,410) |
Corporate and Other | Corporate and Other | ||||
Segment Reporting | ||||
Revenues | 5,651 | 5,865 | 11,480 | 11,189 |
EBITDA | (8,701) | 2,621 | (14,860) | (3,753) |
Capital expenditures | $ 0 | $ 0 | $ 0 | $ 0 |
Label | Element | Value |
---|---|---|
Retained Earnings [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | $ 600,458,000 |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 17,775,000 |
Additional Paid-in Capital [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | 1,754,561,000 |
Noncontrolling Interest [Member] | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance | us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 | $ 14,822,000 |
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