UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, ~~2017.~~2019.

o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-33807

EchoStar Corporation

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in ~~Its Charter)~~

its charter)



Nevada			26-1232727
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~organization)			(I.R.S. Employer Identification No.)

100 Inverness Terrace East,	Englewood,	Colorado	80112-5308
(Address of ~~Principal Executive Offices)~~principal executive offices)			(Zip Code)

(303)	706-4000		Not Applicable
(Registrant’s telephone number, including area code)			(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Class A common stock	$0.001 par value		The NASDAQ Stock Market LLC
(Title of each class)			(Name of each exchange on which registered)
SATS
(Ticker symbol)

~~(303) 706-4000~~

~~(Registrant’s Telephone Number, Including Area Code)~~

~~Not Applicable~~

~~(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes~~ ýYes☒ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ~~Yes~~ ýYes☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filerý	☒	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐	Smaller reporting company	☐		~~Accelerated filer~~ o
~~Non-accelerated filer~~ o	~~(Do not check is a smaller reporting company)~~	~~Smaller reporting company~~ o
		~~Emerging growth company~~ o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No ý☒

As of October ~~31, 2017,~~29, 2019, the registrant’s outstanding common stock consisted of ~~48,039,777~~49,899,672 shares of Class A common stock and 47,687,039 shares of Class B common stock, each $0.001 par value.

Table of Contents

TABLE OF CONTENTS



Disclosure Regarding Forward-Looking Statements		i

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2019 and December 31, ~~2016 (Unaudited)~~2018 (unaudited)	1
	Condensed Consolidated Statements of Operations for the ~~Three~~three and ~~Nine Months Ended~~nine months ended September 30, ~~2017~~2019 and ~~2016 (Unaudited)~~2018 (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the ~~Three~~three and ~~Nine Months Ended~~nine months ended September 30, ~~2017~~2019 and ~~2016 (Unaudited)~~2018 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the ~~Nine Months Ended~~three months ended September 30, ~~2017~~2019 and ~~2016 (Unaudited)~~2018 (unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2019 and 2018 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the ~~Nine Months Ended~~nine months ended September 30, ~~2017~~2019 and ~~2016 (Unaudited)~~2018 (unaudited)	56
	Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~(unaudited)	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4247
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6370
Item 4.	Controls and Procedures	6472

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	6573
Item 1A.	Risk Factors	6573
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6675
Item 3.	Defaults Upon Senior Securities	6675
Item 4.	Mine Safety Disclosures	6675
Item 5.	Other Information	6676
Item 6.	Exhibits	6776
	Signatures	6877

Table of Contents

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about our estimates, expectations, plans, objectives, strategies, and financial condition, expected impact of regulatory developments and legal proceedings, opportunities in our industries and businesses and other trends and projections for the next fiscal quarter and beyond. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements may also be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” “continue,” “future,” “will,” “would,” “could,” “can,” “may” and similar terms. These forward-looking statements are based on information available to us as of the date of this Form 10-Q and represent management’s current views and assumptions. Forward-looking statements are not guarantees of future performance, events or results and involve potential known and unknown risks, uncertainties and other factors, many of which may be beyond our control and may pose a risk to our operating and financial condition. Accordingly, actual performance, events or results could differ materially from those expressed or implied in the forward-looking statements due to a number of factors including, but not limited to:


•	~~our reliance on DISH Network Corporation and its subsidiaries (“DISH Network”) for a significant portion of our revenue;~~

•

significant risks related to the construction ~~launch~~ 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 delays or failures of launches of our satellites and 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 BSS Transaction (as defined herein);


•	lawsuits relating to the BSS Transaction could result in substantial costs;


•	our ability to realize the anticipated benefits of our current satellites and any future satellite we may construct or acquire;


•	risks related to our ~~ability to implement our strategic initiatives;~~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; and~~competitors.

risk related to our foreign operations and other uncertainties associated with doing business internationally, including changes in foreign exchange rates between foreign currencies and the United States dollar, economic instability and political disturbances.

Other factors that could cause or contribute to such differences include, but are not limited to, those discussed under the caption ~~“Risk Factors”~~Risk Factors in Part II, Item 1A of this Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K ~~(“Form 10-K”)~~ filed with the Securities and Exchange Commission (“SEC”) as amended by Amendment No. 1 to Form 10-K on Form 10-K/A filed with the SEC (collectively referred to as our “Form 10-K”), those discussed in ~~“Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations” herein~~Operations in Part I, Item 2 of this Form 10-Q and in Part II, Item 7 of our Form 10-K and those discussed in other documents we file with the SEC.

All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. Investors should consider the risks and uncertainties described herein and should not place undue reliance on any forward-looking statements. We do not undertake, and specifically disclaim, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Although we believe that the expectations reflected in any forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievements. We do not assume responsibility for the accuracy and completeness of any ~~forward‑looking~~forward-looking statements. We assume no responsibility for updating ~~forward‑looking~~forward-looking information contained or incorporated by reference herein or in any documents we file with the SEC, except as required by law.

Should one or more of the risks or uncertainties described herein or in any documents we file with the SEC occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

Table of Contents

PART I — FINANCIAL INFORMATION

~~Item~~ITEM 1. FINANCIAL STATEMENTS

ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(InAmounts in thousands, except per share amounts)

(Unaudited)


	As of						As of
	September 30, 2017			December 31, 2016			September 30, 2019			December 31, 2018
Assets
Current Assets:
Current assets:
Cash and cash equivalents	$	2,798,359		$	2,570,365		$	1,547,162		$	928,306
Marketable investment securities, at fair value	485,035			522,516			1,000,165			2,282,152
Trade accounts receivable, net of allowance for doubtful accounts of $13,211 and $12,956, respectively	192,387			182,527
Trade accounts receivable - DISH Network, net of allowance for doubtful accounts of zero	52,512			19,417
Trade accounts receivable and contract assets, net (Note 3)							200,779			201,096
Trade accounts receivable - DISH Network							16,125			14,200
Inventory	91,232			62,620			83,397			75,379
Prepaids and deposits	53,536			43,456			63,210			57,691
Other current assets	12,746			10,862			17,382			18,539
Current assets of discontinued operations	145			311,524			5,866			3,486
Total current assets	3,685,952			3,723,287			2,934,086			3,580,849
Noncurrent Assets:
Restricted cash and marketable investment securities	13,736			12,926
Property and equipment, net of accumulated depreciation of $2,551,678 and $2,598,492, respectively	3,530,459			3,398,195
Noncurrent assets:
Property and equipment, net							2,444,157			2,534,666
Operating lease right-of-use assets							112,263			—
Goodwill							504,173			504,173
Regulatory authorizations, net	545,557			544,633			426,189			430,039
Goodwill	504,173			504,173
Other intangible assets, net	62,635			80,734			33,188			44,231
Investments in unconsolidated entities	165,290			171,016			225,908			262,473
Other receivable - DISH Network	92,133			90,586
Other receivables - DISH Network							93,321			95,114
Other noncurrent assets, net	207,221			166,385			264,465			247,316
Noncurrent assets of discontinued operations	—			316,924			—			962,433
Total noncurrent assets	5,121,204			5,285,572			4,103,664			5,080,445
Total assets	$	8,807,156		$	9,008,859		$	7,037,750		$	8,661,294
Liabilities and Stockholders’ Equity
Current Liabilities:
Current liabilities:
Trade accounts payable	$	120,436		$	170,297		$	122,319		$	121,437
Trade accounts payable - DISH Network	6,556			1,072			714			1,698
Current portion of long-term debt and capital lease obligations	38,407			32,984
Deferred revenue and prepayments	56,285			59,989
Current portion of long-term debt and finance lease obligations							407			919,582
Contract liabilities							109,557			72,284
Accrued interest	57,837			46,487			37,039			45,350
Accrued compensation	37,096			53,454			42,810			54,242
Accrued taxes							17,465			16,013
Accrued expenses and other	110,872			95,726			126,865			64,395
Current liabilities of discontinued operations	542			71,429			4,565			50,136
Total current liabilities	428,031			531,438			461,741			1,345,137
Noncurrent Liabilities:
Long-term debt and capital lease obligations, net of unamortized debt issuance costs	3,605,715			3,622,463
Noncurrent liabilities:
Long-term debt and finance lease obligations, net							2,388,931			2,386,202
Deferred tax liabilities, net	745,965			746,667			331,498			287,420
Operating lease liabilities							94,332			—
Other noncurrent liabilities	131,626			90,785			77,333			80,304
Noncurrent liabilities of discontinued operations	—			10,701			—			406,757
Total noncurrent liabilities	4,483,306			4,470,616			2,892,094			3,160,683
Total liabilities	4,911,337			5,002,054			3,353,835			4,505,820
Commitments and Contingencies (Note 14)
Stockholders’ Equity:
Preferred stock, $.001 par value, 20,000,000 shares authorized:
Hughes Retail Preferred Tracking Stock, $.001 par value, zero authorized, issued and outstanding at September 30, 2017 and 13,000,000 shares authorized and 6,290,499 issued and outstanding at December 31, 2016	—			6
Common stock, $.001 par value, 4,000,000,000 shares authorized:
Class A common stock, $.001 par value, 1,600,000,000 shares authorized, 53,564,095 shares issued and 48,031,777 shares outstanding at September 30, 2017 and 52,243,465 shares issued and 46,711,147 shares outstanding at December 31, 2016	54			52
Class B common stock, $.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at each of September 30, 2017 and December 31, 2016	48			48
Class C common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2017 and December 31, 2016	—			—
Class D common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2017 and December 31, 2016	—			—
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both September 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, 56,383,893 shares issued and 49,898,972 shares outstanding at September 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 both September 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 both of September 30, 2019 and December 31, 2018							—			—
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both September 30, 2019 and December 31, 2018							—			—
Additional paid-in capital	3,660,696			3,828,677			3,251,808			3,702,522
Accumulated other comprehensive loss	(88,732		)	(124,803		)	(131,664		)	(125,100		)
Accumulated earnings	408,079			314,247			685,927			694,129
Treasury stock, at cost	(98,162		)	(98,162		)	(131,454		)	(131,454		)
Total EchoStar stockholders’ equity	3,881,983			3,920,065
Noncontrolling interest in HSS Tracking Stock	—			73,910
Other noncontrolling interests	13,836			12,830
Total EchoStar Corporation stockholders’ equity							3,674,721			4,140,199
Noncontrolling interests							9,194			15,275
Total stockholders’ equity	3,895,819			4,006,805			3,683,915			4,155,474
Total liabilities and stockholders’ equity	$	8,807,156		$	9,008,859		$	7,037,750		$	8,661,294

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(InAmounts in thousands, except per share amounts)

(Unaudited)

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
Revenue:

Services and other revenue - DISH Network $ 111,135
$ 115,127
$ 339,824
$ 347,440
Services and other revenue - other 310,973
276,280
865,817
820,149
Equipment revenue - DISH Network 126
2,138
175
7,008
Equipment revenue - other 58,999
66,501
173,644
160,081
Total revenue 481,233
460,046
1,379,460
1,334,678
Costs and Expenses:

Cost of sales - services and other (exclusive of depreciation and amortization) 138,641
131,594
404,448
384,942
Cost of sales - equipment (exclusive of depreciation and amortization) 52,051
53,599
153,854
143,252
Selling, general and administrative expenses 91,003
80,672
263,820
240,454
Research and development expenses 8,302
9,030
23,444
23,524
Depreciation and amortization 134,822
108,549
379,939
324,743
Total costs and expenses 424,819
383,444
1,225,505
1,116,915
Operating income 56,414
76,602
153,955
217,763

Other Income (Expense):

Interest income 12,012
6,259
30,342
13,726
Interest expense, net of amounts capitalized (55,646 ) (37,316 ) (156,498 ) (80,376 )
Gains on investments, net 20,090
230
33,962
8,179
Other-than-temporary impairment loss on available-for-sale securities —
—
(3,298 ) —
Equity in earnings of unconsolidated affiliates, net 4,381
4,166
15,620
8,984
Other, net 4,686
364
8,211
5,531
Total other expense, net (14,477 ) (26,297 ) (71,661 ) (43,956 )
Income from continuing operations before income taxes 41,937
50,305
82,294
173,807
Income tax provision (6,082 ) (17,394 ) (9,073 ) (61,258 )
Net income from continuing operations 35,855
32,911
73,221
112,549
Net income (loss) from discontinued operations (654 ) 4,499
6,454
29,213
Net income 35,201
37,410
79,675
141,762
Less: Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock —
85
(655 ) (926 )
Less: Net income attributable to other noncontrolling interests 532
524
1,006
946
Net income attributable to EchoStar 34,669
36,801
79,324
141,742
Less: Net income (loss) attributable to Hughes Retail Preferred Tracking Stock —
157
(1,209 ) (1,709 )
Net income attributable to EchoStar common stock $ 34,669
$ 36,644
$ 80,533
$ 143,451

Amounts attributable to EchoStar common stock:
Net income from continuing operations $ 35,323
$ 32,145
$ 74,079
$ 114,238
Net income (loss) from discontinued operations (654 ) 4,499
6,454
29,213
Net income attributable to EchoStar common stock $ 34,669
$ 36,644
$ 80,533
$ 143,451

Weighted-average common shares outstanding - Class A and B common stock:

Basic 95,656
93,898
95,316
93,661
Diluted 96,890
94,401
96,626
94,189

Earnings (loss) per share - Class A and B common stock:

Basic:
Continuing operations $ 0.37
$ 0.34
$ 0.78
$ 1.22
Discontinued operations (0.01 ) 0.05
0.06
0.31
Total basic earnings per share $ 0.36
$ 0.39
$ 0.84
$ 1.53
Diluted:
Continuing operations $ 0.36
$ 0.34
$ 0.77
$ 1.21
Discontinued operations —
0.05
0.06
0.31
Total diluted earnings per share $ 0.36
$ 0.39
$ 0.83
$ 1.52



	For the three months ended September 30,						For the nine months ended September 30,
	2019			2018			2019			2018

Revenue:
Services and other revenue - DISH Network	$	13,232		$	17,054		$	42,532		$	57,410
Services and other revenue - other	393,305			382,374			1,169,459			1,101,111
Equipment revenue	65,725			56,846			175,084			150,134
Total revenue	472,262			456,274			1,387,075			1,308,655

Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	143,842			142,290			429,869			421,622
Cost of sales - equipment (exclusive of depreciation and amortization)	51,188			46,318			142,744			127,254
Selling, general and administrative expenses	122,676			107,540			384,152			314,040
Research and development expenses	6,136			6,544			19,411			20,328
Depreciation and amortization	122,374			115,325			361,619			338,737
Total costs and expenses	446,216			418,017			1,337,795			1,221,981
Operating income	26,046			38,257			49,280			86,674

Other income (expense):
Interest income	17,175			21,349			64,817			56,237
Interest expense, net of amounts capitalized	(49,865		)	(54,878		)	(156,813		)	(164,038		)
Gains (losses) on investments, net	8,295			2,873			28,087			31,606
Equity in earnings (losses) of unconsolidated affiliates, net	(3,209		)	416			(14,317		)	(2,651		)
Other, net	(16,587		)	(3,249		)	(16,028		)	(3,381		)
Total other income (expense), net	(44,191		)	(33,489		)	(94,254		)	(82,227		)
Income (loss) from continuing operations before income taxes	(18,145		)	4,768			(44,974		)	4,447
Income tax benefit (provision), net	(5,016		)	(7,963		)	(12,607		)	(8,275		)
Net loss from continuing operations	(23,161		)	(3,195		)	(57,581		)	(3,828		)
Net income from discontinued operations	2,055			19,697			46,423			76,843
Net income (loss)	(21,106		)	16,502			(11,158		)	73,015
Less: Net income (loss) attributable to noncontrolling interests	(2,797		)	450			(1,359		)	1,292
Net income (loss) attributable to EchoStar Corporation common stock	$	(18,309	)	$	16,052		$	(9,799	)	$	71,723

Earnings per share - Class A and B common stock:
Basic loss from continuing operations per share	$	(0.21	)	$	(0.04	)	$	(0.58	)	$	(0.05	)
Total basic earnings (loss) per share	$	(0.19	)	$	0.17		$	(0.10	)	$	0.75
Diluted loss from continuing operations per share	$	(0.21	)	$	(0.04	)	$	(0.58	)	$	(0.05	)
Total diluted earnings (loss) per share	$	(0.19	)	$	0.17		$	(0.10	)	$	0.75

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(~~In thousands, except per share amounts)~~Amounts in thousands)

(Unaudited)

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
Comprehensive Income:

Net income $ 35,201
$ 37,410
$ 79,675
$ 141,762
Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 9,373
2,483
33,162
13,769
Unrealized gains (losses) on available-for-sale securities and other (12,037 ) 10,180
2,369
9,695
Recognition of realized gains on available-for-sale securities in net income —
(10 ) (2,758 ) (5,584 )
Recognition of other-than-temporary impairment loss on available-for-sale securities in net income —
—
3,298
—
Total other comprehensive income (loss), net of tax (2,664 ) 12,653
36,071
17,880
Comprehensive income 32,537
50,063
115,746
159,642
Less: Comprehensive income (loss) attributable to noncontrolling interest in HSS Tracking Stock —
85
(655 ) (926 )
Less: Comprehensive income attributable to other noncontrolling interests 532
524
1,006
760
Comprehensive income attributable to EchoStar $ 32,005
$ 49,454
$ 115,395
$ 159,808



	For the three months ended September 30,						For the nine months ended September 30,
	2019			2018			2019			2018

Net income (loss)	$	(21,106	)	$	16,502		$	(11,158	)	$	73,015
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(14,539		)	(7,405		)	(10,732		)	(42,540		)
Unrealized gains (losses) on available-for-sale securities and other	2,375			(120		)	4,734			(105		)
Amounts reclassified to net income (loss):
Realized gains on available-for-sale securities	—			(1		)	(566		)	(4		)
Total other comprehensive income (loss), net of tax	(12,164		)	(7,526		)	(6,564		)	(42,649		)
Comprehensive income (loss)	(33,270		)	8,976			(17,722		)	30,366
Less: Comprehensive income (loss) attributable to noncontrolling interests	(2,797		)	(140		)	(1,359		)	(97		)
Comprehensive income (loss) attributable to EchoStar Corporation	$	(30,473	)	$	9,116		$	(16,363	)	$	30,463

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(InAmounts in thousands)

(Unaudited)

Class
A and B
Common
Stock

Hughes Retail
Preferred
Tracking
Stock

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income (Loss)

Accumulated
Earnings

Treasury
Stock

Noncontrolling
Interest in
HSS Tracking
Stock

Other
Noncontrolling
Interests
Total
Balance, December 31, 2015 $ 99
$ 6
$ 3,776,451
$ (117,233 ) $ 134,317
$ (98,162 ) $ 74,854
$ 11,310
$ 3,781,642
Issuances of Class A common stock:

Exercise of stock options 1
—
4,678
—
—
—
—
—
4,679
Employee benefits —
—
11,126
—
—
—
—
—
11,126
Employee Stock Purchase Plan —
—
11,478
—
—
—
—
—
11,478
Stock-based compensation —
—
11,953
—
—
—
—
—
11,953
R&D tax credits utilized by DISH Network —
—
(1,511 ) —
—
—
—
—
(1,511 )
Other, net —
—
(334 ) —
—
—
—
—
(334 )
Net income (loss) —
—
—
—
141,742
—
(926 ) 946
141,762
Foreign currency translation adjustment —
—
—
13,955
—
—
—
(186 ) 13,769
Unrealized losses on available-for-sale securities, net and other —
—
—
4,111
—
—
—
—
4,111
Balance, September 30, 2016 $ 100
$ 6
$ 3,813,841
$ (99,167 ) $ 276,059
$ (98,162 ) $ 73,928
$ 12,070
$ 3,978,675

Balance, December 31, 2016 $ 100
$ 6
$ 3,828,677
$ (124,803 ) $ 314,247
$ (98,162 ) $ 73,910
$ 12,830
$ 4,006,805
Issuances of Class A common stock:

Exercise of stock options 2
—
34,104
—
—
—
—
—
34,106
Employee benefits —
—
11,200
—
—
—
—
—
11,200
Employee Stock Purchase Plan —
—
6,938
—
—
—
—
—
6,938
Stock-based compensation —
—
7,169
—
—
—
—
—
7,169
Cumulative effect of adoption of ASU 2016-09 as of January 1, 2017 —
—
—
—
14,508
—
—
—
14,508
Reacquisition and retirement of Tracking Stock pursuant to Share Exchange Agreement —
(6 ) (226,815 ) —
—
—
(73,255 ) —
(300,076 )
R&D tax credits utilized by DISH Network —
—
(577 ) —
—
—
—
—
(577 )
Net income (loss) —
—
—
—
79,324
—
(655 ) 1,006
79,675
Foreign currency translation adjustment —
—
—
33,162
—
—
—
—
33,162
Unrealized gains and impairment on available-for-sale securities, net and other —
—
—
2,909
—
—
—
—
2,909
Balance, September 30, 2017 $ 102
$ —
$ 3,660,696
$ (88,732 ) $ 408,079
$ (98,162 ) $ —
$ 13,836
$ 3,895,819



	Class A and B Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Earnings			Treasury Stock			Noncontrolling Interests			Total

Balance, June 30, 2018	$	102	$	3,689,180		$	(154,011	)	$	792,278		$	(98,162	)	$	14,865		$	4,244,252
Issuances of Class A common stock:
Exercise of stock options	—		360			—			—			—			—			360
Employee Stock Purchase Plan	—		2,542			—			—			—			—			2,542
Stock-based compensation	—		2,661			—			—			—			—			2,661
R&D tax credits utilized by DISH Network	—		(61		)	—			—			—			—			(61		)
Other comprehensive loss	—		—			(6,936		)	—			—			(590		)	(7,526		)
Net income	—		—			—			16,052			—			450			16,502
Balance, September 30, 2018	$	102	$	3,694,682		$	(160,947	)	$	808,330		$	(98,162	)	$	14,725		$	4,258,730

Balance, June 30, 2019	$	104	$	3,777,499		$	(119,500	)	$	704,236		$	(131,454	)	$	12,066		$	4,242,951
Issuances of Class A common stock:
Exercise of stock options	—		2,640			—			—			—			—			2,640
Employee Stock Purchase Plan	—		2,650			—			—			—			—			2,650
Stock-based compensation	—		2,287			—			—			—			—			2,287
R&D tax credits utilized by DISH Network	—		(13		)	—			—			—			—			(13		)
Purchase of noncontrolling interest	—		1,833			—			—			—			(1,833		)	—
BSS Transaction (Note 5)	—		(535,103		)	—			—			—			—			(535,103		)
Other comprehensive loss	—		—			(12,164		)	—			—			—			(12,164		)
Net loss	—		—			—			(18,309		)	—			(2,797		)	(21,106		)
Other, net	—		15			—			—			—			1,758			1,773
Balance, September 30, 2019	$	104	$	3,251,808		$	(131,664	)	$	685,927		$	(131,454	)	$	9,194		$	3,683,915

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(InAmounts in thousands)

(Unaudited)

For the Nine Months Ended September 30,
2017 2016
Cash Flows from Operating Activities:

Net income $ 79,675
$ 141,762
Adjustments to reconcile net income to net cash flows from operating activities:

Depreciation and amortization 391,598
370,872
Equity in earnings of unconsolidated affiliates, net (14,461 ) (11,181 )
Gain and impairment on investments, net (30,664 ) (8,179 )
Stock-based compensation 7,169
11,953
Deferred tax provision 7,924
71,422
Dividends received from unconsolidated entities 15,000
15,000
Proceeds from sale of trading securities 8,922
7,140
Changes in current assets and current liabilities, net 144,677
(47,013 )
Changes in noncurrent assets and noncurrent liabilities, net (23,474 ) 8,097
Other, net 5,570
14,836
Net cash flows from operating activities 591,936
574,709
Cash Flows from Investing Activities:

Purchases of marketable investment securities (319,912 ) (883,288 )
Sales and maturities of marketable investment securities 376,648
643,865
Expenditures for property and equipment (422,661 ) (533,669 )
Refunds and other receipts related to capital expenditures —
24,087
Changes in restricted cash and marketable investment securities (810 ) 7,351
Investments in unconsolidated entities —
(1,636 )
Sale of investment in unconsolidated entity 17,781
—
Expenditures for externally marketed software (25,447 ) (17,991 )
Other, net —
1,462
Net cash flows from investing activities (374,401 ) (759,819 )
Cash Flows from Financing Activities:

Proceeds from issuance of long-term debt —
1,500,000
Payments of debt issuance costs (414 ) (6,275 )
Repayment of debt and capital lease obligations (26,394 ) (30,615 )
Net proceeds from Class A common stock options exercised 33,156
4,679
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan 6,938
11,478
Cash exchanged for Tracking Stock (651 ) —
Other, net (3,968 ) (3,373 )
Net cash flows from financing activities 8,667
1,475,894
Effect of exchange rates on cash and cash equivalents 1,014
684
Net increase in cash and cash equivalents 227,216
1,291,468
Cash and cash equivalents, beginning of period 2,571,143
924,240
Cash and cash equivalents, end of period $ 2,798,359
$ 2,215,708

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest (including capitalized interest) $ 183,451
$ 97,044
Capitalized interest $ 45,496
$ 70,386
Cash paid for income taxes $ 10,071
$ 9,187
Employee benefits paid in Class A common stock $ 11,200
$ 11,126
Property and equipment financed under capital lease obligations $ 8,423
$ 7,172
Increase (decrease) in capital expenditures included in accounts payable, net $ (3,494 ) $ 21,951
Capitalized in-orbit incentive obligations $ 43,890
$ —
Noncash net assets exchanged for Tracking Stock $ 299,425
$ —



	Class A and B Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Earnings			Treasury Stock			Noncontrolling Interests			Total

Balance, December 31, 2017	$	102	$	3,669,461		$	(130,154	)	$	721,316		$	(98,162	)	$	14,822		$	4,177,385
Cumulative effect of accounting changes as of January 1, 2018	—		—			10,467			14,658			—			—			25,125
Balance, January 1, 2018	102		3,669,461			(119,687		)	735,974			(98,162		)	14,822			4,202,510
Issuances of Class A common stock:
Exercise of stock options	—		4,405			—			—			—			—			4,405
Employee benefits	—		7,605			—			—			—			—			7,605
Employee Stock Purchase Plan	—		7,428			—			—			—			—			7,428
Stock-based compensation	—		7,771			—			—			—			—			7,771
R&D tax credits utilized by DISH Network	—		(1,859		)	—			—			—			—			(1,859		)
Other comprehensive loss	—		—			(41,260		)	—			—			(1,389		)	(42,649		)
Net income	—		—			—			71,723			—			1,292			73,015
Other, net	—		(129		)	—			633			—			—			504
Balance, September 30, 2018	$	102	$	3,694,682		$	(160,947	)	$	808,330		$	(98,162	)	$	14,725		$	4,258,730

Balance, December 31, 2018	$	102	$	3,702,522		$	(125,100	)	$	694,129		$	(131,454	)	$	15,275		$	4,155,474
Issuances of Class A common stock:
Exercise of stock options	2		64,141			—			—			—			—			64,143
Employee benefits	—		6,654			—			—			—			—			6,654
Employee Stock Purchase Plan	—		7,724			—			—			—			—			7,724
Stock-based compensation	—		7,120			—			—			—			—			7,120
R&D tax credits utilized by DISH Network	—		(432		)	—			—			—			—			(432		)
Purchase of noncontrolling interest	—		(833		)	—			—			—			(6,480		)	(7,313		)
BSS Transaction (Note 5)	—		(535,103		)	—			—			—			—			(535,103		)
Other comprehensive loss	—		—			(6,564		)	—			—						(6,564		)
Net loss	—		—			—			(9,799		)	—			(1,359		)	(11,158		)
Other, net	—		15			—			1,597			—			1,758			3,370
Balance, September 30, 2019	$	104	$	3,251,808		$	(131,664	)	$	685,927		$	(131,454	)	$	9,194		$	3,683,915

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)



	For the nine months ended September 30,
	2019			2018

Cash flows from operating activities:
Net income (loss)	$	(11,158	)	$	73,015
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization	459,054			444,558
Equity in losses of unconsolidated affiliates, net	14,317			2,651
Amortization of debt issuance costs	4,882			5,910
(Gains) losses on investments, net	(28,087		)	(33,524		)
Stock-based compensation	7,120			7,771
Deferred tax provision	22,949			22,357
Dividend received from unconsolidated entity	2,716			5,000
Changes in current assets and current liabilities, net:
Trade accounts receivable, net	(5,439		)	(35,811		)
Trade accounts receivable - DISH Network	(28,779		)	32,323
Inventory	(8,661		)	10,667
Other current assets	(3,716		)	(5,569		)
Trade accounts payable	18,180			2,536
Trade accounts payable - DISH Network	(984		)	(3,342		)
Accrued expenses and other	65,245			19,450
Changes in noncurrent assets and noncurrent liabilities, net	1,303			(16,123		)
Other, net	24,118			12,043
Net cash flows from operating activities	533,060			543,912
Cash flows from investing activities:
Purchases of marketable investment securities	(655,265		)	(2,323,090		)
Sales and maturities of marketable investment securities	1,988,078			1,331,225
Expenditures for property and equipment	(314,861		)	(415,253		)
Refunds and other receipts related to property and equipment	—			77,524
Expenditures for externally marketed software	(21,364		)	(24,568		)
Investment in unconsolidated entities	(7,503		)	(991		)
Dividend received from unconsolidated entity	2,284			—
Sale of investment in unconsolidated entity	—			1,558
Net cash flows from investing activities	991,369			(1,353,595		)
Cash flows from financing activities:
Repayment of debt and finance lease obligations	(29,135		)	(27,764		)
Repurchase and maturity of debt	(920,923		)	—
Purchase of noncontrolling interest	(7,313		)	—
Repayment of in-orbit incentive obligations	(5,269		)	(4,601		)
Net proceeds from Class A common stock options exercised	64,143			4,424
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan	7,724			7,428
Other, net	758			(530		)
Net cash flows from financing activities	(890,015		)	(21,043		)
Effect of exchange rates on cash and cash equivalents	(411		)	(3,449		)
Net increase (decrease) in cash and cash equivalents, including restricted amounts	634,003			(834,175		)
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	$	1,563,498		$	1,598,074

Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	161,766		$	170,303
Cash paid for income taxes	$	2,119		$	3,369

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Note~~ NOTE1. ~~Organization and Business Activities~~ORGANIZATION AND BUSINESS ACTIVITIES

Principal Business

EchoStar Corporation (which, together with its subsidiaries, is referred to as “EchoStar,” the “Company,” “we,” “us” and/or “our”) is a holding company that was organized in October 2007 as a corporation under the laws of the State of ~~Nevada. We are~~Nevada and has operated as a global provider of satellite service operations, video delivery solutions, broadband satellite technologies and broadband services for home and small office customers. We deliver innovative network technologies, managed services, and various communications solutions for enterprise and government customers.separately traded public company from DISH Network Corporation (“DISH”) since 2008. Our Class A common stock is publicly traded on the Nasdaq Global Select Market (“~~Nasdaq”~~NASDAQ”) under the symbol “SATS.”

~~In February 2014, EchoStar Corporation entered into agreements with certain subsidiaries~~We are a global provider of ~~DISH Network Corporation (“DISH”) pursuant~~broadband satellite technologies, broadband internet services for home and small to which, effective March 1, 2014, (i) EchoStar Corporation and our subsidiary Hughes Satellite Systems Corporation (“HSS”) issued the Tracking Stock (as defined below) to subsidiaries of DISH in exchange for five satellites (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI, and EchoStar XIV), including the assumption of related in-orbit incentive obligations, and $11.4 million in cash and (ii) DISH and certain of its subsidiaries began receiving certainmedium-sized business customers, satellite services on these five satellites from us (the “Satellite and Tracking Stock Transaction”). The Tracking Stock tracked the economic performance of the residential retail satellite broadband business of our Hughes segment, including certain operations, assets and liabilities attributed to such business (collectively, the “Hughes Retail Group” or “HRG”), and represented an aggregate 80.0% economic interest in HRG (the Hughes Retail Preferred Tracking Stock issued by EchoStar Corporation (the “EchoStar Tracking Stock”) represented a 51.89% economic interest in HRG and the Hughes Retail Preferred Tracking Stock issued by HSS (the “HSS Tracking Stock”, together with the EchoStar Tracking Stock, the “Tracking Stock”) represented a 28.11% economic interest in the Hughes Retail Group). In addition to the remaining 20.0% economic interest in HRG, EchoStar retained all economic interest in the wholesale satellite broadband business and other businesses of EchoStar.

On January 31, 2017, EchoStar Corporation and certain of its subsidiaries entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries. Pursuant to the Share Exchange Agreement, on February 28, 2017, among other things, EchoStar Corporation and certain of 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 our EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Following consummation of the Share Exchange, we no longer operate the EchoStar Technologies business segment and the EchoStar Tracking Stock and HSS Tracking Stock were retired and are no longer outstanding and all agreements, arrangements and policy statements with respect to such tracking stock terminated and are of no further effect. As a result of the Share Exchange, the condensed consolidated financial statements of the EchoStar Technologies businesses have been presented as discontinued operations and ~~as such, have been excluded from continuing operations~~satellite services. We also deliver innovative network technologies, managed services and ~~segment results~~communications solutions for ~~all periods presented. See~~ ~~Note 3~~ ~~for further discussion of our discontinued operations.~~

aeronautical, enterprise and government customers. We ~~currently~~primarily operate in the following ~~two~~2 business segments:

•

Hughes — which provides broadband satellite technologies and broadband internet services to domestic and international home and small ~~office~~to medium-sized business customers and broadband network technologies, managed services, equipment, hardware, satellite services and communication solutions to ~~domestic and international consumers and~~service providers, 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.~~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 ~~service operations and video delivery solutions~~services on a full-time ~~and~~and/or occasional-use basis ~~primarily~~ to ~~DISH Network~~ ~~Corporation and its subsidiaries (“DISH Network”), Dish Mexico, S. de R.L. de C.V., a joint venture we entered into in 2008 (“Dish Mexico”),~~ United States (“U.S.”) government service providers, internet service providers, broadcast news organizations, ~~programmers,~~content providers and private enterprise customers. ~~We also manage satellite operations for certain satellites owned by DISH Network.~~

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.

In May 2019, we and one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), entered into a master transaction agreement (the “Master Transaction Agreement”) with DISH and a wholly-owned subsidiary of DISH (“Merger Sub”). Pursuant to the terms of the Master Transaction Agreement, on September 10, 2019: (i) we transferred 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 and its subsidiaries (together with DISH, “DISH Network”) and our joint venture Dish Mexico, S. de R.L. de C.V., (“Dish Mexico”) and its subsidiaries and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of our other businesses (collectively, the “BSS Business”); (ii) we distributed to each holder of shares of our Class A or Class B common stock entitled to receive consideration in the transaction 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 our Class A or Class B common stock owned by such stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and DISH owns and operates the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).

Table of Contents

ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

~~Our operations also include various corporate departments (primarily Executive, Strategic Development, Human Resources, IT, Finance, Real Estate~~assumed liabilities, respectively. Additionally, we and ~~Legal) as well as other activities that have not been assigned to our operating segments, including costs incurred in certain satellite development programs~~DISH and ~~other business development activities, our centralized treasury operations, and gains (losses) from~~ certain of our ~~investments. These activities, costs~~ and ~~income are~~their subsidiaries (i) entered into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property and the provision of transitional services, (ii) terminated certain previously existing agreements, and (iii) amended certain existing agreements and entered into certain new agreements pursuant to which we and DISH Network will obtain and provide certain products, services and rights from and to each other.

Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS business segment. The BSS Transaction has been accounted for ~~in “Corporate~~as a spin-off to our shareholders as the Company did not receive any consideration. As a result, the operating results of the BSS Business have been presented as discontinued operations and, ~~Other.”~~as such, have been excluded from continuing operations and segment results for all periods presented. See Note 5 for further discussion of our discontinued operations.

~~In 2008,~~During 2017, we and certain of our subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH ~~Network completed its distribution to us of its digital set-top box business, certain infrastructure,~~ and ~~other assets and related liabilities, including~~ certain of its ~~satellites, uplink~~subsidiaries. We, and ~~satellite transmission~~certain of our subsidiaries, received all the shares of the Hughes Retail Preferred Tracking Stock previously issued by us and one of our subsidiaries (together, the “Tracking Stock”) in exchange for 100% of the equity interests of certain of our subsidiaries that held substantially all of our former EchoStar Technologies businesses and certain other assets ~~and real estate (the “Spin-off”~~(collectively, the “Share Exchange”). ~~Since the Spin-off, EchoStar and DISH have operated as separate publicly-traded companies. Prior to~~Following the consummation of the Share Exchange, ~~on February 28, 2017, DISH Network held~~we no longer operate our former EchoStar Technologies businesses, the Tracking Stock ~~discussed above. A substantial majority~~was retired and is no longer outstanding, and all agreements, arrangements and policy statements with respect to the Tracking Stock terminated. As a result of the ~~voting power~~Share Exchange, the operating results of the ~~shares of each of~~ EchoStar ~~and DISH is owned beneficially by Charles W. Ergen,~~Technologies businesses were presented as discontinued operations in our ~~Chairman, and by certain trusts established by Mr. Ergen for the benefit of his family.~~historical consolidated financial statements in our Form 10-K.

~~Note~~NOTE 2. ~~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~~consisting of normal recurring ~~adjustments)~~adjustments, considered necessary for a fair presentation have been included. ~~Our~~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, ~~2016.~~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 percent~~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 stockholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests.

As of December 31, 2016, noncontrolling interests consisted primarily of HSS Tracking Stock previously owned by DISH Network. As a result of the Share Exchange, the noncontrolling interest in HSS Tracking Stock was extinguished as of February 28, 2017. All significant intercompany balances and transactions have been eliminated in consolidation.

~~Use of Estimates~~

The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, the reported amounts of revenue and expense for each reporting period, and certain information disclosed in the notes to our condensed consolidated financial statements. Estimates are used in accounting for, among other things, amortization periods for deferred subscriber acquisition costs, revenue recognition using the percentage-of-completion method, allowances for doubtful accounts, allowances for sales returns and rebates, warranty obligations, self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair value of financial instruments, fair value of stock-based compensation awards, fair value of assets and liabilities acquired in business combinations, lease classifications, asset impairment testing, useful lives and methods for depreciation and amortization of long-lived assets, and certain royalty obligations. We base our estimates and assumptions on historical experience, observable market inputs and on various other factors that we believe to be relevant under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results may differ from previously estimated amounts, and such differences may be material to our condensed consolidated financial statements. Changing economic conditions may increase the inherent uncertainty in the estimates and assumptions indicated above. We review our estimates and assumptions periodically and the effects of revisions are reflected in the period they occur or prospectively if the revised estimate affects future periods.

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~~ECHOSTAR CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

~~Fair Value Measurements~~

We determine fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. We utilize the highest level of inputs available according to the following hierarchy in determining fair value:


•	~~Level 1, defined as observable inputs being quoted prices in active markets for identical assets;~~


•	Level 2, defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and


•	Level 3, defined as unobservable inputs for which little or no market data exists, consistent with characteristics of the asset or liability that would be considered by market participants in a transaction to purchase or sell the asset or liability.

Transfers between levels in the fair value hierarchy are considered to occur at the beginning of the quarterly accounting period. There were no transfers between levels for each of the nine months ended September 30, 2017 or 2016.

As of September 30, 2017 and December 31, 2016, the carrying amounts of our cash and cash equivalents, trade accounts receivable, net of allowance for doubtful accounts, accounts payable and accrued liabilities were equal to or approximated fair value due to their short-term nature or proximity to current market rates.

Fair values of our marketable investment securities are based on a variety of observable market inputs. For our investments in publicly traded equity securities and U.S. government securities, fair value ordinarily is determined based on a Level 1 measurement that reflects quoted prices for identical securities in active markets. Fair values of our investments in other marketable debt securities generally are based on Level 2 measurements, as the markets for such debt securities are less active. Trades of identical debt securities on or near the measurement date are considered a strong indication of fair value. Matrix pricing techniques that consider par value, coupon rate, credit quality, maturity and other relevant features also may be used to determine fair value of our investments in marketable debt securities.

Fair values for HSS’ 6 1/2% Senior Secured Notes due 2019 (the “2019 Senior Secured Notes”), 7 5/8% Senior Unsecured Notes due 2021 (the “2021 Senior Unsecured Notes”), 5.250% Senior Secured Notes due 2026 (the “2026 Senior Secured Notes”) and 6.625% Senior Unsecured Notes due 2026 (the “2026 Senior Unsecured Notes” and together with the 2026 Senior Secured Notes, the “2026 Notes”) (see ~~Note 11~~) are based on quoted market prices in less active markets and are categorized as Level 2 measurements. The fair values of our other debt are Level 2 measurements and are estimated to approximate their carrying amounts based on the proximity of their interest rates to current market rates. As of September 30, 2017 and December 31, 2016, 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 $113.5 million and $74.1 million, respectively. We use fair value measurements from time to time in connection with asset impairment testing and the assignment of purchase consideration to assets and liabilities of acquired companies. Those fair value measurements typically include significant unobservable inputs and are categorized within Level 3 of the fair value hierarchy.

~~Research and Development~~

Costs incurred in research and development activities generally are expensed as incurred. A significant portion of our research and development costs are incurred in connection with the specific requirements of a customer’s order. In such instances, the amounts for these customer funded development efforts are included in cost of sales.

Cost of sales includes research and development costs incurred in connection with customers’ orders of approximately $7.0 million and $11.1 million for the three months ended September 30, 2017 and 2016, respectively, and $20.7 million and $17.2 million for the nine months ended September 30, 2017 and 2016, respectively. In addition, we incurred other research and development expenses of approximately $8.3 million and $9.0 million for the three months ended September 30, 2017 and 2016, respectively, and $23.4 million and $23.5 million for the nine months ended September 30, 2017 and 2016, respectively.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

Reclassification

~~Capitalized Software Costs~~

Certain prior period amounts have been reclassified to conform with the current period presentation.

~~Costs~~

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 elected to apply the ~~procurement and development of software for internal-use and externally marketed software are capitalized and amortized using the straight-line method over the estimated useful life~~requirements of the ~~software,~~new standard on January 1, 2019 and we have not in excess of five years. Capitalized costs of internal-use software are included in “Property and equipment, net” and capitalized costs of externally marketed software are included in “Other noncurrent assets, net”restated our consolidated financial statements for prior periods. Consequently, certain amounts reported in our condensed consolidated balance sheets. Externally marketed software generally is installed in the equipment we sell to customers. We conduct software program reviews for externally marketed capitalized software costs at least annually, or as events and circumstances warrant such a review, to determine if capitalized software development costs are recoverable and to ensure that costs associated with programs that are no longer generating revenue are expensed. As of September 30, 2017 and December 31, 2016, the net carrying amount of externally marketed software was $87.7 million and $76.3 million, respectively, of which $16.7 million and $50.1 million, respectively, was under development and not yet placed in service. We capitalized costs related to the development of externally marketed software of $8.3 million and $6.2 million for the three months ended September 30, 2017 and 2016, respectively, and $25.4 million and $18.5 million for the nine months ended September 30, 2017 and 2016, respectively. We recorded amortization expense relating to the development of externally marketed software of $5.5 million and $2.5 million for the three months ended September 30, 2017 and 2016, respectively, and $14.1 million and $7.2 million for the nine months ended September 30, 2017 and 2016, respectively. The weighted average useful life of our externally marketed software was approximately four yearsCondensed Consolidated Balance Sheet as of September 30, ~~2017.~~

~~New Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and has modified the standard thereafter. It outlines a single comprehensive model, codified in Topic 606 of the FASB Accounting Standards Codification, for entities2019 are not comparable to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Public entities are required to adopt the new revenue standard in fiscal years beginning after December 15, 2017 and in interim periods within those fiscal years. The standard may be applied either retrospectively to prior periods or as a cumulative-effect adjustmentreported as of ~~the date of adoption. Early adoption is permitted, but not before fiscal years beginning after~~ December ~~15, 2016. We plan to adopt the new revenue standard as of January 1,~~31, 2018 using the “modified retrospective method.” Under this method, we will apply the rules only to contracts that are not substantially completed as of January 1, 2018, recognizing in retained earnings an adjustment for the cumulative effect of the change and providing additional disclosures comparing results to previous accounting standards.

~~Upon initial evaluation, we do not expect the~~or earlier dates. Our adoption of ~~ASU 2014-09 to~~ASC 842 did not have a material impact on the ~~timing~~results of our operations or ~~amount of revenue recognition. However, we do believe~~on our cash flows for the ~~new standard will impact our financial statements~~three and nine months ended September 30, 2019.

Under ASC 842, leases are classified either as ~~it relates to the deferral of sales commissions. We generally expense sales commissions as incurred under the current standard with the exception of the consumer business in our Hughes segment.~~operating leases or finance leases. The ~~requirement to defer incremental contract acquisition costs and recognize them over the contract period or expected customer life will result in~~lease classification affects the recognition of ~~a deferred charge on our consolidated balance sheets and corresponding impact to~~lease expense by lessees in the ~~consolidated~~ statement of ~~operations~~operations. Consistent with prior accounting standards, operating lease expense is included in operating expenses, while finance lease expense is split between depreciation expense and ~~comprehensive income (loss). In addition, we currently amortize our sales acquisition costs related~~interest expense. ASC 842 does not fundamentally change the lessor accounting model, which requires leases to ~~our consumer business in our Hughes segment~~be classified as operating leases or sales-type leases. Operating lease revenue generally is recognized over the ~~contract term. We believe, under the new guidance, the amortization period~~lease term, while sales-type lease revenue is recognized primarily upon lease commencement, except for ~~these contract acquisition costs will be over the estimated customer life which is a longer period of time.~~amounts representing interest on related accounts receivable.

WeExcept 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 ~~evaluate~~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 ~~standard on~~and modified leases did not materially affect our ~~consolidated financial statements~~recognition of revenue or expenses for the three and ~~related disclosures. We are not able to reasonably estimate the impact of the new standard on our consolidated financial statements at this time.~~nine months ended September 30, 2019.

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). This update substantially revises standards for the recognition, measurement and presentation of financial instruments, including requiring all equity investments, except for investments in consolidated subsidiaries and investments accounted for using the equity method, to be measured at fair value with changes in the fair value recognized through net income. The update permits an entity to elect to measure an equity security without a readily determinable fair value at its cost, adjusted for changes resulting from impairments and observable price changes in orderly transactions for identical or similar securities of the same issuer. It also amends certain disclosure requirements associated with

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

Our adoption of ASC 842 resulted in the following adjustments from our continuing operations to our Condensed Consolidated Balance Sheet as of December 31, 2018 (amounts in thousands):



	Balance December 31, 2018		Adoption of ASC 842 Increase (Decrease)			Balance January 1, 2019

Prepaids and deposits	$	57,691	$	(28	)	$	57,663
Operating lease right-of-use assets	$	—	$	120,358		$	120,358
Other noncurrent assets, net	$	247,316	$	(7,272	)	$	240,044
Total assets	$	8,661,294	$	113,058		$	8,774,352
Accrued expenses and other	$	64,395	$	17,453		$	81,848
Operating lease liabilities	$	—	$	100,085		$	100,085
Other noncurrent liabilities	$	80,304	$	(3,871	)	$	76,433
Total liabilities	$	4,505,820	$	113,667		$	4,619,487
Accumulated earnings	$	694,129	$	(609	)	$	693,520
Total stockholders’ equity	$	4,155,474	$	(609	)	$	4,154,865
Total liabilities and stockholders’ equity	$	8,661,294	$	113,058		$	8,774,352

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~equity investments~~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 ~~the fair value~~value-added taxes and our proportionate share of financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted for certain requirements. We plan to adopt all applicable requirements of this update as of January 1, 2018. Upon adoption, we will adjust accumulated earnings to include unrealized gains or losses on any marketable equity securities then designated as available for sale, which historically have been recorded in accumulated other comprehensive loss except when an other-than-temporary impairment has occurred. Following adoption, all periodicactual property taxes, insurance and utilities. Such payments and changes in ~~fair value of such securities will be~~payments based on a rate or index are recognized in net income or loss. As of September 30, 2017, we had recognized $13.6 million in net unrealized gains on such securities in accumulated other comprehensive loss. For our equity investments without a readily determinable fair value that we now account for using the cost method, we expect to elect to measure such securities at cost, adjusted for impairments and observable price changes. We expect our future net income or loss to be more volatile as a result of these changes in accounting for our investments in available-for-sale and cost method equity securities. We continue to assess the impact on our consolidated financial statements of certain requirements of ASU 2016-01 related to measurement of fair value of financial instruments, deferred tax assets related to available-for-sale debt securities, and financial statement presentation and disclosure.operating expenses when incurred.

~~In February 2016,~~Lease expense for operating leases consists of the ~~FASB issued~~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 ~~Standards Update No. 2016-02, Leases (“ASU 2016-02”). This standard requires lessees~~

We lease satellite capacity, communications equipment and real estate to ~~recognize assets~~certain of our customers. We identify and ~~liabilities for all leases with lease terms more than 12 months, including leases classified as operating leases. The standard also modifies~~determine the ~~definition~~classification of ~~a lease and the criteria for classifying~~such leases as operating leases or ~~financing leases. ASU 2016-02~~sales-type leases based on the criteria discussed above for lessees. A lease is ~~effective~~classified as a sales-type lease if it meets the above criteria for ~~fiscal years beginning after December 15, 2018~~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 ~~interim periods within those fiscal years. Early adoption is permitted.~~non-lease components based on their relative standalone selling prices. We ~~are assessing~~have elected an accounting policy, as permitted by ASC 842, to not separate the ~~impact~~lease of ~~adopting this new accounting standard on~~equipment from related services in our ~~consolidated financial statements and related disclosures.~~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”).

~~In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies the~~Our accounting for ~~share-based payment awards. This update requires all excess tax benefits~~revenue from operating leases and deficiencies to be recognized as income tax expense or benefit and permits an entity to make an entity-wide policy election to either estimate forfeitures or recognize forfeitures as they occur. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. The update specifies requirements for retrospective, modified retrospective or prospective application for the various amendments contained in the update. Uponsales-type leases was not substantially changed by our adoption of ~~this standard~~ASC 842. However, we anticipate that certain leases that would have been classified as ~~of January 1, 2017, we recorded~~operating leases under prior accounting standards may be classified as sales-type leases under ASC 842. Operating lease revenue generally is recognized on a ~~$14.5 million deferred tax asset~~straight-line basis over the lease term. Sales-type lease revenue and a corresponding ~~credit to accumulated earnings for excess tax benefits that had not previously been~~receivable generally are recognized ~~because~~at lease commencement based on the present value of the future lease payments and related tax deductions had not reduced taxes payable. We did not change our accounting policy to estimate forfeitures in determining compensation cost. We prospectively adopted amendments requiring presentation of excess tax benefits in operating activitiesinterest 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 statement of cash flows and dealing with the treatment of excess tax benefits in the calculation of diluted earnings per share. The inclusion of excess tax benefits in our income tax provision for the three and nine months ended September 30, 2017 resulted in increases in net income from continuing operations of $0.2 million and $1.6 million, respectively and increases in net income of $0.2 million and $4.8 million, respectively.lease.

Recently Issued Accounting Pronouncements Not Yet Adopted

Credit Losses

In June 2016, the ~~FASB issued~~Financial Accounting Standards ~~Update~~Board issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments ~~(“ASU 2016-13”)~~, which introduces ana new approach ~~based on expected losses~~ to estimate credit losses on certain types of financial instruments ~~rather than~~based on expected losses instead of incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides ~~for~~ a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 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~~Consolidated Financial Statements and related disclosures.

~~In October 2016,~~

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3. REVENUE RECOGNITION

Information About Contract Balances

The following table provides information about our contract balances from our continuing operations with customers, including amounts for certain embedded leases (amounts in thousands):



	As of
	September 30, 2019			December 31, 2018

Trade accounts receivable:
Sales and services	$	163,006		$	154,415
Leasing	3,013			7,990
Total	166,019			162,405
Contract assets	60,012			55,295
Allowance for doubtful accounts	(25,252		)	(16,604		)
Total trade accounts receivable and contract assets, net	$	200,779		$	201,096

Trade accounts receivable - DISH Network:
Sales and services	$	12,272		$	12,274
Leasing	3,853			1,926
Total trade accounts receivable - DISH Network, net	$	16,125		$	14,200

Contract liabilities:
Current	$	109,557		$	72,284
Noncurrent	10,730			10,133
Total contract liabilities	$	120,287		$	82,417

For the ~~FASB issued Accounting Standards Update No. 2016-16, Intra-Entity Transfers~~nine months ended September 30, 2019, we recognized revenue of ~~Assets Other Than Inventory (“ASU 2016-16”), which improves~~$67.3 million that was previously included in the ~~accounting~~contract liability balance at December 31, 2018.

Our bad debt expense was $3.2 million and $8.6 million for the ~~income tax consequences of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective~~three months ended September 30, 2019 and 2018, respectively, and $23.2 million and $16.6 million for ~~fiscal years beginning after December 15, 2017~~the nine months ended September 30, 2019 and interim periods within those fiscal years. We early adopted ASU 2016-16 as of January 1, 2017. Our adoption of this update did not have a material impact on our condensed consolidated financial statements and related disclosures.2018, respectively.

~~In November 2016,~~Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2019, the ~~FASB issued Accounting Standards Update No. 2016-18, Statement~~remaining performance obligations for our customer contracts with original expected durations of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). This standard requires restricted cash and restricted cash equivalents to be included with cash and cash equivalents in the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted and the standard must be applied retrospectively to all periods presented.more than one year was $1.1 billion. We expect to ~~adopt ASU 2016-18~~recognize approximately 37.8% of our remaining performance obligations of these contracts as ~~of January 1, 2018. Following our adoption of this standard,~~revenue in the ~~beginning and ending balances of cash and cash equivalents presented~~next twelve months. This amount excludes agreements with consumer customers in our ~~consolidated statements~~Hughes segment, our leasing arrangements and agreements with certain customers under which collectibility of ~~cash~~all amounts due through the term of contracts is uncertain.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

Disaggregation of Revenue

In the following tables, revenue from our continuing operations 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):



	Hughes		ESS		Corporate and Other		Consolidated Total

For the three months ended September 30, 2019
North America	$	389,264	$	4,098	$	4,323	$	397,685
South and Central America	31,747		—		106		31,853
All other	42,724		—		—		42,724
Total revenue	$	463,735	$	4,098	$	4,429	$	472,262

For the three months ended September 30, 2018
North America	$	373,460	$	6,802	$	4,607	$	384,869
South and Central America	27,593		—		103		27,696
All other	43,709		—		—		43,709
Total revenue	$	444,762	$	6,802	$	4,710	$	456,274

For the nine months ended September 30, 2019
North America	$	1,129,491	$	11,873	$	13,934	$	1,155,298
South and Central America	89,005		—		349		89,354
All other	142,423		—		—		142,423
Total revenue	$	1,360,919	$	11,873	$	14,283	$	1,387,075

For the nine months ended September 30, 2018
North America	$	1,072,187	$	22,562	$	13,932	$	1,108,681
South and Central America	75,813		—		275		76,088
All other	123,886		—		—		123,886
Total revenue	$	1,271,886	$	22,562	$	14,207	$	1,308,655

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nature of Products and Services

The following table disaggregates revenue based on the nature of products and services and by segment (amounts in thousands):



	Hughes		ESS		Corporate and Other		Consolidated Total

For the three months ended September 30, 2019
Equipment	$	21,106	$	—	$	—	$	21,106
Services	385,477		2,737		1,732		389,946
Design, development and construction services	42,328		—		—		42,328
Revenue from sales and services	448,911		2,737		1,732		453,380
Lease revenue	14,824		1,361		2,697		18,882
Total revenue	$	463,735	$	4,098	$	4,429	$	472,262

For the three months ended September 30, 2018
Equipment	$	40,222	$	—	$	—	$	40,222
Services	337,585		5,766		1,383		344,734
Design, development and construction services	16,624		—		—		16,624
Revenue from sales and services	394,431		5,766		1,383		401,580
Lease revenue	50,331		1,036		3,327		54,694
Total revenue	$	444,762	$	6,802	$	4,710	$	456,274

For the nine months ended September 30, 2019
Equipment	$	77,663	$	—	$	—	$	77,663
Services	1,147,868		7,953		5,185		1,161,006
Design, development and construction services	93,254		—		—		93,254
Revenue from sales and services	1,318,785		7,953		5,185		1,331,923
Lease revenue	42,134		3,920		9,098		55,152
Total revenue	$	1,360,919	$	11,873	$	14,283	$	1,387,075

For the nine months ended September 30, 2018
Equipment	$	103,458	$	—	$	—	$	103,458
Services	975,647		17,632		4,291		997,570
Design, development and construction services	46,676		—		—		46,676
Revenue from sales and services	1,125,781		17,632		4,291		1,147,704
Lease revenue	146,105		4,930		9,916		160,951
Total revenue	$	1,271,886	$	22,562	$	14,207	$	1,308,655

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).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

flows will include amounts for restricted cash and cash equivalents, which currently are not included in such balances. Changes in restricted cash and cash equivalents, which we have historically reported in cash flows from investing activities, will not be reported in our consolidated statements of cash flows. NOTE4. LEASES

Lessee Disclosures

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill~~Our operating leases consist primarily of leases for office space, data centers and ~~Other (Topic 350): Simplifying the Test~~satellite ground facilities. We recognized right-of-use assets and lease liabilities for ~~Goodwill Impairment (“ASU 2017-04”). This standard simplifies the accounting for goodwill impairment by removing Step 2~~such leases in connection with our adoption of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying amount, including goodwill, exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and is to be applied on a prospective basis. We early adopted ASU 2017-04ASC 842 as of January 1, ~~2017.~~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 ~~adoption~~finance leases consist primarily of ~~this update did not~~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 from our continuing operations as of September 30, 2019 (amounts in thousands):



	As of September 30, 2019

Right-of-use assets:
Operating	$	112,263
Finance	328,519
Total right-of-use assets	$	440,782

Lease liabilities:
Current:
Operating	$	15,394
Finance	407
Noncurrent:
Operating	94,332
Finance	793
Total lease liabilities	$	110,926

As of September 30, 2019, we have prepaid our obligations regarding most of our finance right-of-use assets. Finance lease assets from our continuing operations that have a ~~material impact~~corresponding liability are reported net of accumulated amortization of $50.9 million as of September 30, 2019.

The following tables detail components of lease cost and weighted average lease terms and discount rates for operating leases and finance leases from our continuing operations (amounts in thousands):



	For the three months ended September 30, 2019		For the nine months ended September 30, 2019

Lease cost:
Operating lease cost	$	6,078	$	18,355
Finance lease cost:
Amortization of right-of-use assets	6,506		19,656
Interest on lease liabilities	46		135
Short-term lease cost	105		381
Variable lease cost	2,426		5,818
Total lease cost	$	15,161	$	44,345

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



	As of September 30, 2019

Lease term and discount rate:
Weighted average remaining lease term (in years):
Finance leases	1.90
Operating leases	10.09

Weighted average discount rate:
Finance leases	11.47	%
Operating leases	6.18	%

The following table details cash flows for operating leases and finance leases from our continuing operations (amounts in thousands):



	For the three months ended September 30, 2019		For the nine months ended September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,880	$	17,297
Operating cash flows from finance leases	$	46	$	135
Financing cash flows from finance leases	$	168	$	505

We obtained right-of-use assets in exchange for lease liabilities of $1.1 million and $2.5 million upon commencement of operating leases for the three and nine months ended September 30, 2019, respectively.

The following table presents maturities of our lease liabilities from our continuing operations as of September 30, 2019 (amounts in thousands):



	Operating Leases			Finance Leases			Total

Year ending December 31,
2019 (remainder)	$	5,988		$	174		$	6,162
2020	20,734			636			21,370
2021	17,326			493			17,819
2022	14,993			96			15,089
2023	14,073			—			14,073
After 2023	80,796			—			80,796
Total lease payments	153,910			1,399			155,309
Less: Interest	(44,184		)	(199		)	(44,383		)
Present value of lease liabilities	$	109,726		$	1,200		$	110,926

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Lessor Disclosures

We report revenue from sales-type leases at the commencement date in Equipment revenueand we report periodic interest income onsales-type lease receivables in Services and other revenue. We report operating lease revenue in Services and other revenue. The following table details our ~~condensed consolidated financial statements and related disclosures, but it may impact the recognition and measurement~~lease revenue from our continuing operations as follows (amounts in thousands):



	For the three months ended September 30, 2019		For the nine months ended September 30, 2019

Sales-type lease revenue:
Revenue at lease commencement	$	2,291	$	4,167
Interest income	206		716

Operating lease revenue	16,385		50,269
Total lease revenue	$	18,882	$	55,152

Substantially all of ~~a goodwill impairment loss~~our net investment in ~~future periods if we determine that the carrying amount~~sales-type leases consisted of ~~any reporting units including goodwill exceeds fair value~~lease receivables totaling $5.6 million as of ~~the reporting unit.~~ September 30, 2019.

The following table presents maturities of our operating lease payments from our continuing operations as of September 30, 2019 (amounts in thousands):



	Amounts

Year ending December 31,
2019 (remainder)	$	11,199
2020	36,154
2021	33,352
2022	31,912
2023	30,241
After 2023	151,284
Total lease payments	$	294,142

~~In March 2017,~~Property and equipment, net as of September 30, 2019 and Depreciation and amortization for the ~~FASB issued Accounting Standards Update No. 2017-08, Receivables - Nonrefundable Fees~~three and ~~Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”). This update shortens~~nine months then ended included the ~~amortization period of premiums on certain purchased callable debt securities~~following amounts for assets subject to the earliest call date, effectively reducing interest income on such securities prior to the earliest call date. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. We are assessing the impact of adopting this new accounting standard onoperating leases from our ~~consolidated financial statements and related disclosures.~~continuing operations (amounts in thousands):



	As of September 30, 2019							For the three months ended September 30, 2019		For the nine months ended September 30, 2019
	Cost		Accumulated Depreciation			Net		Depreciation Expense

Customer premises equipment	$	1,322,084	$	(999,186	)	$	322,898	$	45,546	$	138,197
Satellites	104,620		(29,616		)	75,004		1,802		5,277
Real estate	47,061		(15,909		)	31,152		232		697
Total	$	1,473,765	$	(1,044,711	)	$	429,054	$	47,580	$	144,171

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Note 3~~.NOTE 5. Discontinued Operations

~~On January 31, 2017, EchoStar Corporation and certain of its subsidiaries entered into~~Following the Share Exchange Agreement. Pursuant to the Share Exchange Agreement, on February 28, 2017, among other things, EchoStar Corporation and certain of 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 our EchoStar Technologies businesses and certain other assets. Following consummation of the ~~Share Exchange,~~BSS Transaction in September 2019, we no longer operate the ~~EchoStar Technologies~~BSS Business, which was a substantial portion of our ESS business ~~segment and~~segment. The BSS Transaction has been accounted for as a spin-off to our shareholders as the EchoStar Tracking Stock and HSS Tracking Stock were retired and are no longer outstanding and all agreements, arrangements and policy statements with respect to such tracking stock terminated and are of no further effect.

Company did not receive any consideration. As a result, the operating results of the ~~Share Exchange, the historical financial results of our EchoStar Technologies segment prior to the closing of the Share Exchange are reflected in our condensed consolidated financial statements~~BSS Business have been presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented.

The ~~noncontrolling interest~~following table presents the operating results of our discontinued operations (amounts in ~~HSS Tracking Stock, as reflected in~~thousands):



	For the three months ended September 30,						For the nine months ended September 30,
	2019			2018			2019			2018

Revenue:
Services and other revenue - DISH Network	$	54,297		$	70,805		$	195,942		$	234,425
Services and other revenue - other	4,512			5,874			16,261			17,622
Total revenue	58,809			76,679			212,203			252,047
Costs and Expenses:
Cost of equipment, services and other	7,315			9,721			28,057			30,291
Selling, general and administrative expenses	5,322			(50		)	8,610			(201		)
Depreciation and amortization	27,048			35,230			97,435			105,821
Total costs and expenses	39,685			44,901			134,102			135,911
Operating income	19,124			31,778			78,101			116,136
Other Income (Expense):
Interest expense	(4,767		)	(7,208		)	(17,865		)	(22,333		)
Total other income (expense), net	(4,767		)	(7,208		)	(17,865		)	(22,333		)
Income from discontinued operations before income taxes	14,357			24,570			60,236			93,803
Income tax benefit (provision), net	(12,302		)	(4,873		)	(13,813		)	(16,960		)
Net income (loss) from discontinued operations	$	2,055		$	19,697		$	46,423		$	76,843

Expenditures for property and equipment of our ~~stockholders equity, was extinguished as of February 28, 2017 as a result of~~discontinued operations totaled $0.3 million and de minimis three months ended September 30, 2019 and 2018, respectively, and $0.5 million and $0.1 million for the ~~Share Exchange.~~nine months ended September 30, 2019 and 2018, respectively.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

~~(Unaudited)~~

~~The following table presents the operating results of our discontinued operations:~~

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
(In thousands)
Revenue:
Equipment, services and other revenue - DISH Network $ —
$ 260,829
$ 143,063
$ 892,333
Equipment, services and other revenue - other (45 ) 21,474
10,344
89,326
Total revenue (45 ) 282,303
153,407
981,659
Costs and Expenses:
Cost of equipment, services and other 19
229,414
121,973
800,801
Selling, general and administrative expenses (590 ) 20,869
5,502
55,923
Research and development expenses —
11,556
4,635
38,237
Depreciation and amortization —
15,085
11,659
46,129
Total costs and expenses (571 ) 276,924
143,769
941,090
Operating income 526
5,379
9,638
40,569
Other Income (Expense):
Interest expense —
(41 ) (15 ) (116 )
Equity in earnings (losses) of unconsolidated affiliates, net —
998
(1,159 ) 2,197
Other, net 2
281
(61 ) 369
Total income (expense), net 2
1,238
(1,235 ) 2,450
Income from discontinued operations before income taxes 528
6,617
8,403
43,019
Income tax provision (1,182 ) (2,118 ) (1,949 ) (13,806 )
Net income (loss) from discontinued operations $ (654 ) $ 4,499
$ 6,454
$ 29,213

Expenditures for property and equipment of our discontinued operations totaled zero and $17.2 million for the three months ended September 30, 2017 and 2016, respectively, and $12.5 million and $31.8 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Table of Contents~~

~~ECHOSTAR CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

(Unaudited)

The following table presents the aggregate carrying amounts of assets and liabilities of our discontinued ~~operations:~~operations (amounts in thousands):


	As of				As of
	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
	(In thousands)
Assets:
Cash and cash equivalents	$	—	$	778
Trade accounts receivable, net	5		27,261
Trade accounts receivable - DISH Network	140		259,198
Inventory	—		9,824
Assets
Trade accounts receivable and contract assets, net					$	5,866	$	—
Prepaids and deposits	—		14,463		—		3,486
Current assets of discontinued operations	145		311,524		5,866		3,486
Property and equipment, net	—		271,108		—		880,242
Goodwill	—		6,457
Other intangible assets, net	—		7,720
Investments in unconsolidated entities	—		26,203
Regulatory authorizations, net					—		65,615
Other noncurrent assets, net	—		5,436		—		16,576
Noncurrent assets of discontinued operations	—		316,924		—		962,433
Total assets of discontinued operations	$	145	$	628,448	$	5,866	$	965,919

Liabilities:
Trade accounts payable	$	278	$	19,518	$	661	$	—
Trade accounts payable - DISH Network	—		3,960
Current portion of capital lease obligations	—		4,323
Deferred revenue and prepayments	—		2,967
Accrued compensation	—		4,652
Accrued royalties	—		23,199
Current portion of finance lease obligations					—		39,995
Accrued interest					—		2,066
Accrued expenses and other	264		12,810		3,904		8,075
Current liabilities of discontinued operations	542		71,429		4,565		50,136
Capital lease obligations	—		416
Finance lease obligations					—		187,002
Deferred tax liabilities, net	—		7,353		—		178,513
Other noncurrent liabilities	—		2,932		—		41,242
Noncurrent liabilities of discontinued operations	—		10,701		—		406,757
Total liabilities of discontinued operations	$	542	$	82,130	$	4,565	$	456,893

~~Note 4.Earnings per Share~~NOTE 6. EARNINGS PER SHARE

We present basic earnings or losses per share (“EPS”) and diluted EPS for our Class A and Class B common stock. Basic EPS for our Class A and Class B common stock excludes potential dilution and is computed by dividing ~~“Net~~Net income (loss) attributable to EchoStar Corporation common ~~stock”~~ stockby the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if shares of common stock were issued pursuant to our stock-based compensation awards. The potential dilution from common stock awards was computed using the treasury stock method based on the average market value of our Class A common stock during the period. The calculation of our diluted weighted-average common shares outstanding excluded options to purchase shares of our Class A common stock, whose effect would be anti-dilutive, of ~~1.0~~3.7 million as of September 30, 2019 and 5.0 million shares ~~for the three and nine months ended~~as of September 30, ~~2017 and 3.6 million shares for the three and nine months ended September 30, 2016.~~2018.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

Prior to the Share Exchange, the EchoStar Tracking Stock was a participating security that shared in our consolidated earnings and therefore, we applied the two-class method to calculate EPS for periods prior to March 1, 2017. Under the two-class method, we allocated net income or loss attributable to EchoStar between common stock and the EchoStar Tracking Stock considering both dividends declared on each class of stock and the participation rights of each class of stock in undistributed earnings. Based on the 51.89% economic interest in the Hughes Retail Group represented by the EchoStar Tracking Stock, we allocated undistributed earnings to the EchoStar Tracking Stock based on 51.89% of the attributed net income or loss of the Hughes Retail Group. Moreover, because the reported amount of “Net income attributable to EchoStar” in our condensed consolidated statements of operations excluded DISH Network’s 28.11% economic interest (represented by the HSS Tracking Stock) in the net loss of the Hughes Retail Group (reported as a noncontrolling interest), the amount of consolidated net income or loss allocated to holders of Class A and Class B common stock effectively excluded an aggregate 80.0% of the attributed net loss of the Hughes Retail Group.

The following table presents basic and diluted EPS amounts for all periods and the corresponding weighted-average shares outstanding used in the ~~calculations.~~calculations (amounts in thousands, except per share amounts):


	For the Three Months Ended September 30,					For the Nine Months Ended September 30,						For the three months ended September 30,						For the nine months ended September 30,
	2017			2016		2017			2016			2019			2018			2019			2018
	(In thousands, except per share amounts)
Amounts attributable to EchoStar common stock:
Net income attributable to EchoStar	$	34,669		$	36,801	$	79,324		$	141,742
Less: Net income (loss) attributable to EchoStar Tracking Stock	—			157		(1,209		)	(1,709		)
Net income attributable to EchoStar common stock	$	34,669		$	36,644	$	80,533		$	143,451
Net loss from continuing operations												$	(20,364	)	$	(3,645	)	$	(56,222	)	$	(5,120	)
Net income from discontinued operations												2,055			19,697			46,423			76,843
Net income (loss) attributable to EchoStar Corporation common stock												$	(18,309	)	$	16,052		$	(9,799	)	$	71,723

Net income from continuing operations	$	35,323		$	32,145	$	74,079		$	114,238
Net income (loss) from discontinued operations	(654		)	4,499		6,454			29,213
Net income attributable to EchoStar common stock	$	34,669		$	36,644	$	80,533		$	143,451

Weighted-average common shares outstanding :
Weighted-average common shares outstanding:
Class A and B common stock:
Basic	95,656			93,898		95,316			93,661			97,455			96,166			96,426			96,049
Dilutive impact of stock awards outstanding	1,234			503		1,310			528			—			—			—			—
Diluted	96,890			94,401		96,626			94,189			97,455			96,166			96,426			96,049

Earnings per share:
Earnings (loss) per share:
Class A and B common stock:
Basic:
Continuing operations	$	0.37		$	0.34	$	0.78		$	1.22		$	(0.21	)	$	(0.04	)	$	(0.58	)	$	(0.05	)
Discontinued operations	(0.01		)	0.05		0.06			0.31			0.02			0.21			0.48			0.80
Total basic earnings per share	$	0.36		$	0.39	$	0.84		$	1.53

Total basic earnings (loss) per share												$	(0.19	)	$	0.17		$	(0.10	)	$	0.75
Diluted:
Continuing operations	$	0.36		$	0.34	$	0.77		$	1.21		$	(0.21	)	$	(0.04	)	$	(0.58	)	$	(0.05	)
Discontinued operations	—			0.05		0.06			0.31			0.02			0.21			0.48			0.80
Total diluted earnings per share	$	0.36		$	0.39	$	0.83		$	1.52
Total diluted earnings (loss) per share												$	(0.19	)	$	0.17		$	(0.10	)	$	0.75

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

~~Note 5. Other Comprehensive Income (Loss) and Related Tax Effects~~NOTE 7. OTHER COMPREHENSIVE INCOME (LOSS) AND RELATED TAX EFFECTS

The changes in the balances of Accumulated other comprehensive lossby component were as follows (amounts in thousands):



	Cumulative Foreign Currency Translation Losses			Unrealized Gain (Loss) On Available-For-Sale Securities			Other			Accumulated Other Comprehensive Loss

Balance, December 31, 2017	$	(119,430	)	$	(10,801	)	$	77		$	(130,154	)
Cumulative effect of accounting changes as of January 1, 2018	—			10,467			—			10,467
Balance, January 1, 2018	(119,430		)	(334		)	77			(119,687		)
Other comprehensive income (loss) before reclassifications	(41,151		)	(277		)	172			(41,256		)
Amounts reclassified to net income	—			(4		)	—			(4		)
Other comprehensive income (loss)	(41,151		)	(281		)	172			(41,260		)
Balance, September 30, 2018	$	(160,581	)	$	(615	)	$	249		$	(160,947	)

Balance, December 31, 2018	$	(121,693	)	$	(1,574	)	$	(1,833	)	$	(125,100	)
Other comprehensive income (loss) before reclassifications	(10,732		)	3,299			1,435			(5,998		)
Amounts reclassified to net income	—			(566		)	—			(566		)
Other comprehensive income (loss)	(10,732		)	2,733			1,435			(6,564		)
Balance, September 30, 2019	$	(132,425	)	$	1,159		$	(398	)	$	(131,664	)

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, netin our Condensed Consolidated Statements of Operations.

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. We ~~have~~do not ~~recognized any~~recognize tax effects on unrealized gains or losses on available-for-sale securities ~~because~~until such gains or losses ~~would affect the amount of unrealized capital losses for which the related deferred tax asset has been fully offset by a valuation allowance.~~are realized.

Accumulated other comprehensive loss includes net cumulative foreign currency translation losses of $102.3 million and $135.4 million as of September 30, 2017 and December 31, 2016, respectively. Other comprehensive income includes deferred tax benefits for foreign currency translation losses related to assets that were transferred from a foreign subsidiary to a domestic subsidiary of zero and $7.3 million for the three and nine months ended September 30, 2017, respectively.

~~Reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2017 and 2016 were as follows:~~

Accumulated Other Comprehensive
Loss Components
Affected Line Item in our Condensed Consolidated Statements of Operations For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
(In thousands)
Recognition of realized gains on available-for-sale securities in net income (1) Gains on investments, net $ —
$ (10 ) $ (2,758 ) $ (5,584 )
Recognition of other-than-temporary impairment loss on available-for-sale securities in net income (2) Other-than-temporary impairment loss on available-for-sale securities —
—
3,298
—
Total reclassifications, net of tax and noncontrolling interests $ —
$ (10 ) $ 540
$ (5,584 )


~~(1)~~	When available-for-sale securities are sold, the related unrealized gains and losses that were previously recognized in other comprehensive income (loss) are reclassified and recognized as “Gains on investments, net” in our condensed consolidated statements of operations.


~~(2)~~	~~We recorded an other-than-temporary impairment loss on shares of certain common stock included in our strategic equity securities.~~

~~Note 6. Investment Securities~~

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

As of
September 30, 2017 December 31, 2016
(In thousands)
Marketable investment securities—current, at fair value:
Corporate bonds $ 245,419
$ 402,670
Strategic equity securities 139,373
94,816
Other 100,243
25,030
Total marketable investment securities—current 485,035
522,516
Restricted marketable investment securities (1) 12,961
12,203
Total $ 497,996
$ 534,719

Restricted cash and cash equivalents (1) $ 775
$ 723


~~(1)~~	Restricted marketable investment securities and restricted cash and cash equivalents are included in “Restricted cash and marketable investment securities” in our condensed consolidated balance sheets.

1521

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

~~Marketable Investment Securities~~NOTE 8. MARKETABLE INVESTMENT SECURITIES

Overview

Our marketable investment securities portfolio consists of various debt and equity instruments ~~which generally are classified as available-for-sale or trading securities depending on our investment strategy for those securities. The value of our investment portfolio depends on~~summarized in the ~~value of such securities and other instruments comprising the portfolio.~~table below (amounts in thousands):



	As of
	September 30, 2019		December 31, 2018

Marketable investment securities:
Debt securities:
Corporate bonds	$	758,654	$	1,735,653
Other debt securities	216,958		464,997
Total debt securities	975,612		2,200,650
Equity securities	35,332		90,976
Total marketable investment securities	1,010,944		2,291,626
Less: Restricted marketable investment securities	10,779		9,474
Total marketable investment securities	$	1,000,165	$	2,282,152

Debt Securities

~~Corporate Bonds~~

Our corporate bond portfolio includes debt instruments issued by individual corporations, primarily in the industrial and financial services industries.

~~Strategic Equity Securities~~

Our strategic investment portfolio consists of investments in shares of common stock of public companies, which are highly speculative and have experienced and continue to experience volatility. We received dividend income of $2.3 million and $5.8 million for the three and nine months ended September 30, 2017, respectively, and de minimis dividend income for the three and nine months ended September 30, 2016. We recognized a $3.3 million other-than-temporary impairment for the nine months ended September 30, 2017 on one of our investments. This investment had been in a continuous loss position for more than 12 months and experienced a decline in market value as a result of adverse developments during the three months ended March 31, 2017.

Prior to September 2017, we had an investment in the preferred stock of a privately-held company which had a carrying amount of $4.1 million and was accounted for using the cost method. In connection with the company’s initial public offering of its Class A common stock in September 2017, our shares of preferred stock were converted into the company’s Class B common stock. We have the right to convert such shares of Class B common stock to shares of Class A common stock and to sell such shares following the expiration of a lock-up period. For periods following the initial public offering, we account for this investment as a trading security at fair value in our strategic equity security portfolio.

For the three months ended September 30, 2017 and 2016, “Gains on investments, net” included gains of $19.9 million and zero, respectively, related to trading securities that we held as of September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, “Gains on investments, net” included gains of $19.9 million and losses of $1.0 million, respectively, related to trading securities that we held as of September 30, 2017 and 2016, respectively. The fair values of our trading securities were $23.9 million and $7.2 million as of September 30, 2017 and December 31, 2016, respectively.

~~Other~~

Our other ~~current marketable investment~~debt securities portfolio includes investments in various debt instruments, including U.S. government bonds, commercial paper and mutual funds.

~~Restricted Cash and Marketable Investment Securities~~A summary of our available-for-sale debt securities, exclusive of securities where we have elected the fair value option, is presented in the table below (amounts in thousands):



	Amortized		Unrealized					Estimated
	Cost		Gains		Losses			Fair Value

As of September 30, 2019
Corporate bonds	$	748,815	$	1,150	$	(6	)	$	749,959
Other debt securities	216,943		15		—			216,958
Total available-for-sale debt securities	$	965,758	$	1,165	$	(6	)	$	966,917
As of December 31, 2018
Corporate bonds	$	1,689,093	$	318	$	(1,896	)	$	1,687,515
Other debt securities	464,993		7		(3		)	464,997
Total available-for-sale debt securities	$	2,154,086	$	325	$	(1,899	)	$	2,152,512

As of September 30, ~~2017~~2019, we have $966.9 million of available-for-sale debt securities with contractual maturities of one year or less and NaN with contractual maturities greater than one year.

As of September 30, 2019 and December 31, ~~2016, our restricted marketable investment~~2018, corporate bonds where we have elected the fair value option have a fair value of $8.7 million and $48.1 million, respectively. We recognized gains of $1.9 million and losses of $14.9 million on these securities ~~together with our restricted cash, included amounts required as collateral~~ for ~~our letters~~the three months ended September 30, 2019 and 2018, respectively, and gains of ~~credit or surety bonds.~~$6.4 million and $8.2 million on these securities for the nine months ended September 30, 2019 and 2018, respectively.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

~~Unrealized Gains (Losses) on Available-for-Sale~~Equity Securities

~~The components~~Our marketable equity securities consist primarily of ~~our available-for-sale~~shares of common stock of public companies. Gains (losses) on investments, net related to equity securities ~~are summarized in the table below.~~

Amortized Unrealized Estimated
Cost Gains Losses Fair Value
(In thousands)
As of September 30, 2017
Debt securities:
Corporate bonds $ 245,426
$ 38
$ (45 ) $ 245,419
Other (including restricted) 107,823
1
(30 ) 107,794
Equity securities - strategic 101,808
14,439
(802 ) 115,445
Total available-for-sale securities $ 455,057
$ 14,478
$ (877 ) $ 468,658
As of December 31, 2016
Debt securities:
Corporate bonds $ 402,472
$ 285
$ (87 ) $ 402,670
Other (including restricted) 32,488
3
(23 ) 32,468
Equity securities - strategic 77,149
13,120
(2,652 ) 87,617
Total available-for-sale securities $ 512,109
$ 13,408
$ (2,762 ) $ 522,755

As of September 30, 2017, restricted and non-restricted available-for-sale securities included debt securities of $350.6 million with contractual maturities of one year or less and $2.6 million with contractual maturities greater than one year. We may realize proceeds from certain investments prior to their contractual maturity as a result of our ability to sell these securities prior to their contractual maturity.

~~Available-for-Sale Securities in a Loss Position~~

The following table reflects the length of time that our available-for-sale securities have been in an unrealized loss position. We do not intend to sell these securities before they recover or mature, and it is more likely than not that we ~~will hold these securities until they recover or mature. We believe that changes in the estimated fair values of these securities are primarily related to temporary market conditions.~~

As of
September 30, 2017 December 31, 2016

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(In thousands)
Less than 12 months $ 225,437
$ (871 ) $ 154,826
$ (2,760 )
12 months or more 23,233
(6 ) 1,571
(2 )
Total $ 248,670
$ (877 ) $ 156,397
$ (2,762 )

~~Sales of Available-for-Sale Securities~~

~~We recognized de minimis gains from the sales of our available-for-sale securities~~held each period were $8.5 million and $19.7 million for ~~each of~~ the three months ended September 30, ~~2017~~2019 and ~~2016. We recognized gains from the sales of our available-for-sale securities of $2.8~~2018, respectively, and $51.8 million and ~~$5.6~~$25.3 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. ~~We recognized de minimis losses~~

Sales of Available-for-Sale Securities

Proceeds from ~~the~~ sales of our available-for-sale securities, including securities accounted for using the fair value option, were NaN and $436.0 million for the three and nine months ended September 30, 2019, and $150.9 million for each of the three and nine months ended September 30, ~~2017~~2018, respectively. Sales of securities accounted for using the fair value option do not result in gains or losses because we recognize unrealized gains and ~~2016.~~

~~Proceeds from sales~~losses on such securities prior to the time of our available-for-sale securities totaled zero and $4.0 million for the three months ended September 30, 2017 and 2016, respectively, and $31.0 million and $35.8 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Table of Contents~~

~~ECHOSTAR CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

sale.

Fair Value Measurements

Our ~~current~~ marketable investment securities are measured at fair value on a recurring basis as summarized in the table ~~below.~~below (amounts in thousands). Certain of our investments in debt and equity instruments have historically experienced and are likely to continue experiencing volatility. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, we did not have investments that were categorized within Level 3 of the fair value hierarchy.



	As of
	September 30, 2019						December 31, 2018
	Level 1		Level 2		Total		Level 1		Level 2		Total

Debt securities:
Corporate bonds	$	—	$	758,654	$	758,654	$	—	$	1,735,653	$	1,735,653
Other debt securities	10,779		206,179		216,958		9,474		455,523		464,997
Total debt securities	10,779		964,833		975,612		9,474		2,191,176		2,200,650
Equity securities	28,521		6,811		35,332		85,298		5,678		90,976
Total marketable investment securities	$	39,300	$	971,644	$	1,010,944	$	94,772	$	2,196,854	$	2,291,626

As of
September 30, 2017 December 31, 2016
Total Level 1 Level 2 Total Level 1 Level 2
(In thousands)
Cash equivalents (including restricted) $ 2,736,932
$ 17,355
$ 2,719,577
$ 2,490,168
$ 62,332
$ 2,427,836
Debt securities:
Corporate bonds $ 245,419
$ —
$ 245,419
$ 402,670
$ —
$ 402,670
Other (including restricted) 113,204
13,298
99,906
37,233
13,517
23,716
Equity securities - strategic 139,373
139,373
—
94,816
94,816
—
Total marketable investment securities $ 497,996
$ 152,671
$ 345,325
$ 534,719
$ 108,333
$ 426,386

~~Investments in Unconsolidated Entities~~ — ~~Noncurrent~~

We have strategic investments in certain non-publicly traded equity securities that are accounted for using either the equity or the cost method of accounting. Our ability to realize value from our strategic investments in companies that are not publicly traded depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them.

NOTE 9. INVENTORY

Our ~~investments in unconsolidated entities~~inventory consisted of the ~~following:~~following (amounts in thousands):



	As of
	September 30, 2019		December 31, 2018

Raw materials	$	5,441	$	4,856
Work-in-process	10,869		13,901
Finished goods	67,087		56,622
Total inventory	$	83,397	$	75,379

As of
September 30, 2017 December 31, 2016
(In thousands)
Investments in unconsolidated entities—noncurrent:
Cost method $ 65,438
$ 80,052
Equity method 99,852
90,964
Total investments in unconsolidated entities—noncurrent $ 165,290
$ 171,016

We recorded cash distributions from our investments accounted for using the equity method of $7.5 million and $5.0 million for the three months ended September 30, 2017 and 2016, respectively. For each of the nine months ended September 30, 2017 and 2016, we recorded cash distributions from one of these investments accounted for using the equity method of $15.0 million. These cash distributions were determined to be a return on investment and reported in cash flows from operating activities in our condensed consolidated statements of cash flows.

In January 2017, we sold our investment in Invidi Technologies Corporation to an entity owned in part by DISH Network. Our investment was accounted for using the cost method and had a carrying amount of $10.5 million on the date of sale. We recognized a gain of $8.9 million and received cash proceeds of $17.8 million in connection with this transaction for the nine months ended September 30, 2017. See Note 16 for additional information about this transaction.

In connection with the Share Exchange, our equity interests in NagraStar L.L.C. and SmarDTV SA, which we accounted for using the equity method, and our equity interest in Sling TV Holding L.L.C., which we accounted for using the cost method, were transferred to DISH Network as of February 28, 2017. See Notes 3 and 16 for additional information about the Share Exchange and related party transactions with these companies in which we held equity interests.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

~~Note 7. Trade Accounts Receivable~~

~~Our trade accounts receivable consisted of the following:~~

As of
September 30, 2017 December 31, 2016
(In thousands)
Trade accounts receivable $ 181,555
$ 159,313
Contracts in process, net 24,043
36,170
Total trade accounts receivable 205,598
195,483
Allowance for doubtful accounts (13,211 ) (12,956 )
Trade accounts receivable - DISH Network 52,512
19,417
Total trade accounts receivable, net $ 244,899
$ 201,944

~~As of September 30, 2017 and December 31, 2016, progress billings offset against contracts in process amounted to $17.4 million and $14.6 million, respectively.~~

~~Note 8. Inventory~~

~~Our inventory consisted of the following:~~

As of
September 30, 2017 December 31, 2016
(In thousands)
Finished goods $ 74,693
$ 49,755
Raw materials 6,901
6,678
Work-in-process 9,638
6,187
Total inventory $ 91,232
$ 62,620

~~Note 9. Property and Equipment~~NOTE 10. PROPERTY AND EQUIPMENT

Property and equipment from our continuing operations consisted of the ~~following:~~following (amounts in thousands):


	Depreciable Life (In Years)		As of							Depreciable Life In Years		As of
		September 30, 2017				December 31, 2016				Depreciable Life In Years	September 30, 2019				December 31, 2018
			(In thousands)
Land	Depreciable Life (In Years)	—		$	33,682			$	35,815		—		$	28,914			$	33,571
Buildings and improvements	1-40		184,511				175,593			1 to 40		113,494				170,816
Furniture, fixtures, equipment and other	1-12		680,428				514,056			1 to 12		807,142				791,035
Customer rental equipment	2-4		859,596				689,579
Customer premises equipment										2 to 4		1,322,084				1,159,977
Satellites - owned	2-15		2,764,153				2,381,120			2 to 15		1,763,770				1,760,252
Satellites acquired under capital leases	10-15		794,705				781,761
Satellites - acquired under finance leases										10 to 15		376,321				385,592
Construction in progress	—		765,062				1,418,763			—		388,189				307,026
Total property and equipment			6,082,137				5,996,687					4,799,914				4,608,269
Accumulated depreciation			(2,551,678		)		(2,598,492		)			(2,355,757		)		(2,073,603		)
Property and equipment, net			$	3,530,459			$	3,398,195				$	2,444,157			$	2,534,666

Construction in progress consisted of the following (amounts in thousands):



	As of
	September 30, 2019		December 31, 2018

Progress amounts for satellite construction	$	348,106	$	277,583
Satellite related equipment	25,027		13,001
Other	15,056		16,442
Construction in progress	$	388,189	$	307,026

Construction in progress as of September 30, 2019 included our EchoStar XXIV satellite. In August 2017, we entered into a contract for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite, with a planned 2021 launch. The EchoStar XXIV satellite is primarily intended to provide additional capacity for our HughesNet service in North, Central and South America as well as aeronautical and enterprise broadband services. In the first quarter of 2019, Maxar Technologies Inc. (“Maxar”), the parent company of Space Systems/Loral, LLC (“SSL”), the manufacturer of our EchoStar XXIV satellite, announced that, although it will continue to operate its geostationary communications satellite business, it intends to adjust its organization to better align costs with revenue. SSL has indicated to us that it intends to meet its contractual obligations regarding the timely manufacture and delivery of the EchoStar XXIV satellite. However, if SSL fails to meet or is delayed in meeting these obligations for any reason, including if Maxar decides to significantly modify its geostationary communications satellite business, such failure could have a material adverse impact on our business operations, future revenues, financial position and prospects, the completion of the manufacture of the EchoStar XXIV satellite and our planned expansion of satellite broadband services throughout North, South and Central America. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in Corporate and Other in our segment reporting.

We recorded capitalized interest related to our satellites, satellite payloads and related ground facilities under construction of $6.1 million and $4.6 million for the three months ended September 30, 2019 and 2018, respectively, and $16.4 million and $13.8 million for the nine months ended September 30, 2019 and 2018, respectively.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

~~Construction in progress consisted of the following:~~

As of
September 30, 2017 December 31, 2016
(In thousands)
Progress amounts for satellite construction, including prepayments under capital leases and launch services costs $ 661,250
$ 1,235,577
Satellite related equipment 83,907
152,737
Other 19,905
30,449
Construction in progress $ 765,062
$ 1,418,763

~~Construction in progress included the following owned and leased satellites under construction or undergoing in-orbit testing as of September 30, 2017.~~



~~Satellites~~	~~Segment~~	~~Expected Launch Date~~
~~EchoStar XXI~~	~~Corporate and Other~~	~~June 2017 (1)~~
~~EchoStar 105/SES-11~~	~~ESS~~	~~October 2017 (2)~~
~~Telesat T19V (“63 West”) (3)~~	~~Hughes~~	~~Second quarter of 2018~~
~~EchoStar XXIV~~	~~Corporate and Other~~	~~2021~~


~~(1)~~	~~This satellite was launched in June 2017 and is expected to be placed in service during the fourth quarter of 2017.~~


~~(2)~~	~~This satellite was launched in October 2017 and is expected to be placed in service during the fourth quarter of 2017.~~


~~(3)~~	~~We entered into a satellite services agreement for certain capacity on this satellite once launched, but are not party to the construction contract.~~

Depreciation expense associated with our property and equipment from our continuing operations consisted of the ~~following:~~following (amounts in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the three months ended September 30,				For the nine months ended September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
	(In thousands)
Buildings and improvements									$	1,385	$	2,895	$	4,624	$	8,825
Furniture, fixtures, equipment and other									22,114		20,580		66,438		61,333
Customer premises equipment									49,074		43,584		142,541		129,907
Satellites	$	61,078	$	46,965	$	173,293	$	140,895	38,998		37,557		115,919		106,785
Furniture, fixtures, equipment and other	22,423		18,443		61,178		50,198
Customer rental equipment	39,104		28,652		103,781		86,789
Buildings and improvements	1,729		1,721		5,287		5,198
Total depreciation expense	$	124,334	$	95,781	$	343,539	$	283,080	$	111,571	$	104,616	$	329,522	$	306,850

Satellites depreciation expense includes amortization of satellites under finance lease agreements of $6.4 million and $5.5 million for the three months ended September 30, 2019 and 2018, respectively, and $19.3 million and $13.8 million for the nine months ended September 30, 2019 and 2018, respectively.

Satellites

As of September 30, ~~2017,~~2019, our satellite fleet consisted of 189 satellites, 6 of ~~our~~which are owned and ~~leased satellites~~3 of which are leased. They are all in geosynchronous orbit, approximately 22,300 miles above the equator. ~~We have not included the EchoStar XXI and EchoStar 105/SES-11 satellites in our satellite fleet as of September 30, 2017 since they had not been placed into service as of this date.~~ We depreciate our owned satellites on a straight-line basis over the estimated useful life of each satellite. ~~As of September 30, 2017, three of~~We depreciate our leased satellites ~~are accounted for as capital leases and are depreciated~~ on a straight-line basis over their respective lease terms. ~~We accounted~~In connection with the BSS Transaction, 7 of our owned satellites and the leases for ~~one~~2 of our leased satellites were transferred to DISH Network.

Our operating satellite ~~as an operating lease that is not included~~fleet consists of both owned and leased satellites detailed in ~~property and equipment~~the table below as of September 30, ~~2017.~~2019.

~~Recent Developments~~



Satellites	Segment	Launch Date	Nominal Degree Orbital Location (Longitude)	Depreciable Life In Years
Owned:
SPACEWAY 3 (1)	Hughes	August 2007	95 W	12
EchoStar XVII	Hughes	July 2012	107 W	15
EchoStar XIX	Hughes	December 2016	97.1 W	15
EchoStar IX (2)(3)	ESS	August 2003	121 W	12
EchoStar XXI	Corporate and Other	June 2017	10.25 E	15
EUTELSAT 10A (“W2A”) (4)	Corporate and Other	April 2009	10 E	—

Capital Leases:
Eutelsat 65 West A	Hughes	March 2016	65 W	15
Telesat T19V	Hughes	July 2018	63 W	15
EchoStar 105/SES-11	ESS	October 2017	105 W	15


(1)	Depreciable life represents the remaining useful life as of June 8, 2011, the date EchoStar completed its acquisition of Hughes Communications, Inc. and its subsidiaries (the “Hughes Acquisition”).


(2)	See Note 18 for discussion of related party transactions with DISH Network.


(3)	Fully depreciated assets as of December 31, 2015.


(4)	The Company acquired the S-band payload on this satellite, which prior to the acquisition in December 2013, experienced an anomaly at the time of the launch. As a result, the S-band payload is not fully operational.

~~EchoStar III.~~ In July 2017, the EchoStar III satellite experienced an anomaly that caused communications with the satellite to be interrupted resulting in a loss of control. We regained communications with and control of the EchoStar III satellite and retired it in August 2017. The EchoStar III satellite was a fully depreciated, non-revenue generating asset.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

~~EchoStar VIII.During the second quarter of 2017, the EchoStar VIII satellite was removed from its orbital location~~Satellite Anomalies and ~~retired from commercial service. This retirement has not had, and is not expected to have, a material impact on our results of operations or financial position.~~

~~EchoStar XIX~~. The EchoStar XIX satellite was launched in December 2016 and was placed into service in March 2017 at the 97.1 degree west longitude orbital location. The EchoStar XIX satellite provides additional capacity for the Hughes broadband services to our customers in North America and added capacity in certain Central and South American countries and has added capability for aeronautical, enterprise and international broadband services. ~~We contributed the EchoStar XIX satellite to our Hughes segment in February 2017.~~

~~EchoStar XXI~~. The EchoStar XXI satellite was launched in June 2017 and is anticipated to be placed into service in the fourth quarter of 2017 at the 10.25 degree east longitude orbital location. The EchoStar XXI satellite is expected to provide space segment capacity to EchoStar Mobile Limited in Europe.

~~EchoStar 105/SES-11.~~The EchoStar 105/SES-11 satellite was launched in October 2017 and is anticipated to be placed into service in the fourth quarter of 2017 at the 105 degree west longitude orbital location. Our Ku-band payload on the EchoStar 105/SES-11 satellite will replace our current capacity on the AMC-15 satellite.

~~EchoStar XXIII.~~ The EchoStar XXIII satellite, a Ku-band broadcast satellite services satellite, was launched in March 2017 and placed into service at the 45 degree west longitude orbital location in the second quarter of 2017.

~~Satellite Anomalies~~Impairments

Our satellites may experience anomalies from time to time, some of which may have a significant adverse ~~impact~~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 ~~material~~significant adverse effect during the nine months ended September 30, ~~2017.~~2019. There can be no assurance, however, that anomalies will not have any such adverse ~~impacts~~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 ~~in-orbit~~ satellites were to fail.

We historically have not carried in-orbit insurance on our satellites because we have assessed that the cost of insurance ~~was uneconomical~~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~~only for our SPACEWAY 3 ~~EchoStar XVI,~~ and EchoStar XVII ~~satellites. Based on economic analysis~~satellites insurance or other contractual arrangements during the commercial in-orbit service of ~~the current~~such satellite. We were required pursuant to such agreements to maintain similar insurance ~~market we obtained launch plus one year in-orbit insurance, subject to certain limitations,~~or other contractual arrangements for the EchoStar ~~XIX, EchoStar XXI and EchoStar XXIII satellites. Additionally,~~XVI satellite, which we ~~obtained certain launch and in-orbit insurance for our interest in~~transferred to DISH Network pursuant to the ~~EchoStar 105/SES-11 satellite. All~~BSS Transaction. 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~~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.

~~Note 10. Goodwill, Regulatory Authorizations and Other Intangible Assets~~NOTE 11. GOODWILL, REGULATORY AUTHORIZATIONSAND OTHER INTANGIBLE ASSETS

Goodwill

The excess of the cost of an acquired business over the fair values of net tangible and identifiable intangible assets at the time of the acquisition is recorded as goodwill. Goodwill is assigned to the reporting units within our operating segments and is subject to impairment testing annually, or more frequently when events or changes in circumstances indicate the fair value of a reporting unit is more likely than not less than its carrying amount.

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, all of our goodwill related to our continuing operations was assigned to reporting ~~units of our Hughes segment.~~units. We test this goodwill for impairment annually in the second quarter. Based on our ~~qualitative assessment of~~ impairment testing in the second quarter of ~~2017, we determined that it was~~2019, our goodwill is considered to be not ~~more likely than not that the fair values of the Hughes segment reporting units were less than the corresponding carrying amounts.~~

~~Table of Contents~~

~~ECHOSTAR CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

impaired.

Regulatory Authorizations

Regulatory authorizations included amounts with both finite and indefinite useful ~~lives, as follows:~~

As of December 31, 2016 Additions
Currency
Translation
Adjustment
As of
September 30, 2017
(In thousands)
Finite useful lives:
Cost $ 87,959
$ —
$ 6,086
$ 94,045
Accumulated amortization (14,983 ) (3,751 ) (1,411 ) (20,145 )
Net 72,976
(3,751 ) 4,675
73,900
Indefinite lives 471,657
—
—
471,657
Total regulatory authorizations, net $ 544,633
$ (3,751 ) $ 4,675
$ 545,557

~~Regulatory authorizations with finite lives include our Brazilian license, which had a carrying amount of $38.4 million and $38.6 million as~~lives. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, regulatory authorization balances, net of accumulated amortization, from our continuing operations were $426.2 million and $430.0 million, respectively. We had regulatory obligations to meet certain in-service milestones by the second quarter of 2017 for our Brazilian license at the 45 degree west longitude orbital location for the Ka-, Ku- and S-band frequency bands. We have met our regulatory milestone for the Ku-band. On October 5, 2017, ANATEL, the Brazilian regulatory authority, declined our request to extend our milestone deadlines for the S-band and Ka-band and, as a result, we no longer have the right to use such frequency bands. We may be subject to penalties as a result of our failure to meet these milestones. The loss of our right to use the S- and Ka-bands in October 2017 is an event that may affect the recoverability of the carrying value of our Brazilian license and related assets. Accordingly, we expect to test our Brazilian license and related assets for recoverability in the fourth quarter of 2017. We may be required to record an impairment loss if we determine that the carrying value of such license or its related assets are not recoverable and their fair values are lower than such carrying amounts.

Other Intangible Assets

~~Our~~As of September 30, 2019 and December 31, 2018, accumulated amortization for our other intangible assets ~~which are subject to amortization, consisted of the following:~~

Weighted Average Useful Life (in Years) As of
September 30, 2017 December 31, 2016
Cost
Accumulated
Amortization

Carrying
Amount
Cost
Accumulated
Amortization

Carrying
Amount
(In thousands)
Customer relationships 8 $ 270,300
$ (228,355 ) $ 41,945
$ 270,300
$ (214,544 ) $ 55,756
Technology-based 6 61,300
(60,905 ) 395
60,835
(57,266 ) 3,569
Trademark portfolio 20 29,700
(9,405 ) 20,295
29,700
(8,291 ) 21,409
Total other intangible assets $ 361,300
$ (298,665 ) $ 62,635
$ 360,835
$ (280,101 ) $ 80,734

Customer relationships are amortized predominantly in relation to the expected contribution of cash flow to the business over the life of the intangible asset. Other intangible assets are amortized on a straight-line basis over the periods the assets are expected to contribute to our cash flows. Intangible asset amortization expense, including amortization of regulatory authorizations with finite lives and externally marketed capitalized software, was ~~$10.5~~$328.1 million and ~~$12.8~~$317.1 million, ~~for the three months ended September 30, 2017 and 2016, respectively, and $36.4 million and $41.7 million for the nine months ended September 30, 2017 and 2016,~~ respectively.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

NOTE 12. 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):



	As of
	September 30, 2019		December 31, 2018

Investments in unconsolidated entities:
Equity method	$	166,623	$	182,035
Other equity investments without a readily determinable fair value	59,285		80,438
Total investments in unconsolidated entities	$	225,908	$	262,473

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. During the nine months ended September 30, 2019, we recorded a $28.7 million reduction to the carrying amount of one of our investments based on circumstances that indicated the fair value of the investment was less than its carrying amount. There were 0 similar reductions during the nine months ended September 30, 2018. For the nine months ended September 30, 2019 and 2018, we did not identify any observable price changes requiring an adjustment to our investments.

See Note 1118 for additional information about Dish Mexico, Deluxe/EchoStar LLC (“Deluxe”) and Broadband Connectivity Solutions (Restricted) Limited (together with its subsidiaries, “BCS”).

NOTE13. ~~Debt and Capital Lease Obligations~~LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS

The following table summarizes the carrying amounts and fair values of our ~~debt:~~long-term debt and finance lease obligations from our continuing operations (amounts in thousands):


	Effective Interest Rate		As of															Effective Interest Rate		As of
		September 30, 2017								December 31, 2016									September 30, 2019								December 31, 2018
		Carrying Amount				Fair Value				Carrying Amount				Fair Value					Carrying Amount				Fair Value				Carrying Amount				Fair Value
			(In thousands)
Senior Secured Notes:
6 1/2% Senior Secured Notes due 2019		6.959%		$	990,000			$	1,056,825			$	990,000			$	1,084,050		6.959%		$	—			$	—			$	920,836			$	932,696
5 1/4% Senior Secured Notes due 2026		5.320%		750,000				783,038				750,000				739,688			5.320%		750,000				806,295				750,000				695,865
Senior Unsecured Notes:
7 5/8% Senior Unsecured Notes due 2021	8.062%		900,000				1,023,408				900,000				990,189			8.062%		900,000				973,908				900,000				934,902
6 5/8% Senior Unsecured Notes due 2026	6.688%		750,000				806,910				750,000				760,245			6.688%		750,000				815,273				750,000				696,353
Less: Unamortized debt issuance costs			(26,756		)		—				(31,821		)		—					(11,862		)		—				(16,757		)		—
Subtotal			3,363,244				$	3,670,181			3,358,179				$	3,574,172				2,388,138				$	2,595,476			3,304,079				$	3,259,816
Capital lease obligations			280,878								297,268
Total debt and capital lease obligations			3,644,122								3,655,447
Finance lease obligations																				1,200								1,705
Total debt and finance lease obligations																				2,389,338								3,305,784
Less: Current portion			(38,407		)						(32,984		)							(407		)						(919,582		)
Long-term debt and capital lease obligations, net of unamortized debt issuance costs			$	3,605,715							$	3,622,463
Long-term debt and finance lease obligations, net																				$	2,388,931							$	2,386,202

~~The fair values~~Table of ~~our debt are estimates categorized within Level 2 of the fair value hierarchy.~~Contents

ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~Pursuant to~~During the ~~terms~~three and nine months ended September 30, 2019, we repurchased NaN and $11.5 million, respectively, of ~~a registration rights agreement, HSS registered notes having substantially identical terms as the 2026~~our 6 1/2% Senior Secured Notes ~~with the SEC as part of an offer to exchange registered notes for the 2026 Notes. This exchange offer expired May 11, 2017 with 99.98%~~due 2019 in open market trades. The outstanding balance of the ~~2026~~6 1/2% Senior Secured Notes ~~being tendered for exchange.~~due 2019 matured in June 2019.

~~Note 12.~~NOTE 14. 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 ~~quarterly~~interim income tax provision and our ~~quarterly~~interim estimate of our annual effective tax rate ~~is subject to significant volatility due to~~are influenced by several factors, including ~~income~~foreign losses and capital gains and losses ~~from investments~~ for which ~~we have~~related deferred tax assets are offset by a ~~full~~ valuation allowance, changes in tax laws and relative changes in unrecognized tax benefits. Additionally, our effective tax rate can be ~~more or less volatile based on~~affected by the amount of pre-tax ~~income.~~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.

~~Income~~Our income tax ~~expense~~provision from our continuing operations was ~~$6.1~~$5.0 million for the three months ended September 30, ~~2017~~2019 compared to ~~an income tax expense of approximately $17.4~~$8.0 million for the three months ended September 30, ~~2016.~~2018. Our estimated effective income tax rate was ~~14.5%~~(27.6)% and ~~34.6%~~167.0% for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. The variations in our current year effective tax rate from the U.S. federal statutory rate for the three months ended September 30, 2017 was primarily due to various permanent tax differences, the increase in our valuation allowance associated with unrealized gains that are capital in nature, and a change in the amount of unrecognized tax benefit from uncertain tax positions. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended September 30, ~~2016 was~~2019 were primarily due to the increase in our valuation allowance associated with certain foreign losses and by the impact of state and local taxes partially offset by the change in net unrealized gains that are capital in nature and research and experimentation ~~credits, partially offset by state and local taxes.~~

Income tax expense was approximately $9.1 million for the nine months ended September 30, 2017 compared to an income tax expense of approximately $61.3 million for the nine months ended September 30, 2016. Our estimated effective income tax rate was 11.0% and 35.2% for the nine months ended September 30, 2017 and 2016, respectively.credits. The variations in our

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effective tax rate from the U.S. federal statutory rate for the ~~nine~~three months ended September 30, ~~2017 was~~2018 were primarily due to the ~~recognition of a one-time tax benefit for the revaluation of our deferred tax assets and liabilities due to a~~ change ~~in our state effective tax rate as a result of the Share Exchange, the increase~~ in our valuation allowance associated with unrealized gains that are capital in ~~nature, and change in~~nature.

Our income tax provision from our continuing operations was $12.6 million for the ~~amount of unrecognized tax benefit from uncertain tax positions. The tax benefit recognized from~~nine months ended September 30, 2019 compared to $8.3 million for the ~~change in our~~nine months ended September 30, 2018. Our estimated effective income tax rate was ~~partially offset by~~(28.0)% and 186.1% for the ~~increase in our valuation allowance associated with certain state~~nine months ended September 30, 2019 and ~~foreign losses.~~2018, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, ~~2016~~2019 were primarily due to the increase in our valuation allowance associated with certain foreign losses and by the impact of state and local taxes partially offset by the change in net unrealized gains that are capital in nature and research and experimentation credits. For the year ended December 31, 2018, we recorded a tax provision of nil related to the tax on deemed mandatory repatriation of our unrepatriated foreign earnings. As a result of the release of new treasury regulations in June 2019, we have recorded additional tax expense of $1.5 million on deemed mandatory repatriation of certain deferred foreign earnings. The variations in our effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2018 were primarily due to research and experimentation credits and the change in our valuation allowance associated with unrealized gains that are capital in nature, partially offset by the impact of state and local ~~taxes.~~taxes and the increase in our valuation allowance associated with certain foreign losses.

~~Note 13. Stock-Based Compensation~~NOTE 15. STOCK-BASED COMPENSATION

Stock Incentive Plans

We maintain stock incentive plans to attract and retain officers, directors, employees, consultants and ~~key employees.~~advisors. Stock awards under these plans may include both ~~performance based~~performance-based and non-performance based stock incentives. We granted stock options and other incentive awards to our employees and nonemployee directors to acquire ~~62,600 shares~~35,240 and ~~137,470~~27,590 shares of our Class A common stock during the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~1,263,350 shares~~190,320 and ~~722,350~~211,326 shares of our Class A common stock ~~for~~during the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. ~~On April 24, 2017, Mr. Ergen, our Chairman, voluntarily forfeited~~In connection with the BSS Transaction, we adjusted options ~~to purchase 600,000 shares of Class A common stock~~ that were ~~granted to him on April 1, 2017,~~unexercised and ~~we canceled~~outstanding as of the date of the Distribution, which resulted in an increase in the number of such ~~forfeited~~ options.

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(Unaudited)

Stock-Based Compensation

Total ~~non-cash,~~noncash, stock-based compensation expense for all of our employees from our continuing operations is shown in the following table for the three and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018, respectively, and was assigned to the same expense categories as the base compensation for such ~~employees:~~employees (amounts in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,				For the three months ended September 30,				For the nine months ended September 30,
	2017		2016		2017		2016		2019		2018		2019		2018
	(In thousands)
Research and development expenses	$	297	$	297	$	774	$	827	$	110	$	162	$	352	$	503
Selling, general and administrative expenses	2,965		2,311		7,932		7,627		2,185		2,477		6,731		7,204
Total stock-based compensation	$	3,262	$	2,608	$	8,706	$	8,454	$	2,295	$	2,639	$	7,083	$	7,707

As of September 30, ~~2017,~~2019, total unrecognized stock-based compensation cost, net of estimated forfeitures, related to our unvested stock awards was ~~$22.8~~$10.1 million.

~~Note 14~~NOTE 16. ~~Commitments and Contingencies~~COMMITMENTS AND CONTINGENCIES

Commitments

As of September 30, ~~2017,~~2019 and December 31, 2018, our satellite-related obligations from our continuing operations were ~~approximately $1.01 billion.~~$439.1 million and $529.9 million, respectively. Our satellite-related obligations primarily include payments pursuant to agreements for the construction of the EchoStar XXIV satellite; payments pursuant to ~~launch services contracts and~~ regulatory authorizations; ~~executory~~non-lease costs ~~for~~associated with our ~~capital~~finance lease satellites; ~~costs under satellite service agreements;~~ and in-orbit incentives relating to certain satellites; as well as commitments for ~~long-term satellite operating leases and~~ satellite service arrangements.

Contingencies

Patents and Intellectual Property

Many entities, including some of our competitors, have or may have in the future ~~obtain~~ patents and other intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer. We may not be aware of all patents and other intellectual property rights that our products and services may potentially infringe. Damages in patent infringement cases can be substantial, and in certain circumstances can be ~~trebled.~~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 ~~persons~~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

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~~(Unaudited)~~

from these ~~persons~~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.

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(Unaudited)

Separation ~~Agreement;~~Agreement, Share Exchange and BSS Transaction

In connection with ~~the Spin-off,~~our spin-off from DISH in 2008 (the “Spin-off”), we entered into a separation agreement with DISH Network that provides, among other things, for the division of certain liabilities, including liabilities resulting from litigation. Under the terms of the separation agreement, we assumed certain liabilities that relate to our business, including certain designated liabilities for acts or omissions that occurred prior to the Spin-off. Certain specific provisions govern intellectual property related claims under which, ~~generally,~~ we will generally only be liable for our acts or omissions following the Spin-off and DISH Network will indemnify us for any liabilities or damages resulting from intellectual property claims relating to the period prior to the Spin-off, as well as DISH Network’s acts or omissions following the Spin-off. Additionally, in connection with the Share Exchange and BSS Transaction, we entered into the Share Exchange Agreement and the Master Transaction Agreement, respectively, 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 us and DISH Network for, in the case of the Share Exchange, certain pre-existing liabilities and legal ~~proceedings.~~proceedings and, in the case of the BSS Transaction, certain losses with respect to breaches of certain representations and covenants and certain liabilities.

Litigation

We are involved in a number of legal proceedings ~~(including those described below)~~ concerning matters arising in connection with the conduct of our business activities. Many of these proceedings are at preliminary stages and/or seek an indeterminate amount of damages. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable ~~or there is a reasonable possibility that a loss or an additional loss may have been incurred~~ and to determine if accruals are appropriate. We record an accrual for litigation and other loss contingencies when we determine that a loss is probable and the amount of the loss can be reasonably estimated. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. There can be no assurance that legal proceedings against us will be resolved in amounts that will not differ from the amounts of our recorded accruals. Legal fees and other costs of defending ~~litigation~~legal proceedings are charged to expense as incurred.

For certain cases, ~~described below,~~ management is unable to predict with any degree of certainty the outcome or provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii) damages have not been sought or specified; (iii) damages are unsupported, indeterminate and/or exaggerated in management’s opinion; (iv) there is uncertainty as to the outcome of pending 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, ~~for these cases,~~ 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 ~~United States~~U.S. District Court for the Eastern District of Texas, alleging infringement of ~~United States~~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

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(Unaudited)

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

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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 ~~Patent and Trademark Office~~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 ~~approximately~~ $21.1 million. As a result of interest, costs and unit sales through the 073 patent’s expiration in November 2017, we estimate the jury verdict could result in a judgment of approximately $27 million if not overturned or modified by post-trial motions or appeals. The jury also found that such infringement of the 073 patent was not willful and that the 874 patent was not infringed. ~~HNS intends to vigorously pursue its post-trial rights, including appeals. We cannot predict with certainty~~On March 30, 2018, the ~~outcome of any~~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 initially requested an award of approximately $13.9 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 ~~appeals. For~~rehearing en banc with the ~~nine months ended~~Federal Circuit, which was denied on September 10, 2019. In an order dated September 18, 2019, the District Court questioned the attorneys’ fees calculations proposed by both parties and asked for further briefing, which the parties submitted on October 25, 2019.As a result of the Federal Circuit’s rulings, as of September 30, ~~2017, we~~2019, we have recorded ~~a charge~~an accrual of ~~$2.5~~$33.7 million, reflecting the $21.1 million jury verdict and $12.6 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 recorded an accrual of $3.2 million with respect to this ~~matter.~~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.

~~Michael Heskiaoff, Marc Langenohl, and Rafael Mann~~

On July 10, 2015, Messrs. Michael Heskiaoff and Marc Langenohl, purportedly on behalf of themselves and all others similarly situated, filed suit against our now former subsidiary Sling Media, Inc. in the United States District Court for the Southern District of New York. The complaint alleges that Sling Media Inc.’s display of advertising to its customers violates a number of state statutes dealing with consumer deception. On September 25, 2015, the plaintiffs filed an amended complaint, and Mr. Rafael Mann, purportedly on behalf of himself and all others similarly situated, filed an additional complaint alleging similar causes of action. On November 16, 2015, the cases were consolidated. On August 12, 2016, the Court dismissed the consolidated case due to plaintiffs’ failure to state a claim. On September 12, 2016, the plaintiffs moved the Court for leave to file an amended complaint, which the Court denied on March 22, 2017. On April 17, 2017, the plaintiffs filed a notice of appeal to the United States Court of Appeals for the Second Circuit.

Realtime Data LLC

On May 8, 2015, Realtime Data LLC (“Realtime”) filed suit against EchoStar Corporation and our subsidiary HNS in the ~~United States~~U.S. District Court for the Eastern District of Texas alleging infringement of ~~United States~~U.S. Patent Nos. 7,378,992 (the “992 patent”), entitled “Content Independent Data Compression Method and ~~System”;~~System;” 7,415,530 (the “530 patent”), entitled “System and Methods for Accelerated Data Storage and ~~Retrieval”;~~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 ~~United States~~U.S. Patent No. 9,116,908 (the “908 patent”), entitled “System and Methods for Accelerated Data Storage and Retrieval.” Realtime generally alleges that the asserted patents are infringed by certain HNS data compression products and services. Over April 29, 2016 and May 5, 2016, the defendants filed petitions before the United States Patent and Trademark Office (“USPTO”) challenging the validity of the asserted patents. The USPTO instituted proceedings on each of those petitions. The USPTO invalidated the asserted claims of the 513 patent, but Realtime is still asserting this patent against us and may appeal this ruling. Realtime is no longer asserting the 992 patent against us and additionally the USPTO invalidated the claims of the 992 patent that had been asserted against us. The USPTO is still reviewing the 530 patent; however, two of the four claims asserted against us were invalidated in a separate litigation between Realtime and a third party, which Realtime may appeal. The USPTO did not invalidate the asserted claims of the 908 patent, but a third party has challenged these claims in a separate proceeding before the USPTO. 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 ~~United States~~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 ~~June 6, 2017, Realtime~~February 13, 2018, we filed ~~an amended complaint, adding~~petitions before the USPTO challenging the validity of all claims ~~of infringement~~asserted against ~~EchoStar Technologies, L.L.C., a wholly-owned subsidiary of DISH, DISH, DISH Network L.L.C., Sling TV L.L.C., Sling Media L.L.C., and Arris Group, Inc.,~~us from the 707 patent, as well as ~~additionally alleging infringement~~one of ~~United States Patent No. 8,553,759 (the “759 patent”), entitled “Bandwidth Sensitive Data Compression and Decompression.” The cases were consolidated and no trial date has been set.~~the asserted claims of the 728 patent. On ~~July 20, 2017,~~September 5, 2018, the ~~claims~~USPTO declined to institute proceedings for the petition that we had filed against the ~~newly added parties, with the exception of EchoStar Technologies, L.L.C., were severed into a separate case.~~728 patent. On September ~~1, 2017, EchoStar Technologies, L.L.C. was dismissed~~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 ~~case. On October 10, 2017, Realtime informed us that it is not pursuing the 759 patent against us. Trial is scheduled for January 21, 2019.~~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 Corporation’s stockholders, filed a complaint in the District Court of Clark County, Nevada against our 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; our officer, David J. Rayner; EchoStar Corporation; HSS; our former subsidiary BSS Corp.; and DISH and its subsidiary Merger Sub. On September 5, 2019, the defendants filed motions to dismiss. On October 11, 2019, the plaintiffs filed an amended complaint removing Messrs. Dodge, Federico, Kaul, Schroeder, Tarr and Wade as defendants. The amended complaint alleges that Mr. Ergen, as our controlling stockholder, breached fiduciary duties to EchoStar Corporation’s minority stockholders by structuring the BSS Transaction with inadequate consideration and improperly influencing our board of directors to approve the BSS

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(Unaudited)

~~Shareholder Derivative Litigation~~

~~On December 5, 2012, Greg Jacobi, purporting to sue derivatively~~Transaction. The amended complaint also alleges that the other defendants aided and abetted such alleged breaches. The plaintiffs seek equitable and monetary relief, including the issuance of additional DISH Common Stock, and other costs and disbursements, including attorneys’ fees on behalf of ~~EchoStar Corporation,~~the purported class. We intend to vigorously defend this case. We cannot predict its outcome with any degree of certainty.

License Fee Dispute with Government of India, Department of Telecommunications

In 1994, the Government of India promulgated a “National Telecommunications Policy” under which the government liberalized the telecommunications sector and required telecommunications service providers to pay fixed license fees. Pursuant to this policy, our subsidiary Hughes Communications India Private Limited (“HCIPL”), formerly known as Hughes Escorts Communications Limited, obtained a license to operate a data network over satellite using VSAT systems. In 1999, HCIPL’s license was amended pursuant to a new government policy that eliminated the fixed license fees and instead required each telecommunications service provider to pay license fees based on its adjusted gross revenue (“AGR”). In March 2005, the Indian Department of Telecommunications (“DOT”) notified HCIPL that, based on its review of HCIPL’s audited accounts and AGR statements, HCIPL must pay additional license fees, interest on such fees and penalties and interest on the penalties. HCIPL responded that the DOT had improperly calculated its AGR by including revenue from licensed and unlicensed activities. The DOT rejected this explanation and in 2006, HCIPL filed ~~suit~~a petition with an administrative tribunal (the ~~“Jacobi Litigation”~~“Tribunal”) ~~against Charles W. Ergen, Michael T. Dugan, R. Stanton Dodge, Tom A. Ortolf, C. Michael Schroeder, Joseph P. Clayton, David K. Moskowitz,~~, challenging the DOT’s calculation of its AGR. The DOT also issued license fee assessments to other telecommunications service providers and ~~EchoStar Corporation in~~a number of similar petitions were filed by several other such providers with the ~~United States District Court~~Tribunal. These petitions were amended, consolidated, remanded and re-appealed several times over the following twelve years. On April 23, 2015, the Tribunal issued a judgment affirming the DOT’s calculation of AGR for the ~~District~~telecommunications service providers but reversing the DOT’s imposition of ~~Nevada.~~interest, penalties and interest on such penalties as excessive. Over subsequent years, the DOT and HCIPL and other telecommunications service providers, respectively, filed several appeals of the Tribunal’s ruling. As of March 31, 2018, the DOT had assessed HCIPL $4.2 million for additional license fees and $17.8 million for interest, penalties and interest on penalties. On October 24, 2019, the Supreme Court of India issued an order affirming the license fee assessments imposed by the DOT, including its imposition of interest, penalties and interest on the penalties. We expect the DOT will issue an updated assessment that could possibly have additional interest, penalties and interest on penalties in light of the Supreme Court’s recent decision. As of September 30, 2019 and December 31, 2018, we have recorded an accrual of $22.0 million and $1.3 million, respectively. The complaint alleges that a March 2011 attempted grant of 1.5 million stock options to Charles Ergen breached defendants’ fiduciary duties, resulted in unjust enrichment, and constituted a waste of corporate assets.

On December 18, 2012, Chester County Employees’ Retirement Fund, derivatively on behalf of EchoStar Corporation, filed a suit (the “Chester County Litigation”) against Charles W. Ergen, Michael T. Dugan, R. Stanton Dodge, Tom A. Ortolf, C. Michael Schroeder, Anthony M. Federico, Pradman P. Kaul, Joseph P. Clayton, and EchoStar Corporation in the United States District Court for the District of Colorado. The complaint similarly alleges that the March 2011 attempted grant of 1.5 million stock options to Charles Ergen breached defendants’ fiduciary duties, resulted in unjust enrichment, and constituted a waste of corporate assets.

~~On February 22, 2013, the Chester County Litigation was transferred~~eventual payments made with respect to the ~~District~~ultimate outcome of ~~Nevada,~~this matter may be different from our accruals and on April 3, 2013, the Chester County Litigation was consolidated into the Jacobi Litigation. Oral argument on a motion to dismiss the Jacobi Litigation was held February 21, 2014. On March 30, 2015, the Court dismissed the Jacobi Litigation, with leave for Jacobi to amend his complaint by April 20, 2015. On April 20, 2015, Jacobi filed an amended complaint, which on June 12, 2015, we moved to dismiss. On March 17, 2016, the Court dismissed the amended complaint. On July 31, 2017, a motion from the Chester County Employee’s Retirement Fund seeking attorneys’ fees and expenses was denied. Jacobi appealed the amended complaint’s dismissal to the United States Court of Appeals for the Ninth Circuit. On October 9, 2017, Jacobi agreed to dismiss its appeal, with each party bearing its own costs. Accordingly, on October 10, 2017 the Court of Appeals granted a stipulated motion to voluntarily dismiss Jacobi’s appeal, and on October 17, 2017, the District Court entered the Court of Appeal’s mandate. The Chester County and Jacobi matters are now concluded.such differences could be significant.

Other

In addition to the above actions, we are subject to various other legal proceedings and claims, which arise in the ordinary course of ~~our~~ business. As part of our ongoing operations, ~~the Company is~~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 ~~the Company~~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, ~~the Company~~we from time to time ~~receives~~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.

~~The Company indemnifies its~~We also indemnify our directors, officers and employees for certain liabilities that might arise from the performance of their responsibilities for ~~the Company.~~us. Additionally, in the normal course of its business, ~~the Company enters~~we enter into contracts pursuant to which ~~the Company~~we may make a variety of representations and warranties and indemnify the counterparty for certain losses. ~~The Company’s~~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 ~~the Company~~us or ~~its~~our officers, directors or employees, the outcomes of which are unknown and not currently predictable or estimable.

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(Unaudited)

~~Note 15~~NOTE 17. ~~Segment Reporting~~SEGMENT REPORTING

Operating segments are business components of an enterprise for which separate financial information is available and regularly evaluated by ~~the~~our chief operating decision maker (“CODM”), who ~~for EchoStar~~ is ~~the Company’s~~our Chief Executive Officer. ~~Prior to March 2017, we operated~~We primarily operate in ~~three primary~~2 business segments, Hughes ~~EchoStar Technologies~~ and ~~ESS.~~ESS, as described in Note 1. Following the consummation of the ~~Share Exchange described in~~ ~~Note 3~~ ~~of these condensed consolidated financial statements,~~BSS Transaction, we no longer operate the ~~EchoStar Technologies~~BSS Business, which was 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. Effective in March 2017, we also changed our overhead allocation methodology to reflect how the CODM evaluates our segments. Historically, the costs of all corporate functions were included on an allocated basis in each of the business segments’ EBITDA. Under the revised allocation methodology, these costs are now reported and analyzed as part of “Corporate and Other” (previously “All Other and Eliminations”). Our prior period segment EBITDA disclosures have been restated to reflect this change.

~~As of March 2017, our two primary business segments are Hughes and ESS, as described in~~ ~~Note 1~~ ~~of these condensed consolidated financial statements.~~

Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Real Estate, Accounting and Legal) ~~as well as~~and other activities that have not been assigned to our operating segments ~~including~~such as costs incurred in certain satellite development programs and other business development activities, ~~our centralized treasury operations,~~ and gains ~~(losses)~~or losses from certain of our investments. ~~Costs~~These activities, costs and income, ~~associated with these departments and activities~~as well as eliminations of intersegment transactions, are accounted for in ~~the “Corporate~~Corporate and ~~Other” column~~Other in the ~~table~~tables below or in the reconciliation of EBITDA below.

~~Transactions between segments were not significant for the three and nine months ended September 30, 2017 or 2016, respectively.~~ Total assets by segment have not been reported herein because the information is not provided to our CODM on a regular basis.

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(Unaudited)

The following table presents revenue, EBITDA and capital expenditures for each of our operating ~~segments:~~

Hughes EchoStar
Satellite
Services Corporate and Other Consolidated
Total
(In thousands)
For the Three Months Ended September 30, 2017
External revenue $ 379,702
$ 96,743
$ 4,788
$ 481,233
Intersegment revenue $ 359
$ 350
$ (709 ) $ —
Total revenue $ 380,061
$ 97,093
$ 4,079
$ 481,233
EBITDA $ 131,817
$ 78,345
$ 9,699
$ 219,861
Capital expenditures $ 108,428
$ 8,203
$ 75,500
$ 192,131

For the Three Months Ended September 30, 2016
External revenue $ 355,090
$ 101,308
$ 3,648
$ 460,046
Intersegment revenue $ 786
$ 172
$ (958 ) $ —
Total revenue $ 355,876
$ 101,480
$ 2,690
$ 460,046
EBITDA $ 125,522
$ 84,257
$ (20,477 ) $ 189,302
Capital expenditures $ 75,682
$ 15,730
$ 48,162
$ 139,574

For the Nine Months Ended September 30, 2017
External revenue $ 1,070,715
$ 294,839
$ 13,906
$ 1,379,460
Intersegment revenue $ 1,428
$ 946
$ (2,374 ) $ —
Total revenue $ 1,072,143
$ 295,785
$ 11,532
$ 1,379,460
EBITDA $ 342,693
$ 241,873
$ 3,472
$ 588,038
Capital expenditures $ 270,624
$ 21,351
$ 118,170
$ 410,145

For the Nine Months Ended September 30, 2016
External revenue $ 1,019,203
$ 305,401
$ 10,074
$ 1,334,678
Intersegment revenue $ 2,248
$ 518
$ (2,766 ) $ —
Total revenue $ 1,021,451
$ 305,919
$ 7,308
$ 1,334,678
EBITDA $ 353,505
$ 257,181
$ (45,506 ) $ 565,180
Capital expenditures $ 261,241
$ 50,762
$ 165,815
$ 477,818

segments from our continuing operations (amounts in thousands). Capital expenditures are net of refunds and other receipts related to property and equipment and exclude capital expenditures from discontinued operations of $0.3 million and de minimis three months ended September 30, 2019 and 2018, respectively, and $0.5 million and $0.1 million for the nine months ended September 30, 2019 and 2018, respectively.

~~The following table reconciles total consolidated EBITDA to reported “Income from continuing operations before income taxes” in our condensed consolidated statements of operations:~~

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
(In thousands)
EBITDA $ 219,861
$ 189,302
$ 588,038
$ 565,180
Interest income and expense, net (43,634 ) (31,057 ) (126,156 ) (66,650 )
Depreciation and amortization (134,822 ) (108,549 ) (379,939 ) (324,743 )
Net income attributable to noncontrolling interest in HSS Tracking Stock and other noncontrolling interests 532
609
351
20
Income from continuing operations before income taxes $ 41,937
$ 50,305
$ 82,294
$ 173,807



	Hughes		ESS			Corporate and Other			Consolidated Total

For the three months ended September 30, 2019
External revenue	$	463,735	$	3,772		$	4,756		$	472,262
Intersegment revenue	—		326			(326		)	—
Total revenue	$	463,735	$	4,098		$	4,429		$	472,262
EBITDA	$	155,940	$	1,791		$	(18,015	)	$	139,716
Capital expenditures	$	76,572	$	—		$	18,583		$	95,155

For the three months ended September 30, 2018
External revenue	$	444,762	$	6,802		$	4,710		$	456,274
Intersegment revenue	—		—			—			—
Total revenue	$	444,762	$	6,802		$	4,710		$	456,274
EBITDA	$	164,135	$	4,687		$	(15,650	)	$	153,172
Capital expenditures	$	110,550	$	18		$	56,576		$	167,144

For the nine months ended September 30, 2019
External revenue	$	1,360,919	$	11,058		$	15,098		$	1,387,075
Intersegment revenue	—		815			(815		)	—
Total revenue	$	1,360,919	$	11,873		$	14,283		$	1,387,075
EBITDA	$	448,837	$	5,006		$	(43,843	)	$	410,000
Capital expenditures	$	224,483	$	—		$	89,868		$	314,351

For the nine months ended September 30, 2018
External revenue	$	1,271,527	$	22,562		$	14,566		$	1,308,655
Intersegment revenue	359		—			(359		)	—
Total revenue	$	1,271,886	$	22,562		$	14,207		$	1,308,655
EBITDA	$	452,982	$	15,478		$	(18,767	)	$	449,693
Capital expenditures	$	285,352	$	(76,757	)	$	129,030		$	337,625

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~- Continued~~

(Unaudited)

~~Note 16~~The following table reconciles total consolidated EBITDA to reported Income (loss) from continuing operations before income taxes in our Condensed Consolidated Statements of Operations (amounts in thousands):



	For the three months ended September 30,						For the nine months ended September 30,
	2019			2018			2019			2018

EBITDA	$	139,716		$	153,172		$	410,000		$	449,693
Interest income and expense, net	(32,690		)	(33,529		)	(91,996		)	(107,801		)
Depreciation and amortization	(122,374		)	(115,325		)	(361,619		)	(338,737		)
Net income attributable to noncontrolling interests	(2,797		)	450			(1,359		)	1,292
Income (loss) from continuing operations before income taxes	$	(18,145	)	$	4,768		$	(44,974	)	$	4,447

NOTE 18. ~~Related Party Transactions~~RELATED PARTY TRANSACTIONS

DISH Network

~~Following the Spin-off, we~~EchoStar Corporation and DISH have operated as separate publicly-traded ~~companies. However,~~companies since 2008. In addition, prior to the consummation of the Share Exchange onin February ~~28,~~ 2017, DISH Network owned the Tracking Stock, ~~representing~~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. ~~In addition, a~~A substantial majority of the voting power of the shares of each of EchoStar Corporation and DISH is owned beneficially by Charles W. Ergen, our Chairman, and by certain ~~trusts~~entities established by Mr. Ergen for the benefit of his family.

In connection with and following ~~both~~ the Spin-off, ~~and~~ the Share Exchange and the BSS Transaction, we and DISH Network entered into certain agreements pursuant to which we obtain certain products, services and rights from DISH Network; DISH Network obtains certain products, services and rights from us; and we and DISH Network indemnify each other against certain liabilities arising from our respective businesses. ~~We also may enter into additional agreements with DISH Network in the future.~~ Generally, the amounts we or DISH Network pay for products and services provided under the agreements are based on cost plus a fixed margin (unless noted differently ~~below or in our most recent Annual Report on Form 10-K)~~below), which varies depending on the nature of the products and services provided.

We 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.

~~Equipment revenue~~Services and Other Revenue — DISH Network

~~Receiver Agreement~~Satellite Capacity Leased to DISH Network.~~. Effective January 2012, one of our subsidiaries and DISH Network~~ We have entered into ~~a receiver agreement (the “2012 Receiver Agreement”), pursuant~~certain agreements to which DISH Network had the right, but not the obligation, to purchase digital set-top boxes, related accessories, and other equipment from us for the period from January 2012 through December 2014. The 2012 Receiver Agreement replaced the receiver agreement one of our subsidiaries entered into with DISH Network in connection with the Spin-off. The 2012 Receiver Agreement allowed DISH Network to purchase digital set-top boxes, related accessories, and other equipment from us either: (i) at cost (decreasing as we reduced costs and increasing as costs increased) plus a dollar mark-up which depended upon the cost of the product subject to a collar on our mark-up; or (ii) at cost plus a fixed margin, which depended on the nature of the equipment purchased. Under the 2012 Receiver Agreement, our margins would have increased if we were able to reduce the costs of our digital set-top boxes and our margins would have reduced if these costs increased. One of our subsidiaries provided DISH Network with standard manufacturer warranties for the goods sold under the 2012 Receiver Agreement. Additionally, the 2012 Receiver Agreement included an indemnification provision, whereby the parties agreed to indemnify each other for certain intellectual property matters. In November 2016, one of our subsidiaries and DISH Network amended this agreement to extend its term for one year through December 2017. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~Services and other revenue — DISH Network~~

~~Broadcast Agreement. Effective January 2012, one of our subsidiaries and DISH Network entered into a broadcast agreement (the “2012 Broadcast Agreement”),~~lease satellite capacity pursuant to which we ~~provided certain broadcast~~provide satellite services to DISH Network including teleport services such as transmission and downlinking, channel origination services, and channel management services, for the period from January 2012 through December 2016. In November 2016, one of our subsidiaries and DISH Network amended the 2012 Broadcast Agreement to extend the term for one year through December 2017. The fees for the services provided under the 2012 Broadcast Agreement were calculated at either: (a) our cost of providing the relevant service plus a fixed dollar fee, which was subject to certain adjustments; or (b) our cost of providing the relevant service plus a fixed margin, depending on the nature of the services provided. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~Table of Contents~~

~~ECHOSTAR CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

~~Broadcast Agreement for Certain Sports Related Programming~~. In May 2010, one of our subsidiaries and DISH Network entered into a broadcast agreement pursuant to which we provided certain broadcast services to DISH Network in connection with its carriage of certain sports related programming. The term of this agreement was ten years. The fees for the broadcast services provided under this agreement depended, among other things, upon the cost to develop and provide such services. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~RUS Implementation Agreement~~. In September 2010, DISH Broadband L.L.C. (“DISH Broadband”), DISH’s indirect, wholly-owned subsidiary, was selected by the Rural Utilities Service (“RUS”) of the United States Department of Agriculture to receive up to approximately $14.1 million in broadband stimulus grant funds (the “Grant Funds”). Effective November 2011, HNS and DISH Broadband entered into a RUS Implementation Agreement (the “RUS Agreement”) pursuant to which HNS provided certain portions of the equipment and broadband service used to implement DISH Broadband’s RUS program. While the RUS Agreement expired in June 2013 when the Grant Funds were exhausted, HNS is required to continue providing services to DISH Broadband’s customers activated prior to the expiration of the RUS Agreement in accordance with the terms and conditions of the RUS Agreement.

~~Satellite Services Provided to DISH Network. Since the Spin-off, we have entered into certain satellite service agreements pursuant to which DISH Network receives satellite services~~ on certain satellites owned or leased by us. The fees for the services provided under these ~~satellite service~~ agreements depend, among other things, upon the orbital location of the applicable satellite, the number of transponders that are providing services on the applicable satellite and the length of the service arrangements. The terms of each service arrangement is set forth below:

EchoStar ~~VII, EchoStar X, EchoStar XI and EchoStar XIV.~~ As part of the Satellite and Tracking Stock Transaction, described below, in March 2014, we began providing certain satellite services to DISH Network on the EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV satellites. The term of each satellite services agreement generally terminates upon the earlier of: (i) the end of life of the satellite; (ii) the date the satellite fails; or (iii) a certain date, which depends upon, among other things, the estimated useful life of the satellite. DISH Network generally has the option to renew each satellite service agreement on a year-to-year basis through the end of the respective satellite’s life. There can be no assurance that any options to renew such agreements will be exercised. In December 2016, DISH Network renewed the satellite services agreement relative to the EchoStar VII satellite for ~~one year to June 2018.~~

~~EchoStar~~ IX. Effective January 2008, DISH Network began ~~receiving~~leasing satellite ~~services~~capacity from us on the EchoStar IX satellite. Subject to availability, DISH Network generally has the right to continue ~~to receive~~leasing satellite ~~services~~capacity from us on the EchoStar IX satellite on a month-to-month basis.

~~EchoStar XII. DISH Network received satellite services from us on the EchoStar XII satellite. The term of the satellite services agreement terminated at the end of September 2017.~~

~~EchoStar XVI~~. In December 2009, we entered into an initial ten-year transponder service agreement with DISH Network, pursuant to which DISH Network has received satellite services from us on the EchoStar XVI satellite since January 2013. Effective December 2012, we and DISH Network amended the transponder service agreement to, among other things, change the initial term to generally expire upon the earlier of: (i) the end-of-life or replacement of the satellite; (ii) the date the satellite fails; (iii) the date the transponder(s) on which service is being provided under the agreement fails; or (iv) four years following the actual service commencement date. In July 2016, we and DISH Network further amended the transponder service agreement to, among other things, extend the initial term by one additional year through January 2018 and to reduce the term of the first renewal option by one year. In May 2017, DISH Network renewed the satellite services agreement relative to the EchoStar XVI satellite for five-years to January 2023. DISH Network has the option to renew for an additional five-year period prior to expiration of the 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.

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~~ECHOSTAR CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

~~Nimiq 5 Agreement~~. In September 2009, we entered into a fifteen-year satellite service agreement with Telesat Canada (“Telesat”) to receive service on all 32 DBS transponders on the Nimiq 5 satellite at the 72.7 degree west longitude orbital location (the “Telesat Transponder Agreement”). In September 2009, we also entered into a satellite service agreement (the “DISH Nimiq 5 Agreement”) with DISH Network, pursuant to which DISH Network receives satellite services from us on all 32 of the DBS transponders covered by the Telesat Transponder Agreement.

Under the terms of the DISH Nimiq 5 Agreement, DISH Network makes certain monthly payments to us that commenced in September 2009, when the Nimiq 5 satellite was placed into service, and continue through the service term. Unless earlier terminated under the terms and conditions of the DISH Nimiq 5 Agreement, the service term will expire 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 receive service from us on a replacement satellite. There can be no assurance that any options to renew the DISH Nimiq 5 Agreement will be exercised or that DISH Network will exercise its option to receive service on a replacement satellite.

~~QuetzSat-1 Agreement~~. In November 2008, we entered into a ten-year satellite service agreement with SES Latin America, which provides, among other things, for the provision by SES Latin America to us of service on 32 DBS transponders on the QuetzSat-1 satellite. Concurrently, in 2008, we entered into a transponder service agreement with DISH Network, pursuant to which DISH Network receives satellite services on 24 of the DBS transponders on the QuetzSat-1 satellite. The QuetzSat-1 satellite was launched in September 2011 and was placed into service in November 2011 at the 67.1 degree west longitude orbital location. In February 2013, we and DISH Network entered into an agreement pursuant to which we receive certain satellite services from DISH Network on five DBS transponders on the QuetzSat-1 satellite. In January 2013, the QuetzSat-1 satellite was moved to the 77 degree west longitude orbital location and DISH Network commenced commercial operations at such location in February 2013.

Under the terms of our contractual arrangements with DISH Network, we began to provide service to DISH Network on the QuetzSat-1 satellite in February 2013 and will continue to provide service through the remainder of the service term. Unless extended or earlier terminated under the terms and conditions of our agreement with DISH Network for the QuetzSat-1 satellite, the initial service term will expire in November 2021. Upon expiration of the initial service term, DISH Network has the option to renew the agreement for the QuetzSat-1 satellite on a year-to-year basis through the end of life of the QuetzSat-1 satellite. Upon an in-orbit failure or end of life of the QuetzSat-1 satellite, and in certain other circumstances, DISH Network has certain rights to receive service from us on a replacement satellite. There can be no assurance that any options to renew this agreement will be exercised or that DISH Network will exercise its option to receive service on a replacement satellite.

103 Degree Orbital Location/~~SES-3.~~ SES-3. In May 2012, we entered into a spectrum development agreement (the “103 Spectrum Development Agreement”) with Ciel Satellite Holdings Inc. (“Ciel”) to develop certain spectrum rights at the 103 degree west longitude orbital location (the “103 Spectrum Rights”). In June 2013, we and DISH Network entered into a spectrum development agreement (the “DISH 103 Spectrum Development Agreement”) pursuant to which DISH Network may use and develop the 103 Spectrum Rights. ~~Unless earlier terminated under the terms and conditions~~Effective in March 2018, DISH Network

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

exercised its right to terminate the DISH 103 Spectrum Development Agreement ~~the term generally will continue for the duration of~~and we exercised our right to terminate the 103 Spectrum ~~Rights.~~Development Agreement.

In connection with the 103 Spectrum Development Agreement, in May 2012, we also entered into a ten-year ~~service~~ agreement with Ciel pursuant to which we ~~receive~~leased certain satellite ~~services~~capacity from Ciel on the SES-3 satellite at the 103 degree west longitude orbital ~~location.~~location (the “Ciel 103 Agreement”). In June 2013, we and DISH Network entered into an agreement pursuant to which DISH Network ~~receives~~leased certain satellite ~~services~~capacity from us on the SES-3 satellite (the “DISH 103 ~~Service~~ Agreement”). Under the terms of the DISH 103 ~~Service~~ Agreement, DISH Network ~~makes~~made certain monthly payments to us through the service term. ~~Unless earlier terminated under the terms and conditions of~~Effective in March 2018, DISH Network exercised its right to terminate the DISH 103 ~~Service~~ Agreement and we exercised our right to terminate the initial service term will expire on the earlier of: (i) the date the SES-3 satellite fails; (ii) the date the transponder(s) on which service was being provided under the agreement fails; or (iii) June 2023. Upon in-orbit failure or end of life of the SES-3 satellite, and in certain other circumstances, DISH Network has certain rights to receive service from us on a replacement satellite. There can be no assurance that DISH Network will exercise its option to receive service on a replacement satellite.Ciel 103 Agreement.

~~Table of Contents~~

~~ECHOSTAR CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

~~TT&C~~Telesat Obligation Agreement. ~~Effective January 2012,~~In September 2009, we entered into ~~a telemetry, tracking and control~~an agreement with Telesat Canada to lease satellite capacity from Telesat Canada on all 32 direct broadcast satellite (“~~TT&C”~~DBS”) ~~agreement pursuant to which we provide TT&C services~~transponders on the Nimiq 5 satellite at the 72.7 degree west longitude orbital location (the “Telesat Transponder Agreement”). We transferred the Telesat Transponder Agreement to DISH Network ~~for a period ending in December 2016 (the “2012 TT&C Agreement”).~~as part of the BSS Transaction; however, we retained certain obligations related to DISH Network’s performance under that agreement. In ~~November 2016,~~September 2019, we and DISH Network ~~amended the 2012 TT&C Agreement to extend the term for one year through December 2017. The 2012 TT&C Agreement replaced the TT&C agreement we~~ entered into ~~with~~an agreement whereby DISH Network ~~in connection with the Spin-off. The fees~~compensates us for services provided under the 2012 TT&C Agreement are calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which will vary depending on the nature of the services provided. DISH Network is able to terminate the 2012 TT&C Agreement for any reason upon 60 days’ notice.retaining such obligations.

In connection with the Satellite and Tracking Stock Transaction, in February 2014, we amended the TT&C Agreement to cease the provision of TT&C services to DISH Network for the EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV satellites. Effective March 2014, we provide TT&C services for the D-1 and EchoStar XV satellites; however, for the period that we received satellite services on the EchoStar XV satellite from DISH Network, we waived the fees for the TT&C services on the EchoStar XV satellite. Effective August 2016, we provide TT&C services to DISH Network for the EchoStar XVIII satellite.

Real Estate Leases to DISH Network. We have entered into lease agreements pursuant to which DISH Network leases certain real estate from us. The rent on a per square foot basis for each of the leases is comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease, and DISH Network is responsible for its portion of the taxes, insurance, utilities and maintenance of the premises. The term of each of the leases is set forth below:

100 Inverness Lease Agreement. ~~In connection with the Share Exchange, effective~~Effective March 2017, DISH Network ~~leases from us~~is licensed to use certain of our space at 100 Inverness ~~Circle~~Terrace East, Englewood, Colorado for a period ending in December 2020. This agreement may be terminated by either party upon 180 days’ prior notice. This agreement may be extended by mutual consent, in which case this agreement will be converted to a month-to-month lease agreement. Upon extension, either party has the right to terminate this agreement upon 30 days’ notice. In connection with the BSS Transaction, we transferred to DISH Network the Englewood Satellite Operations Center located at 100 Inverness Terrace East, including any equipment, hardware licenses, software, processes, software licenses, furniture and technical documentation associated with the satellites transferred in the BSS Transaction.

~~90 Inverness Lease Agreement. The lease for certain space at 90 Inverness Circle East, Englewood, Colorado was for a period ending in December 2016. In February 2016, DISH Network terminated this lease effective in August 2016.~~

Meridian Lease Agreement. The lease for all of 9601 S. Meridian Blvd., Englewood, Colorado was for a period ending in December 2016. ~~Effective December 2016, we~~We and DISH Network have amended this lease over time to, among other things, extend the term ~~for one year~~ through December ~~2017. This~~2019. After December 2019, this agreement may be ~~extended~~converted by mutual consent ~~in which case this agreement will be converted~~ to a month-to-month lease ~~agreement. Upon extension,~~agreement with either party ~~has~~having the right to terminate ~~this agreement~~ upon 30 days’ notice.

~~Santa Fe Lease Agreement~~. The lease for all of 5701 S. Santa Fe Dr., Littleton, Colorado was for a period ending in December 2016. Effective December 2016, we and DISH Network amended this lease to, among other things, extend the term for one year through December 2017. This agreement may be extended by mutual consent, in which case this agreement will be converted to a month-to-month lease agreement. Upon extension, either party has the right to terminate this agreement upon 30 days’ notice.

~~Atlanta Sublease Agreement. The sublease for certain space at 211 Perimeter Center, Atlanta, Georgia terminated in October 2016.~~

~~Gilbert Lease Agreement~~. The lease for certain space at 801 N. DISH Drive, Gilbert, Arizona was for a period ending July 2016. Effective November 2016, we and DISH Network amended this lease to extend the term for one year through July 2017. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~Cheyenne Lease Agreement~~. Prior to the Share Exchange, we leased to DISH Network certain space at 530 EchoStar Drive, Cheyenne, Wyoming. In connection with the Share Exchange, we transferred ownership of a portion of this property to DISH Network and we and DISH Network amended this 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 we retained for a period ending in December 2031. This agreement may be extended by mutual consent, in which case this agreement will be converted to

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~~a month-to-month lease agreement. Upon extension, either party has the right to terminate this agreement upon 30 days’ notice.~~

~~Product Support Agreement~~. In connection with the Spin-off, one of our subsidiaries entered into a product support agreement pursuant to which DISH Network had the right, but not the obligation, to receive product support from us (including certain engineering and technical support services) for all set-top boxes and related accessories that we had previously sold to DISH Network. The fees for the services provided under the product support agreement were calculated at cost plus a fixed margin, which varied depending on the nature of the services provided. The term of the product support agreement was the economic life of such set-top boxes and related accessories, unless terminated earlier. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~DISHOnline.com Services Agreement~~. Effective January 2010, DISH Network entered into a two-year agreement with one of our subsidiaries pursuant to which DISH Network received certain services associated with an online video portal. The fees for the services provided under this services agreement depended, among other things, upon the cost to develop and operate such services. In November 2016, one of our subsidiaries and DISH Network amended this agreement to, among other things, extend the term for one year through December 2017. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~DISH Remote Access Services Agreement~~. Effective February 2010, one of our subsidiaries entered into an agreement with DISH Network pursuant to which DISH Network received, among other things, certain remote digital video recorder (“DVR”) management services. The fees for the services provided under this services agreement depended, among other things, upon the cost to develop and operate such services. This agreement automatically renewed in February 2017 for an additional one-year period until February 2018. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~SlingService Services Agreement~~. Effective February 2010, one of our subsidiaries entered into an agreement with DISH Network pursuant to which DISH Network received certain services related to placeshifting. The fees for the services provided under this services agreement depended, among other things, upon the cost to develop and operate such services. This agreement automatically renewed in February 2017 for an additional one-year period until February 2018. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

TerreStar Agreement. In March 2012, DISH Network completed its acquisition of substantially all the assets of TerreStar Networks Inc. (“TerreStar”). Prior to DISH Network’s acquisition of substantially all the assets of TerreStar and our completion of the acquisition of Hughes ~~Acquisition,~~Communications, Inc. and its subsidiaries (the “Hughes Acquisition”), TerreStar and HNS entered into various agreements pursuant to which ~~our Hughes segment provides,~~we provide, among other things, warranty, operations and maintenance and hosting services for TerreStar’s ground-based communications equipment. ~~TerreStar~~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 ~~one of~~ our products on a month-to-month ~~basis. The provision of warranty services for our other product will continue until March 2018 and will automatically renew in March 2018 for an additional~~ ~~one-year period,~~basis unless terminated by ~~TerreStar~~DISH Network upon at least 6021 days’ written notice to ~~us prior~~us. DISH Network generally has the right to ~~the end of the term. The provision of~~continue to receive operations and maintenance services ~~will continue until April 2018~~from us on a quarter-to-quarter basis unless operations and ~~will automatically renew in April 2018 for an additional one-year period, unless~~maintenance services are terminated by ~~TerreStar or us~~DISH Network upon at least 90 days’ written notice ~~prior~~ to ~~the end of the term.~~us. The provision of hosting services will continue until May ~~2022 and will not renew beyond May 2022 unless the parties enter into a new agreement or amend the existing agreement.~~2022. In addition, ~~TerreStar~~DISH Network generally may terminate ~~such~~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

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~~Hughes Broadband Distribution Agreement~~. Effective October 2012, HNS and dishNET Satellite Broadband L.L.C. (“dishNET”), a wholly-owned subsidiary of DISH, entered into a distribution agreement (the “Distribution Agreement”) pursuant to which dishNET has the right, but not the obligation, to market, sell and distribute the Hughes satellite internet service (the “Hughes service”). dishNET pays HNS a monthly per subscriber wholesale service fee for the Hughes service based upon a subscriber’s service level, and based upon certain volume subscription thresholds. The Distribution Agreement also provides that ~~dishNET~~DISH Network has the right, but not the obligation, to purchase certain broadband equipment from us to support the sale of the ~~Hughes~~HughesNet service. The Distribution Agreement had an initial term of five years with automatic renewal for successive ~~one year~~one-year terms unless terminated by either party with a written notice at least 180 days before the expiration of the then-current term. In February 2014, ~~HNS~~we and ~~dishNET~~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, ~~the parties~~we and DISH Network will continue to provide ~~the Hughes~~our HughesNet service to the then-current ~~dishNET~~DISH Network subscribers pursuant to the terms and conditions of the Distribution Agreement.

~~Set-Top Box Application Development Agreement.~~ In November 2012, one of our subsidiaries and DISH Network entered into a set-top box application development agreement (the “Application Development Agreement”) pursuant to which we provided DISH Network with certain services relating to the development of web-based applications for set-top boxes. The fees for services provided under the Application Development Agreement were calculated at our cost of providing the relevant service plus a fixed margin, which depended on the nature of the services provided. The Application Development Agreement automatically renewed in February 2017 for a one-year period ending in February 2018. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~XiP Encryption Agreement~~. In July 2012, we entered into an encryption agreement with DISH Network for our whole-home HD DVR line of set-top boxes (the “XiP Encryption Agreement”) pursuant to which we provided certain security measures on our whole-home HD DVR line of set-top boxes to encrypt the content delivered to the set-top box via a smart card and secure the content between set-top boxes. The XiP Encryption Agreement’s term ended on the same day as the 2012 Receiver Agreement and therefore was automatically extended through December 2017 when we and DISH Network extended the 2012 Receiver Agreement. The fees for the services provided under the XiP Encryption Agreement were calculated on a monthly basis based on the number of receivers utilizing such security measures each month. Effective March 2017 in connection with the Share Exchange, we and DISH Network terminated the XiP Encryption Agreement and EchoStar has no further obligations and will earn no additional revenue under these agreements after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

DBSD North America Agreement. In March 2012, DISH Network completed its acquisition of ~~100%~~ all of the equity of reorganized DBSD North America, Inc. (“DBSD North America”). Prior to DISH Network’s acquisition of DBSD North America and our completion of the Hughes Acquisition, DBSD North America and HNS entered into various agreements pursuant to which ~~our Hughes segment provides,~~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 ~~generally~~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 ~~February 2019. The provision of operations and maintenance services will continue until April 2018 and will automatically renew in April 2018 for an additional one-year period,~~December 2023, unless terminated by DBSD North America upon at least ~~120~~21 days’ written notice to ~~us prior to the end of the term.~~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 prior to the end of the term.~~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.

~~Sling TV Holding L.L.C. (“Sling TV Holding”).~~ Hughes Equipment and Services Agreement.~~Effective July 2012,~~ In February 2019, we and DISH Network formed Sling TV Holding, which was owned two-thirds by DISH Network and one-third by us. Sling TV Holding was formed to develop and commercialize certain advanced technologies. At that time, we, DISH Network and Sling TV Holding entered into ~~the following agreements with respect to Sling TV Holding: (i) a contribution~~an agreement pursuant to which we and DISH Network contributed certain assets in exchange for our respective ownership interests in Sling TV Holding; (ii) a limited liability company operating agreement (“Operating Agreement”), which provided for the governance of Sling TV Holding; and (iii) a commercial agreement (“Commercial Agreement”) pursuant to which, among other things, Sling TV Holding had: (a) certain rights and corresponding obligations with respect to its business; and (b) the right, but not the obligation, to receive certain services from

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us and DISH Network, respectively. Additionally, the spouse of Mr. Vivek Khemka, who was the President - EchoStar Technologies L.L.C. during portions of 2016 and through February 2017, was employed during 2016 as Vice President of Business Development and Operations of Sling TV Holding.

Effective August 2014, we and Sling TV Holding entered into an exchange agreement (“Exchange Agreement”) pursuant to which, among other things, Sling TV Holding distributed certain assets to us and we reduced our interest in Sling TV Holding to a 10.0% non-voting interest. As a result, DISH Network had a 90.0% equity interest and a 100% voting interest in Sling TV Holding. In addition, we, DISH Network and Sling TV Holding amended and restated the Operating Agreement, primarily to reflect the changes implemented by the Exchange Agreement. Finally, we, DISH Network and Sling TV Holding amended and restated the Commercial Agreement, pursuant to which, among other things, Sling TV Holding: (1) had certain rights and corresponding obligations with respect to its business; (2) had the right, but not the obligation, to receive certain services from us and DISH Network; and (3) had a license from us to use certain of the assets distributed to us as part of the Exchange Agreement. Effective March 2017 following the consummation of the Share Exchange, we no longer hold our investment in Sling TV Holding. Effective March 2017 in connection with the Share Exchange, we and DISH Network terminated the Exchange Agreement and the Commercial Agreement and EchoStar has no further obligations and will earn no additional revenue under these agreements after February 2017. Historical transactions under these agreements are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~Cost of sales — equipment and services and other — DISH Network~~

~~Remanufactured Receiver and Services Agreement~~. In connection with the Spin-off, one of our subsidiaries entered into a remanufactured receiver and services agreement with DISH Network pursuant to which we had the right, but not the obligation, to purchase remanufactured receivers and related components from DISH Network at cost plus a fixed margin, which varied depending on the nature of the equipment purchased. In November 2016, one of our subsidiaries and DISH Network amended this agreement to extend its term for one year through December 2017. This agreement was transferredsell to DISH Network ~~as part~~our HughesNet Service and HughesNet equipment that has been modified to meet DISH Network’s internet-of-things specifications for the transfer of ~~the Share Exchange and EchoStar~~data to DISH Network’s network operations centers. This agreement has ~~no further obligations and will incur no additional expenses under this agreement after~~an initial term of five years expiring February ~~2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).~~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~~Administrative Expenses — DISH Network

Amended and Restated Professional Services Agreement. In connection with the Spin-off, we entered into various agreements with DISH Network including ~~the Transition Services Agreement, Satellite Procurement Agreement~~a transition services agreement, satellite procurement agreement and ~~Services Agreement,~~services agreement, which all expired in January 2010 and were replaced by a ~~Professional~~professional services agreement (the “Professional Services ~~Agreement.~~Agreement”). In January 2010, we and DISH Network agreed that we ~~shall~~ continue to have the right, but not the obligation, to receive the following services from DISH Network, among others, certain of which were previously provided under ~~the Transition Services Agreement:~~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. Mr. Vivek Khemka, who ~~remained~~was then employed as DISH Network’s Executive Vice President and Chief Technology Officer, provided services to us during portions of 2016 and through February 2017 pursuant to the Professional Services Agreement as President -- EchoStar Technologies L.L.C. Additionally, we and DISH Network agreed that DISH Network would continue to have the right, but not the obligation, to engage us to manage the process of procuring new satellite capacity for DISH Network (previously provided under ~~the Satellite Procurement Agreement)~~a satellite procurement agreement), receive logistics, procurement and quality assurance services from us (previously provided under ~~the Services Agreement)~~a services agreement) and provide other support services. In connection with the consummation of the Share Exchange, we and DISH amended and restated the Professional Services Agreement (the “Amended and Restated Professional Services Agreement”) to provide that we and DISH Network shall have the right to receive additional services that either we 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 (collectively, the “TT&C Antennas”). In September 2019, in connection with the BSS Transaction, we amended the Amended and Restated Professional Services Agreement to provide that we and DISH Network shall have the right to receive additional services that either we or DISH Network may require as a result of the ~~Share Exchange.~~BSS Transaction and to remove our access to and the maintenance and support services for the TT&C Antennas. The term of the Amended and Restated Professional ~~Services~~S

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ervices Agreement is through January ~~2019~~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~~We or DISH Network 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.~~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.

Real Estate Leases from DISH Network. We have entered into lease agreements pursuant to which we lease certain real estate from DISH Network. The rent on a per square foot basis is comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the leases, and for certain properties, we are responsible for our portion of the taxes, insurance, utilities and maintenance of the premises.

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~~El Paso Lease Agreement~~. The lease for certain space at 1285 Joe Battle Blvd., El Paso, Texas, was for an initial period ending in August 2015, and provided us with renewal options for four consecutive three-year terms. Effective August 2015, we exercised our first renewal option for a period ending in August 2018.

~~90 Inverness Lease Agreement~~. In connection with the Share Exchange, effective March 2017 we lease from DISH Network certain space at 90 Inverness Circle East in Englewood, Colorado for a period ending in December 2022. EchoStar has the option to renew this lease for four three-year periods.

Cheyenne Lease ~~Agreement~~Agreement.~~. In connection with the Share Exchange, effective~~ Effective March 2017, we lease from DISH Network certain space at 530 EchoStar Drive in Cheyenne, Wyoming for a period ending in ~~March~~February 2019. ~~EchoStar has the~~In August 2018, we exercised our option to renew this lease for ~~thirteen one-year periods.~~

~~Gilbert Lease Agreement~~.a one year period ending in February 2020. In connection with the ~~Share Exchange, effective March 2017~~BSS Transaction, we ~~lease from~~transferred the Cheyenne Satellite Operations Center, including any equipment, software licenses, and furniture located within, to DISH Network and amended this lease to provide us with certain space ~~at 801 N. DISH Dr. in Gilbert, Arizona~~for the Cheyenne Satellite Access Center for a period ending in ~~March 2019. EchoStar has~~September 2021, with the option for us to renew ~~this lease~~ for ~~thirteen one-year periods.~~a one year period upon 180 days’ written notice prior to the end of the term.

American Fork Occupancy License Agreement. ~~In connection with the Share Exchange, effective~~Effective March 2017, we ~~sublease~~subleased from DISH Network certain space at 796 East Utah Valley Drive in American Fork, Utah for a period ending in August 2017. We ~~have~~ 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.

Share Exchange Employee Matters Agreement. Effective March 2017, in connection with the Share Exchange, we and DISH Network entered into an ~~Employee Matters Agreement~~employee matters agreement that ~~addresses~~addressed the transfer of employees from ~~EchoStar~~us to DISH Network, including certain benefit and compensation matters and the allocation of responsibility for employee related liabilities relating to current and past employees of the transferred businesses. DISH Network assumed employee-related liabilities relating to the transferred businesses as part of the Share Exchange, except that we are responsible for certain existing employee related litigation as well as certain pre-Share Exchange compensation and benefits for employees transferring to DISH Network in connection with the Share Exchange.

BSS Transaction Employee Matters Agreement. Effective September 2019, in connection with the BSS Transaction , we and DISH Network entered into an employee matters agreement that addressed the transfer of employees from us to DISH Network, including certain benefit and compensation matters and the allocation of responsibility for employee related liabilities relating to current and past employees of the BSS Business. DISH Network assumed employee-related liabilities relating to the BSS Business as part of the BSS Transaction, except that we are responsible for certain pre-BSS Transaction compensation and benefits for employees transferring to DISH Network in connection with the BSS Transaction.

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 ~~will provide~~provides collocation and antenna space to EchoStar through ~~March~~February 2022 at the following locations: Cheyenne, Wyoming; Gilbert, Arizona; New Braunfels, Texas; Monee, Illinois; Spokane, Washington; and Englewood, Colorado. In October 2019, we provided a termination notice for our New Braunfels, Texas agreement to be effective May 2020. In August 2017, we and DISH Network also entered into certain other agreements pursuant to which DISH Network ~~will provide~~provides additional collocation and antenna space to EchoStar in Monee, Illinois and Spokane, Washington through August 2022. ~~EchoStar~~We generally may renew ~~each of these~~our collocation and antenna space agreements for ~~four~~ 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. ~~EchoStar~~We may terminate certain of these agreements with 180 days’ prior written notice. In September 2019, in connection with the BSS Transaction, we entered into an agreement pursuant to which DISH Network provides us with certain additional collocation space in Cheyenne,

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Wyoming for a period ending in September 2020, with the option for us to renew for a one-year period, with prior written notice no more than 120 days but no less than 90 days prior to the end of the term. The fees for the services provided under these agreements depend on the number of racks leased at the location.

Also in connection with the BSS Transaction, in September 2019, we entered into an agreement pursuant to which DISH Network will provide us with antenna space and power in Cheyenne, Wyoming for a period of five years commencing no later than October 2020, with 4 three-year renewal terms, with prior written notice no more than 120 days but no less than 90 days prior to the end of the then-current term.

Other ~~agreements~~Agreements — DISH Network

Master Transaction Agreement. In May 2019, we and BSS Corp. entered into the Master Transaction Agreement with DISH and Merger Sub with respect to the BSS Transaction. Pursuant to the terms of the Master Transaction Agreement, on September 10, 2019: (i) we transferred the BSS Business to BSS Corp.; (ii) we completed the Distribution; and (iii) immediately after the Distribution, (1) BSS Corp. became a wholly-owned subsidiary of DISH such that DISH owns and operates the BSS Business and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Common Stock. Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. The Master Transaction Agreement contained customary representations and warranties by us and DISH Network, including our 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. We 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 entered into agreements with DISH Network to implement a transaction pursuant to which, among other things: (i) in March 2014, EchoStar and ~~HSS~~our subsidiary, Hughes Satellite Systems Corporation (“HSS”), issued ~~shares of~~ the Tracking Stock to DISH Network in exchange for ~~five~~5 satellites owned by DISH Network (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV) (including assumption of related in-orbit incentive obligations) and ~~approximately~~ $11.4 million in cash; and (ii) in March 2014, DISH Network began receiving certain satellite services from us as discussed above on these ~~five~~5 satellites ~~from us~~ (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. ~~See Note 3 for further information.~~

Share Exchange Agreement. On January 31, 2017, ~~EchoStar Corporation~~we and certain of ~~its~~our subsidiaries entered into ~~the Share~~a share exchange agreement (the “Share Exchange ~~Agreement~~Agreement”) with DISH and certain of its subsidiaries, pursuant to which, on February 28, 2017, ~~EchoStar Corporation and its subsidiaries~~we 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 our EchoStar Technologies businesses and certain other assets. Following consummation of the Share Exchange, ~~on February 28, 2017, EchoStar~~we no longer ~~operates~~operate 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

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Agreement, ~~EchoStar~~we 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 ~~contains~~contained customary representations and warranties by the parties, including representations by ~~EchoStar~~us related to the transferred assets, assumed liabilities and the financial condition of the transferred businesses. ~~EchoStar~~We and DISH Network ~~have~~ 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 itus or DISH causes the transaction to be taxable to the other party after closing. See Note 31 for further information.

Hughes Broadband Master Services Agreement. In March 2017, ~~HNS~~we and DISH Network ~~L.L.C. (“DNLLC”), a wholly-owned subsidiary of DISH,~~ entered into a master service agreement (the ~~“MSA”~~“Hughes Broadband MSA”) pursuant to which ~~DNLLC,~~DISH Network, among other things: (i) has the right, but not the obligation, to market, promote and solicit orders and upgrades for ~~the Hughes~~our HughesNet service and related equipment and other telecommunication services and (ii) installs ~~Hughes~~HughesNet service equipment with respect to activations generated by ~~DNLLC.~~DISH Network. Under the Hughes Broadband MSA, ~~HNS~~we and ~~DNLLC will~~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. ~~After the first anniversary, either~~Either party

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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, ~~HNS~~we will continue to provide ~~the Hughes~~our HughesNet service to subscribers and make certain payments to ~~DNLLC~~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 $3.7 million and $6.4 million for the three months ended September 30, 2019 and 2018, respectively, and $13.2 million and $26.3 million for the nine months ended September 30, 2019 and 2018, respectively.

~~Intellectual Property Matters Agreement~~. We entered into an Intellectual Property Matters Agreement with DISH Network in connection with the Spin-off. The Intellectual Property Matters Agreement governed our relationship with DISH Network with respect to patents, trademarks and other intellectual property. Pursuant to the Intellectual Property Matters Agreement, DISH Network irrevocably assigned to us all right, title and interest in certain patents, trademarks and other intellectual property necessary for the operation of our set-top box business. In addition, the agreement permitted us to use, in the operation of our set-top box business, certain other intellectual property currently owned or licensed by DISH Network. In addition, DISH Network was prohibited from using the “EchoStar” name as a trademark, except in certain limited circumstances. Similarly, the Intellectual Property Matters Agreement provided that we would not make any use of the name or trademark “DISH Network” or any other trademark owned by DISH Network, except in certain circumstances. Effective March 2017 in connection with the Share Exchange ~~we and DISH Network terminated this agreement and EchoStar has no further obligations and will earn no additional revenue nor incur additional expenses under this agreement after February 2017.~~

Intellectual Property and Technology License Agreement. Effective March 2017, in connection with the Share Exchange, we and DISH Network entered into an ~~Intellectual Property~~intellectual property and ~~Technology License Agreement~~technology license agreement (“IPTLA”) pursuant to which we and DISH ~~and their respective subsidiaries~~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 granted to DISH Network a license to our 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, among other things, for the continued use of all intellectual property and technology that is used in our retained businesses but the ownership of which was transferred to DISH Network pursuant to the Share Exchange.

BSS Transaction Intellectual Property and Technology License Agreement. Effective September 2019, in connection with the BSS Transaction, we and DISH Network entered into an intellectual property and technology license agreement (the “BSS IPTLA”) pursuant to which we and DISH Network license to each other certain intellectual property and technology. The BSS IPTLA will continue in perpetuity, unless mutually terminated by the parties. Pursuant to the BSS IPTLA, we granted to DISH Network a license to our intellectual property and technology for use by DISH Network, among other things, in connection with its continued operation of the BSS Business acquired pursuant to the BSS Transaction, including a limited license to use the “ESS” and “ECHOSTAR SATELLITE SERVICES” trademarks during a transition period. EchoStar retains full ownership of the “ESS” and “ECHOSTAR SATELLITE SERVICES” trademarks. In addition, DISH Network granted a license back to us, among other things, for the continued use of all intellectual property and technology that is used in our retained businesses but the ownership of which was transferred to DISH Network pursuant to the BSS Transaction.

TT&C Agreement. In September 2019, in connection with the BSS Transaction, we entered into an agreement pursuant to which DISH Network provides TT&C services to us for a period ending in September 2021, with the option for us to renew for a one-year period upon written notice at least 90 days prior to the initial expiration (the “TT&C Agreement”). 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. Either party is able to terminate the TT&C Agreement for any reason upon 12 months’ notice.

Share Exchange Tax Matters Agreement. Effective March 2017, in connection with the Share Exchange, we and DISH entered into a tax matters agreement. This agreement governs certain of our rights, responsibilities and obligations with respect to taxes of the transferred businesses pursuant to the Share Exchange. Generally, we are 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 we and DISH Network made certain tax-related representations and are subject to various tax-related covenants after the consummation of the Share Exchange. Both we 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 us 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.

BSS Transaction Tax Matters Agreement. Effective September 2019, in connection with the BSS Transaction, we, BSS Corp. and DISH entered into a tax matters agreement. This agreement governs certain of our rights, responsibilities and obligations with respect to taxes of the BSS Business transferred pursuant to the BSS Transaction. Generally, we are responsible for all tax returns and tax liabilities for the BSS Business for periods prior to the BSS Transaction and DISH is responsible for all tax returns and tax liabilities for the BSS Business from and after the BSS Transaction.

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Both we and DISH made certain tax-related representations and are subject to various tax-related covenants after the consummation of the BSS Transaction. Both we and DISH Network have agreed to indemnify each other for certain losses if there is a breach of any the tax representations or violation of any of the tax covenants in the tax matters agreement and that breach or violation results in the failure of the BSS Transaction being treated as a transaction that is tax-free for EchoStar or its stockholders for U.S. federal income tax purposes. In addition, DISH Network has agreed to indemnify us if the BSS Business is acquired, either directly or indirectly (e.g., via an acquisition of DISH Network), by one or more persons, where either it took an action, or knowingly facilitated, consented to or assisted with an action by its stockholders, that resulted in the failure of the BSS Transaction being treated as a transaction that is tax-free for EchoStar and its stockholders for U.S. federal income tax purposes. The tax matters agreement supplements the Share Exchange Tax Matters Agreement outlined above and the Tax Sharing Agreement outlined below, which continue in full force and effect.

Tax Sharing Agreement. Effective December 2007, we and DISH Network entered into a tax sharing agreement (the “Tax Sharing Agreement”) in connection with the Spin-off. This agreement governs our and DISH Network’s 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 us for such taxes. However, DISH Network is not liable for and does not indemnify us for any taxes that are incurred as a result of the Spin-off or certain related transactions failing to qualify as tax-free distributions pursuant to any provision of Section 355 or Section 361 of the Internal Revenue Code ~~of 1986, as amended,~~(the “Code”), because of: (i) a direct or indirect acquisition of any of our stock, stock options or assets; (ii) any action that we take or fail to take; or (iii) any action that we take that is inconsistent with the information and representations furnished to the IRS in connection with the request for the private letter ruling, or to counsel in connection with any opinion being delivered by counsel with respect to the Spin-off or certain related transactions. In such case, we will be solely liable for, and will indemnify DISH Network for, any resulting taxes, as well as any losses, claims and expenses. The Tax Sharing Agreement will 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.

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In light of the Tax Sharing Agreement, among other things, and in connection with our consolidated federal income tax returns for certain tax years prior to and for the year of the Spin-off, in September 2013, we and DISH Network agreed upon a supplemental allocation of the tax benefits arising from certain tax items resolved in the course of the IRS’s examination of our consolidated tax returns. Prior to the agreement with DISH Network in 2013, the federal tax benefits were reflected as a deferred tax asset for depreciation and amortization, which was netted in our noncurrent deferred tax liabilities. The agreement with DISH Network in 2013 requires DISH Network to pay us the federal tax benefit it receives at such time as we would have otherwise been able to realize such tax benefit. We recorded a noncurrent receivable from DISH Network in ~~“Other receivable —~~Other receivables - DISH ~~Network”~~ Networkand a corresponding increase in our ~~net noncurrent deferred~~Deferred tax liabilities, net to reflect the effects of this agreement in September 2013. In addition, in September 2013, we and DISH Network agreed upon a tax sharing arrangement for filing certain combined state income tax returns and a method of allocating the respective tax liabilities between us and DISH Network for such combined returns, through the taxable period ending on December 31, 2017 (the “State Tax Arrangement”).

In August 2018, we and DISH Network amended the Tax Sharing Agreement and the 2013 agreements (the “Tax Sharing Amendment”). Under the Tax Sharing Amendment, to the extent permitted by applicable tax law, DISH Network is entitled to apply the benefit of our 2009 net operating losses (the “SATS 2009 NOLs”) to DISH Network’s federal tax return for the year ended December 31, 2008, in exchange for DISH Network paying us over time the value of the net annual federal income taxes paid by us that would have been otherwise offset by the SATS 2009 NOLs. The Tax Sharing Amendment also requires us and DISH Network to pay the other for the benefits of certain past and future federal research and development tax credits that we or DISH Network receive or received as a result of being part of a controlled group under the Code, and requires DISH Network to compensate us for certain past tax losses utilized by DISH Network and for certain past and future excess California research and development tax credits generated by us and used by DISH Network. In addition, the Tax Sharing Amendment extends the term of the State Tax Arrangement to the earlier to occur of termination of the Tax Sharing Agreement, a change in control of either us or DISH Network or, for any particular state, if we and DISH Network no longer file a combined tax return for such state.

We and DISH Network file combined income tax returns in certain states. ~~In 2016, we~~We have earned and recognized a tax ~~benefit~~benefits for certain state income tax credits that we would be unable to utilize currently if we had filed separately from DISH Network. DISH Network expects to utilize these tax credits to reduce its state income tax payable. We expect to increase additional paid-in capital upon receipt of any consideration paid to us by DISH Network in exchange for these tax credits.

~~Tax Matters Agreement~~. Effective March 2017, in connection with the Share Exchange, we and DISH entered into a tax matters agreement. This agreement governs certain of our rights, responsibilities and obligations with respect to taxes of the transferred businesses pursuant to the Share Exchange. Generally, we are 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 we and DISH Network have made certain tax-related representations and are subject to various tax-related covenants after the consummation of the Share Exchange. Both we 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 us 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 above, which continues in full force and effect.

~~TiVo~~. In April 2011, we and DISH Network entered into a settlement agreement with TiVo, Inc. (“TiVo”). The settlement resolved all pending litigation between us and DISH Network, on the one hand, and TiVo, on the other hand, including litigation relating to alleged patent infringement involving certain DISH Network DVRs. Under the settlement agreement, all pending litigation was dismissed with prejudice and all injunctions that permanently restrain, enjoin or compel any action by us or DISH Network were dissolved. We and DISH Network were jointly responsible for making payments to TiVo in the aggregate amount of $500.0 million, including an initial payment of $300.0 million and the remaining $200.0 million in six equal annual installments between 2012 and 2017. Pursuant to the terms and conditions of the agreements entered into in connection with the Spin-off, DISH Network made the initial payment to TiVo in May 2011, except for the contribution from us totaling approximately $10.0 million, representing an allocation of liability relating to our sales of DVR-enabled receivers to an international customer. Subsequent payments were allocated between us and DISH Network based on historical sales of certain licensed products, with EchoStar being responsible for 5% of each annual payment. Effective March 2017, in connection with the Share Exchange, EchoStar has no further obligations and will incur no additional costs under this settlement agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

~~Sling Trademark License Agreement~~. In December 2014, Sling TV Holding entered into an agreement with Sling Media, Inc., our subsidiary, pursuant to which Sling TV Holding had the right, for a fixed fee, to use certain trademarks, domain names and other intellectual property related to the “Sling” trademark. In December 2016, Sling TV Holding and Sling Media, Inc. amended this agreement to extend the term thereof on a month-to-month basis. This agreement was transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will earn no additional revenue under this agreement after February 2017. Historical transactions under this agreement are reported in “Net income (loss) from discontinued operations” in our condensed consolidated statements of operations (see Note 3).

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~~gTLD Bidding Agreement~~Network. We have charged ~~. In April 2015, we and~~Additional paid-in capital in prior periods when DISH Network ~~entered into a gTLD Bidding Agreement whereby, among other things: (i)~~has utilized such tax benefits. We expect to increase Additional paid-in capital upon receipt of any consideration that DISH Network ~~obtained rights from~~pays to us ~~to participate~~ in ~~a generic top level domain (“gTLD”) auction, assuming all rights and obligations from us related to our application with the Internet Corporation~~exchange for Assigned Names and Numbers (“ICANN”) for a particular gTLD; (ii) DISH Network agreed to reimburse us for our ICANN application fee and certain out-of-pocket expenses related to the application and the auction; and (iii) we and DISH Network agreed to split equally the net proceeds obtained by DISH Network as the losing bidder in the auction, less such fee reimbursement and out-of-pocket expenses.these tax credits.

Patent Cross-License Agreements. In December 2011, we and DISH Network entered into separate patent cross-license agreements with the same third party whereby: (i) we and such third party licensed our respective patents to each other subject to certain conditions; and (ii) DISH Network and such third party licensed their respective patents to each other subject to certain conditions (each, a “Cross-License Agreement”). Each Cross-License Agreement covers patents acquired by the respective party prior to January 2017 and aggregate payments under both Cross-License Agreements ~~total~~were less than $10.0 million. Each Cross-License Agreement contained an option to extend each Cross-License Agreement to include patents acquired by the respective party prior to January 2022. In December 2016, both we and DISH Network exercised our respective renewal options, resulting in aggregate additional payments to such third party totaling less than $3.0 million. Since the aggregate payments under both Cross-License Agreements were based on the combined annual revenue of us and DISH Network, we and DISH Network agreed to allocate our respective payments to such third party based on our respective percentage of combined total revenue.

~~Caltech~~. ~~On October 1, 2013, Caltech Institute of Technology (“Caltech”) filed complaints against~~ two of our subsidiaries, Hughes Communications, Inc. and HNS, as well as against DISH and certain of its subsidiaries, in the United States District Court for the Central District of California alleging infringement of United States Patent Nos. 7,116,710; 7,421,032; 7,916,781; and 8,284,833, each of which is entitled “Serial Concatenation of Interleaved Convolutional Codes forming Turbo-Like Codes.” Caltech asserted that encoding data as specified by the DVB-S2 standard infringed each of the asserted patents. Caltech claimed that certain of our Hughes segment’s satellite broadband products and services, infringed the asserted patents by implementing the DVB-S2 standard. Pursuant to a settlement agreement among us, DISH and Caltech, in May 2016, Caltech dismissed with prejudice all of its claims in these actions.

~~Orange, NJ~~. In October 2016, we and DISH Network sold two parcels of real estate owned separately by us and DISH Network in Orange, NJ to a third party pursuant to a purchase and sale agreement. Pursuant to the agreement, we and DISH Network separately received our respective payments from the buyer.

~~Invidi~~. In November 2010 and April 2011, we made investments in Invidi Technologies Corporation (“Invidi”) in exchange for shares of Invidi’s Series D Preferred Stock. In November 2016, DIRECTV, LLC, a wholly owned indirect subsidiary of AT&T Inc., DISH Network and Cavendish Square Holding B.V., an affiliate of WPP plc, entered into a series of agreements to acquire Invidi. As a result of the transaction, we sold our ownership interest in Invidi on the same terms offered to the other shareholders of Invidi. The transaction closed in January 2017.

Other Agreements

Hughes Systique Corporation (“Hughes Systique”)

We contract with Hughes Systique for software development services. In 2008, Hughes Communications, Inc. loaned $1.5 million to Hughes Systique pursuant to a term loan facility. The initial interest rate on the outstanding loans was 6%, payable annually, and the accrued and unpaid interest was added to the principal amount outstanding under the loan facility in certain circumstances. The loans were convertible into shares of Hughes Systique upon non-payment or an event of default. In May 2014, we amended the term loan facility to increase the interest rate from 6% to 8%, payable annually, to reflect then-current market conditions and extend the maturity date of the loans to May 1, 2015, and in April 2015, we extended the maturity date of the loans to May 1, 2016 on the same terms. In 2015, Hughes Systique repaid $1.5 million of the outstanding principal of the loan facility. In 2016, Hughes Systique repaid $0.6 million of the outstanding principal of the loan facility. As of September 30, 2017, the principal amount outstanding of the loan facility was zero. In addition to our ~~43.7%~~approximately 43.3% ownership in Hughes Systique, Mr. Pradman Kaul, the President of our subsidiary Hughes Communications, Inc. and a member of our board of directors, and his brother, who is the ~~CEO~~Chief Executive Officer and President of Hughes Systique, in the aggregate, own approximately ~~25.7%~~25.4%, on an undiluted basis, of Hughes Systique’s outstanding shares as of September 30, ~~2017.~~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

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Hughes Systique due to, among other factors, our ability to direct the activities that most significantly impact the economic performance of Hughes Systique. As a result, we consolidate Hughes Systique’s financial statements in our ~~condensed consolidated financial statements.~~accompanying Condensed Consolidated Financial Statements.

~~NagraStar L.L.C.~~

Prior to March 2017, we owned 50.0% of NagraStar L.L.C. (“NagraStar”), a joint venture that was the primary provider of encryption and related security technology used in the set-top boxes produced by our former EchoStar Technologies segment. We accounted for our investment in NagraStar using the equity method. Following the consummation of the Share Exchange, we no longer hold this investment in NagraStar.

Dish Mexico

We own 49.0% of Dish Mexico, an entity that provides direct-to-home satellite services in ~~Mexico known as Dish~~ Mexico. We ~~provide~~provided certain satellite services to Dish ~~Mexico and prior to~~Mexico; following the Share Exchange we also provided certain broadcast services and sold hardware such as digital set-top boxes and related equipment to Dish Mexico. We recognized revenue from sales of services we provided to Dish Mexico in continuing operations of approximately $5.8 million for eachconsummation of the ~~three months ended September 30, 2017 and 2016 and $17.5 million~~BSS Transaction, we no longer provide these services. See Note 12 for each of the nine months ended September 30, 2017 and 2016. As of September 30, 2017 and December 31, 2016, we had trade accounts receivable from continuing operations from Dish Mexico of approximately $7.6 million and $10.7 million, respectively.additional information about our investments in unconsolidated entities.

Deluxe/EchoStar LLC

We own 50.0% of ~~Deluxe/EchoStar LLC (“Deluxe”),~~Deluxe, a joint venture that we entered into in 2010 to build an advanced digital cinema satellite distribution network targeting delivery to digitally equipped theaters in the U.S. and Canada. We account for our investment in Deluxe using the equity method. We recognized revenue from Deluxe for transponder services and the sale of broadband equipment of ~~approximately $1.3~~$0.9 million and ~~$0.7~~$1.1 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~$3.6~~$2.6 million and ~~$2.1~~$3.3 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, we had trade accounts receivable from Deluxe of ~~approximately $1.3~~$0.6 million and ~~$0.7~~$0.8 million, respectively. See Note 12 for additional information about our investments in unconsolidated entities.

~~SmarDTV~~Broadband Connectivity Solutions

In ~~May 2015,~~August 2018, we ~~acquired~~entered into an agreement with Yahsat to establish a ~~22.5%~~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 $100.0 million in cash in exchange for a 20.0% interest in ~~SmarDTV, which we accounted for using~~BCS. Under the equity method. Pursuant to our agreements with SmarDTV and its subsidiaries, our former EchoStar Technologies segment purchased engineering services from and paid royalties to SmarDTV and its subsidiaries. Following the consummationterms of the ~~Share Exchange,~~agreement, we ~~no longer own our interest~~may also acquire, for further cash investments, additional ownership interests in BCS in the ~~equity~~future provided certain conditions are met. We supply network operations and ~~subordinated debt~~management services and equipment to BCS. We recognized revenue from BCS for such services and equipment of ~~SmarDTV~~$1.7 million and ~~no longer purchase engineering services~~$6.2 million for the three and nine months ended September 30, 2019,

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respectively. As of September 30, 2019 and December 31, 2018, we had trade accounts receivable from ~~SmarDTV.~~BCS of $2.4 million and $3.4 million, respectively. See Note 12 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~~AsiaSat’s satellites. Mr. William David Wade, ~~a member of~~who joined our board of directors in February 2017, served as the Chief Executive Officer of AsiaSat in 2016 and as a senior advisor to the ~~CEO~~Chief Executive Officer of AsiaSat through March 2017. We incurred expenses payable to AsiaSat under this agreement of ~~approximately zero~~NaN for both the three and ~~$0.4~~nine months ended September 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 our 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 NaN for both the three and nine months ended September 30, 2019, respectively, and $5.9 million and $6.5 million for the three and nine months ended September 30, 2018, respectively. As of both September 30, 2019 and December 31, 2018, we are owed $7.5 million from Global IP.

TerreStar Solutions

DISH Network owns more than 15.0% 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 $2.0 million and $2.7 million for the three months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively, and ~~$0.1~~$10.2 million and ~~$1.1~~$3.0 million for the nine months ended September 30, ~~2017~~2019 and ~~2016,~~2018, respectively. As of both September 30, 2019 and December 31, 2018, we had trade accounts receivable from TSI of $2.3 million.

Maxar Technologies Inc.

Mr. Jeffrey Tarr, who joined our 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 $12.1 million and $78.9 million for the three and nine months ended September 30, 2019, respectively.

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Discontinued Operations

The following agreements were terminated or transferred to DISH Network as part of the BSS Transaction and EchoStar has no further obligations and has earned no additional revenue or incurred no additional expense, as applicable, under these agreements or investments after the consummation of the BSS Transaction on September 10, 2019. Historical transactions under this agreement are reported in Net income from discontinued operations in our Condensed Consolidated Statements of Operations (see Note 5).

Satellite Capacity Leased to DISH Network. We entered into certain agreements to lease satellite capacity pursuant to which we provided satellite services to DISH Network on certain satellites owned or leased by us. The fees for the services provided under these agreements depended, among other things, upon the orbital location of the applicable satellite, the number of transponders that provided services on the applicable satellite and the length of the service arrangements.

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.

EchoStar XII. DISH Network leased satellite capacity from us on the EchoStar XII satellite.

EchoStar XVI. In December 2009, we entered into an agreement to lease satellite capacity to DISH Network, pursuant to which DISH Network leased satellite capacity from us on the EchoStar XVI satellite since January 2013.

Nimiq 5 Agreement. In addition to the Telesat Transponder Agreement, in September 2009, we entered into an agreement with DISH Network, pursuant to which DISH Network leased 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 made certain monthly payments to us that commenced in September 2009, when the Nimiq 5 satellite was placed into service.

QuetzSat-1 Agreement. In November 2008, we entered into an agreement to lease satellite capacity from SES Latin America, which provided, 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 leased 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, we and DISH Network entered into an agreement pursuant to which we leased back from DISH Network certain satellite capacity on 5 DBS transponders on the QuetzSat-1 satellite.

TT&C Agreement. Effective January 2012, we entered into a TT&C agreement pursuant to which we provided TT&C services to DISH Network, which we subsequently amended (the “TT&C Agreement”). The fees for services provided under the TT&C Agreement were calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which varied depending on the nature of the services provided.

Real Estate Leases to DISH Network. We entered into lease agreements pursuant to which DISH Network leased certain real estate from us. The rent on a per square foot basis each of the leases was 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 was responsible for its portion of the taxes, insurance, utilities and maintenance of the premises.

Santa Fe Lease Agreement. DISH Network leased from us all of 5701 S. Santa Fe Dr., Littleton, Colorado.

Cheyenne Lease Agreement. Prior to the Share Exchange, we leased to DISH Network certain space at 530 EchoStar Drive, Cheyenne, Wyoming. In connection with the Share Exchange, we transferred ownership of a portion of this property to DISH Network and we and DISH Network amended this agreement to, among other things, provide for a continued lease to DISH Network of the portion of the property we retained (the “Cheyenne Data Center”). In connection with the BSS Transaction, we transferred the Cheyenne Data Center to DISH Network.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Real Estate Leases from DISH Network. We entered into a lease agreement pursuant to which we leased certain real estate from DISH Network. The rent on a per square foot basis was comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the leases, and, we were responsible for our portion of the taxes, insurance, utilities and maintenance of the premises. Effective March 2017 we leased from DISH Network certain space at 801 N. DISH Dr. in Gilbert, Arizona. In connection with the BSS Transaction, we transferred the Gilbert Satellite Operations Center, including any equipment, software, processes, software licenses, hardware licenses, furniture, and technical documentation located within, to DISH Network and terminated this lease.

NOTE 19. SUPPLEMENTAL FINANCIAL INFORMATION

Noncash Investing and Financing Activities

The following table presents the noncash investing and financing activities (amounts in thousands):



	For the nine months ended September 30,
	2019			2018

Employee benefits paid in Class A common stock	$	6,654		$	7,605
Increase (decrease) in capital expenditures included in accounts payable, net	$	(15,083	)	$	17,058
Noncash net assets exchanged for BSS Transaction (Note 5)	$	535,211		$	—

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 $1.2 million and $16.3 million, respectively, for the nine months ended September 30, 2019 and $0.8 million each for the nine months ended September 30, 2018. These amounts are included in Other noncurrent assets, net in our Condensed Consolidated Balance Sheets.

Fair Value of In-Orbit Incentives

As of September 30, 2019 and December 31, 2018, the fair values of our in-orbit incentive obligations from our continuing operations, based on measurements categorized within Level 2 of the fair value hierarchy, approximated their carrying amounts of $57.1 million and $57.9 million, respectively.

Contract Acquisition and Fulfillment Costs

Unamortized contract acquisition costs totaled $112.5 million and $103.6 million as of September 30, 2019 and December 31, 2018, respectively, and related amortization expense totaled $23.8 million and $22.0 million for the three months ended September 30, 2019 and 2018, respectively, and $70.4 million and $64.3 million for the nine months ended September 30, 2019 and 2018, respectively.

Unamortized contract fulfillment costs were $3.0 million as of each of September 30, 2019 and December 31, 2018 and related amortization expense was de minimis for the three and nine months ended September 30, 2019 and 2018, respectively.

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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):



	For the three months ended September 30,				For the nine months ended September 30,
	2019		2018		2019		2018

Cost of sales	$	6,564	$	5,555	$	18,275	$	18,443
Research and development	$	6,136	$	6,544	$	19,411	$	20,328

Capitalized Software Costs

As of September 30, 2019 and December 31, 2018, the net carrying amount of externally marketed software was $99.7 million and $96.8 million, respectively, of which $33.1 million and $28.8 million, respectively, is under development and not yet placed in service. We capitalized costs related to the development of externally marketed software of $6.0 million and $9.6 million for the three months ended September 30, 2019 and 2018, respectively, and $21.4 million and $24.6 million for the nine months ended September 30, 2019 and 2018, respectively. We recorded amortization expense relating to the development of externally marketed software of $6.2 million and $5.8 million for the three months ended September 30, 2019 and 2018, respectively, and $18.4 million and $16.9 million for the nine months ended September 30, 2019 and 2018, respectively. The weighted average useful life of our externally marketed software was three years as of September 30, 2019.

Supplemental Cash Flows from Discontinued Operations

Significant supplemental cash flow information and adjustments to reconcile net income to net cash flow from operating activities for discontinued operations for the nine months ended September 30, 2019 and 2018 are as below:



	For the nine months ended September 30,
	2019			2018

Operating Activities
Net income from discontinued operations	$	46,423		$	76,843
Depreciation and amortization	$	97,435		$	105,821

Investing Activities
Expenditures for property and equipment	$	(510	)	$	(104	)

Financing Activities
Repayment of lease obligations	$	29,588		$	26,545
Repayment of in-orbit incentive obligations	$	3,440		$	3,245

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~~Item~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context indicates otherwise, as used herein, the terms “we,” “us,” “EchoStar,” the “Company” and “our” refer to EchoStar Corporation and its subsidiaries. References to “$” are to United States (“U.S.”) dollars. The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with ~~the~~our accompanying condensed consolidated financial statements and notes ~~to our financial statements~~thereto included elsewhere in this Quarterly Report on Form ~~10-Q.~~10-Q (“Form 10-Q”). This management’s discussion and analysis is intended to help provide an understanding of our financial condition, changes in our financial condition and our results of operations. Many of the statements in this management’s discussion and analysis are forward-looking statements that involve assumptions and are subject to risks and uncertainties that are often difficult to predict and beyond our control. Actual results could differ materially from those expressed or implied by such forward-looking statements. See ~~“Disclosure~~Disclosure Regarding Forward-Looking ~~Statements”~~Statements in this ~~Quarterly Report on~~ Form 10-Q for further discussion. For a discussion of additional risks, uncertainties and other factors that could impact our results of operations or financial condition, see the caption ~~“Risk Factors”~~Risk Factors in Part II, Item 1A of this ~~Quarterly Report on~~ Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018 filed with the Securities and Exchange Commission (“SEC”) as amended by Amendment No. 1 to Form 10-K on Form 10-K/A filed with the SEC (collectively referred to as our “Form 10-K”). Further, such forward-looking statements speak only as of the date of this ~~Quarterly Report on~~ Form 10-Q and we undertake no obligation to update them.

EXECUTIVE SUMMARY

EchoStar is a global provider of ~~satellite service operations, video delivery solutions,~~ broadband satellite technologies, ~~and~~ broadband internet services for home and small ~~office customers.~~to medium-sized business customers, satellite operations and satellite services. We also deliver innovative network technologies, managed services and ~~various~~ communications solutions for aeronautical, enterprise and government customers.

~~Prior to March 2017,~~In May 2019, we ~~operated in three primary business segments, Hughes,~~and one of our former subsidiaries, EchoStar ~~Technologies and EchoStar Satellite Services~~BSS Corporation (“~~ESS”~~BSS Corp.”)~~. On January 31, 2017, EchoStar Corporation and certain of its subsidiaries~~, entered into a ~~Share Exchange Agreement~~master transaction agreement (the ~~“Share Exchange~~“Master Transaction Agreement”) with DISH and a wholly-owned subsidiary of DISH (“Merger Sub”). Pursuant to the terms of the Master Transaction Agreement, on September 10, 2019: (i) we transferred 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 Corporation (“DISH”) and ~~certain of its subsidiaries. Pursuant to the Share Exchange Agreement, on February 28, 2017, among other things, EchoStar Corporation and certain of~~ its subsidiaries ~~received all~~(together with DISH, “DISH Network”) and our joint venture Dish Mexico, S. de R.L. de C.V., (“Dish Mexico”) and its subsidiaries and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of our other businesses (collectively, the “BSS Business”); (ii) we distributed to each holder of shares of our Class A or Class B common stock entitled to receive consideration in the ~~Hughes Retail Preferred Tracking~~transaction 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 our Class A or Class B common stock owned by such stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and DISH owns and operates the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar ~~Corporation (the “EchoStar Tracking~~stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ~~and~~((i) - (iii) collectively, the Hughes Retail Preferred Tracking Stock issued by Hughes Satellite Systems Corporation (“HSS”) (the “HSS Tracking Stock”, together with the EchoStar Tracking Stock, the “Tracking Stock”) in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of our EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”“BSS Transaction”). Following the consummation of the ~~Share Exchange,~~BSS Transaction, we no longer operate the ~~EchoStar Technologies~~BSS Business, which was a substantial portion of our ESS business ~~segment and~~segment. The BSS Transaction has been accounted for as a spin-off to our shareholders as the EchoStar Tracking Stock and HSS Tracking Stock were retired and are no longer outstanding and all agreements, arrangements and policy statements with respect to such tracking stock terminated and are of no further effect.Company did not receive any consideration. As a result, the operating results of the ~~Share Exchange, the condensed consolidated financial statements of the EchoStar Technologies businesses~~BSS Business have been presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented.

The BSS Transaction was structured in a manner intended to be tax-free to us and our stockholders for U.S. federal income tax purposes. In connection with the BSS Transaction, we and DISH Network agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. Additionally, we and DISH and certain of our and their subsidiaries (i) entered into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property and the provision of transitional services, (ii) terminated certain previously existing agreements, and (iii) amended certain existing agreements and entered into certain new agreements pursuant to which we and DISH Network will obtain and provide certain products, services and rights from and to each other.

Prior to March 2017, we operated in three primary business segments: Hughes, EchoStar Technologies and EchoStar Satellite Services (“ESS”). On January 31, 2017, EchoStar Corporation and certain of our subsidiaries entered into a share exchange agreement with DISH and certain of its subsidiaries. We, and certain of our subsidiaries, received all

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

the shares of the Hughes Retail Preferred Tracking Stock previously issued by us and one of our subsidiaries (together, the “Tracking Stock”) in exchange for 100% of the equity interests of certain of our subsidiaries that held substantially all of our former EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Following the consummation of the Share Exchange, we no longer operate our 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. See Note 34 in the notes to ~~condensed consolidated financial statements~~our Consolidated Financial Statements in Item 115 of ~~this report~~our Form 10-K for further discussion of our discontinued ~~operations.~~operations related to the Share Exchange.

~~As a consequence, we~~We currently operate in two business ~~segments, which are differentiated primarily by their operational focus:~~segments: Hughes and ESS. These segments are consistent with the way we make decisions regarding the allocation of resources, ~~are made,~~ as well as how operating results are reviewed by our chief operating decision maker, ~~(“CODM”),~~ who ~~for EchoStar~~ is the Company’s Chief Executive Officer.

In addition, as of March 2017, we also changed our overhead allocation methodology used in our segment disclosures to reflect how the CODM evaluates our segments. Historically, the costs of all corporate functions were included on an allocated basis in each of the business segments’ EBITDA. Under the revised allocation methodology, these costs are now reported and analyzed as part of “Corporate and Other” (previously “All Other and Eliminations”). Our prior period segment EBITDA disclosures have been restated to reflect this change.

Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Real Estate, Accounting and Legal) ~~as well as~~and other activities that have not been assigned to our operating segments ~~including~~such as costs incurred in certain satellite development programs and other business development activities, ~~our centralized treasury operations,~~ and gains ~~(losses)~~or losses from certain of our investments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in ~~“Corporate~~Corporate and ~~Other.”~~Other in our segment reporting.

Highlights from our financial results are as follows:

2019 Third Quarter Consolidated Results of Operations


•	Revenue of $472.3 million


•	Operating income of $26.0 million


•	Net loss from continuing operations of $23.2 million


•	Net loss attributable to EchoStar common stock of $18.3 million and basic loss per share of common stock of $0.19

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) of $139.7 million (see reconciliation of this non-GAAP measure on page 56)

Consolidated Financial Condition as of September 30, 2019


•	Total assets of $7.0 billion

Total liabilities of $3.3 billion


•	Total stockholders’ equity of $3.7 billion


•	Cash, cash equivalents and current marketable investment securities of $2.5 billion

Hughes Segment

Our Hughes segment is a global provider of broadband satellite technologies and broadband internet services to home and small to medium-sized business customers and broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to consumers, 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.

We incorporate advances in technology to reduce costs and to increase the functionality and reliability of our products and services. Through advanced and proprietary methodologies, technologies, software and techniques, we continue to improve the efficiency of our networks. We invest in technologies to enhance our system and network management

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capabilities, specifically our managed services for enterprises. We also continue to invest in next generation technologies that can be applied to our future products and services.

We continue to focus our efforts on growing our consumer revenue by maximizing utilization of our existing satellites while planning for new satellites to be launched or acquired. Our consumer revenue growth depends on our success in adding new and retaining existing subscribers in our domestic and international markets across wholesale and retail channels. The growth of our enterprise businesses, including aeronautical, relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. Service costs related to ongoing support for our direct and indirect customers and partners are typically impacted most significantly by our growth.

Our Hughes segment currently uses capacity from three of our satellites (the SPACEWAY 3 satellite, the EchoStar XVII satellite and the EchoStar XIX satellite) and additional satellite capacity acquired from third-party providers to provide services to our customers. Growth of our subscriber base continues to be constrained in areas where we are nearing or have reached maximum capacity. While these constraints are expected to be resolved when we launch new satellites, we continue to focus on subscriber growth in the areas where we have available capacity.

In May 2019, we entered into an agreement with Al Yah Satellite Communications Company PrJSC (“Yahsat”) pursuant to which Yahsat will contribute its current satellite communications services business in Brazil to us in exchange for a 20% ownership interest in our existing Brazilian subsidiary that conducts our current satellite communications services business in Brazil. The combined business will provide broadband internet services and enterprise solutions in Brazil using the Telesat T19V and Eutelsat 65W satellites and Yahsat’s Al Yah 3 satellite. Under the terms of the agreement, Yahsat may also acquire, for further cash investments, additional minority ownership interests in the business in the future provided certain conditions are met. The completion of the transaction is subject to customary regulatory approvals and closing conditions. No assurance can be given that the transaction will be consummated on the terms agreed to or at all.

In May 2019, we entered into an agreement with Bharti Airtel Limited (“BAL”) and its subsidiary, Bharti Airtel Services Limited (together with BAL, “Bharti”), pursuant to which Bharti will contribute its very small aperture terminal (“VSAT”) telecommunications services and hardware business in India to our two existing Indian subsidiaries that conduct our VSAT services and hardware business. The combined entities will provide broadband satellite and hybrid solutions for enterprise and government networks. Upon consummation of the transaction, Bharti will have a 33% ownership interest in the combined business. The completion of the transaction is subject to customary regulatory approvals and closing conditions. No assurance can be given that the transaction will be consummated on the terms agreed to or at all.

In August 2018, we entered into an agreement with Yahsat to establish a new entity, Broadband Connectivity Solutions (Restricted) Limited (together with its subsidiaries, “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.

In August 2017, we entered into a contract for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite, with a planned 2021 launch. The EchoStar XXIV satellite is primarily intended to provide additional capacity for our HughesNet satellite internet service (“HughesNet service”) in North, Central and South America as well as aeronautical and enterprise broadband services. In the first quarter of 2019, Maxar Technologies Inc. (“Maxar”), the parent company of Space Systems/Loral, LLC (“SSL”), the manufacturer of our EchoStar XXIV satellite, announced that, although it will continue to operate its geostationary communications satellite business, it intends to adjust its organization to better align costs with revenue. SSL has indicated to us that it intends to meet its contractual obligations regarding the timely manufacture and delivery of the EchoStar XXIV satellite. However, if SSL fails to meet or is delayed in meeting these obligations for any reason, including if Maxar decides to significantly modify its geostationary communications satellite business, such failure could have a material adverse impact on our business operations, future revenues, financial position and prospects, the completion of the manufacture of the EchoStar XXIV satellite and our planned expansion of satellite broadband services throughout North

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

, South and Central America. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in Corporate and Other in our segment reporting.

In March 2017, we and DISH Network entered into a master service agreement (the “Hughes Broadband MSA”). Pursuant to the Hughes Broadband MSA, DISH’s subsidiary, 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 the DISH subsidiary. As a result of the Hughes Broadband MSA, we have not earned and do not expect to earn in the future, significant equipment revenue from our distribution agreement with another wholly-owned subsidiary of DISH. We expect churn in the existing wholesale subscribers to continue to reduce Services and other revenue - DISH Network in the future.

Developments toward the launch of next-generation satellite systems including low-earth orbit (“LEO”), medium-earth orbit (“MEO”) and geostationary systems could provide additional opportunities to drive the demand for our equipment, hardware, technology and services. In June 2015, we made an equity investment in OneWeb Global Limited (the successor in interest to WorldVue Satellite Limited) (“OneWeb”), a global LEO satellite service company. The investment is reflected in Corporate and Other. In addition, we have an agreement with OneWeb to provide certain equipment and services in connection with the ground network system for OneWeb’s LEO satellites. We expect to continue delivering additional equipment and services to OneWeb.

We continue our efforts to expand our consumer satellite services business outside of the U.S. In April 2014, we entered into a 15-year agreement with Eutelsat do Brasil for Ka-band capacity into Brazil on the EUTELSAT 65 West A satellite. We began delivering high-speed consumer satellite broadband services in Brazil in July 2016. Additionally, in September 2015, we entered into 15-year agreements with affiliates of Telesat Canada for Ka-band capacity on the Telesat T19V satellite located at the 63 degree west longitude orbital location, which was launched in July 2018. Telesat T19V was placed in service during the fourth quarter of 2018 and augmented the capacity being provided by the EUTELSAT 65 West A and EchoStar XIX satellites in Central and South America. We currently provide satellite broadband internet service in several Central and South American countries, and expect to launch similar services in other Central and South American countries.

Our subscriber numbers as of September 30, 2019, June 30, 2019 and December 31, 2018 are approximately as follows:



	As of
	September 30, 2019	June 30, 2019	December 31, 2018
Broadband subscribers	1,437,000	1,415,000	1,361,000

Our broadband subscribers include customers that subscribe to our HughesNet services in North, Central and South America through retail, wholesale and small/medium enterprise service channels. During the third quarter of 2019, we had net additions of approximately 22,000 new subscribers. Our gross subscriber additions increased by approximately 10,000 compared to the second quarter of 2019. Our net subscriber additions for the quarter ended September 30, 2019 decreased by 4,000 compared to the quarter ended June 30, 2019 reflecting higher churn in the third quarter compared to the second quarter of 2019.

As of both September 30, 2019 and December 31, 2018, our Hughes segment had $1.4 billion, respectively, of contracted revenue backlog. We define Hughes contracted revenue backlog as our expected future revenue, including lease revenue, under customer contracts that are non-cancelable, excluding agreements with customers in our consumer market.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ESS Segment

Our ESS segment provides satellite services on a full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. We operate our ESS business using primarily the EchoStar IX and EchoStar 105/SES-11 satellites and related infrastructure. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. Our ESS segment, like others in the fixed satellite services industry, has encountered, and may continue to encounter, negative pressure on transponder rates and demand.

As of September 30, 2019 and December 31, 2018, our ESS segment had contracted revenue backlog of $12.2 million and $5.8 million respectively. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue.

Other Business Opportunities

Our industry continues to evolve with the increasing worldwide demand for broadband internet access for information, entertainment and commerce. In addition to fiber and wireless systems, other technologies such as geostationary high throughput satellites, LEO networks, MEO systems, balloons and High Altitude Platform Systems are expected to play significant roles in enabling global broadband access, networks and services. We intend to use our expertise, technologies, capital, investments, global presence, relationships and other capabilities to continue to provide broadband internet systems, equipment, networks and services for information, the internet-of-things, entertainment and commerce in North America and internationally for consumers, as well as aeronautical, enterprise and government customers. We are closely tracking the developments in next-generation satellite businesses, and we are seeking to utilize our services, technologies and expertise to find new commercial opportunities for our business.

We intend to continue to selectively explore opportunities to pursue investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, domestically and internationally, that we believe may allow us to increase our existing market share, increase our satellite capacity, expand into new markets and new customers, broaden our portfolio of services, products and intellectual property, make our business more valuable, align us for future growth and expansion, maximize the return on our investments, and strengthen our business and relationships with our customers. We may allocate or dispose of significant resources for long-term value that may not have a short or medium-term or any positive impact on our revenue, results of operations, or cash flow.

S-Band Strategy

We intend to explore the development of S-band technologies that we expect will reduce the cost of satellite communications for internet of things, machine-to-machine communications, public protection, disaster relief and other end-to-end services worldwide. We believe that our products and services will be integrated into new global, hybrid networks that leverage multiple satellites and terrestrial technologies. In December 2013, we acquired EchoStar Mobile Limited (“EML”), an entity based in Dublin, Ireland, which is licensed by the European Union and its member states (“EU”) to provide mobile satellite service and complementary ground component services covering the EU using S-band spectrum. EML’s services in the EU are supported by our EchoStar XXI satellite, which was placed into service in November 2017, and the EUTELSAT 10A (“W2A”) payload. In October 2019, we acquired Sirion Global Pty Ltd., which we have renamed EchoStar Global Australia Pty Ltd (“EchoStar Global”), which holds global S-band non-geostationary satellite orbit spectrum rights for mobile satellite service. As of September 30, 2019, we have no material future commitments in connection with these acquisitions.

Cybersecurity

As a global provider of satellite technologies and services, internet services and communications equipment and networks, we may be prone to more targeted and persistent levels of cyber-attacks than other businesses. These risks may be more prevalent as we continue to expand and grow our business into other areas of the world outside of North America, some of which are still developing their cybersecurity infrastructure maturity. Detecting, deterring, preventing and mitigating incidents caused by hackers and other parties may result in significant costs to us and may expose our customers to financial or other harm that have the potential to significantly increase our liability.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We treat cybersecurity risk seriously and are focused on maintaining the security of our and our partners’ systems, networks, technologies and data. We regularly review and revise our relevant policies and procedures, invest in and maintain internal resources, personnel and systems and review, modify and supplement our defenses through the use of various services, programs and outside vendors. We also maintain agreements with third party vendors and experts to assist in our remediation and mitigation efforts if we experience or identify a material incident or threat. In addition, senior management and the Audit Committee of our Board of Directors are regularly briefed on cybersecurity matters.

We are not aware of any cyber-incidents with respect to our owned or leased satellites or other networks, equipment or systems that have had a material adverse effect on our business, costs, operations, prospects, results of operation or financial position during the three and nine months ended September 30, 2019. There can be no assurance, however, that any such incident can be detected or thwarted or will not have such a material adverse effect in the future.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018

The following table presents our consolidated results of operations for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 (amounts in thousands):



	For the three months ended September 30,						Variance
Statements of Operations Data (1)	2019			2018			Amount			%

Revenue:
Services and other revenue - DISH Network	$	13,232		$	17,054		$	(3,822	)	(22.4	)
Services and other revenue - other	393,305			382,374			10,931			2.9
Equipment revenue	65,725			56,846			8,879			15.6
Total revenue	472,262			456,274			15,988			3.5
Costs and expenses:
Cost of sales - services and other	143,842			142,290			1,552			1.1
% of total services and other revenue	35.4		%	35.6		%
Cost of sales - equipment	51,188			46,318			4,870			10.5
% of total equipment revenue	77.9		%	81.5		%
Selling, general and administrative expenses	122,676			107,540			15,136			14.1
% of total revenue	26.0		%	23.6		%
Research and development expenses	6,136			6,544			(408		)	(6.2	)
% of total revenue	1.3		%	1.4		%
Depreciation and amortization	122,374			115,325			7,049			6.1
Total costs and expenses	446,216			418,017			28,199			6.7
Operating income	26,046			38,257			(12,211		)	(31.9	)

Other income (expense):
Interest income	17,175			21,349			(4,174		)	(19.6	)
Interest expense, net of amounts capitalized	(49,865		)	(54,878		)	5,013			9.1
Gains (losses) on investments, net	8,295			2,873			5,422			*
Equity in earnings (losses) of unconsolidated affiliates, net	(3,209		)	416			(3,625		)	*
Other, net	(16,587		)	(3,249		)	(13,338		)	*
Total other income (expense), net	(44,191		)	(33,489		)	(10,702		)	(32.0	)
Income (loss) from continuing operations before income taxes	(18,145		)	4,768			(22,913		)	*
Income tax benefit (provision), net	(5,016		)	(7,963		)	(2,947		)	37.0
Net loss from continuing operations	(23,161		)	(3,195		)	(19,966		)	*
Net income from discontinued operations	2,055			19,697			(17,642		)	(89.6	)
Net income (loss)	(21,106		)	16,502			(37,608		)	*
Less: Net income (loss) attributable to noncontrolling interests	(2,797		)	450			(3,247		)	*
Net income (loss) attributable to EchoStar Corporation common stock	$	(18,309	)	$	16,052		$	(34,361	)	*

Other data:
EBITDA (2)	$	139,716		$	153,172		$	(13,456	)	(8.8	)
Subscribers, end of period	1,437,000			1,332,000			105,000			7.9

* Percentage is not meaningful.


(1)	An explanation of our key metrics is included on pages 68 and 69 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 56. For further information on our use of EBITDA, see Explanation of Key Metrics and Other Items on page 69.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

~~Highlights from~~

The following discussion relates to our ~~financial results are as follows:~~

~~2017 Third Quarter Consolidated Results of Operations~~


•	~~Revenue of $481.2 million~~


•	~~Operating income of $56.4 million~~


•	~~Net income from continuing operations of $35.9 million~~


•	~~Net income attributable to EchoStar common stock of $34.7 million and basic earnings per share of common stock of $0.36~~

~~EBITDA of $219.9 million (see reconciliation of this non-GAAP measure on page 51)~~

~~Consolidated Financial Condition as of~~continuing operations for the three months ended September 30, ~~2017~~2019 and 2018 unless otherwise stated.


•	~~Total assets of $8.81 billion~~


•	~~Total liabilities of $4.91 billion~~


•	~~Total stockholders’ equity of $3.90 billion~~


•	~~Cash, cash equivalents and current marketable investment securities of $3.28 billion~~

~~Hughes Segment~~

~~Our Hughes segment is~~Services and other revenue - DISH Network. Services and other revenue - DISH Network totaled $13.2 million for the three months ended September 30, 2019, a ~~global provider~~decrease of ~~broadband satellite technologies and~~$3.8 million or 22.4%, compared to the same period in 2018. The decrease was primarily attributable to a continued decrease in our residential wholesale broadband services in our Hughes segment.

Services and other revenue - other. Services and other revenue - other totaled $393.3 million for ~~home~~the three months ended September 30, 2019, an increase of $10.9 million or 2.9%, compared to the same period in 2018.

Services and small office customers. We deliver network technologies, managed services, equipment, hardware, satellite services and communications solutions to domestic and international consumers and aeronautical, enterprise and government customers. In addition,other revenue - other from our Hughes segment ~~designs, provides~~for the three months ended September 30, 2019 increased by $13.9 million, or 3.7%, to $390.1 million compared to the same period in 2018. The increase was primarily attributable to increases in sales of broadband services to our consumer customers of $24.3 million, partially offset by a decrease in sales of broadband services to our enterprise customers of $11.3 million.

Services and ~~installs gateway and terminal equipment~~other revenue - other from our ESS segment for the three months ended September 30, 2019 decreased by $2.6 million, or 43.6%, to ~~customers for other satellite systems and provides satellite ground segment systems and terminals for other satellite systems, including mobile system operators.~~

~~We continue~~$3.4 million compared to ~~focus our efforts on growing our Hughes segment consumer revenue by maximizing utilization of our existing satellites while planning for new satellites~~the same period in 2018. The decrease was due to ~~be launched. Our consumer revenue growth depends on our success~~a net decrease in ~~adding new subscribers and driving higher average revenue per subscriber across our wholesale and retail channels.~~transponder services provided to third parties.

Our Hughes segment currently uses three satellites, the SPACEWAY 3 satellite, the EchoStar XVII satellite, and the EchoStar XIX satellite, and additional satellite capacity acquired from multiple third-party providers, to provide satellite broadband internet access and communications services to our customers. In DecEquipment revenue~~ember 2016,~~. Equipment revenue we launched our EchoStar XIX satellite, a next-generation, high throughput geostationary satellite, which provides significant capacity for continued subscriber growth. The EchoStar XIX satellite employs a multi-spot beam, bent pipe Ka-band architecture and provides additional capacitytotaled $65.7 million for the ~~Hughes broadband services~~three months ended September 30, 2019, an increase of $8.9 million or 15.6%, compared to ~~our customers~~the same period in ~~North America and added capacity in certain Central and South American countries and has added capability for aeronautical, enterprise and international broadband services.~~

In August 2017, we entered into a contract for the design and construction of a new, next-generation, high throughput geostationary satellite, with a planned 2021 launch, that is primarily intended to provide additional capacity for our HughesNet service in North, Central and South America as well as aeronautical and enterprise services. Capital expenditures associated with the construction and launch of this satellite will be included in “Corporate and Other” in our segment reporting.

Our wholly-owned subsidiary, Hughes Network Systems, L.L.C. and DISH Network L.L.C. (“DNLLC”), a wholly-owned subsidiary of DISH, have entered into a master service agreement (the “MSA”) pursuant to which DNLLC, among other things: (i) has the right, but not the obligation, to market, promote and solicit orders and upgrades for the Hughes satellite internet service and related equipment and other telecommunication services and (ii) will install Hughes service equipment with respect to activations generated by DNLLC. As a result of the MSA we do not expect to earn significant equipment revenue2018. The increase was from~~our Distribution Agreement with dishNET Satellite Broadband L.L.C. (“dishNET”)~~ ~~in the future and we expect our subscriber acquisition costs to increase in future periods.~~

~~In addition to our broadband consumer service offerings,~~ our Hughes segment ~~also provides network technologies, managed services,~~and is mainly due to increases in hardware ~~equipment and satellite services~~sales of $10.3 million to ~~large enterprise and government customers globally. Examples of such~~

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customers include lottery agencies, gas station operators and companies with multi-branch networks that rely on satellite or terrestrial networks for critical communication across wide geographies. Most of our domestic enterprise customers ~~have contracts with us for the services they purchase.~~

~~Developments toward the launch of next-generation~~and $3.8 million to our mobile satellite systems including low-earth orbit (“LEO”) and geostationary systems could provide additional opportunities to drive the demand for our network equipment and services. The growth of our enterprise and equipment businesses relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. We have an agreement with WorldVu Satellites Limited (“OneWeb”), a global LEO satellite service company, to provide certain equipment and services in connection with the ground network system for OneWeb’s LEO satellites. In November 2017, we began the production of OneWeb’s ground network system equipment and expect to begin delivering this equipment in mid-2018.

We continue to expand our efforts to grow our consumer satellite services business outside of the U.S. In April 2014, we entered into a satellite services agreement pursuant to which Eutelsat do Brasil provides us Ka-band capacity into Brazil on the EUTELSAT 65 West A satellite for a 15-year term. That satellite was launched in March 2016 and we began delivering high-speed consumer satellite broadband services in Brazil in July 2016. In September 2015, we entered into satellite services agreements pursuant to which affiliates of Telesat Canada (“Telesat”) will provide to us the Ka-band capacity on a satellite to be located at the 63 degree west longitude orbital location (“63 West”) for a 15-year term. We expect the satellite to be launched in the second quarter of 2018 and to augment the capacity being provided by the EUTELSAT 65 West A and EchoStar XIX satellites. ~~We launched our consumer satellite broadband service in Colombia in the third quarter of 2017 and we expect to launch similar services in various other Central and South American countries in 2018.~~

As of September 30, 2017 and December 31, 2016, our Hughes segment had approximately 1,140,000 and 1,036,000 broadband subscribers, respectively. These broadband subscribers include customers that subscribe to our HughesNet broadband services through retail, wholesale and small/medium enterprise service channels. Gross subscriber additions increased by approximately 9,000 in the third quarter of 2017 compared to the second quarter of 2017 primarily due to an increase in new additions in our domestic retail channel as a result of the launch of the EchoStar XIX satellite, which was placed into service in March 2017.customers. The increase was partially offset by a decrease in ~~new subscribers additions in~~hardware sales of $5.1 million to our international ~~retail channel. Our average monthly subscriber churn percentage~~enterprise customers.

Cost of sales - services and other. Cost of sales - services and other totaled $143.8 million for the ~~third quarter~~three months ended September 30, 2019, an increase of ~~2017 decreased~~$1.6 million or 1.1%, compared to the ~~second quarter~~same period in 2018. The increase was from our Hughes segment primarily attributable to an increase in the costs of ~~2017. As~~broadband services provided to our consumer customers supporting the increase in number of subscribers and revenue in both the domestic and international markets, partially offset by a ~~result~~decrease in the costs of ~~higher gross subscriber additions and lower churn, total net subscriber additions were approximately 53,000 for the quarter ended September 30, 2017 compared~~broadband services provided to ~~approximately 41,000 for the second quarter of 2017. Subscriber additions and churn include only subscribers through~~ our ~~retail and wholesale channels.~~enterprise customers.

AsCost of sales - equipment. Cost of sales - equipment totaled $51.2 million for the three months ended September 30, ~~2017 and December 31, 2016,~~2019, an increase of $4.9 million or 10.5%, compared to the same period in 2018. The increase was from our Hughes segment ~~had approximately $1.74 billion~~ and ~~$1.52 billion, respectively, of contracted revenue backlog. We define Hughes contracted revenue backlog as~~primarily attributable to an increase in hardware sales to our ~~expected future revenue under customer contracts that are non-cancelable, excluding agreements with~~domestic enterprise customers and our mobile satellite systems customers. The increase was partially offset by a decrease in hardware sales to our ~~consumer market.~~international enterprise customers.

Selling, general and administrative expenses.Selling, general and administrative expenses totaled $122.7 million for the three months ended September 30, 2019, an increase of $15.1 million or 14.1%, compared to the same period in 2018. The increase was primarily attributable to increases in marketing and promotional expenses of $7.9 million from our Hughes segment mainly associated with our consumer business and $8.6 million related to certain legal proceedings.

Depreciation and amortization.Depreciation and amortization expenses totaled $122.4 million for the three months ended September 30, 2019, an increase of $7.0 million or 6.1%, compared to the same period in 2018. The increase was primarily from our Hughes segment and due to increases in depreciation expense of $5.5 million relating to our customer premises equipment and $1.4 million relating to the EchoStar ~~Satellite Services Segment~~

~~Our ESS segment is a global provider of satellite service operations~~XIX and video delivery solutions. We operate our business using our owned and leased in-orbit satellites and related licenses. Revenue growth in our ESS segment depends largely on our ability to continuously make satellite capacity available for sale. We provide satellite services on a full-time and occasional-use basis primarily to DISH Network Corporation and its subsidiaries (“DISH Network”), Dish Mexico, S. de R.L. de C.V., a joint venture we entered into in 2008 (“Dish Mexico”), United States (“U.S.”) government service providers, internet service providers, broadcast news organizations, programmers, and private enterprise customers. We also manage satellite operations for certain satellites owned by DISH Network.Telesat T19V satellites.

~~We depend on DISH Network~~Interest income. Interest income totaled $17.2 million for the three months ended September 30, 2019, a ~~significant portion~~decrease of $4.2 million or 19.6%, compared to the same period in 2018 primarily attributable to a decrease in yield percentage in 2019 compared to 2018 and a result of the ~~revenue for our ESS segment,~~decrease in cash and ~~we expect that DISH Network will continue to be the primary source of revenue for our ESS segment. Therefore, the results of operations of our ESS segment are linked to changes~~cash equivalents and current marketable investment securities in DISH Network’s satellite capacity requirements. DISH Network’s capacity requirements have been driven by the addition of new channels and migration of programming to high-definition TV and video on demand services. The services that we provide to DISH Network are critical to its nationwide delivery of content to its customers across the U.S. While we expect to continue to provide satellite services to DISH Network, its satellite capacity requirements may change for a variety of reasons, including its ability to construct and launch its own satellites. Any termination or reduction in the services we provide to DISH Network may cause us to have unused capacity on our satellites and require that we aggressively pursue alternative sources of revenue for this business. 2019.

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~~We entered into: (i)~~Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized totaled $49.9 million for the three months ended September 30, 2019, a ~~construction contract with Airbus Defence~~decrease of $5.0 million or 9.1%, compared to the same period in 2018. The decrease was primarily due to a decrease of $17.2 million in interest expense and ~~Space SAS for~~in amortization of deferred financing cost as a result of the repurchase and maturity of HSS’ 6 1/2% Senior Secured Notes due 2019 (the “2019 Senior Secured Notes”). The decrease was also attributable to an increase of $1.5 million in capitalized interest relating to the construction of the EchoStar ~~105/SES-11 satellite with C-band, Ku-band and Ka-band payloads; (ii)~~XXIV satellite. The decreases were partially offset by an ~~agreement with SES Satellite Leasing Limited for the procurement~~increase of the related launch services; and (iii) an agreement with SES Americom Inc. (“SES”) pursuant to which we will transfer the title to the Ku-band payload to an affiliate of SES following in-orbit testing of the satellite and the title to the C-band and Ka-band payloads to an affiliate of SES and SES, respectively, by early 2018. SES will provide to us satellite service on the entire Ku-band payload on the EchoStar 105/SES-11 satellite for an initial ten-year term, with an option for us to renew the agreement on a year-to-year basis. The EchoStar 105/SES-11 satellite was launched$13.6 million in October 2017 and is expected to be placed into service in the fourth quarter of 2017. Our Ku-band payload on the EchoStar 105/SES-11 satellite will replace and augment our current capacity on the AMC-15 satellite, resulting in additional sales capacity. We expect to transfer activities from the AMC-15 satellite to the EchoStar 105/SES-11 satellite in the fourth quarter of 2017, which we expect will result in reduced operating costsinterest expense associated with ~~the lease of the AMC-15 satellite.~~

We continue to pursue expanding our business offerings by providing value added services such as telemetry, tracking, and control services to third parties, which leverages the ground monitoring networks and personnel currently within our ESS segment.certain legal proceedings.

~~As of~~Gains (losses) on investments, net. Gains (losses) on investments, net totaled $8.3 million in gains for the three months ended September 30, ~~2017 and December 31, 2016, our ESS segment had contracted revenue backlog~~2019, an increase of $5.4 million, compared to the same period in 2018. The increase was primarily attributable to ~~satellites currently~~an increase in ~~orbit of approximately $1.26 billion~~gains on certain marketable equity and ~~$1.16 billion, respectively.~~debt securities that we account for using the fair value option.

~~New Business Opportunities~~

~~Our industry is evolving with~~Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net totaled $3.2 million in loss for the three months ended September 30, 2019, an increase in ~~worldwide demand for broadband internet access for information, entertainment and commerce. In addition~~loss of $3.6 million compared to ~~fiber and wireless systems, other technologies such as geostationary high throughput satellites, LEO networks, balloons, and High Altitude Platform Systems have begun to play significant roles~~the same period in enabling global broadband access, networks and services. We intend to use our expertise, technologies, capital, investments, global presence, relationships and other capabilities to continue to provide broadband internet systems, equipment, networks and services for information, entertainment and commerce in North America and internationally for consumers, enterprises and governments.2018.

~~We continue~~Other, net.Other, net totaled $16.6 million in loss for the three months ended September 30, 2019, an increase in loss of $13.3 million, compared to ~~selectively explore opportunities~~the same period in 2018. The increase in loss was primarily due to ~~pursue partnerships, joint ventures~~a higher unfavorable foreign exchange impact of $11.0 million for the three months ended September 30, 2019 compared to the same period in 2018.

Income tax benefit (provision), net. Income tax provision was $5.0 million for the three months ended September 30, 2019 compared to an income tax benefit of $8.0 million for the three months ended September 30, 2018. Our effective income tax rate was (27.6)% and ~~strategic acquisitions, domestically~~167.0% for the three months ended September 30, 2019 and ~~internationally,~~2018, respectively. The variations in our current year effective tax rate from the U.S. federal statutory rate for the three months ended September 30, 2019 were primarily due to the increase in our valuation allowance associated with certain foreign losses and by the impact of state and local taxes partially offset by the change in net unrealized gains that ~~we believe may allow us~~are capital in nature and research and experimentation credits. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended September 30, 2018 were primarily due to ~~increase~~the change in our ~~existing market share, expand into new markets and new customers, broaden our portfolio of services, products and intellectual property, and strengthen our relationships~~valuation allowance associated with ~~our customers. We may allocate significant resources for long-term initiatives~~unrealized gains that ~~may not have a short or medium-term or any positive impact on our revenue, results of operations, or cash flow.~~ are capital in nature.

~~In 2012, we acquired the right~~Net income (loss) attributable to use various frequencies at the 45 degree west longitude orbital location (“Brazilian Authorization”) from ANATEL, the Brazilian communications regulatory agency. The Brazilian Authorization currently provides us the rightsEchoStar Corporation common stock. Net income attributable to ~~utilize Ku-band spectrum. In April 2014, we entered into an agreement with Space Systems Loral, LLC~~EchoStar Corporation common stock totaled $18.3 million for the ~~construction~~three months ended September 30, 2019, a decrease of $34.4 million compared to the ~~EchoStar XXIII satellite, a high powered broadcast satellite service satellite. The EchoStar XXIII satellite was launched~~same period in ~~March 2017 and placed into service at the 45 degree west longitude orbital location~~2018 as set forth in the second quarter of 2017. We had regulatory obligations to meet certain in-service milestones by the second quarter of 2017 for our Brazilian license at the 45 degree west longitude orbital location for the Ka-, Ku- and S-band frequency bands. We have met our regulatory milestone for the Ku-band. On October 5, 2017, ANATEL declined our request to extend our milestone deadlines for the S- band and Ka- band frequencies and, as a result, we no longer have the right to use such frequency bands. We may be subject to penalties as a result of our failure to meet these milestones.following table (amounts in thousands):



	Amounts

Net income attributable to EchoStar Corporation for the three months ended September 30, 2018	$	16,052
Decrease in operating income, including depreciation and amortization	(12,211		)
Decrease in interest income	(4,174		)
Decrease in interest expense, net of amounts capitalized	5,013
Increase in gains on investments, net	5,422
Increase in equity in losses of unconsolidated affiliates, net	(3,625		)
Decrease in other income	(13,338		)
Decrease in income tax provision, net	2,947
Decrease in net income from discontinued operations	(17,642		)
Decrease in net income attributable to noncontrolling interests	3,247
Net loss attributable to EchoStar Corporation for the three months ended September 30, 2019	$	(18,309	)

In December 2013, we acquired 100% of Solaris Mobile, which is based in Dublin, Ireland and licensed by the European Union and its member states (“EU”) to provide mobile satellite services (“MSS”) and complementary ground component (“CGC”) services covering the entire EU using S-band spectrum. Solaris Mobile changed its name to EchoStar Mobile Limited (“EchoStar Mobile”) in the first quarter of 2015. We are in the process of developing commercial services utilizing the operable payload we own on the EUTELSAT 10A satellite, along with our EchoStar XXI S-band satellite. The EchoStar XXI satellite will provide space segment capacity to EchoStar Mobile in the EU. We believe we are in a unique position to deploy a European wide MSS/CGC network and maximize the long-term value of our S-band spectrum in Europe and other regions within the scope of our licenses. The EchoStar XXI satellite launched in June 2017 and is anticipated to be placed in service in the fourth quarter of 2017. We intend to launch commercial service in the fourth quarter of 2017.

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We are tracking closely the developments in next-generation satellite businesses, and we are seeking to utilize our services, technologies and expertise to find new commercial opportunities for our business. In June 2015, we made an equity investment in OneWeb.

~~Capital expenditures associated with the construction and launch of the EchoStar XXIII, EchoStar XXI and EchoStar XXIV satellites are included in “Corporate and Other” in our segment reporting.~~

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~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued~~

~~RESULTS OF OPERATIONS~~

~~Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016~~

For the Three Months
Ended September 30, Variance
Statements of Operations Data (1) 2017 2016 Amount %
(Dollars in thousands)
Revenue:

Services and other revenue - DISH Network $ 111,135
$ 115,127
$ (3,992 ) (3.5 )
Services and other revenue - other 310,973
276,280
34,693
12.6
Equipment revenue - DISH Network 126
2,138
(2,012 ) (94.1 )
Equipment revenue - other 58,999
66,501
(7,502 ) (11.3 )
Total revenue 481,233
460,046
21,187
4.6
Costs and Expenses:

Cost of sales - services and other 138,641
131,594
7,047
5.4
% of Total services and other revenue 32.8 % 33.6 %

Cost of sales - equipment 52,051
53,599
(1,548 ) (2.9 )
% of Total equipment revenue 88.0 % 78.1 %

Selling, general and administrative expenses 91,003
80,672
10,331
12.8
% of Total revenue 18.9 % 17.5 %

Research and development expenses 8,302
9,030
(728 ) (8.1 )
% of Total revenue 1.7 % 2.0 %

Depreciation and amortization 134,822
108,549
26,273
24.2
Total costs and expenses 424,819
383,444
41,375
10.8
Operating income 56,414
76,602
(20,188 ) (26.4 )

Other Income (Expense):

Interest income 12,012
6,259
5,753
91.9
Interest expense, net of amounts capitalized (55,646 ) (37,316 ) (18,330 ) 49.1
Gains and impairment on investment, net 20,090
230
19,860
*
Equity in earnings of unconsolidated affiliates, net 4,381
4,166
215
5.2
Other, net 4,686
364
4,322
*
Total other expense, net (14,477 ) (26,297 ) 11,820
(44.9 )
Income from continuing operations before income taxes 41,937
50,305
(8,368 ) (16.6 )
Income tax provision (6,082 ) (17,394 ) 11,312
(65.0 )
Net income from continuing operations 35,855
32,911
2,944
8.9
Net income (loss) from discontinued operations (654 ) 4,499
(5,153 ) *
Net income 35,201
37,410
(2,209 ) (5.9 )
Less: Net income attributable to noncontrolling interest in HSS Tracking Stock —
85
(85 ) (100.0 )
Less: Net income attributable to other noncontrolling interests 532
524
8
1.5
Net income attributable to EchoStar $ 34,669
$ 36,801
$ (2,132 ) (5.8 )

Other Data:

EBITDA (2) $ 219,861
$ 189,302
$ 30,559
16.1
Subscribers, end of period 1,140,000
1,018,000
122,000
12.0

* Percentage is not meaningful.

~~(1) An explanation of our key metrics is included on pages 61 and 62 under the heading “Explanation of Key Metrics and Other Items.”~~

~~(2) A reconciliation of EBITDA to “Net income,” the most directly comparable GAAP measure in the accompanying financial statements, is included on page~~ ~~51.~~ ~~For further information on our use of EBITDA see “Explanation of Key Metrics and Other Items” on page 62.~~

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~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued~~

~~Services and other revenue - DISH Network~~EBITDA. “Services and other revenue - DISH Network” totaled $111.1 million for the three months ended September 30, 2017, a decrease of $4.0 million or 3.5%, compared to the same period in 2016 primarily from our Hughes segment. The decrease in revenue was primarily attributable to a decrease in wholesale subscribers.

~~Services and other revenue - other. “Services and other revenue - other” totaled $311.0 million for the three months ended September 30, 2017, an increase of $34.7 million or 12.6%, compared to the same period in 2016.~~

Services and other revenue - other from our Hughes segment for the three months ended September 30, 2017 increased by $38.2 million, or 14.5%, to $301.1 million compared to the same period in 2016. The increase was primarily attributable to increases in sales of broadband services of $31.5 million to our domestic and international consumers, $5.8 million to our domestic enterprise customers and $1.7 million to our telecom systems customers, partially offset by a decrease of $1.0 million to our international enterprise customers.

Services and other revenue - other from our ESS segment for the three months ended September 30, 2017 decreased by $3.9 million, or 26.8%, to $10.6 million compared to the same period in 2016. The decrease was primarily attributable to a decrease in sales of transponder services due to expired service contracts.

~~Equipment revenue - DISH Network.~~ “Equipment revenue - DISH Network” totaled $0.1 million for the three months ended September 30, 2017, a decrease of $2.0 million or 94.1%, compared to the same period in 2016 primarily from our Hughes segment. The decrease in revenue was primarily due to the decrease in unit sales of broadband equipment to dishNET as a result of the MSA. See Note 16 in the notes to condensed consolidated financial statements in Item 1 of this report for additional information about the MSA.

~~Equipment revenue - other.~~ “Equipment revenue - other” totaled $59.0 million for the three months ended September 30, 2017, a decrease of $7.5 million or 11.3%, compared to the same period in 2016 primarily from our Hughes segment. The decrease was primarily due to a decrease in sales of broadband equipment to telecom systems customers of $6.1 million, our international enterprise customers of $3.3 million, and our government customers of $1.2 million, partially offset by an increase in sales of broadband equipment to our domestic consumers and enterprise customers of $2.8 million.

~~Cost of sales - services and other~~. “Cost of sales - services and other” totaled $138.6 million for the three months ended September 30, 2017, an increase of $7.0 million or 5.4%, compared to the same period in 2016 primarily from our Hughes segment. The increase was primarily attributable to an increase in the costs of broadband services provided to our domestic and international consumers and domestic enterprise customers as a result of the increase in sales of broadband services.

~~Cost of sales - equipment.~~ “Cost of sales - equipment” totaled $52.1 million for the three months ended September 30, 2017, a decrease of $1.5 million or 2.9%, compared to the same period in 2016 primarily from our Hughes segment. The decrease was primarily attributable to a decrease of $3.9 million in equipment costs related to the decrease in sales to dishNET, telecom systems customers, and international enterprise customers. The decrease was partially offset by an increase of $2.6 million in equipment costs related to the increase in sales to our domestic consumers and domestic enterprise customers.

~~Selling, general and administrative expenses. “~~Selling, general and administrative expenses” totaled $91.0 million for the three months ended September 30, 2017, an increase of $10.3 million or 12.8%, compared to the same period in 2016. The increase was primarily due to an increase of $15.2 million in marketing and promotional costs primarily attributable to our domestic and international consumer broadband sales in our Hughes segment, partially offset by a decrease of $4.9 million in general and administrative expenses.

~~Research and development expenses.~~ “Research and development expenses” totaled $8.3 million for the three months ended September 30, 2017, a decrease of $0.7 million or 8.1%, compared to the same period in 2016. Our research and development activities vary based on the activity level and scope of other engineering and customer related development contracts.

~~Depreciation and amortization.~~ “Depreciation and amortization” expenses totaled $134.8 million for the three months ended September 30, 2017, an increase of $26.3 million or 24.2%, compared to the same period in 2016. The increase was primarily related to an increase of $15.3 million in depreciation expense of the EchoStar XIX and EchoStar XXIII satellites that were placed into service in the first and second quarters of 2017, respectively, an increase of $10.5 million in depreciation expense of domestic and international customer rental equipment, an increase of $4.0 million in depreciation expense relating to machinery and equipment, and an increase of $2.9 million in amortization expense relating to the development of externally marketed

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~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued~~

~~software, partially offset by a decrease of $5.0 million in amortization expense from certain fully amortized other intangible assets in our Hughes segment.~~

~~Interest income~~. “Interest income” totaled $12.0 million for the three months ended September 30, 2017, an increase of $5.8 million or 91.9%, compared to the same period in 2016. The increase was primarily attributable to the increase in our marketable investments and an increase in yield percentage for the three months ended September 30, 2017 when compared to the same period in 2016.

~~Interest expense, net of amounts capitalized~~. “Interest expense, net of amounts capitalized” totaled $55.6 million for the three months ended September 30, 2017, an increase of $18.3 million or 49.1%, compared to the same period in 2016. The increase was primarily due to a decrease of $11.6 million in capitalized interest relating to the EchoStar XIX and EchoStar XXIII satellites that were placed into service in the first and second quarters of 2017, respectively, and an increase of $6.4 million in interest expense relating to the issuance of 5.250% Senior Secured Notes due 2026 (the “2026 Senior Secured Notes”) and 6.625% Senior Unsecured Notes due 2026 (the “2026 Senior Unsecured Notes” and together with 2026 Senior Secured Notes, the “2026 Notes”) in the third quarter of 2016.

~~Gains and impairment on investments, net.~~ “Gains and impairment on investments, net” totaled $20.1 million in gains for the three months ended September 30, 2017, an increase of $19.9 million, compared to the same period in 2016. The increase in gains was primarily a result of gains on our trading securities in the third quarter of 2017.

~~Equity in earnings of unconsolidated affiliates, net~~. “Equity in earnings of unconsolidated affiliates, net” totaled $4.4 million in earnings for the three months ended September 30, 2017, an increase of $0.2 million or 5.2%, compared to the same period in 2016. The increase was primarily related to an increase in earnings from our investment in Dish Mexico, partially offset by a decrease in earnings from our investment in Deluxe/EchoStar LLC.

~~Other, net.~~ “Other, net” totaled $4.7 million in income for the three months ended September 30, 2017, an increase of $4.3 million, compared to the same period in 2016. The increase was primarily related to a favorable foreign exchange impact of $2.5 million in the third quarter of 2017 and dividends of $2.3 million received from certain strategic equity investments in the third quarter of 2017.

~~Income tax provision~~. Income tax expense was $6.1 million for the three months ended September 30, 2017, a decrease in expense of $11.3 million or 65.0%, compared to the same period in 2016. Our effective income tax rate was 14.5% and 34.6% for the three months ended September 30, 2017 and 2016, respectively. The variations in our current year effective tax rate from the U.S. federal statutory rate for the three months ended September 30, 2017 was primarily due to various permanent tax differences, the increase in our valuation allowance associated with unrealized gains that are capital in nature, and a change in the amount of unrecognized tax benefit from uncertain tax positions. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended September 30, 2016 was primarily due to research and experimentation credits, partially offset by state and local taxes.

~~Net income attributable to EchoStar. “Net income attributable to EchoStar~~” was $34.7 million for the three months ended September 30, 2017, a decrease of $2.1 million or 5.8%, compared to the same period in 2016. The decrease was primarily due to (i) a decrease in operating income, including depreciation and amortization, of $20.2 million, (ii) an increase of $18.3 million in interest expense and (iii) a decrease of $5.2 million in net income from discontinuing operations in 2017. The decrease was partially offset by (i) an increase of $19.9 million in gains on our trading securities, (ii) a decrease in income tax expense of $11.3 million, (iii) an increase of $5.8 million in interest income, and (iv) an increase in other income of $4.3 million.

~~Earnings before interest, taxes, depreciation and amortization (“EBITDA”)~~. EBITDA was $219.9 million for the three months ended September 30, 2017, an increase of $30.6 million or 16.1%, compared to the same period in 2016. The increase was primarily due to (i) an increase of $19.9 million in gains on our trading securities, (ii) an increase in operating income, excluding depreciation and amortization, of $6.1 million and (iii) an increase in other income of $4.3 million. EBITDA is a non-GAAP financial measure and is described under Explanation of Key Metrics and Other Items below. The following table reconciles EBITDA to Net income, the most directly comparable U.S. GAAP measure in the accompanying condensed consolidating financial ~~statements.~~statements (amounts in thousands):



	For the three months ended September 30,						Variance
	2019			2018			Amount			%

Net income (loss)	$	(21,106	)	$	16,502		$	(37,608	)	*
Interest income and expense, net	32,690			33,529			(839		)	(2.5	)
Income tax provision, net	5,016			7,963			(2,947		)	(37.0	)
Depreciation and amortization	122,374			115,325			7,049			6.1
Net (income) loss from discontinued operations	(2,055		)	(19,697		)	(17,642		)	89.6
Net (income) loss attributable to noncontrolling interests	2,797			(450		)	3,247			*
EBITDA	$	139,716		$	153,172		$	(13,456	)	(8.8	)

* Percentage is not meaningful.

EBITDA was $139.7 million for the three months ended September 30, 2019, a decrease of $13.5 million or 8.8%, compared to the same period in 2018. The decrease was primarily due to (i) a decrease of $13.3 million in other income, (ii) an increase of $3.6 million in equity in losses of unconsolidated affiliates, net and (iii) a decrease of $1.9 million in operating income, excluding depreciation and amortization and net loss attributable to noncontrolling interests. The decrease was partially offset by an increase of $5.4 million in gains on investments, net of losses and write-downs.

Segment Operating Results and Capital Expenditures

The following tables present our operating results, capital expenditures and EBITDA by segment for the three months ended September 30, 2019 compared to the three months ended September 30, 2018 (amounts in thousands). Capital expenditures exclude capital expenditures from discontinued operations of $0.3 million and de minimis three months ended September 30, 2019 and 2018, respectively.



	Hughes		ESS		Corporate and Other			Consolidated Total

For the three months ended September 30, 2019
Total revenue	$	463,735	$	4,098	$	4,429		$	472,262
Capital expenditures	$	76,572	$	—	$	18,583		$	95,155
EBITDA	$	155,940	$	1,791	$	(18,015	)	$	139,716

For the three months ended September 30, 2018
Total revenue	$	444,762	$	6,802	$	4,710		$	456,274
Capital expenditures	$	110,550	$	18	$	56,576		$	167,144
EBITDA	$	164,135	$	4,687	$	(15,650	)	$	153,172

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For the Three Months
Ended September 30, Variance
2017 2016 Amount %
(Dollars in thousands)
Net income $ 35,201
$ 37,410
$ (2,209 ) (5.9 )

Interest income and expense, net 43,634
31,057
12,577
40.5
Income tax provision 6,082
17,394
(11,312 ) (65.0 )
Depreciation and amortization 134,822
108,549
26,273
24.2
Net (income) loss from discontinued operations 654
(4,499 ) 5,153
*
Net income attributable to noncontrolling interests (532 ) (609 ) 77
(12.6 )
EBITDA $ 219,861
$ 189,302
$ 30,559
16.1

Hughes Segment

* Percentage is not meaningful.

~~Segment Operating Results and Capital Expenditures~~



	For the three months ended September 30,				Variance
	2019		2018		Amount			%

Total revenue	$	463,735	$	444,762	$	18,973		4.3
Capital expenditures	$	76,572	$	110,550	$	(33,978	)	(30.7	)
EBITDA	$	155,940	$	164,135	$	(8,195	)	(5.0	)

~~Three Months Ended September 30, 2017 Compared to the Three Months Ended September 30, 2016~~

Hughes
EchoStar
Satellite
Services
Corporate and Other
Consolidated
Total
(In thousands)
For the Three Months Ended September 30, 2017

Total revenue $ 380,061
$ 97,093
$ 4,079
$ 481,233
Capital expenditures $ 108,428
$ 8,203
$ 75,500
$ 192,131
EBITDA $ 131,817
$ 78,345
$ 9,699
$ 219,861

For the Three Months Ended September 30, 2016

Total revenue $ 355,876
$ 101,480
$ 2,690
$ 460,046
Capital expenditures $ 75,682
$ 15,730
$ 48,162
$ 139,574
EBITDA $ 125,522
$ 84,257
$ (20,477 ) $ 189,302

~~Hughes Segment~~

For the Three Months Ended September 30, Variance
2017 2016 Amount %
(Dollars in thousands)
Total revenue $ 380,061
$ 355,876
$ 24,185
6.8
Capital expenditures $ 108,428
$ 75,682
$ 32,746
43.3
EBITDA $ 131,817
$ 125,522
$ 6,295
5.0

~~Revenue~~

~~Hughes segment total~~Total revenue for the three months ended September 30, ~~2017~~2019 increased by ~~$24.2~~$19.0 million, or ~~6.8%~~4.3%, compared to the same period in ~~2016.~~2018. The increase was primarily due to ana net increase of $20.3 million in sales of broadband ~~equipment and~~ services to our ~~domestic~~consumer customers and ~~international consumers and domestic~~net increases in hardware sales of $5.2 million to our enterprise customers ~~of $40.5 million.~~and $3.8 million to our mobile satellite systems customers. The increase was partially offset by a decrease in sales of broadband ~~equipment and~~ services to ~~DISH Network~~our enterprise customers of ~~$6.5~~$11.3 million.

Capital expenditures for the three months ended September 30, 2019 decreased by $34.0 million, or 30.7%, compared to the same period in 2018, primarily due to net decreases in capital expenditures associated with the construction and infrastructure of our satellites and in our consumer and enterprise businesses.

EBITDA for the three months ended September 30, 2019 was $155.9 million, a decrease of $8.2 million, or 5.0%, compared to the same period in ~~sales~~2018. The change in EBITDA was primarily attributable to an increase of ~~broadband equipment~~$12.6 million in gross margins, which was offset by increases in (i) expense of $8.6 million related to ~~telecom systems customers~~certain legal proceedings, (ii) foreign exchange with an unfavorable impact of ~~$6.1~~$8.1 million, and (iii) marketing and promotional expenses of $7.9 million mainly associated with our consumer business.

ESS Segment



	For the three months ended September 30,				Variance
	2019		2018		Amount			%

Total revenue	$	4,098	$	6,802	$	(2,704	)	(39.8	)
Capital expenditures	$	—	$	18	$	(18	)	(100.0	)
EBITDA	$	1,791	$	4,687	$	(2,896	)	(61.8	)

Total revenue for the three months ended September 30, 2019 decreased by $2.7 million or 39.8%, compared to the same period in 2018, due to a net decrease in ~~sales~~transponder services provided to third parties.

EBITDA for the three months ended September 30, 2019 was $1.8 million, an increase of ~~broadband equipment and services of $4.3~~$2.9 million, or 61.8%, compared to ~~our international enterprise customers.~~the same period in 2018, primarily due to the decrease in ESS revenue.

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Corporate and Other



	For the three months ended September 30,						Variance
	2019			2018			Amount			%

Total revenue	$	4,429		$	4,710		$	(281	)	(6.0	)
Capital expenditures	$	18,583		$	56,576		$	(37,993	)	(67.2	)
EBITDA	$	(18,015	)	$	(15,650	)	$	(2,365	)	15.1

Capital ~~Expenditures~~

~~Hughes segment capital~~ expenditures for the three months ended September 30, ~~2017 increased~~2019 decreased by ~~$32.7~~$38.0 million, or ~~43.3%~~67.2%, compared to the same period in ~~2016,~~2018, primarily ~~as a result of an increase of $56.2 million~~due to decreases in satellite expenditures ~~in our domestic and international businesses. The increase was mainly associated with customer rental equipment for consumer services provided~~ on the ~~EUTELSAT 65 West A and~~ EchoStar XIX satellites that were placed into service in the third quarter of 2016 and the first quarter of 2017, respectively. The increase was partially offset by a decrease of $23.5 million in expenditures on satellites and related ground infrastructure, primarily resulted from the launch of service on EUTELSAT 65 West A and EchoStar XIX satellites.XXIV satellite.

~~EBITDA~~

~~Hughes segment~~ EBITDA for the three months ended September 30, ~~2017~~2019 was ~~$131.8~~a loss of $18.0 million, an increase in loss of ~~$6.3~~$2.4 million or ~~5.0%,~~15.1% compared to the same period in ~~2016.~~2018. The increase in loss was ~~due~~largely attributable to ~~an increase of $18.9 million in gross margin which we define as revenue less cost of sales,~~ a ~~favorable~~higher unfavorable foreign exchange impact of ~~$1.9~~$2.9 million, in the third quarter 2017 and a decrease of $0.7 million in research and development expenses, partially offset by an increase of $15.2 million in marketing and promotional costs primarily attributable to our domestic and international consumer broadband sales.

~~EchoStar Satellite Services Segment~~

For the Three Months Ended September 30, Variance
2017 2016 Amount %
(Dollars in thousands)
Total revenue $ 97,093
$ 101,480
$ (4,387 ) (4.3 )
Capital expenditures $ 8,203
$ 15,730
$ (7,527 ) (47.9 )
EBITDA $ 78,345
$ 84,257
$ (5,912 ) (7.0 )

~~Revenue~~

~~ESS segment total revenue for the three months ended September 30, 2017 decreased by $4.4 million, or 4.3%, compared to the same period in 2016, primarily due to~~ a decrease in ~~sales~~equity in earnings from our investment in unconsolidated entities of ~~transponder services due to expired service contracts.~~

~~Capital Expenditures~~

~~ESS segment capital expenditures for the three months ended September 30, 2017 decreased by $7.5~~$2.2 million ~~or 47.9%, compared to the same period in 2016, primarily related to a decrease in expenditures on the EchoStar 105/SES-11 satellite.~~

~~EBITDA~~

ESS segment EBITDA for the three months ended September 30, 2017 was $78.3 million, a decrease of $5.9 million, or 7.0%, compared to the same period in 2016. The decrease in EBITDA for our ESS segment was due to the decrease of $4.4 million in revenues and an increase of ~~$1.3 million in general and administrative expenses.~~

~~Table of Contents~~

~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued~~

~~Corporate and Other~~

Corporate and Other is comprised of various corporate departments (primarily Executive, Strategic Development, Human Resources, IT, Finance, Real Estate, and Legal) as well as other activities that have not been assigned to our operating segments, including costs incurred in certain satellite development programs and other business development activities, our centralized treasury activities and gains (losses) from certain of our investments.

For the Three Months Ended September 30, Variance
2017 2016 Amount %
(Dollars in thousands)
Total revenue $ 4,079
$ 2,690
$ 1,389
51.6
Capital expenditures $ 75,500
$ 48,162
$ 27,338
56.8
EBITDA $ 9,699
$ (20,477 ) $ 30,176
*

* Percentage is not meaningful.

~~Capital Expenditures~~

For the three months ended September 30, 2017, Corporate and Other capital expenditures increased by $27.3 million, or 56.8%, compared to the same period in 2016, primarily related to an increase in satellite expenditures of $61.9 million on the EchoStar XXIV satellite and an increase in satellite expenditures of $6.8 million on the EchoStar XXI satellite, partially offset by a decrease in satellite expenditures of $33.6 million on the EchoStar XIX satellite and a decrease in satellite expenditures of $8.9 million on the EchoStar XXIII satellite. The EchoStar XIX satellite was launched in December 2016 and placed into service in the first quarter of 2017. The EchoStar XXIII satellite was launched in March 2017 and was placed into service in the second quarter of 2017. The EchoStar XXI satellite is intended to be used by EchoStar Mobile in providing mobile satellite services in the EU. It was launched in June 2017 and is anticipated to be placed into service in the fourth quarter of 2017. The EchoStar XXIV satellite is intended to provide additional capacity for the Hughes broadband services in North America and certain Latin American countries.

~~EBITDA~~

For the three months ended September 30, 2017, Corporate and Other EBITDA was a gain of $9.7 million compared to a loss of $20.5 million for the three months ended September 30, 2016. The change of $30.2 million was primarily related to (i) an increase of $19.9 million in gains on our trading securities in the third quarter of 2017 , (ii) a decrease of $6.2$2.5 million in general and administrative expenses ~~(iii) dividends of $2.3 million received from certain~~primarily related to strategic ~~equity investments~~transactions. The increase in ~~the third quarter of 2017, (iv)~~loss was partially offset by an increase in gains of ~~$1.0~~$5.5 million ~~in revenue from DISH Network primarily attributable to rental income relating to our lease agreements pursuant to which DISH Network leases~~on certain ~~real estate from us,~~marketable equity and ~~(v) a favorable foreign exchange impact of $0.4 million in 2017.~~debt securities that we account for using the fair value option.

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Nine Months Ended September 30, ~~2017~~2019 Compared to the Nine Months Ended September 30, ~~2016~~

For the Nine Months
Ended September 30, Variance
Statements of Operations Data (1) 2017 2016 Amount %
(Dollars in thousands)
Revenue:

Services and other revenue - DISH Network $ 339,824
$ 347,440
$ (7,616 ) (2.2 )
Services and other revenue - other 865,817
820,149
45,668
5.6
Equipment revenue - DISH Network 175
7,008
(6,833 ) (97.5 )
Equipment revenue - other 173,644
160,081
13,563
8.5
Total revenue 1,379,460
1,334,678
44,782
3.4
Costs and Expenses:

Cost of sales - services and other 404,448
384,942
19,506
5.1
% of Total services and other revenue 33.5 % 33.0 %

Cost of sales - equipment 153,854
143,252
10,602
7.4
% of Total equipment revenue 88.5 % 85.7 %

Selling, general and administrative expenses 263,820
240,454
23,366
9.7
% of Total revenue 19.1 % 18.0 %

Research and development expenses 23,444
23,524
(80 ) (0.3 )
% of Total revenue 1.7 % 1.8 %

Depreciation and amortization 379,939
324,743
55,196
17.0
Total costs and expenses 1,225,505
1,116,915
108,590
9.7
Operating income 153,955
217,763
(63,808 ) (29.3 )

Other Income (Expense):

Interest income 30,342
13,726
16,616
*
Interest expense, net of amounts capitalized (156,498 ) (80,376 ) (76,122 ) 94.7
Gains and impairment on investments, net 30,664
8,179
22,485
*
Equity in earnings of unconsolidated affiliates, net 15,620
8,984
6,636
73.9
Other, net 8,211
5,531
2,680
48.5
Total other expense, net (71,661 ) (43,956 ) (27,705 ) 63.0
Income from continuing operations before income taxes 82,294
173,807
(91,513 ) (52.7 )
Income tax provision (9,073 ) (61,258 ) 52,185
(85.2 )
Net income from continuing operations 73,221
112,549
(39,328 ) (34.9 )
Net income (loss) from discontinued operations 6,454
29,213
(22,759 ) (77.9 )
Net income 79,675
141,762
(62,087 ) (43.8 )
Less: Net loss attributable to noncontrolling interest in HSS Tracking Stock (655 ) (926 ) 271
(29.3 )
Less: Net income attributable to other noncontrolling interests 1,006
946
60
6.3
Net income attributable to EchoStar $ 79,324
$ 141,742
$ (62,418 ) (44.0 )

Other Data:

EBITDA (2) $ 588,038
$ 565,180
$ 22,858
4.0
Subscribers, end of period 1,140,000
1,018,000
122,000
12.0

* Percentage is not meaningful.

~~(1) An explanation of our key metrics is included on pages 61 and 62 under the heading “Explanation of Key Metrics and Other Items.”~~

~~(2) A reconciliation of EBITDA to “Net income,” the most directly comparable GAAP measure in the accompanying financial statements, is included on page~~ ~~56.~~ ~~For further information on our use of EBITDA see “Explanation of Key Metrics and Other Items” on page 62.~~ 2018

~~Table~~The following table presents our consolidated results of ~~Contents~~

~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued~~

~~Services and other revenue - DISH Network. “Services and other revenue - DISH Network” totaled $339.8 million~~operations for the nine months ended September 30, ~~2017, a decrease of $7.6 million or 2.2%,~~2019 compared to ~~the same period in 2016.~~

~~Services and other revenue - DISH Network from our Hughes segment for~~ the nine months ended September 30, ~~2017 decreased by $9.2 million, or 12.4%, to $65.4 million compared to the same period~~2018 (amounts in ~~2016. The decrease was primarily attributable to a decrease in wholesale subscribers.~~

Services and other revenue - DISH Network from Corporate and Other for the nine months ended September 30, 2017 increased by $2.6 million, or 23.5%, to $13.9 million compared to the same period in 2016. The increase was primarily attributable to an increase in rental income relating to certain lease agreements pursuant to which DISH Network leases certain real estate from us.

~~Services and other revenue - other. “Services and other revenue - other” totaled $865.8 million for the nine months ended September 30, 2017, an increase of $45.7 million or 5.6%, compared to the same period in 2016.~~

Services and other revenue - other from our Hughes segment for the nine months ended September 30, 2017 increased by $53.9 million, or 6.9%, to $833.1 million compared to the same period in 2016. The increase was primarily attributable to increases in sales of broadband services of $51.5 million to our domestic and international consumers, $8.2 million to our domestic enterprise customers and $3.8 million to our telecom systems customers, partially offset by a decrease of $9.8 million to our international enterprise customers.

Services and other revenue - other from our ESS segment for the nine months ended September 30, 2017 decreased by $9.1 million, or 20.6%, to $35.2 million compared to the same period in 2016. The decrease was primarily attributable to decreases in sales of transponder services due to expired service contracts.

~~Equipment revenue - DISH Network.~~ “Equipment revenue - DISH Network” totaled $0.2 million for the nine months ended September 30, 2017, a decrease of $6.8 million or 97.5%, compared to the same period in 2016 primarily from our Hughes segment. The decrease in revenue was primarily due to the decrease in unit sales of broadband equipment to dishNET as a result of the MSA. See Note 16 in the notes to condensed consolidated financial statements in Item 1 of this report for additional information about the MSA.

~~Equipment revenue - other.~~ “Equipment revenue - other” totaled $173.6 million for the nine months ended September 30, 2017, an increase of $13.6 million or 8.5%, compared to the same period in 2016 primarily from our Hughes segment. The increase was mainly due to an increase of $23.7 million in sales of broadband equipment to our domestic enterprise customers and an increase of $6.1 million to our domestic and international consumers. The increase was partially offset by a decrease in sales of broadband equipment to our telecom systems customers of $11.3 million, our international enterprise customers of $2.9 million, and our government customers of $2.8 million.

~~Cost of sales - services and other. “Cost of sales - services and other” totaled $404.4 million for the nine months ended September 30, 2017, an increase of $19.5 million or 5.1%, compared to the same period in 2016.~~

Cost of sales - services and other from our Hughes segment for the nine months ended September 30, 2017 increased by $18.5 million, or 5.5%, to $352.9 million compared to the same period in 2016. The increase was primarily attributable to an increase in the costs of broadband services provided to our domestic and international consumers, domestic enterprise customers, and telecom systems customers primarily due to the increase in sales of broadband services.

Cost of sales - services and other from our ESS segment for the nine months ended September 30, 2017 increased by $0.8 million, or 1.7%, to $48.9 million compared to the same period in 2016. The increase was primarily due to rental expenses for the lease of certain real estate and collocation and antenna space from DISH Network in 2017.

~~Cost of sales - equipment.~~ “Cost of sales - equipment” totaled $153.9 million for the nine months ended September 30, 2017, an increase of $10.6 million or 7.4%, compared to the same period in 2016 primarily from our Hughes segment. The increase was primarily attributable to an increase of $20.8 million in equipment costs related to the increase in sales to our domestic and international consumers and enterprise customers, partially offset by a decrease of $10.7 million in equipment costs related to the decrease in sales to dishNET and our telecom systems customers.

~~Table of Contents~~

~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued~~

~~Selling, general and administrative expenses.~~ “Selling, general and administrative expenses” totaled $263.8 million for the nine months ended September 30, 2017, an increase of $23.4 million or 9.7%, compared to the same period in 2016. The increase was primarily related to an increase of $28.9 million in marketing and promotional costs primarily attributable to our domestic and international consumer broadband sales in our Hughes segment and an increase of $2.5 million in litigation expense in 2017, partially offset by a decrease of $8.1 million in general and administrative expenses.

~~Research and development expenses.~~ “Research and development expenses” totaled $23.4 million for the nine months ended September 30, 2017, a decrease of $0.1 million or 0.3%, compared to the same period in 2016. Our research and development activities vary based on the activity level and scope of other engineering and customer related development contracts.

~~Depreciation and amortization.~~ “Depreciation and amortization” expenses totaled $379.9 million for the nine months ended September 30, 2017, an increase of $55.2 million or 17.0%, compared to the same period in 2016. The increase was primarily related to an increase of $34.4 million in depreciation expense of the EUTELSAT 65 West A, EchoStar XIX and EchoStar XXIII satellites that were placed into service in the third quarter of 2016, and the first and second quarters of 2017, respectively, an increase of $17.0 million in depreciation expense relating to domestic and international customer rental equipment, an increase of $11.0 million in depreciation expense relating to machinery and equipment and an increase of $6.9 million in amortization expense relating to the development of externally marketed software, partially offset by a decrease of $11.4 million in amortization expense from certain fully amortized other intangible assets in our Hughes segment and Corporate and Other.

~~Interest income~~. “Interest income” totaled $30.3 million for the nine months ended September 30, 2017, an increase of $16.6 million compared to the same period in 2016. The increase was primarily attributable to the increase in our marketable investments and an increase in yield percentage in 2017 when compared to 2016.

~~Interest expense, net of amounts capitalized~~. “Interest expense, net of amounts capitalized” totaled $156.5 million for the nine months ended September 30, 2017, an increase of $76.1 million or 94.7%, compared to the same period in 2016. The increase was primarily due to an increase in interest expense of $51.0 million relating to the issuance of 2026 Notes in the third quarter of 2016 and a decrease of $24.9 million in capitalized interest relating to the EchoStar XIX and EchoStar XXIII satellites that were placed into service in the first and second quarters of 2017, respectively.

~~Gains and impairment on investments, net.~~ “Gains and impairment on investments, net” totaled $30.7 million in gains for the nine months ended September 30, 2017, an increase of $22.5 million, compared to the same period in 2016. The increase was primarily due to an increase of $19.9 million in gains on our trading securities in the third quarter of 2017, a gain of $8.9 million from the sale of our investment in Invidi Technologies Corporation to an entity owned in part by DISH Network in the first quarter of 2017, partially offset by an other than temporary impairment loss of $3.3 million on certain strategic equity securities in our marketable investment securities in 2017 and a decrease of $2.8 million in realized gains on our securities classified as available-for-sale in 2017.

~~Equity in earnings of unconsolidated affiliates, net~~. “Equity in earnings of unconsolidated affiliates, net” totaled $15.6 million in earnings for the nine months ended September 30, 2017, an increase of $6.6 million or 73.9%, compared to the same period in 2016. The increase was primarily related to an increase in earnings from our investment in Dish Mexico, partially offset by a decrease in earnings from our investment in Deluxe/EchoStar LLC.

~~Other, net.~~ “Other, net” totaled $8.2 million in income for the nine months ended September 30, 2017, an increase of $2.7 million or 48.5%, compared to the same period in 2016. The increase was primarily related to dividends of $5.8 million received from certain strategic equity investments in 2017, a favorable foreign exchange impact of $2.0 million in 2017, and $1.5 million in a protective put associated with our trading securities in 2016, partially offset by a $6.8 million for a provision recorded in the first half of 2015 in connection with Federal Communications Commission (“FCC”) regulatory fees, which was reversed in the first quarter of 2016.

~~Income tax provision~~. Income tax expense was $9.1 million for the nine months ended September 30, 2017, a decrease in expense of $52.2 million or 85.2%, compared to the same period in 2016. Our effective income tax rate was 11.0% and 35.2% for the nine months ended September 30, 2017 and 2016, respectively. The variations in our current year effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2017 were primarily due to the recognition of a one-time tax benefit for the revaluation of our deferred tax assets and liabilities due to a change in our state effective tax rate as a

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result of the Share Exchange, the increase in our valuation allowance associated with unrealized gains that are capital in nature, and change in the amount of unrecognized tax benefit from uncertain tax positions. The tax benefit recognized from the change in our effective tax rate was partially offset by the increase in our valuation allowance associated with certain state and foreign losses. The variations in our effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2016 were primarily due to research and experimentation credits, partially offset by state and local taxes.

~~Net income attributable to EchoStar. “Net income attributable to EchoStar~~” was $79.3 million for the nine months ended September 30, 2017, a decrease of $62.4 million or 44.0%, compared to the same period in 2016. The decrease was primarily due to (i) an increase in interest expense of $76.1 million, (ii) a decrease in operating income, including depreciation and amortization, of $63.8 million and (iii) a decrease of $22.8 million in income from discontinued operations in 2017. The decrease was partially offset by (i) a decrease in income tax expense of $52.2 million, (ii) an increase of $22.5 million in gains on investments, net of losses and impairments, (iii) an increase of $16.6 million in interest income, (iv) an increase of $6.6 million in equity in earnings of unconsolidated affiliates, net, and (v) an increase in other income of $2.7 million.

~~Earnings before interest, taxes, depreciation and amortization (“EBITDA”)~~. EBITDA was $588.0 million for the nine months ended September 30, 2017, an increase of $22.9 million or 4.0%, compared to the same period in 2016. The increase was primarily due to (i) an increase of $19.3 million in gains on our trading securities, (ii) an increase of $6.6 million in equity in earnings of unconsolidated affiliates, net and (iii) an increase in other income of $2.7 million. The increase was partially offset by a decrease in operating income, excluding depreciation and amortization, of $8.6 million. EBITDA is a non-GAAP financial measure and is described under Explanation of Key Metrics and Other Items below. The following table reconciles EBITDA to Net income, the most directly comparable GAAP measure in the accompanying financial statements.thousands):

For the Nine Months
Ended September 30, Variance
2017 2016 Amount %
(Dollars in thousands)
Net income $ 79,675
$ 141,762
$ (62,087 ) (43.8 )

Interest income and expense, net 126,156
66,650
59,506
89.3
Income tax provision 9,073
61,258
(52,185 ) (85.2 )
Depreciation and amortization 379,939
324,743
55,196
17.0
Net income from discontinued operations (6,454 ) (29,213 ) 22,759
(77.9 )
Net income attributable to noncontrolling interests (351 ) (20 ) (331 ) *
EBITDA $ 588,038
$ 565,180
$ 22,858
4.0



	For the nine months ended September 30,						Variance
Statements of Operations Data (1)	2019			2018			Amount				%

Revenue:
Services and other revenue - DISH Network	$	42,532		$	57,410		$	(14,878	)		(25.9	)
Services and other revenue - other	1,169,459			1,101,111			68,348				6.2
Equipment revenue	175,084			150,134			24,950				16.6
Total revenue	1,387,075			1,308,655			78,420				6.0
Costs and expenses:
Cost of sales - services and other	429,869			421,622			8,247				2.0
% of total services and other revenue	35.5		%	36.4		%
Cost of sales - equipment	142,744			127,254			15,490				12.2
% of total equipment revenue	81.5		%	84.8		%
Selling, general and administrative expenses	384,152			314,040			70,112				22.3
% of total revenue	27.7		%	24.0		%
Research and development expenses	19,411			20,328			(917		)		(4.5	)
% of total revenue	1.4		%	1.6		%
Depreciation and amortization	361,619			338,737			22,882				6.8
Total costs and expenses	1,337,795			1,221,981			115,814				9.5
Operating income	49,280			86,674			(37,394		)		(43.1	)

Other income (expense):
Interest income	64,817			56,237			8,580				15.3
Interest expense, net of amounts capitalized	(156,813		)	(164,038		)	7,225			��	4.4
Gains (losses) on investments, net	28,087			31,606			(3,519		)		(11.1	)
Equity in earnings (losses) of unconsolidated affiliates, net	(14,317		)	(2,651		)	(11,666		)		*
Other, net	(16,028		)	(3,381		)	(12,647		)		*
Total other income (expense), net	(94,254		)	(82,227		)	(12,027		)		(14.6	)
Income (loss) from continuing operations before income taxes	(44,974		)	4,447			(49,421		)		*
Income tax benefit (provision), net	(12,607		)	(8,275		)	4,332				(52.4	)
Net loss from continuing operations	(57,581		)	(3,828		)	53,753				*
Net income from discontinued operations	46,423			76,843			(30,420		)		(39.6	)
Net income (loss)	(11,158		)	73,015			(84,173		)		*
Less: Net income (loss) attributable to noncontrolling interests	(1,359		)	1,292			(2,651		)		*
Net income (loss) attributable to EchoStar Corporation common stock	$	(9,799	)	$	71,723		$	(81,522	)		*

Other data:
EBITDA (2)	$	410,000		$	449,693		$	(39,693	)		(8.8	)
Subscribers, end of period	1,437,000			1,332,000			105,000				7.9

* Percentage is not meaningful.

~~Segment Operating Results and Capital Expenditures~~

~~Nine Months Ended September 30, 2017 Compared to the Nine Months Ended September 30, 2016~~

Hughes EchoStar
Satellite
Services Corporate and Other Consolidated
Total
(In thousands)
For the Nine Months Ended September 30, 2017

Total revenue $ 1,072,143
$ 295,785
$ 11,532
$ 1,379,460
Capital expenditures $ 270,624
$ 21,351
$ 118,170
$ 410,145
EBITDA $ 342,693
$ 241,873
$ 3,472
$ 588,038

For the Nine Months Ended September 30, 2016

Total revenue $ 1,021,451
$ 305,919
$ 7,308
$ 1,334,678
Capital expenditures $ 261,241
$ 50,762
$ 165,815
$ 477,818
EBITDA $ 353,505
$ 257,181
$ (45,506 ) $ 565,180

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~~Hughes Segment~~

For the Nine Months
Ended September 30, Variance
2017 2016 Amount %
(Dollars in thousands)
Total revenue $ 1,072,143
$ 1,021,451
$ 50,692
5.0
Capital expenditures $ 270,624
$ 261,241
$ 9,383
3.6
EBITDA $ 342,693
$ 353,505
$ (10,812 ) (3.1 )

~~Revenue~~

Hughes segment total revenue for the nine months ended September 30, 2017 increased by $50.7 million, or 5.0%, compared to the same period in 2016. The increase was primarily due to an increase of $57.6 million in sales of broadband equipment and services to our domestic and international consumers, an increase of $31.9 million in sales of broadband equipment and services to our domestic enterprise customers, and an increase of $3.8 million in sales of services to our telecom systems customers. The increase was partially offset by a decrease of $16.1 million in sales of broadband equipment and services to DISH Network, a decrease of $14.1 million in sales of broadband equipment to our telecom systems customers and government customers, and a decrease of $12.7 million in sales of broadband equipment and services to our international enterprise customers.

~~Capital Expenditures~~

Hughes segment capital expenditures for the nine months ended September 30, 2017 increased by $9.4 million, or 3.6%, compared to the same period in 2016, primarily as a result of an increase of $95.4 million in expenditures in our domestic and international businesses. The increase was mainly associated with customer rental equipment for consumer services provided on the EUTELSAT 65 West A and EchoStar XIX satellites that were placed into service in the third quarter of 2016 and the first quarter of 2017, respectively. The increase was partially offset by a decrease of $84.6 million in expenditures on other satellites and related ground infrastructure, primarily resulted from the launch of service on EUTELSAT 65 West A and EchoStar XIX satellites.

~~EBITDA~~

Hughes segment EBITDA for the nine months ended September 30, 2017 was $342.7 million, a decrease of $10.8 million, or 3.1%, compared to the same period in 2016. The decrease was primarily due to an increase of $28.9 million in marketing and promotional costs mainly attributable our domestic and international consumer broadband sales and an other than temporary impairment loss of $3.3 million on certain strategic equity securities in our marketable investment securities in 2017. The decrease was partially offset by an increase of $22.1 million in gross margin.

~~EchoStar Satellite Services Segment~~

For the Nine Months
Ended September 30, Variance
2017 2016 Amount %
(Dollars in thousands)
Total revenue $ 295,785
$ 305,919
$ (10,134 ) (3.3 )
Capital expenditures $ 21,351
$ 50,762
$ (29,411 ) (57.9 )
EBITDA $ 241,873
$ 257,181
$ (15,308 ) (6.0 )

~~Revenue~~

ESS segment total revenue for the nine months ended September 30, 2017 decreased by $10.1 million, or 3.3%, compared to the same period in 2016, primarily attributable to decreases in sales of transponder services due to expired service contracts.

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~~Capital Expenditures~~

ESS segment capital expenditures for the nine months ended September 30, 2017 decreased by $29.4 million, or 57.9%, compared to the same period in 2016, primarily related to a decrease in expenditures on the EchoStar 105/SES-11 satellite.

~~EBITDA~~

ESS segment EBITDA for the nine months ended September 30, 2017 was $241.9 million, a decrease of $15.3 million, or 6.0%, compared to the same period in 2016. The decrease in EBITDA for our ESS segment was primarily due to a decrease of $10.9 million in gross margin and a decrease of $3.8 million due to a provision recorded in the first half of 2015 in connection with FCC regulatory fees, which was reversed in the first quarter of 2016.

~~Corporate and Other~~

For the Nine Months
Ended September 30, Variance
2017 2016 Amount %
(Dollars in thousands)
Total revenue $ 11,532
$ 7,308
$ 4,224
57.8
Capital expenditures $ 118,170
$ 165,815
$ (47,645 ) (28.7 )
EBITDA $ 3,472
$ (45,506 ) $ 48,978
*

* Percentage is not meaningful.

~~Capital Expenditures~~

For the nine months ended September 30, 2017, Corporate and Other capital expenditures decreased by $47.6 million, or 28.7%, compared to the same period in 2016, primarily related to a decrease in satellite expenditures of $72.7 million on the EchoStar XIX satellite, a decrease in satellite expenditures of $26.2 million on the EchoStar XXIII satellite, and a decrease in satellite expenditures of $10.3 million on the EchoStar XXI satellite, partially offset by an increase in satellite expenditures of $61.9 million on the EchoStar XXIV satellite. The EchoStar XIX satellite was launched in December 2016 and placed into service in the first quarter of 2017. The EchoStar XXIII satellite was launched in March 2017 and was placed into service in the second quarter of 2017. The EchoStar XXI satellite is intended to be used by EchoStar Mobile in providing mobile satellite services in the EU. It was launched in June 2017 and is anticipated to be placed into service in the fourth quarter of 2017. The EchoStar XXIV satellite is intended to provide additional capacity for the Hughes broadband services in North America and certain Latin American countries.

~~EBITDA~~

For the nine months ended September 30, 2017, Corporate and Other EBITDA was a gain of $3.5 million compared to a loss of $45.5 million for the nine months ended September 30, 2016. The change of $49.0 million was primarily related to (i) an increase of $19.9 million in gains on our trading securities in the third quarter of 2017, (ii) a gain of $8.9 million from the sale of our investment in Invidi Technologies Corporation to an entity owned in part by DISH Network in the first quarter of 2017, (iii) a decrease of $7.9 million in general and administrative expenses, (iv) an increase of $6.6 million in equity in earnings of unconsolidated affiliates, net in 2017, (v) dividends of $5.8 million received from certain strategic equity investments in 2017, (vi) an increase of $2.3 million in rental income relating to certain lease agreements pursuant to which DISH Network leases certain real estate from us, and (vii) a favorable foreign exchange impact of $1.7 million in 2017. The reduction in loss was partially offset by $3.0 million attributable to a provision recorded in the first half of 2015 in connection with FCC regulatory fees, which was reversed in the first quarter of 2016.

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~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Cash, Cash Equivalents and Current Marketable Investment Securities~~

We consider all liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. See “Quantitative and Qualitative Disclosures about Market Risk” for further discussion regarding our marketable investment securities. As of September 30, 2017 and December 31, 2016, our cash, cash equivalents and current marketable investment securities totaled $3.28 billion and $3.09 billion, respectively.

As of September 30, 2017 and December 31, 2016, we held $485.0 million and $522.5 million, respectively, of marketable investment securities, consisting of various debt and equity instruments including corporate bonds, corporate equity securities, government bonds and mutual funds.

~~The following discussion highlights our cash flow activities for the nine months ended September 30, 2017.~~

~~Cash flows from operating activities~~. We typically reinvest the cash flow from operating activities in our business. For the nine months ended September 30, 2017, we reported net cash inflows from operating activities of $591.9 million, an increase of $17.2 million, compared to the same period in 2016. The increase in cash inflows was primarily attributable to an increase of $160.1 million resulting from changes in operating assets and liabilities related to timing differences, partially offset by lower net income of $142.9 million adjusted to exclude: (i) “Depreciation and amortization;” (ii) “Equity in earnings of unconsolidated affiliates, net;” (iii) “Gain and impairment on investments, net;” (iv) “Stock-based compensation;” (v) “Deferred tax provision;” (vi) “Other, net;” (vii) “Dividends received from unconsolidated entities;” and (viii) “~~Proceeds from sale of trading securities~~”.

~~Cash flows from investing activities~~. Our investing activities generally include purchases and sales of marketable investment securities, capital expenditures, acquisitions and strategic investments. For the nine months ended September 30, 2017, we reported net cash outflows from investing activities of $374.4 million, a decrease of $385.4 million, compared to the same period in 2016. The decrease in cash outflows was primarily related to a decrease of $296.2 million in purchases of marketable investment securities, net of sales and maturities, and a decrease of $86.9 million in capital expenditures, net of related refunds, in 2017 when compared to the same period in 2016 and cash proceeds of $17.8 million from the sale of our investment in Invidi Technologies Corporation to an entity owned in part by DISH Network in the first quarter of 2017. The decrease was partially offset by a decrease of $8.2 million in restricted cash and marketable investment securities and an increase of $7.5 million in expenditures for externally marketed software.

~~Cash flows from financing activities~~. Our financing activities generally include proceeds related to the issuance of debt and cash used for the repurchase, redemption or payment of debt and capital lease obligations and the proceeds from Class A common stock options exercised and stock issued under our stock incentive plans and employee stock purchase plan. For the nine months ended September 30, 2017, we reported net cash inflows from financing activities of $8.7 million, a decrease in cash inflows of $1.47 billion, compared to the same period in 2016. The decrease in cash inflows was primarily due to proceeds of $1.5 billion from the issuance of the 2026 Notes in the third quarter of 2016 and a decrease of $4.5 million in net proceeds from Class A common stock issued under our employee stock purchase plan in 2017, partially offset by an increase of $28.5 million in net proceeds from Class A common stock options exercised issued under our stock incentive plans in 2017, a decrease of $6.6 million in capital lease obligation payments relating to our uplink equipment, and a decrease of $5.9 million in payments of debt issuance costs in 2017.

~~Obligations and Future Capital Requirements~~

~~Contractual Obligations~~

As of September 30, 2017, our satellite-related obligations were approximately $1.01 billion. Our satellite-related obligations primarily include payments pursuant to agreements for the construction of the EchoStar XXIV satellite; payments pursuant to launch services contracts and regulatory authorizations; executory costs for our capital lease satellites; costs under satellite service agreements; and in-orbit incentives relating to certain satellites; as well as commitments for long-term satellite operating leases and satellite service arrangements.


(1)	An explanation of our key metrics is included on pages 68 and 69 under the heading Explanation of Key Metrics and Other Items.


(2)	A reconciliation of EBITDA to Net income, the most directly comparable U.S. GAAP measure in the accompanying financial statements, is included on page 62. For further information on our use of EBITDA, see Explanation of Key Metrics and Other Items on page 69.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

~~Off-Balance Sheet Arrangements~~The following discussion relates to our continuing operations for the nine months ended September 30, 2019 and 2018 unless otherwise stated.

Services and other revenue - DISH Network. Services and other revenue - DISH Network totaled $42.5 million for the nine months ended September 30, 2019, a decrease of $14.9 million or 25.9%, compared to the same period in 2018.

Services and other revenue - DISH Network from our Hughes segment for the nine months ended September 30, 2019 decreased by $13.7 million, or 34.9%, to $25.6 million compared to the same period in 2018. The decrease was primarily attributable to a continued decrease in our residential wholesale broadband services.

Services and other revenue - DISH Network from our ESS segment for the nine months ended September 30, 2019 decreased by $1.6 million, or 41.4%, to $2.2 million compared to the same period in 2018. The decrease was primarily due to a decrease of $1.6 million in satellite capacity leased to DISH Network on the EchoStar IX satellite.

Services and other revenue - other. Services and other revenue - other totaled $1.2 billion for the nine months ended September 30, 2019, an increase of $68.3 million or 6.2%, compared to the same period in 2018.

Services and other revenue - other from our Hughes segment for the nine months ended September 30, 2019 increased by $77.8 million, or 7.2%, to $1.2 billion compared to the same period in 2018. The increase was primarily attributable to increases in sales of broadband services to our consumer customers of $95.4 million, partially offset by a decrease in sales of broadband services to our enterprise customers of $20.5 million.

Services and other revenue - other from our ESS segment for the nine months ended September 30, 2019 decreased by $9.7 million, or 48.5%, to $9.7 million compared to the same period in 2018. The decrease was due to a net decrease in transponder services provided to third parties.

Equipment revenue. Equipment revenue totaled $175.1 million for the nine months ended September 30, 2019, an increase of $25.0 million or 16.6%, compared to the same period in 2018. The increase was from our Hughes segment and mainly due to increases in hardware sales of $15.0 million to our international enterprise customers and $11.9 million to our mobile satellite systems customers. The increase was partially offset by a decrease in hardware sales of $2.6 million to our domestic consumer and enterprise customers.

Cost of sales - services and other. Cost of sales - services and other totaled $429.9 million for the nine months ended September 30, 2019, an increase of $8.2 million or 2.0%, compared to the same period in 2018. The increase was from our Hughes segment primarily attributable to an increase in the costs of broadband services provided to our consumer customers supporting the increase in number of subscribers and revenue in both the domestic and international markets, partially offset by a decrease in the costs of broadband services provided to our enterprise customers.

~~Other than~~Cost of sales - equipment. Cost of sales - equipment totaled $142.7 million for the ~~transactions described below, we generally do not engage in off-balance sheet financing activities or use derivative financial instruments for hedge accounting or speculative purposes.~~

~~As of~~nine months ended September 30, ~~2017, we had $35.5~~2019, an increase of $15.5 million ~~of letters of credit~~or 12.2%, compared to the same period in 2018. The increase was from our Hughes segment and ~~insurance bonds. Of this amount, $12.9 million was secured by restricted cash, $0.4 million was related~~primarily attributable to ~~insurance bonds, and $22.1 million was issued under credit arrangements available~~an increase in hardware sales to our ~~foreign subsidiaries. Certain letters of credit are secured~~international enterprise customers and our mobile satellite systems customers. The increase was partially offset by ~~assets of~~a decrease in hardware sales to our ~~foreign subsidiaries.~~domestic consumer and enterprise customers.

~~As of~~Selling, general and administrative expenses.Selling, general and administrative expenses totaled $384.2 million for the nine months ended September 30, ~~2017, we had foreign currency forward contracts with a notional value~~2019, an increase of ~~$6.5~~$70.1 million ~~in place to partially mitigate foreign currency exchange risk. From time to time, we may enter into foreign currency forward contracts,~~ or ~~take other measures, to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions.~~

~~Satellite Insurance~~

~~We historically have not carried in-orbit insurance on our satellites because we assessed that the cost of insurance was uneconomical relative~~22.3%, compared to the ~~risk~~same period in 2018. The increase was primarily attributable to increases in (i) expense 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. Based on economic analysis of the current insurance market we obtained launch plus one year in-orbit insurance, subject to certain limitations, for the EchoStar XIX, EchoStar XXI and EchoStar XXIII satellites. Additionally, we obtained certain launch and in-orbit insurance for our interest in the EchoStar 105/SES-11 satellite. All 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.

~~Future Capital Requirements~~

We primarily rely on our existing cash and marketable investment securities balances, as well as cash flow generated through our operations to fund our business. We currently depend on DISH Network for a significant portion of our revenue. The loss of, or a significant reduction in provision of satellite services would significantly reduce our revenue and materially adversely impact our results of operations. There can be no assurance that we will have positive cash flows from operations. Furthermore, if we experience negative cash flows, our existing cash and marketable investment securities balances may be reduced.

~~We have a significant amount of outstanding indebtedness. As of September 30, 2017, our total indebtedness was $3.64 billion, of which $280.9~~$32.9 million related to ~~capital lease obligations. See~~certain legal proceedings, (ii) marketing and promotional expenses of $18.4 million from our ~~most recent Form 10-K for a discussion~~Hughes segment mainly associated with our consumer business, (iii) bad debt expense of ~~the terms~~$6.6 million and (iv) other general and administrative expenses of our indebtedness. Our liquidity requirements will be significant, primarily due to our debt service requirements. In addition, our future capital expenditures are likely to increase if we make acquisitions or additional investments in infrastructure or joint ventures necessary to support and expand our business, or if we decide to purchase or build one or more additional satellites. Furthermore, we expect to be a federal cash taxpayer for 2017 which will require additional liquidity. Other aspects of our business operations may also require additional capital. We periodically evaluate various strategic initiatives, the pursuit of which could also require us to invest or raise significant additional capital, which may not be available on acceptable terms or at all.$12.2 million.

~~We anticipate that our existing cash and marketable investment securities are sufficient to fund the currently anticipated operations of our business through the next twelve months.~~

~~Satellites~~

As our satellite fleet ages, we will be required to evaluate replacement alternatives such as acquiring, leasing or constructing additional satellites, with or without customer commitments for capacity. We may also construct or lease additional satellites in the future to provide satellite services at additional orbital locations or to improve the quality of our satellite services.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

~~Stock Repurchases~~

~~Pursuant to a stock repurchase program approved by our board of directors, we are authorized to repurchase up to $500.0~~Depreciation and amortization.Depreciation and amortization expenses totaled $361.6 million ~~of our outstanding shares of Class A common stock through December 31, 2018. As of~~for the nine months ended September 30, ~~2017, we have not repurchased any common stock under this program.~~

~~Seasonality~~

~~For~~2019, an increase of $22.9 million or 6.8%, compared to the same period in 2018. The increase was primarily due to increases in depreciation expense of (i) $12.6 million relating to our ~~Hughes segment,~~customer premises equipment, (ii) $4.8 million relating the Telesat T19V satellite that was placed into service revenue is generally not impacted by seasonal fluctuations other than those associated with fluctuations related to sales and promotional activities. However, like many communications infrastructure equipment vendors, a higher amount of our hardware revenue occurs in the ~~second half~~fourth quarter of 2018 and (iii) $3.1 million relating to the decrease in depreciable life of the year due to our customers’ annual procurement and budget cycles. Large enterprises and operators often allocate their capital expenditure budgets at the beginning of their fiscal year (which often coincides with the calendar year). The typical sales cycle for large complex system procurements is six to 12 months, which often results in the customer expenditure occurring towards the end of the year. Customers often seek to expend the budgeted funds prior to the end of the year and the next budget cycle.

~~Our ESS segment is not generally affected by seasonal impacts.~~

~~Inflation~~

Inflation has not materially affected our operations during the past three years. We believe that our ability to increase the prices charged for our products and services in future periods will depend primarily on competitive pressures or contractual terms.

~~EXPLANATION OF KEY METRICS AND OTHER ITEMS~~

~~Services and other revenue - DISH Network~~SPACEWAY 3 satellite. . “Services and other revenue - DISH Network” primarily includes revenue associated with satellite and transponder services, telemetry, tracking and control, professional services, facilities rental revenue and other services provided to DISH Network. “Services and other revenue - DISH Network” also includes subscriber wholesale service fees for the Hughes service sold to dishNET.

~~Services and other revenue - other~~Interest income. ~~“Services~~Interest income totaled $64.8 million for the nine months ended September 30, 2019, an increase of $8.6 million or 15.3%, compared to the same period in 2018 primarily attributable to an increase in yield percentage in 2019 compared to 2018, partially offset by a decrease in interest income as a result of the decrease in cash and ~~other revenue - other”~~cash equivalents and current marketable investment securities in 2019.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized totaled $156.8 million for the nine months ended September 30, 2019, a decrease of $7.2 million or 4.4%, compared to the same period in 2018. The decrease was primarily ~~includes~~due to a decrease of $22.4 million in interest expense and the ~~sales~~amortization of ~~enterprise~~deferred financing cost as a result of the repurchase and ~~consumer broadband services, as well as maintenance~~maturity of the 2019 Senior Secured Notes and ~~other contracted services. “Services and other revenue - other” also includes revenue~~a net increase of $2.6 million in capitalized interest relating to the construction of the EchoStar XXIV satellite. The decrease was partially offset by an increase of $18.2 million in interest expense associated with ~~satellite~~certain legal proceedings.

Gains (losses) on investments, net. Gains (losses) on investments, net totaled $28.1 million in gains for the nine months ended September 30, 2019, a decrease of $3.5 million or 11.1% compared to the same period in 2018. The decrease was primarily attributable to a $28.7 million reduction to the carrying amount of one of our investments in the first quarter of 2019 and ~~transponder services, satellite uplinking/downlinking and other services provided to customers other than DISH Network.~~a $1.8 million increase in loss of available for sale securities, partially offset by an increase in gains on certain marketable equity securities of $26.5 million in 2019.

~~Equipment revenue - DISH Network~~Equity in earnings (losses) of unconsolidated affiliates, net. ~~“Equipment revenue - DISH Network”~~Equity in earnings (losses) of unconsolidated affiliates, net totaled $14.3 million in loss for the nine months ended September 30, 2019, an increase in loss of $11.7 million compared to the same period in 2018.

Other, net.Other, net totaled $16.0 million in loss for the nine months ended September 30, 2019, a decrease of $12.6 million compared to the same period in 2018. For the nine months ended September 30, 2019, the $16.0 million in loss was primarily ~~includes sales~~related to an unfavorable foreign exchange impact of ~~satellite broadband equipment~~$14.5 million. For the nine months ended September 30, 2018, the $3.4 million in loss was related to (i) an unfavorable foreign exchange impact of $15.5 million, (ii) a net gain of $9.6 million due to the settlement of certain amounts due to and ~~related equipment,~~from a third party vendor and (iii) a net decrease of $2.9 million of dividends received from certain marketable equity securities.

Income tax benefit (provision), net. Income tax provision was $12.6 million for the nine months ended September 30, 2019, an increase of $4.3 million or 52.4%, compared to the same period in 2018. Our effective income tax rate was (28.0)% and 186.1% for the nine months ended September 30, 2019 and 2018, respectively. The variations in our current year effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2019 were primarily due to the increase in our valuation allowance associated with certain foreign losses and by the impact of state and local taxes partially offset by the change in net unrealized gains that are capital in nature and research and experimentation credits. For the year ended December 31, 2018, we recorded a tax provision of nil related to the ~~Hughes service, to DISH Network.~~

~~Equipment revenue - other. “Equipment revenue - other” primarily includes broadband equipment and networks sold to customers~~tax on deemed mandatory repatriation of our unrepatriated foreign earnings. As a result of the release of new treasury regulations in June 2019, we have recorded additional tax expense of $1.5 million on deemed mandatory repatriation of certain deferred foreign earnings. The variations in our ~~enterprise~~effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2018 were primarily due to research and ~~consumer markets.~~

~~Cost of sales - services~~experimentation credits and ~~other. “Cost of sales - services and other” primarily includes~~ the ~~cost of broadband services provided to~~change in our ~~enterprise and consumer customers, and to DISH Network, as well as the cost of providing maintenance and other contracted services. “Cost of sales - services and other” also includes the costs~~valuation allowance associated with ~~satellite~~unrealized gains that are capital in nature, partially offset by the impact of state and ~~transponder services, telemetry, tracking~~local taxes and ~~control, professional services, facilities rental costs, and other services provided to our customers, including DISH Network.~~

~~Cost of sales - equipment. “Cost of sales - equipment” consists primarily of~~ the ~~cost of broadband equipment and networks sold to customers~~increase in our ~~enterprise and consumer markets, and to DISH Network.~~

~~Selling, general and administrative expenses. “Selling, general and administrative expenses” primarily includes selling and marketing costs and employee-related costs~~valuation allowance associated with administrative services (e.g., information systems, human resources and other services), including stock-based compensation expense. It also includes professional fees (e.g. legal, information systems and accounting services) and other items associated with facilities and administrative services provided by DISH Network and other third parties.certain foreign losses.

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~~Research and development expenses~~Net income (loss) attributable to EchoStar Corporation common stock. ~~“Research and development expenses” primarily includes costs associated with~~Net income attributable to EchoStar Corporation common stock totaled $9.8 million for the ~~design and development~~nine months ended September 30, 2019, a decrease of ~~products~~$81.5 million, compared to ~~support future growth and provide new technology and innovation to our customers.~~the same period in 2018 as set forth in the following table (amounts in thousands):



	Amounts

Net income attributable to EchoStar Corporation for the nine months ended September 30, 2018	$	71,723
Decrease in operating income, including depreciation and amortization	(37,394		)
Increase in interest income	8,580
Decrease in interest expense, net of amounts capitalized	7,225
Decrease in gains on investments, net	(3,519		)
Increase in equity in losses of unconsolidated affiliates, net	(11,666		)
Decrease in other income	(12,647		)
Increase in income tax provision, net	(4,332		)
Increase in net income from discontinued operations	(30,420		)
Decrease in net income attributable to noncontrolling interests	2,651
Net loss attributable to EchoStar Corporation for the nine months ended September 30, 2019	$	(9,799	)

~~Interest income~~EBITDA. ~~“Interest income”~~EBITDA is a non-GAAP financial measure and is described under Explanation of Key Metrics and Other Items below. The following table reconciles EBITDA to Net income, the most directly comparable U.S. GAAP measure in the accompanying condensed consolidating financial statements (amounts in thousands):



	For the nine months ended September 30,						Variance
	2019			2018			Amount			%

Net income (loss)	$	(11,158	)	$	73,015		$	(84,173	)	*
Interest income and expense, net	91,996			107,801			(15,805		)	(14.7	)
Income tax provision, net	12,607			8,275			4,332			52.4
Depreciation and amortization	361,619			338,737			22,882			6.8
Net income from discontinued operations	(46,423		)	(76,843		)	30,420			(39.6	)
Net (income) loss attributable to noncontrolling interests	1,359			(1,292		)	2,651			*
EBITDA	$	410,000		$	449,693		$	(39,693	)	(8.8	)

EBITDA was $410.0 million for the nine months ended September 30, 2019, a decrease of $39.7 million or 8.8%, compared to the same period in 2018. The decrease was primarily ~~includes interest earned on our cash, cash equivalents~~due to decreases of (i) $12.6 million in other income, (ii) $11.9 million in operating income, excluding depreciation and ~~marketable investment securities, including premium~~ amortization and ~~discount accretion on debt securities.~~

~~Interest expense,~~ net ~~of amounts capitalized~~. “Interest expense, net of amounts capitalized” primarily includes interest expense associated with our debt and capital lease obligations (net of capitalized interest), and amortization of debt issuance costs.

~~Gains and impairment on investments, net~~. “Gains and impairment on investments, net” primarily includes gains, net of any losses, on the sale or exchange of investments, other-than-temporary impairment on certain of our marketable investment securities and unrealized gains on our trading securities.

~~Equity~~loss attributable to noncontrolling interests, (iii) $11.7 million in equity in earnings of unconsolidated affiliates ~~net. “Equity~~and (iv) $3.5 million in ~~earnings of unconsolidated affiliates, net” includes earnings or losses from our~~gains on investments, ~~accounted for under the equity method.~~

~~Other, net~~. “Other, net” primarily includes foreign exchange gains and losses, dividends received from our marketable investment securities, and other non-operating income or expense items that are not appropriately classified elsewhere in our condensed consolidated statements of operations.

~~Income (loss) from discontinued operations.~~ “Income (loss) from discontinued operations” includes the condensed consolidated financial statements of the EchoStar Technologies businesses and certain other assets exchanged as a result of the Share Exchange.

~~Earnings before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA is defined as “Net income” excluding “Interest expense,~~ net of ~~amounts capitalized,” “Interest income,” “Income tax provision,”~~losses and “Depreciation and amortization.” EBITDA is not a measure determined in accordance with GAAP. This non-GAAP measure is reconciled to “Net income” in our discussion of “Results of Operations” above. EBITDA should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with GAAP. EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes EBITDA provides meaningful supplemental information regarding the underlying operating performance of our business. Management also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties to evaluate the performance of companies in our industry.write-downs.

~~Subscribers. “Subscribers” include customers that subscribe to our Hughes segment’s HughesNet broadband services, through retail, wholesale and small/medium enterprise service channels.~~

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Segment Operating Results and Capital Expenditures

The following tables present our operating results, capital expenditures and EBITDA by segment for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 (amounts in thousands). Capital expenditures are net of refunds and other receipts related to property and equipment and exclude capital expenditures from discontinued operations of $0.5 million and $0.1 million for the nine months ended September 30, 2019 and 2018, respectively.



	Hughes		ESS			Corporate and Other			Consolidated Total

For the nine months ended September 30, 2019
Total revenue	$	1,360,919	$	11,873		$	14,283		$	1,387,075
Capital expenditures	$	224,483	$	—		$	89,868		$	314,351
EBITDA	$	448,837	$	5,006		$	(43,843	)	$	410,000

For the nine months ended September 30, 2018
Total revenue	$	1,271,886	$	22,562		$	14,207		$	1,308,655
Capital expenditures	$	285,352	$	(76,757	)	$	129,030		$	337,625
EBITDA	$	452,982	$	15,478		$	(18,767	)	$	449,693

Hughes Segment



	For the nine months ended September 30,				Variance
	2019		2018		Amount			%

Total revenue	$	1,360,919	$	1,271,886	$	89,033		7.0
Capital expenditures	$	224,483	$	285,352	$	(60,869	)	(21.3	)
EBITDA	$	448,837	$	452,982	$	(4,145	)	(0.9	)

Total revenue for the nine months ended September 30, 2019 increased by $89.0 million, or 7.0%, compared to the same period in 2018. The increase was primarily due to an increase of $81.4 million in sales of broadband services to our consumer customers and net increases in hardware sales of $13.2 million to our enterprise customers and $11.9 million to our mobile satellite systems customers. The increase was partially offset by a decrease of $20.5 million in sales of broadband services to our enterprise customers.

Capital expenditures for the nine months ended September 30, 2019 decreased by $60.9 million, or 21.3%, compared to the same period in 2018, primarily due to net decreases in capital expenditures associated with the construction and infrastructure of our satellites and in our consumer and enterprise businesses.

EBITDA for the nine months ended September 30, 2019 was $448.8 million, a decrease of $4.1 million, or 0.9%, compared to the same period in 2018. The change in EBITDA was primarily attributable to an increase of $65.3 million in gross margin, which was offset by increases in (i) expense of $32.9 million related to certain legal proceedings, (ii) marketing and promotional expenses of $18.4 million mainly associated with our consumer business, (iii) bad debt expense of $6.6 million, (iv) a loss of $4.8 million from certain investments in our unconsolidated entities, and (v) other general and administrative expenses.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

ESS Segment



	For the nine months ended September 30,					Variance
	2019		2018			Amount			%

Total revenue	$	11,873	$	22,562		$	(10,689	)	(47.4	)
Capital expenditures	$	—	$	(76,757	)	$	76,757		(100.0	)
EBITDA	$	5,006	$	15,478		$	(10,472	)	(67.7	)

* Percentage is not meaningful.

Total revenue for the nine months ended September 30, 2019 decreased by $10.7 million, or 47.4%, compared to the same period in 2018. The decrease was attributable to a net decrease of $9.7 million in transponder services provided to third parties and a decrease of $1.6 million in satellite capacity leased to DISH Network on the EchoStar IX satellite.

Capital expenditures for the nine months ended September 30, 2019 increased by $76.8 million compared to the same period in 2018, primarily due to a reimbursement of $77 million related to the EchoStar 105/SES-11 satellite received in the first quarter of 2018.

EBITDA for the nine months ended September 30, 2019 was $5.0 million, a decrease of $10.5 million, or 67.7%, compared to the same period in 2018, primarily due to the decrease in ESS revenue.

Corporate and Other



	For the nine months ended September 30,						Variance
	2019			2018			Amount			%

Total revenue	$	14,283		$	14,207		$	76		0.5
Capital expenditures	$	89,868		$	129,030		$	(39,162	)	(30.4	)
EBITDA	$	(43,843	)	$	(18,767	)	$	(25,076	)	*

* Percentage is not meaningful.

Capital expenditures for the nine months ended September 30, 2019 decreased by $39.2 million, or 30.4%, compared to the same period in 2018, primarily due to decreases in satellite expenditures on the EchoStar XXIV satellite.

EBITDA for the nine months ended September 30, 2019 was a loss of $43.8 million, an increase in loss of $25.1 million compared to the same period in 2018. The increase in loss was largely attributable to (i) a net gain of $9.6 million due to the settlement of certain amounts due to and from a third party vendor in 2018, (ii) a decrease of $6.9 million in earnings from investments in our unconsolidated entities, (iii) a net decrease of $2.5 million of dividends received from certain marketable equity securities, (iv) a decrease of $2.5 million in gains on investments, net of losses and write-downs and (v) a higher unfavorable foreign exchange impact of $1.6 million.

LIQUIDITY AND CAPITAL RESOURCES

Cash, Cash Equivalents and Current Marketable Investment Securities

We consider all liquid investments purchased with an original maturity of less than 90 days to be cash equivalents. See Quantitative and Qualitative Disclosures about Market Risk for further discussion regarding our marketable investment securities.

As of September 30, 2019, our cash, cash equivalents, including restricted cash, and current marketable investment securities, totaled $2.5 billion compared to $3.2 billion as of December 31, 2018.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As of September 30, 2019 and December 31, 2018, we held $1.0 billion and $2.3 billion, respectively, of marketable investment securities, consisting of various debt and equity instruments including corporate bonds, corporate equity securities, government bonds and mutual funds.

The following discussion highlights our cash flow activities for the nine months ended September 30, 2019.

Cash flows from operating activities. We typically reinvest the cash flow from operating activities in our business. For the nine months ended September 30, 2019, we reported net cash inflows from operating activities of $533.1 million, a decrease of $10.9 million, compared to the same period in 2018. The decrease in cash inflows was primarily attributable to lower net income of $43.9 million adjusted to exclude: (i) Depreciation and amortization; (ii) Amortization of debt issuance costs, (iii) Equity in losses of unconsolidated affiliates, net; (iv) (Gains) losses on investments, net; (v) Stock-based compensation; (vi) Deferred tax provision; and (vii) Dividend received from unconsolidated entity, partially offset by an increase of $33.0 million resulting from changes in operating assets and liabilities.

Cash flows from investing activities. Our investing activities generally include purchases and sales of marketable investment securities, capital expenditures, acquisitions and strategic investments. For the nine months ended September 30, 2019, we reported net cash inflows from investing activities of $991.4 million compared to net cash outflows of $1.4 billion for the same period in 2018. For the nine months ended September 30, 2019, we had net sales and maturities of marketable securities of $1.3 billion, partially offset by expenditures for property and equipment of $314.9 million. For the nine months ended September 30, 2018, we had net purchases of marketable securities of $991.9 million, expenditures for property and equipment of $415.3 million and a reimbursement of $77.5 million million related to the EchoStar 105/SES-11 satellite.

Cash flows from financing activities. Our financing activities generally include proceeds related to the issuance of debt and cash used for the repurchase, redemption or payment of debt and capital lease obligations and the proceeds from Class A common stock options exercised and stock issued under our stock incentive plans and employee stock purchase plan. For the nine months ended September 30, 2019, we reported net cash outflows from financing activities of $890.0 million, an increase of $869.0 million compared to the same period in 2018. Net cash outflows for the nine months ended September 30, 2019 included $920.9 million for the repurchasing and maturity of debt and $7.3 million for the purchase of noncontrolling shareholder interests in a subsidiary of ours that were held by an unaffiliated third party. These transactions did not occur during the nine months ended September 30, 2018. Additionally, during the nine months ended September 30, 2019, we received $64.1 million in net proceeds from Class A common stock options exercised in 2019 compared to $4.4 million during the nine months ended September 30, 2018.

Obligations and Future Capital Requirements

Contractual Obligations

As of September 30, 2019, our satellite-related obligations were $439.1 million. Our satellite-related obligations primarily include payments pursuant to agreements for the construction of the EchoStar XXIV satellite; 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.

Off-Balance Sheet Arrangements

We generally do not engage in off-balance sheet financing activities or use derivative financial instruments for hedge accounting or speculative purposes.

Letters of Credit

As of September 30, 2019, we had $52.1 million of letters of credit and insurance bonds. Of this amount, $25.5 million was secured by restricted cash, $4.3 million was related to insurance bonds and $22.3 million was issued under credit arrangements available to our foreign subsidiaries. Certain letters of credit are secured by assets of our foreign subsidiaries.

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Satellites

As our satellite fleet ages, we will be required to evaluate replacement alternatives such as acquiring, leasing or constructing additional satellites, with or without customer commitments for capacity. We may also construct, acquire or lease additional satellites in the future to provide satellite services at additional orbital locations or to improve the quality of our satellite services.

Satellite Insurance

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 only for our SPACEWAY 3 and EchoStar XVII satellites insurance or other contractual arrangements during the commercial in-orbit service of such satellite. We were required pursuant to such agreements to maintain similar insurance or other contractual arrangements for the EchoStar XVI satellite, which we transferred to DISH Network pursuant to the BSS Transaction. 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.

Future Capital Requirements

We primarily rely on our existing cash and marketable investment securities balances, as well as cash flow generated through our operations to fund our business. The loss of or a significant reduction in provision of satellite services would significantly reduce our revenue and materially adversely impact our results of operations. We no longer generate cash flows from our former BSS Business, which comprised a substantial portion of our ESS segment prior to the BSS Transaction. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. Consumer revenue in our Hughes segment depends on our success in adding new and retaining existing subscribers and driving higher average revenue per subscriber across our wholesale and retail channels. Revenue in our aeronautical, enterprise and equipment businesses relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. Service costs related to ongoing support of our direct and indirect customers and partners are typically impacted most significantly by our growth. There can be no assurance that we will have positive cash flows from operations. Furthermore, if we experience negative cash flows, our existing cash and marketable investment securities balances may be reduced.

We have a significant amount of outstanding indebtedness. As of September 30, 2019, our total indebtedness was $2.4 billion, of which $1.2 million related to finance lease obligations. See our most recent Annual Report on Form 10-K for a discussion of the terms of our indebtedness. In June 2019, we repurchased the outstanding principal of the 2019 Senior Secured Notes at maturity. Our liquidity requirements will be continue to be significant, primarily due to our remaining debt service requirements and the design and construction of our new EchoStar XXIV satellite. We may from time to time seek to purchase amounts of our outstanding debt in open market purchases, privately negotiated transactions or otherwise, depending on market conditions, our liquidity needs and other factors. The amounts we may repurchase may be material. In addition, our future capital expenditures are likely to increase if we make acquisitions or additional investments in infrastructure or joint ventures to support and expand our business, or if we decide to purchase or build one or more additional satellites. Other aspects of our business operations may also require additional capital.

We periodically evaluate various strategic initiatives, the pursuit of which could also require us to invest or raise significant additional capital, which may not be available on acceptable terms or at all. The Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”) limits the deductibility of interest expense for U.S. federal income tax purposes. While the 2017 Tax Act generally is likely to reduce our federal income tax obligations, if these limitations or other newly enacted provisions become applicable to us they could minimize such reductions or otherwise require us to pay additional federal income taxes, which in turn could result in additional liquidity needs. We do not expect to owe U.S. Federal income tax for 2019.

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We anticipate that our existing cash and marketable investment securities are sufficient to fund the currently anticipated operations of our business through the next twelve months.

Critical Accounting Policies and Estimates

The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, the reported amounts of revenue and expenses for each reporting period, and certain information disclosed in the notes to our accompanying Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q. We base our estimates, judgments and assumptions on historical experience and on various other factors that we believe to be relevant under the circumstances. Actual results may differ from previously estimated amounts, and such differences may be material to our Condensed Consolidated Financial Statements. We review our estimates and assumptions periodically, and the effects of revisions are reflected in the period they occur or prospectively if the revised estimate affects future periods. The following represent what we believe are the critical accounting policies that may involve a high degree of estimation, judgment and complexity. For a summary of our significant accounting policies, including those discussed below, see Note 2 in the notes to our accompanying Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

Contingent Liabilities

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. Legal fees and other costs of defending legal proceedings are charged to expense as incurred. A significant amount of management judgment is required in determining whether an accrual should be recorded for a loss contingency and the amount of such accrual. Estimates generally are developed in consultation with legal counsel and are based on an analysis of potential outcomes. Due to the inherent uncertainty in determining the likelihood of potential outcomes and the potential financial statement impact of such outcomes, it is possible that upon further development or resolution of a contingent matter, charges related to existing loss contingencies could be recorded in future periods, which could be material to our consolidated results of operations and financial position.

Revenue Recognition

Our Hughes segment enters into contracts to design, develop and deliver telecommunication networks to customers in our enterprise and mobile satellite systems markets. Those contracts require significant effort to develop and construct the network over an extended time period. Revenue from such contracts is recognized over time using an appropriate method to measure progress toward completion. Depending on the nature of the arrangement, we measure progress toward completion using the cost-to-cost input method or the units-of-delivery output method. Under the cost-to-cost method, revenue reflects the ratio of costs incurred to estimated total costs at completion. Under the units-of-delivery method, revenue and related costs are recognized as products are delivered based on the expected profit for the entire agreement. Profit margins on long-term contracts are based on estimates of total revenue and costs at completion. We review and revise our estimates periodically and recognize related adjustments in the period in which the revisions are made. Estimated losses on contracts are recorded in the period in which they are identified. Changes in our periodic estimates for these contracts could result in significant adjustments to our revenue or costs, which could be material to our consolidated results of operations.

Impairment of Long-lived Assets

We evaluate our long-lived assets other than goodwill and intangible assets with indefinite lives for impairment whenever events and changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of a long-lived asset or asset group is considered to not be recoverable when the estimated future undiscounted cash flows from such asset or asset group is less than its carrying amount. In that event, an impairment loss is recorded in the determination of operating income based on the amount by which the carrying amount exceeds the estimated fair value of the long-lived asset or asset group. Fair value is determined primarily using discounted cash flow techniques reflecting the estimated cash flows and discount rate that would be assumed by a market participant for the asset or asset group under review. Our discounted cash flow estimates typically include assumptions based on unobservable inputs and may reflect probability-weighting of alternative scenarios. Estimated losses on long-lived assets to be

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

disposed of by sale may be determined in a similar manner, except that fair value estimates are reduced for estimated selling costs. Changes in estimates of future cash flows, discount rates and other assumptions could result in recognition of additional impairment losses in future periods.

Seasonality

For our Hughes segment, service revenue is generally not impacted by seasonal fluctuations other than those associated with fluctuations related to sales and promotional activities. However, like many communications infrastructure equipment vendors, a higher amount of our hardware revenue occurs in the second half of the year due to our customers’ annual procurement and budget cycles. Large enterprises and operators often allocate their capital expenditure budgets at the beginning of their fiscal year (which often coincides with the calendar year). The typical sales cycle for large complex system procurements is six to 12 months, which often results in the customer expenditure occurring towards the end of the year. Customers often seek to expend the budgeted funds prior to the end of the year and the next budget cycle.

Our ESS segment is not generally affected by seasonal impacts.

Inflation

EXPLANATION OF KEY METRICS AND OTHER ITEMS

Services and other revenue - DISH Network. Services and other revenue - DISH Network primarily includes revenue associated with satellite and transponder leases and services, TT&C, professional services, facilities rental revenue and other services provided to DISH Network. Services and other revenue - DISH Network also includes subscriber wholesale service fees for the HughesNet service sold to DISH Network.

Services and other revenue - other. Services and other revenue - other primarily includes the sales of enterprise and consumer broadband services, as well as maintenance and other contracted services. Services and other revenue - other also includes revenue associated with satellite and transponder leases and services, satellite uplinking/downlinking and other services provided to customers other than DISH Network.

Equipment revenue. Equipment revenue primarily includes broadband equipment and networks sold to customers in our enterprise and consumer markets and sales of satellite broadband equipment and related equipment, related to the HughesNet service, to DISH Network.

Cost of sales - services and other. Cost of sales - services and other primarily includes the cost of broadband services provided to our enterprise and consumer customers, and to DISH Network, as well as the cost of providing maintenance and other contracted services. Cost of sales - services and other also includes the costs associated with satellite and transponder leases and services, TT&C, professional services, facilities rental costs and other services provided to our customers, including DISH Network.

Cost of sales - equipment. Cost of sales - equipment consists primarily of the cost of broadband equipment and networks sold to customers in our enterprise and consumer markets and to DISH Network. Cost of sales - equipment also includes certain other costs associated with the deployment of equipment to our customers.

Selling, general and administrative expenses. Selling, general and administrative expenses primarily includes selling and marketing costs and employee-related costs associated with administrative services (e.g., information systems, human resources and other services), including stock-based compensation expense. It also includes professional fees (e.g. legal, information systems and accounting services) and other items associated with facilities and administrative services provided by DISH Network and other third parties.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Research and development expenses. Research and development expenses primarily includes costs associated with the design and development of products to support future growth and provide new technology and innovation to our customers.

Interest income. Interest income primarily includes interest earned on our cash, cash equivalents and marketable investment securities, including premium amortization and discount accretion on debt securities.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized primarily includes interest expense associated with our debt and capital lease obligations (net of capitalized interest) and amortization of debt issuance costs.

Gains (losses) on investments, net. Gains (losses) on investments, net primarily includes changes in fair value of our marketable equity securities and other investments for which we have elected the fair value option. It may also include realized gains and losses on the sale or exchange of our available-for-sale debt securities, other-than-temporary impairment losses on our available-for-sale securities, realized gains and losses on the sale or exchange of our investments in unconsolidated entities and adjustments to the carrying amount of investments in unconsolidated entities and marketable equity securities resulting from impairments and observable price changes.

Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net includes earnings or losses from our investments accounted for using the equity method.

Other, net. Other, net primarily includes foreign exchange gains and losses, dividends received from our marketable investment securities and other non-operating income or expense items that are not appropriately classified elsewhere in our Condensed Consolidated Statements of Operations.

Net income from discontinued operations. Net income from discontinued operationsincludes the condensed consolidated financial statements of the BSS Business transferred in the BSS Transaction.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA is defined as Net income (loss) excluding Interest income and expense, net, Income tax benefit (provision), net, Depreciation and amortization, Net income (loss) from discontinued operations and Net income (loss) attributable to noncontrolling interests. EBITDA is not a measure determined in accordance with U.S. GAAP. This non-GAAP measure is reconciled to Net income (loss) in our discussion of Results of Operations above. EBITDA should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with U.S. GAAP. EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes EBITDA provides meaningful supplemental information regarding the underlying operating performance of our business and is appropriate to enhance an overall understanding of our financial performance. Management also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate the performance of companies in our industry.

Subscribers. Subscribers include customers that subscribe to our HughesNet service, through retail, wholesale and small/medium enterprise service channels.

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~~Item~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks Associated with Financial Instruments and Foreign Currency

Our investments and debt are exposed to market risks as discussed below.

Cash, Cash Equivalents and Current Marketable Investment Securities

As of September 30, ~~2017,~~2019, our cash, cash equivalents and current marketable investment securities had a fair value of ~~$3.28~~$2.5 billion. Of this amount, a total of ~~$3.14~~$2.5 billion was invested in: (a) cash; (b) commercial paper and corporate notes with an overall average maturity of less than one year and rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations; (c) debt instruments of the United States (“U.S.”) government and its agencies; and/or (d) instruments with similar risk, duration and credit quality characteristics to the commercial paper and corporate obligations described above. The primary purpose of these investing activities has been to preserve principal until the cash is required to, among other things, fund operations, make strategic investments and expand the business. Consequently, the size of this portfolio fluctuates significantly as cash is received and used in our business. The value of this portfolio may be negatively impacted by credit losses; however, this risk is mitigated through diversification that limits our exposure to any one issuer.

Interest Rate Risk

A change in interest rates would not affect the fair value of our cash, or materially affect the fair value of our cash equivalents due to their maturities of less than 90 days. A change in interest rates would affect the fair value of our current marketable debt securities portfolio; however, we normally hold these investments to maturity. Based on our cash, cash equivalents and current ~~non-strategic~~marketable debt securities investment portfolio of ~~$3.14~~$2.5 billion as of September 30, ~~2017,~~2019, a hypothetical 10% change in average interest rates during ~~2017~~the nine months ended September 30, 2019 would not have had a material impact on the fair value of our cash, cash equivalents and debt securities portfolio due to the limited duration of our investments.

Our cash, cash equivalents and current marketable debt securities had an average annual rate of return for the nine months ended September 30, ~~2017~~2019 of ~~1.9%~~2.9%. A change in interest rates would affect our future annual interest income from this portfolio, since funds would be re-invested at different rates as the instruments mature. A hypothetical 10% decrease in average interest rates during ~~2017~~the nine months ended September 30, 2019 would have resulted in a decrease of ~~approximately $5.6~~$8.2 million in annual interest income.

Strategic Marketable Investment Securities

As of September 30, ~~2017,~~2019, we held ~~current strategic~~ investments in the publicly traded ~~common stock~~securities of several companies with a fair value of ~~$139.4~~$44.0 million. These investments, which are held for strategic and financial purposes, are concentrated in a small number of companies, are highly speculative and have experienced, and continue to experience, volatility. The fair value of these investments are subject to significant fluctuations in fair value and can be significantly impacted by the risk of adverse changes in securities markets generally, as well as risks related to the performance of the companies whose securities we have invested in, risks associated with specific industries and other factors. ~~These investments are subject to significant fluctuations in fair value due to the volatility of the securities markets and of the underlying businesses.~~ In general, our strategic marketable investment securities portfolio is not significantly impacted by interest rate fluctuations as it currently consists ~~solely~~primarily of equity securities, the value of which is more closely related to factors specific to the underlying business. A hypothetical 10% adverse change in the market price of our public strategic equity investments during the nine months ended September 30, 2019 would have resulted in a decrease of ~~approximately $13.9~~$4.4 million in the fair value of these investments.

~~Restricted cash and marketable investment securities~~ ~~and investments~~Investments in ~~unconsolidated entities~~

~~Restricted cash and marketable investment securities~~Unconsolidated Entities

As of September 30, ~~2017,~~2019, we had ~~$13.7 million of restricted cash and marketable investment securities invested in: (a) cash; (b) debt instruments of the U.S. government and its agencies; (c) commercial paper and corporate notes~~investments with an ~~overall average maturity~~aggregate carrying amount of ~~less than one year and rated~~$225.9 million in ~~one~~securities of the four highest rating categories by at least two nationally recognized statistical rating organizations; (d) mutual funds; and (e) instruments with similar risk, duration and credit quality characteristics to the commercial paper described above. Based on our investment portfolio as of September 30, 2017, a hypothetical 10% increase in average interest rates would not have had a material impact on the fair value of our restricted cash and marketable investment securities.

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~~Investments in unconsolidated entities~~

~~As of September 30, 2017, we had $165.3 million of noncurrent equity instruments~~privately held companies that we hold for strategic business ~~purposes and account for under the cost or equity methods of accounting.~~purposes. The fair value of these ~~instruments~~investments is not readily determinable. We periodically review these investments, ~~and~~ estimate fair value and adjust the carrying amount when there are indications of ~~impairment.~~impairment or observable prices changes for the investments. A hypothetical adverse change equal to 10% of the carrying amount of these equity instruments during the nine months ended September 30, 2019 would have resulted in a decrease of ~~approximately $16.5~~$22.6 million in the value of these investments.

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Our ability to realize value from our strategic investments in companies that are privately held depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them.

Foreign Currency Exchange Risk

We generally conduct our business in U.S. dollars. Our international business is conducted in a variety of foreign currencies with our largest exposures being to the Brazilian real, the Indian rupee, European euro and the British pound. This exposes us to fluctuations in foreign currency exchange rates. Transactions in foreign currencies are converted into U.S. dollars using exchange rates in effect on the dates of the transactions.

Our objective in managing our exposure to foreign currency changes is to reduce earnings and cash flow volatility associated with foreign exchange rate fluctuations. Accordingly, we may enter into foreign currency forward contracts, or take other measures, to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions. As of September 30, ~~2017,~~2019, we had ~~$16.4 million~~a de minimis amount of net foreign currency denominated receivables and payables outstanding and foreign currency forward contracts with a notional value of ~~$6.5~~$3.7 million in place to partially mitigate foreign currency exchange risk. The estimated fair values of the foreign exchange contracts were not material as of September 30, ~~2017.~~2019. The impact of a hypothetical 10% adverse change in exchange rates on the carrying amount of the net assets and liabilities of our foreign subsidiaries during nine months ended September 30, 2019 would have been an estimated loss to the cumulative translation adjustment of ~~$27.9~~$16.1 million as of September 30, ~~2017.~~2019.

Derivative Financial Instruments

We generally do not use derivative financial instruments for speculative purposes and we generally do not apply hedge accounting treatment to our derivative financial instruments. We evaluate our derivative financial instruments from time to time but there can be no assurance that we will not enter into additional foreign currency forward contracts, or take other measures, in the future to mitigate our foreign exchange risk.

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~~Item~~ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as ~~amended)~~amended (the “Exchange Act”) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report such that the information required to be disclosed in our ~~SEC~~Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in the ~~SEC~~Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control ~~over~~Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the ~~Securities~~ Exchange ~~Act of 1934, as amended)~~Act) that occurred during the ~~third quarter of 2017~~three months ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We continue to review our internal control over financial reporting and may from time to time make changes aimed at enhancing its effectiveness and to ensure that our systems evolve with our business.

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PART II — OTHER INFORMATION

~~Item~~ITEM 1. LEGAL PROCEEDINGS

For a discussion of legal proceedings, see Part I, Item 1. Financial Statements — Note ~~Note 14~~16 ~~“Commitments~~Commitments and Contingencies — ~~Litigation”~~Litigation in this Quarterly Report on Form 10-Q.

~~Item~~ITEM 1A. RISK FACTORS

The following information updates, and should be read in conjunction with, the information in Part I, Item 1A, ~~“Risk~~Risk Factors,” of our Annual Report on Form ~~10-K~~10-K/A for the year ended December 31, ~~2016 includes a detailed discussion of our risk factors. Except as provided below, for~~2018, which was filed with the ~~nine months ended September 30, 2017, there were no material changes in our risk factors as previously disclosed.~~Securities and Exchange Commission on February 27, 2019.

~~The failure to adequately anticipate the need for satellite capacity or the inability to obtain satellite capacity for our Hughes segment could harm our results of operations.~~RISKS RELATING TO THE BSS TRANSACTION

Certain of our directors and executive officers have interests in the BSS Transaction that may be different from, or in addition to, those of our other stockholders.

Certain of our directors and executive officers have interests in the BSS Transaction that may be different from, or in addition to, the interests of our stockholders generally. Our ~~Hughes segment has made~~directors and executive officers of EchoStar who own shares of our common stock participated in the Distribution and the Merger on the same terms as our other stockholders. Additionally, Mr. Ergen, director and Chairman of both us and DISH, serves as a director and executive officer of BSS Corp. following the consummation of the BSS Transaction. The EchoStar parties that approved the BSS Transaction, as described below, were aware of and considered these interests, among other things, in deciding to approve the terms of the Master Transaction Agreement and the BSS Transaction.

The BSS Transaction was approved, in accordance with our longstanding related party transaction policy, by (i) our independent management, (ii) our non-interlocking directors (i.e., directors who are not also directors or employees of DISH Network), with our director, Mr. R. Stanton Dodge, recusing himself to avoid the appearance of any potential conflict resulting from his prior employment with DISH Network and our director, Mr. Anthony M. Federico, recusing himself to avoid the appearance of any potential conflict resulting from his service on DISH’s special litigation committee, (iii) our audit committee, with Mr. Federico recusing himself and, after all such approvals were obtained, (iv) our board of directors, with, our chairman, Mr. Ergen, recusing himself.

If the Distribution and the Merger do not qualify as a tax‑free distribution and merger under the Code, then we and/or our stockholders may be required to pay substantial ~~contractual commitments~~U.S. federal income taxes and under certain circumstances we may have indemnification obligations to DISH Network.

The parties received a tax opinion from their respective counsels as to the tax‑free nature of the transactions. They did not obtain a private letter ruling from the IRS with respect to the Distribution and the Merger and instead are relying solely on their respective tax opinions for ~~satellite capacity~~comfort that the Distribution and the Merger qualify for tax‑free treatment for U.S. federal income tax purposes under the Code.

The tax opinions were based on, our existing customer contracts and backlog. If our existing customer contracts were to be terminated prior to their respective expiration dates, we may be committed to maintaining excess satellite capacity for which we will have insufficient revenue to cover our costs, which would have a negative impact on our margins and results of operations. Alternatively, we may not have sufficient satellite capacity to meet demand. We generally only purchase satellite capacity based on existing contracts and bookings. Therefore, capacity foramong other things, certain ~~types of coverage in the future may not be readily available to~~undertakings made by us and ~~we may not be able~~DISH Network, as well as certain representations and assumptions as to ~~satisfy certain needs of our customers, which could result in a loss of possible new business~~factual matters made by us, DISH Network, and could negatively impact the margins for those services. Our ability to provide capacity for subscriber growth in our North American consumer market could also be adversely affected by regulations and/or legislation in the U.S. that enable or propose to enable the use of a portion of the frequency bands we currently use or in the future intend to use for satellite services, 5G mobile terrestrial services or other uses. These bands include the Ka-band, where we operate our broadband gateway earth stations,Mr. and other bands in which we may operate in the future. Such regulation or legislation could limit our ability to use the Ka-band and/or other bands, limit our flexibility to change the way in which we use the Ka-band and/or adversely impact our ability to use additional bands in the future. Other countries in which we currently, or may in the future, operate are also considering regulations that could similarly limit access to the Ka-band or other frequency bands. In addition, the fixed satellite services (“FSS”) industry has seen consolidation in the past decade, and today, the main FSS providers in North America and a number of smaller regional providers own and operate the current satellites that are available for our capacity needs.Mrs. Ergen. The failure of any factual representation or assumption to be true, correct and complete, or any undertaking to be fully complied with, could affect the validity of ~~these FSS providers to replace existing satellite assets at~~ the ~~end~~tax opinions. An opinion of ~~their useful lives~~counsel represents counsel’s best legal judgment, is not binding on the IRS or ~~a downturn~~the courts, and the IRS or the courts may not agree with the conclusions set forth in ~~their industry~~the tax opinions. In addition, the tax opinions will be based on current law, and cannot be relied upon if current law changes with retroactive effect.

If the Distribution does not qualify as a ~~whole~~tax‑free distribution under Section 355 of the Code, then the Distribution would be taxable to our stockholders, we would recognize a substantial gain on the Distribution, we and our stockholders could ~~reduce or interrupt the satellite capacity available to us. Our business~~incur significant U.S. federal income tax liabilities, and ~~results of operations~~we could be ~~adversely affected~~required to indemnify DISH Network for the tax on such gain if ~~we are not able to renew our capacity leases at economically viable rates, if capacity is not available due to problems experienced by these FSS providers or if frequencies are not available to us.~~

~~Our business is subject to risks of adverse government regulation.~~

~~Our business is subject to varying degrees of regulation in~~ the U.S. by the FCC, and other federal, state and local entities, and in foreign countries by similar entities, and internationally by the ITU. These regulations are subject to the administrative and political process and do change, for political and other reasons, from time to time. For example, the FCC recently adopted an order in its “Spectrum Frontiers” proceeding under which a portionfailure of the ~~Ka-band, in which~~Distribution to so qualify is the result of certain actions or misrepresentations by us, but we operate our broadband gateway earth stations, has been enabled for 5G mobile terrestrial services, which could limit our flexibility to change the way in which we use Ka-band in the future and/or limit our access to and ability to use the Ka-band and/or other bands in the future. Other countries in which we currently, or may in the future, operate are also considering regulations that could limit access to the Ka-band or other frequency bands. The FCC has also opened a proceeding on non-geostationary satellites, which may adversely impact our ability to use certain spectrum for user terminals. Moreover, a substantial number of foreign countries in which we have, or may in the future make, an investment, regulate, in varying degrees, the ownership of satellites and other telecommunication facilities/networks and foreign investment in telecommunications companies. Violations of laws or regulations may result in various sanctions including fines, loss of authorizations and the denial of applications for new authorizations or for the renewal of existing authorizations. Further material changes in law and regulatory requirements may also occur, and there can be no assurance that our business and the business of our subsidiaries and affiliates will not be ~~adversely affected by future legislation, new regulation or deregulation. The failure~~required to ~~obtain or comply~~indemnify any of our stockholders. In the event we are required to indemnify DISH Network for taxes incurred in connection with the ~~authorizations and regulations governing our operations~~BSS Transaction, the indemnification obligation could have a material adverse effect on our ~~ability to generate revenue~~business, financial conditions, results or operations and ~~our overall competitive position and could result in our suffering serious harm to our reputation.~~cash flow.

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~~Our business depends~~Even if the Distribution otherwise qualifies as a tax-free distribution, the Distribution would be taxable to us (but not to our stockholders) pursuant to Section 355(e) of the Code if one or more persons acquire a 50% or greater interest (measured by vote or value) in our or BSS Corp.’s stock, directly or indirectly (including through acquisitions of the BSS Common Stock or DISH Common Stock after the completion of the BSS Transaction), as part of a plan or series of related transactions that includes the Distribution. If there is a change of control of DISH Network or BSS Corp. after the completion of the BSS Transaction or a transfer of stock or assets of DISH Network or BSS Corp. that results in the Distribution being taxable to us under Section 355(e) of the Code, DISH Network would be required to indemnify us (but not our stockholders) for such taxes only if DISH Network took an action or knowingly facilitated, consented to or assisted with an action by a DISH shareholder that caused the Distribution to fail to qualify as a tax-free distribution. If the Merger were taxable, our stockholders would be considered to have made a taxable sale of their BSS Common Stock to DISH Network and, consequently, our stockholders would recognize taxable gain or loss on ~~regulatory authorizations issued by~~their receipt of DISH Common Stock in the ~~FCC~~Merger. In addition, the Merger being taxable could cause the Distribution to fail to qualify as a tax-free distribution.

A putative class action lawsuit relating to the BSS Transaction has been filed against us, DISH Network, Mr. Ergen and ~~state and foreign regulators that can expire, be revoked or modified, and applications for licenses~~certain of our officers and other ~~authorizations that~~lawsuits related to the BSS Transaction may ~~not~~ be ~~granted.~~filed against us, DISH Network and other persons which could result in substantial costs.

~~Generally all satellite, earth stations and other licenses granted~~As of November 7, 2019, one complaint has been filed by a purported EchoStar stockholder. See Note 16 in the ~~FCC and most other countries are subject~~notes to ~~expiration unless renewed by~~our accompanying Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for more information about litigation related to the ~~regulatory agency. Our satellite licenses are currently set~~BSS Transaction that has been commenced prior to ~~expire at various times. In addition, we occasionally receive special temporary authorizations that are granted for limited periods~~the date of ~~time (e.g., 180 days or less) and subject to possible renewal. Generally, our licenses and special temporary authorizations have been renewed on a routine basis, but there can be no assurance that~~ this ~~will continue. In addition, we must obtain new licenses from the FCC and other countries’ regulators for the operation of new satellites that we may build and/or acquire.~~report. There can be no assurance that additional complaints will not be filed with respect to the ~~FCC~~BSS Transaction.

Even if this lawsuit and any others that may be filed are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition.

Our ability to operate and control our satellites is subject to risks related to DISH Network’s integration of the BSS Business.

In connection with the BSS Transaction, we transferred our satellite operation centers, which are used to monitor and control our satellites, to DISH Network. DISH Network may not be able to successfully or ~~other regulators will continue granting applications for new licenses~~profitably integrate, operate, maintain and manage the BSS Business and its employees, including the operations and employees of the satellite operations centers. DISH Network may not be able to maintain uniform standards, controls, procedures and policies with respect to the satellite operations centers, and this may lead to operational inefficiencies. A failure or ~~for the renewal of existing ones. If the FCC or other regulators were to cancel, revoke, suspend, or fail to renew~~inefficiency at any of the satellite operations centers could cause a significant loss of service for our ~~licenses~~customers and might lead to a breakdown in the ability to communicate with one or ~~authorizations,~~more of our satellites or ~~fail~~cause the transmission of incorrect commands to ~~grant~~the affected satellite(s), which could lead to a temporary or permanent degradation in satellite performance or to the loss of one or more of our ~~applications for FCC~~satellites. Any such failure could have a material adverse impact on our business, financial condition, and results of operations.

RISKS RELATED TO OUR BUSINESS AND OUR CLASS A COMMON STOCK

We may be more susceptible to adverse events as a result of the BSS Transaction.

We have divested the BSS Business and our business will be subject to concentration of the risks that affect our retained businesses. We are now a smaller, less diversified and more narrowly focused business, which makes us more vulnerable to changing market and economic conditions. Operating as a smaller entity may reduce or ~~other licenses, it~~eliminate some of the benefits and synergies which previously existed across our business platforms, including our operating diversity, purchasing and borrowing leverage, available capital, and relationships and opportunities to pursue integrated strategies within our businesses and attract, retain and motivate key employees. In addition, as a smaller company, our ability to absorb costs may be negatively impacted, including the significant cost of the BSS Transaction, and we may be unable to obtain financing, goods or services at prices or on terms as favorable as those obtained prior to the BSS Transaction. Any of these factors could have a material adverse effect on our business, financial condition, ~~and~~ results of ~~operations. Specifically, loss~~operations, cash flows, business prospects and the trading price of our common stock. By separating the BSS Business, we also may be more susceptible to market fluctuations and other adverse events. If we fail to achieve some or all of the benefits that we expect to achieve as a ~~frequency authorization~~result of the BSS Transaction, or ~~limitations on our ability to use the frequencies we currently use and/or intend to use~~do not achieve them in the ~~future would reduce the amount~~time we expect, our results of spectrum available to us, potentially reducing the amount of services we provide to our customers. The significance of such a loss of authorizations would vary based upon, among other things, the orbital location, the frequency bandoperations and the availability of replacement spectrum. In addition, the legislative and executive branches of the U.S. government and foreign governments often consider legislation and regulatory requirements thatfinancial condition could ~~affect us, as could the actions that the FCC and foreign regulatory bodies take. We cannot predict the outcomes of these legislative or regulatory proceedings or their effect on our business.~~be materially adversely affected.

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We might not be able to engage in certain strategic transactions because we have agreed to certain restrictions to comply with U.S. federal income tax requirements for a tax‑free spin‑off.

To preserve the intended tax treatment of the Distribution, we will undertake to comply with certain restrictions under current U.S. federal income tax laws for spin‑offs, including (i) refraining from engaging in certain transactions that would result in a fifty percent or greater change by vote or by value in our stock ownership, (ii) continuing to own and manage our historic business, and (iii) limiting sales or redemptions of our common stock. These restrictions could prevent us from pursuing otherwise attractive business opportunities, result in our inability to respond effectively to competitive pressures, industry developments and future opportunities and may otherwise harm our business, financial results and operations. If these restrictions, among others, are not followed, the Distribution could be taxable to us and possibly our stockholders. In addition, ~~third parties have or may oppose some~~we could be required to indemnify DISH Network for any tax liability incurred by DISH Network as a result of our ~~license applications~~non‑compliance with these restrictions, and pending and future requests for extensions, modifications, waivers and approvals of our licenses. Even if we have fully complied with all of the required reporting, filing and other requirements in connection with our authorizations, it is possible a regulatorsuch indemnity obligations could ~~decline to grant certain of our applications or requests for authority, or could revoke, terminate, condition or decline to modify, extend or renew certain of our authorizations or licenses.~~be substantial.

~~Item~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

There were no repurchases of our Class A common stock ~~for~~during the nine months ended September 30, ~~2017.~~2019.

~~Item~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

~~Item~~ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

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~~Item~~ITEM 5. OTHER INFORMATION

~~Our~~Stock Repurchases

In October 2018, our Board of Directors ~~previously~~ authorized us to repurchase up to $500.0 million of our Class A common stock through and including December 31, ~~2017.~~2019. In 2018, we repurchased $33.3 million of our Class A common stock. On ~~November 1, 2017,~~October 29, 2019, our Board of Directors ~~extended~~terminated its prior authorization and authorized us to repurchase under this authorization ~~to repurchase~~ up to $500.0 million ~~of outstanding shares~~ of our Class A common stock through and including December 31, 2020. Purchases under our repurchase authorization may be made through privately negotiated transactions, open market repurchases, ~~including, without limitation,~~ one or more trading plans in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, ~~through~~or otherwise, subject to market conditions and ~~including December 31, 2018.~~other factors. We may elect not to purchase the maximum amount or any of the shares allowable under this program and we may also enter into additional share repurchase programs authorized by our Board of Directors.

Financial Results

On November 7, 2019, we issued a press release (the “Press Release”) announcing our financial results for the quarter ended September 30, 2019 and a supplemental investor information presentation (the “Presentation”) providing preliminary unaudited pro forma financial information. A copy of the Press Release and Presentation are furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively. The foregoing information, including the exhibits related thereto, are furnished in response to Item 2.02 of Form 8-K and shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise, and shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.

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~~Item~~ITEM 6. EXHIBITS



Exhibit No.		Description

31.1(H)		Section 302 Certification of Chief Executive Officer.
31.2(H)		Section 302 Certification of Chief Financial Officer.
32.1(I)		Section 906 Certifications of Chief Executive Officer and Chief Financial Officer.
99.1(I)		Press release dated November 7, 2019 issued by EchoStar Corporation regarding financial results for the period ended September 30, 2019
99.2(I)		Presentation dated November 7, 2019 issued by EchoStar Corporation regarding preliminary unaudited pro forma financial information
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.


(H)	Filed herewith.


(I)	Furnished herewith


*	Incorporated by reference.


**	Constitutes a management contract or compensatory plan or arrangement.

*** Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We agree to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request, subject to our right to request confidential treatment of any requested schedule or exhibit.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		ECHOSTAR CORPORATION


Date: November ~~8, 2017~~7, 2019	By:	/s/ Michael T. Dugan
		Michael T. Dugan
		Chief Executive Officer, President and Director
		(Principal Executive Officer)


Date: November ~~8, 2017~~7, 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)

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	Class A and B Common Stock		Hughes Retail Preferred Tracking Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Earnings		Treasury Stock			Noncontrolling Interest in HSS Tracking Stock			Other Noncontrolling Interests			Total
Balance, December 31, 2015	$	99	$	6		$	3,776,451		$	(117,233	)	$	134,317	$	(98,162	)	$	74,854		$	11,310		$	3,781,642
Issuances of Class A common stock:
Exercise of stock options	1		—			4,678			—			—		—			—			—			4,679
Employee benefits	—		—			11,126			—			—		—			—			—			11,126
Employee Stock Purchase Plan	—		—			11,478			—			—		—			—			—			11,478
Stock-based compensation	—		—			11,953			—			—		—			—			—			11,953
R&D tax credits utilized by DISH Network	—		—			(1,511		)	—			—		—			—			—			(1,511		)
Other, net	—		—			(334		)	—			—		—			—			—			(334		)
Net income (loss)	—		—			—			—			141,742		—			(926		)	946			141,762
Foreign currency translation adjustment	—		—			—			13,955			—		—			—			(186		)	13,769
Unrealized losses on available-for-sale securities, net and other	—		—			—			4,111			—		—			—			—			4,111
Balance, September 30, 2016	$	100	$	6		$	3,813,841		$	(99,167	)	$	276,059	$	(98,162	)	$	73,928		$	12,070		$	3,978,675

Balance, December 31, 2016	$	100	$	6		$	3,828,677		$	(124,803	)	$	314,247	$	(98,162	)	$	73,910		$	12,830		$	4,006,805
Issuances of Class A common stock:
Exercise of stock options	2		—			34,104			—			—		—			—			—			34,106
Employee benefits	—		—			11,200			—			—		—			—			—			11,200
Employee Stock Purchase Plan	—		—			6,938			—			—		—			—			—			6,938
Stock-based compensation	—		—			7,169			—			—		—			—			—			7,169
Cumulative effect of adoption of ASU 2016-09 as of January 1, 2017	—		—			—			—			14,508		—			—			—			14,508
Reacquisition and retirement of Tracking Stock pursuant to Share Exchange Agreement	—		(6		)	(226,815		)	—			—		—			(73,255		)	—			(300,076		)
R&D tax credits utilized by DISH Network	—		—			(577		)	—			—		—			—			—			(577		)
Net income (loss)	—		—			—			—			79,324		—			(655		)	1,006			79,675
Foreign currency translation adjustment	—		—			—			33,162			—		—			—			—			33,162
Unrealized gains and impairment on available-for-sale securities, net and other	—		—			—			2,909			—		—			—			—			2,909
Balance, September 30, 2017	$	102	$	—		$	3,660,696		$	(88,732	)	$	408,079	$	(98,162	)	$	—		$	13,836		$	3,895,819



Accumulated Other Comprehensive Loss Components	Affected Line Item in our Condensed Consolidated Statements of Operations	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
Accumulated Other Comprehensive Loss Components		2017		2016			2017			2016
		(In thousands)
Recognition of realized gains on available-for-sale securities in net income (1)	Gains on investments, net	$	—	$	(10	)	$	(2,758	)	$	(5,584	)
Recognition of other-than-temporary impairment loss on available-for-sale securities in net income (2)	Other-than-temporary impairment loss on available-for-sale securities	—		—			3,298			—
Total reclassifications, net of tax and noncontrolling interests		$	—	$	(10	)	$	540		$	(5,584	)



	As of December 31, 2016			Additions			Currency Translation Adjustment			As of September 30, 2017
	(In thousands)
Finite useful lives:
Cost	$	87,959		$	—		$	6,086		$	94,045
Accumulated amortization	(14,983		)	(3,751		)	(1,411		)	(20,145		)
Net	72,976			(3,751		)	4,675			73,900
Indefinite lives	471,657			—			—			471,657
Total regulatory authorizations, net	$	544,633		$	(3,751	)	$	4,675		$	545,557



	Weighted Average Useful Life (in Years)	As of
		September 30, 2017							December 31, 2016
		Cost		Accumulated Amortization			Carrying Amount		Cost		Accumulated Amortization			Carrying Amount
		(In thousands)
Customer relationships	8	$	270,300	$	(228,355	)	$	41,945	$	270,300	$	(214,544	)	$	55,756
Technology-based	6	61,300		(60,905		)	395		60,835		(57,266		)	3,569
Trademark portfolio	20	29,700		(9,405		)	20,295		29,700		(8,291		)	21,409
Total other intangible assets		$	361,300	$	(298,665	)	$	62,635	$	360,835	$	(280,101	)	$	80,734



	Hughes		EchoStar Satellite Services		Corporate and Other			Consolidated Total
	(In thousands)
For the Three Months Ended September 30, 2017
External revenue	$	379,702	$	96,743	$	4,788		$	481,233
Intersegment revenue	$	359	$	350	$	(709	)	$	—
Total revenue	$	380,061	$	97,093	$	4,079		$	481,233
EBITDA	$	131,817	$	78,345	$	9,699		$	219,861
Capital expenditures	$	108,428	$	8,203	$	75,500		$	192,131

For the Three Months Ended September 30, 2016
External revenue	$	355,090	$	101,308	$	3,648		$	460,046
Intersegment revenue	$	786	$	172	$	(958	)	$	—
Total revenue	$	355,876	$	101,480	$	2,690		$	460,046
EBITDA	$	125,522	$	84,257	$	(20,477	)	$	189,302
Capital expenditures	$	75,682	$	15,730	$	48,162		$	139,574

For the Nine Months Ended September 30, 2017
External revenue	$	1,070,715	$	294,839	$	13,906		$	1,379,460
Intersegment revenue	$	1,428	$	946	$	(2,374	)	$	—
Total revenue	$	1,072,143	$	295,785	$	11,532		$	1,379,460
EBITDA	$	342,693	$	241,873	$	3,472		$	588,038
Capital expenditures	$	270,624	$	21,351	$	118,170		$	410,145

For the Nine Months Ended September 30, 2016
External revenue	$	1,019,203	$	305,401	$	10,074		$	1,334,678
Intersegment revenue	$	2,248	$	518	$	(2,766	)	$	—
Total revenue	$	1,021,451	$	305,919	$	7,308		$	1,334,678
EBITDA	$	353,505	$	257,181	$	(45,506	)	$	565,180
Capital expenditures	$	261,241	$	50,762	$	165,815		$	477,818

For the three months ended

September 30, 2019

June 30, 2019

Net additions