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.~~MARCH 31, 2020.

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,~~April 30, 2020, the registrant’s outstanding common stock consisted of ~~48,039,777~~50,187,977 shares of Class A common stock and 47,687,039 shares of Class B common stock, each $0.001 par value.

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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~~March 31, 2020 (unaudited) and December 31, ~~2016 (Unaudited)~~2019 (audited)	1
	Condensed Consolidated Statements of Operations for the ~~Three~~three months ended March 31, 2020 and ~~Nine Months Ended September 30, 2017 and 2016 (Unaudited)~~2019 (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the ~~Three~~three months ended March 31, 2020 and ~~Nine Months Ended September 30, 2017 and 2016 (Unaudited)~~2019 (unaudited)	3
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the ~~Nine Months Ended September 30, 2017~~three months ended March 31, 2020 and ~~2016 (Unaudited)~~2019 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the ~~Nine Months Ended September 30, 2017~~three months ended March 31, 2020 and ~~2016 (Unaudited)~~2019 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements ~~(Unaudited)~~(unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4241
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6357
Item 4.	Controls and Procedures	6457

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	6558
Item 1A.	Risk Factors	6558
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6660
Item 3.	Defaults Upon Senior Securities	6660
Item 4.	Mine Safety Disclosures	6660
Item 5.	Other Information	6660
Item 6.	Exhibits	6761
	Signatures	6862

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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 and the ability of third parties with whom we engage in order to operate our business, including customers, suppliers, vendors, financing sources, governmental entities and others, to successfully or fully operate as a result of outbreaks of viruses or widespread illness, including existing, continuing and future impacts and consequences of the COVID-19 pandemic caused by the novel coronavirus;


•	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;


•	lawsuits relating to the BSS Transaction or AGR matter (each as defined herein), which could result in substantial costs and, for the AGR matter, material adverse effects on our business, results of operation, financial condition and prospects in India;


•	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~~foreign operations and other uncertainties associated with doing business internationally, including changes in foreign exchange rates between foreign currencies and the United States (“U.S.”) dollar, economic instability, political disturbances and the consequences of being subject to ~~implement our strategic initiatives;~~foreign regulation and foreign legal proceedings, including increased operations costs and potential fines and penalties for violations, which may be substantial;


•	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”), 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~~

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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.

iii

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PART I — FINANCIAL INFORMATION

~~Item~~ITEM 1. FINANCIAL STATEMENTS

ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(InAmounts in thousands, except share and per share amounts)

(Unaudited)

As of
September 30, 2017 December 31, 2016
Assets

Current Assets:

Cash and cash equivalents $ 2,798,359
$ 2,570,365
Marketable investment securities, at fair value 485,035
522,516
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
Inventory 91,232
62,620
Prepaids and deposits 53,536
43,456
Other current assets 12,746
10,862
Current assets of discontinued operations 145
311,524
Total current assets 3,685,952
3,723,287
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
Regulatory authorizations, net 545,557
544,633
Goodwill 504,173
504,173
Other intangible assets, net 62,635
80,734
Investments in unconsolidated entities 165,290
171,016
Other receivable - DISH Network 92,133
90,586
Other noncurrent assets, net 207,221
166,385
Noncurrent assets of discontinued operations —
316,924
Total noncurrent assets 5,121,204
5,285,572
Total assets $ 8,807,156
$ 9,008,859
Liabilities and Stockholders’ Equity

Current Liabilities:

Trade accounts payable $ 120,436
$ 170,297
Trade accounts payable - DISH Network 6,556
1,072
Current portion of long-term debt and capital lease obligations 38,407
32,984
Deferred revenue and prepayments 56,285
59,989
Accrued interest 57,837
46,487
Accrued compensation 37,096
53,454
Accrued expenses and other 110,872
95,726
Current liabilities of discontinued operations 542
71,429
Total current liabilities 428,031
531,438
Noncurrent Liabilities:

Long-term debt and capital lease obligations, net of unamortized debt issuance costs 3,605,715
3,622,463
Deferred tax liabilities, net 745,965
746,667
Other noncurrent liabilities 131,626
90,785
Noncurrent liabilities of discontinued operations —
10,701
Total noncurrent liabilities 4,483,306
4,470,616
Total liabilities 4,911,337
5,002,054
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 —
—
Additional paid-in capital 3,660,696
3,828,677
Accumulated other comprehensive loss (88,732 ) (124,803 )
Accumulated earnings 408,079
314,247
Treasury stock, at cost (98,162 ) (98,162 )
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 stockholders’ equity 3,895,819
4,006,805
Total liabilities and stockholders’ equity $ 8,807,156
$ 9,008,859



	As of
	March 31, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	1,599,025	$	1,519,431
Marketable investment securities	790,361		940,623
Trade accounts receivable and contract assets, net	187,919		196,629
Other current assets, net	189,887		179,531
Total current assets	2,767,192		2,836,214
Non-current assets:
Property and equipment, net	2,428,543		2,528,738
Operating lease right-of-use assets	119,794		114,042
Goodwill	509,315		506,953
Regulatory authorizations, net	471,164		478,598
Other intangible assets, net	25,826		29,507
Other investments, net	298,147		325,405
Other non-current assets, net	339,640		334,841
Total non-current assets	4,192,429		4,318,084
Total assets	$	6,959,621	$	7,154,298

Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable	$	107,245	$	124,080
Contract liabilities	99,266		101,060
Accrued expenses and other current liabilities	239,706		270,879
Total current liabilities	446,217		496,019
Non-current liabilities:
Long-term debt	2,390,218		2,389,168
Deferred tax liabilities, net	339,006		351,692
Operating lease liabilities	105,482		96,941
Other non-current liabilities	73,123		74,925
Total non-current liabilities	2,907,829		2,912,726
Total liabilities	3,354,046		3,408,745

Commitments and contingencies



Stockholders’ equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both March 31, 2020 and December 31, 2019	—			—
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, 56,760,433 shares issued and 50,078,513 shares outstanding at March 31, 2020 and 56,592,251 shares issued and 50,107,330 shares outstanding at December 31, 2019	57			57
Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at both March 31, 2020 and December 31, 2019	48			48
Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both March 31, 2020 and December 31, 2019	—			—
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both March 31, 2020 and December 31, 2019	—			—
Additional paid-in capital	3,307,360			3,290,483
Accumulated other comprehensive income (loss)	(192,218		)	(122,138		)
Accumulated earnings (losses)	569,446			632,809
Treasury stock, at cost	(137,347		)	(131,454		)
Total EchoStar Corporation stockholders’ equity	3,547,346			3,669,805
Non-controlling interests	58,229			75,748
Total stockholders’ equity	3,605,575			3,745,553
Total liabilities and stockholders’ equity	$	6,959,621		$	7,154,298

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

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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 March 31,
	2020			2019
Revenue:
Services and other revenue	$	408,357		$	402,668
Equipment revenue	57,309			51,714
Total revenue	465,666			454,382
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	145,252			143,347
Cost of sales - equipment (exclusive of depreciation and amortization)	45,908			45,007
Selling, general and administrative expenses	125,281			112,114
Research and development expenses	6,254			6,888
Depreciation and amortization	132,368			118,978
Total costs and expenses	455,063			426,334
Operating income (loss)	10,603			28,048
Other income (expense):
Interest income, net	15,583			24,429
Interest expense, net of amounts capitalized	(36,233		)	(53,199		)
Gains (losses) on investments, net	(46,672		)	6,936
Equity in earnings (losses) of unconsolidated affiliates, net	2,613			(6,353		)
Foreign currency transaction gains (losses), net	(10,844		)	(1,160		)
Other, net	(279		)	(42		)
Total other income (expense), net	(75,832		)	(29,389		)
Income (loss) from continuing operations before income taxes	(65,229		)	(1,341		)
Income tax benefit (provision), net	7,492			(2,898		)
Net income (loss) from continuing operations	(57,737		)	(4,239		)
Net income (loss) from discontinued operations	—			19,247
Net income (loss)	(57,737		)	15,008
Less: Net loss (income) attributable to non-controlling interests	3,442			(806		)
Net income (loss) attributable to EchoStar Corporation common stock	$	(54,295	)	$	14,202

Earnings (losses) per share - Class A and B common stock:
Basic and diluted earnings (losses) from continuing operations per share	$	(0.56	)	$	(0.05	)
Total basic and diluted earnings (losses) per share	$	(0.56	)	$	0.15

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~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 March 31,
	2020			2019
Net income (loss)	$	(57,737	)	$	15,008
Other comprehensive income (loss), net of tax:
Foreign currency translation	(80,362		)	911
Unrealized gains (losses) on available-for-sale debt securities	(3,366		)	3,287
Other	(2,675		)	(2,800		)
Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale debt securities	—			(549		)
Total other comprehensive income (loss), net of tax	(86,403		)	849
Comprehensive income (loss)	(144,140		)	15,857
Less: Comprehensive loss (income) attributable to non-controlling interests	19,765			(806		)
Comprehensive income (loss) attributable to EchoStar Corporation	$	(124,375	)	$	15,051

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

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ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

(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



	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Earnings (Losses)			Treasury Stock, at cost			Non-controlling Interests			Total
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	—		2,046			—			—			—			—			2,046
Employee benefits	—		6,654			—			—			—			—			6,654
Employee Stock Purchase Plan	—		2,749			—			—			—			—			2,749
Stock-based compensation	—		2,628			—			—			—			—			2,628
Purchase of non-controlling interest	—		(2,666		)	—			—			—			(4,647		)	(7,313		)
Other comprehensive income (loss)	—		—			849			—			—			—			849
Net income (loss)	—		—			—			14,202			—			806			15,008
Other, net	—		(156		)	—			1,597			—			—			1,441
Balance, March 31, 2019	$	102	$	3,713,777		$	(124,251	)	$	709,928		$	(131,454	)	$	11,434		$	4,179,536

Balance, December 31, 2019	$	105	$	3,290,483		$	(122,138	)	$	632,809		$	(131,454	)	$	75,748		$	3,745,553
Cumulative effect of accounting changes	—		—			—			(9,068		)	—			(240		)	(9,308		)
Balance, January 1, 2020	105		3,290,483			(122,138		)	623,741			(131,454		)	75,508			3,736,245
Issuances of Class A common stock:
Exercise of stock options	—		178			—			—			—			—			178
Employee benefits	—		6,920			—			—			—			—			6,920
Employee Stock Purchase Plan	—		2,924			—			—			—			—			2,924
Stock-based compensation	—		2,384			—			—			—			—			2,384
Issuance of equity and contribution of assets pursuant to the Yahsat JV formation	—		4,338			—			—			—			(1,514		)	2,824
Contribution by non-controlling interest holder	—		—			—			—			—			4,000			4,000
Other comprehensive income (loss)	—		—			(70,080		)	—			—			(16,323		)	(86,403		)
Net income (loss)	—		—			—			(54,295		)	—			(3,442		)	(57,737		)
Treasury share repurchase	—		—			—			—			(5,893		)	—			(5,893		)
Other, net	—		133			—			—			—			—			133
Balance, March 31, 2020	$	105	$	3,307,360		$	(192,218	)	$	569,446		$	(137,347	)	$	58,229		$	3,605,575

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

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ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(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
$ —



	For the three months ended March 31,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	(57,737	)	$	15,008
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization	132,368			154,221
Losses (gains) on investments, net	46,672			(6,418		)
Equity in losses (earnings) of unconsolidated affiliates, net	(2,613		)	6,353
Foreign currency transaction losses (gains), net	10,844			1,160
Deferred tax provision (benefit), net	(10,064		)	6,455
Stock-based compensation	2,384			2,628
Amortization of debt issuance costs	1,050			2,010
Other, net	(4,899		)	1,754
Changes in assets and liabilities, net:
Trade accounts receivable and contract assets, net	(7,664		)	(19,231		)
Other current assets, net	(16,127		)	(10,370		)
Trade accounts payable	(9,559		)	8,831
Contract liabilities	(3,212		)	17,896
Accrued expenses and other current liabilities	(4,922		)	(9,914		)
Non-current assets and non-current liabilities, net	(5,226		)	5,563
Net cash flows from operating activities	71,295			175,946

Cash flows from investing activities:
Purchases of marketable investment securities	(550,891		)	(325,557		)
Sales and maturities of marketable investment securities	687,579			712,666
Purchase of other investments	(5,500		)	—
Expenditures for property and equipment	(104,604		)	(111,962		)
Expenditures for externally marketed software	(8,638		)	(7,600		)
Net cash flows from investing activities	17,946			267,547

Cash flows from financing activities:
Repurchase of the 2019 Senior Secured Notes	—			(8,046		)
Payment of finance lease obligations	(215		)	(9,882		)
Payment of in-orbit incentive obligations	(801		)	(1,573		)
Net proceeds from Class A common stock options exercised	150			2,047
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan	2,924			2,749
Treasury share purchase	(5,893		)	—
Contribution by non-controlling interest holder	4,000			—
Purchase of non-controlling interest	—			(7,313		)
Other, net	817			(131		)
Net cash flows from financing activities	982			(22,149		)

Effect of exchange rates on cash and cash equivalents	(4,809		)	(133		)
Net increase (decrease) in cash and cash equivalents	85,414			421,211
Cash and cash equivalents, including restricted amounts, beginning of period	1,521,889			929,495
Cash and cash equivalents, including restricted amounts, end of period	$	1,607,303		$	1,350,706

The accompanying notes are an integral part of these ~~condensed consolidated financial statements.~~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~~and “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~~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 consumer customers, which include 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 certain 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 Technologiesmedium-sized businesses, and ~~certain other assets (collectively, the “Share Exchange”). Following consummation of the Share Exchange, we no longer operate the EchoStar Technologies business segment~~satellite services. We also deliver innovative network technologies, managed services and ~~the EchoStar Tracking Stock~~communications solutions for enterprise customers, which include aeronautical 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 and segment results for all periods presented. See ~~Note 3~~ ~~for further discussion of our discontinued operations.~~

government enterprises. We ~~currently~~ operate in the following ~~two~~2 business segments:

•

Hughes — which provides broadband satellite technologies and broadband internet services to ~~home~~domestic and ~~small office~~international consumer customers and broadband network technologies, managed services, equipment, hardware, satellite services and communication solutions to ~~domestic~~service providers and ~~international consumers and aeronautical,~~ enterprise ~~and government~~ customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system ~~operators.~~operators and our enterprise customers.

•

~~EchoStar Satellite Services (“ESS”)~~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, Accounting, Real Estate and Legal) and other activities that have not been assigned to our business 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. We also divide our operations by primary geographic market as follows: (i) North America (the U.S. and its territories, Mexico, and Canada); (ii) South and Central America and; (iii) All other (Asia, Africa, Australia, Europe, India, and the Middle East). Refer to Note 14. Segment Reporting for further detail.

In September 2019, pursuant to a master transaction agreement (the “Master Transaction Agreement”) with DISH and a wholly-owned subsidiary of DISH (“Merger Sub”), (i) we transferred certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily related to the former portion of our ESS segment that managed, marketed and provided (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”) to one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), (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 with DISH then owning and operating 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”).

Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. As a result of the BSS Transaction, the financial results of the BSS Business, except for certain real estate that transferred in the transaction, are presented as discontinued operations and, as such, excluded

Table of Contents

ECHOSTAR CORPORATION

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

(Unaudited)

Our operations also include 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 treasuryfrom continuing operations and ~~gains (losses) from certain of our investments. These activities, costs and income are accounted for in “Corporate and Other.”~~

In 2008, DISH Network completed its distribution to us of its digital set-top box business, certain infrastructure, and other assets and related liabilities, including certain of its satellites, uplink and satellite transmission assets, and real estate (the “Spin-off”). Since the Spin-off, EchoStar and DISH have operated as separate publicly-traded companies. Prior to the consummation of the Share Exchange on February 28, 2017, DISH Network held the Tracking Stock discussed above. A substantial majority of the voting power of the shares of each of EchoStar and DISH is owned beneficially by Charles W. Ergen, our Chairman, and by certain trusts established by Mr. Ergensegment results for the ~~benefit of his family.~~three months ended March 31, 2019, as presented in these unaudited Condensed Consolidated Financial Statements and the accompanying notes (collectively, the “Condensed Consolidated Financial Statements”).

All amounts in the following footnotes reference results from continuing operations unless otherwise noted. Refer to Note 4. Discontinued Operations for further detail.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Note 2. Summary of Significant Accounting Policies~~

Basis of Presentation

~~The accompanying unaudited condensed consolidated financial statements have been~~These Condensed Consolidated Financial Statements are prepared in conformity with U.S. generally accepted accounting principles ~~generally accepted in the~~ (“U.S. (“GAAP”) and ~~with~~ the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, ~~these financial statements~~they 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~~

All amounts presented in these Condensed Consolidated Financial Statements are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted.

Refer to Note 2. Summary of Significant Accounting Policies to the consolidated financial statements ~~and notes thereto included~~ in our Form 10-K for ~~the year ended December 31, 2016.~~a summary and discussion of our significant accounting policies, except as updated below.

~~Principles of Consolidation~~

We consolidate all entities in which we have a controlling financial interest. We are deemed to have a controlling financial interest in variable interest entities where we are the primary beneficiary. We are deemed to have a controlling financial interest in other entities when we own more than 50 percent of the outstanding voting shares and other shareholders do not have substantive rights to participate in management. For entities we control but do not wholly own, we record a noncontrolling interest within stockholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests.

As of 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~~We are required to make certain estimates and assumptions that affect the amounts reported ~~amounts of assets~~in these Condensed Consolidated Financial Statements. The most significant estimates 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. Estimatesassumptions are used in ~~accounting for, among other things,~~determining: (i) inputs used to recognize revenue over time, including amortization periods for deferred ~~subscriber~~contract acquisition ~~costs, revenue recognition using the percentage-of-completion method,~~costs; (ii) allowances for doubtful ~~accounts, allowances for sales returns and rebates, warranty obligations, self-insurance obligations,~~accounts; (iii) deferred taxes and related valuation allowances, including uncertain tax ~~positions,~~positions; (iv) loss ~~contingencies,~~contingencies; (v) fair value of financial ~~instruments, fair value of stock-based compensation awards,~~instruments; (vi) fair value of assets and liabilities acquired in business ~~combinations, lease classifications,~~combinations; and (vii) asset impairment ~~testing, useful lives and methods for depreciation and amortization of long-lived assets, and certain royalty obligations.~~ testing.

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~~Additionally, changing economic and other 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 thereto are reflected in the period they occur or prospectively if the revised ~~estimate affects~~estimates or assumptions affect future periods.

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 in which we are the primary beneficiary and in other entities in which we own more than 50% of the outstanding voting shares and other shareholders do not have substantive rights to participate in management. For entities we control but do not wholly own, we record a non-controlling interest within stockholders’ equity for the portion of the entity’s equity attributed to the non-controlling ownership interests. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassification

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

Table of Contents

ECHOSTAR CORPORATION

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

(Unaudited)

~~Fair Value Measurements~~Recently Adopted Accounting Pronouncements

Credit Losses

On January 1, 2020, we adopted Accounting Standards Update (“ASU”) No. 2016-13 - Financial Instruments - Credit Losses (Topic 326), as amended, and codified in Accounting Standards Codification Topic 326 (“ASC 326”). ASC 326 introduces a new approach to the periodic estimation of credit losses for certain financial assets based on expected losses instead of incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets that have experienced credit deterioration since their original purchase. We ~~determine fair value~~have elected to apply the requirements of the new standard prospectively and we recognized a cumulative effect of adoption of $9.1 million to Accumulated earnings (losses) as of January 1, 2020. Based on this election, we did not restate our comparative Condensed Consolidated Financial Statements and they continue to be reported under the accounting standards in effect for the periods before January 1, 2020.

The following describes the accounting impacts, by major balance sheet line item, of our adoption of this new standard based on the ~~exchange price~~relevant types of losses that ~~would~~we and our equity method investees may 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:subject to:

•

~~Level 1, defined~~Trade Accounts Receivable and Contract Assets, Net —Our trade accounts receivables and contract assets consist of amounts due from both our consumer and enterprise customers. Our receivables and related credit losses for our consumer customers are limited due to policies that require advance payment for services, predominant use of credit card and ACH payment processes, and our ability to promptly terminate service when timely payments are not received. However, for our enterprise customers, we estimate expected credit losses on a collective basis based on our historical loss experience, as ~~observable inputs being quoted prices~~adjusted to reflect changes in ~~active markets for identical assets;~~relevant factors, such as macroeconomic conditions and customer mix, that can significantly impact collectability.

We apply our collective estimation processes separately to several pools of receivables that share common risk characteristics, generally based on the customers’ geographical location. Customers with significant past-due balances or other atypical characteristics are excluded from our collective analysis and evaluated on a case-by-case basis. Our estimates of expected credit losses for such receivables reflect significant judgments that consider customer-specific matters such as the customer’s financial condition, payment history, and recent developments in the customer’s business and industry. Due to the short-term nature of our trade receivables and contract assets, forecasts about the future have limited relevance to our expected credit loss estimates.

We record our customer related estimated credit losses as a component of our bad debt expense as reported in Selling, general and administrative expenses.

•

~~Level 2, defined as observable inputs~~Other Current Assets, Net, and Other Non-current Assets, Net —We estimate expected credit losses for receivables with payment terms longer than one year separately by borrower, due to the unique risk characteristics of such receivables. We generally use discounted cash flow techniques to estimate such credit losses. In applying such techniques, we may estimate principal and interest cash flows under probability-weighted scenarios that consider entity-specific matters and forecasted economic conditions. The majority of our other ~~than quoted prices included~~non-current receivables are from entities in ~~Level 1, including quoted prices~~the telecommunications industry. The collection of contractual principal and interest on these receivables is highly dependent on the future business operations of those entities. Our estimation of expected credit losses for ~~similar assets~~such receivables requires significant judgment about matters specific to the borrower and ~~liabilities~~their industry. Accordingly, our actual collection experience may differ from the assumptions reflected 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; andour expected credit loss estimates.

We record our estimated credit losses as a component of our bad debt expense as reported in Selling, general and administrative expenses.

•

~~Level 3, defined as unobservable inputs for which little or no market data exists, consistent~~Other Investments, Net — We estimate expected credit losses on our other debt investments with payment terms longer than one year separately by debtor, due to the unique risk characteristics of such debt investments. We generally use discounted cash flow techniques to estimate such credit losses. In applying such techniques, we may estimate principal and interest cash flows under probability-weighted scenarios that consider entity-specific matters and forecasted economic conditions. The majority of our other debt investments are with entities in the ~~asset or liability that would be considered by market participants in a transaction to purchase or sell the asset or liability.~~telecommunications industry. The collection of contractual principal and interest on these debt

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

(Unaudited)

~~Capitalized Software Costs~~

~~Costs related~~investments are highly dependent on the future business operations of those entities. Our estimation of expected credit losses for such debt investments require significant judgment about matters specific to the ~~procurement~~debtor and ~~development of software for internal-use and externally marketed software are capitalized and amortized using~~their industry. Accordingly, our actual collection experience may differ from the straight-line method over the estimated useful life of the software, not in excess of five years. Capitalized costs of internal-use software are included in “Property and equipment, net” and capitalized costs of externally marketed software are included in “Other noncurrent assets, net”assumptions reflected in our ~~condensed consolidated balance sheets. Externally marketed software generally is installed~~expected credit loss estimates.

We record our other debt investments related estimated credit losses as a reduction of Interest income, net.

Financial Impact of Adoption. Our adoption of this new standard resulted in the ~~equipment we sell~~following adjustments 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. Asour Condensed Consolidated Balance Sheet:



	Balance at December 31, 2019		Adoption of ASC 326 Increase (Decrease)			Balance at January 1, 2020
Trade accounts receivable and contract assets, net	$	196,629	$	(13,672	)	$	182,957
Other current assets, net	$	179,531	$	6,723		$	186,254
Other investments, net	$	325,405	$	(7,381	)	$	318,024
Other non-current assets, net	$	334,841	$	4,050		$	338,891
Total assets	$	7,154,298	$	(10,280	)	$	7,144,018
Deferred tax liabilities, net	$	351,692	$	(972	)	$	350,720
Accumulated earnings (losses)	$	632,809	$	(9,068	)	$	623,741
Non-controlling interests	$	75,748	$	(240	)	$	75,508
Total stockholders’ equity	$	3,745,553	$	(9,308	)	$	3,736,245
Total liabilities and stockholders’ equity	$	7,154,298	$	(10,280	)	$	7,144,018

The application of ~~September 30, 2017 and December 31, 2016, the net carrying amount~~ASC 326 requirements did not materially affect our Condensed Consolidated Statements 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 millionOperations 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 years as of September 30, 2017.March 31, 2020.

~~New~~

Recently Issued Accounting Pronouncements Not Yet Adopted

In ~~May 2014,~~December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting ~~Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“~~for Income Taxes (“ASU ~~2014-09”~~2019-12”) ~~and has modified the standard thereafter. It outlines a single comprehensive model, codified in Topic 606~~. ASU 2019-12 is part of the ~~FASB Accounting Standards Codification, for entities~~FASB’s overall simplification initiative and seeks to ~~use in~~simplify the accounting for ~~revenue arising from contracts with customers~~income taxes by updating certain guidance and ~~supersedes most current revenue recognition~~removing certain exceptions. The updated 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 exchangeeffective for ~~those goods or services.” Public entities are required to adopt the new revenue standard in~~ fiscal years beginning after December 15, ~~2017~~2020 and in interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the impact of adopting this new guidance.

In March 2020, the FASB issued ASU No. 2020-04 - Reference Rate Reform (Topic 848), codified as ASC 848 (“ASC 848”). The ~~standard~~purpose of ASC 848 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates (“IBORs”) to alternative reference rates. ASC 848 applies only to contracts, hedging relationships, and other transactions that reference a reference rate expected to be discontinued because of reference rate reform. The guidance may be applied ~~either retrospectively to prior periods or as a cumulative-effect adjustment as~~upon issuance of ASC 848 through December 31, 2022. We are currently assessing the ~~date~~impact of ~~adoption. Early adoption is permitted,~~adopting this new guidance, but not before fiscal years beginning after December 15, 2016. We plan to adopt the new revenue standard as of January 1, 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 adoption of ASU 2014-09~~it to have a material impact on the timing or amount of revenue recognition. However, we do believe the new standard will impact our financial statements 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. The requirement to defer incremental contract acquisition costs and recognize them over the contract period or expected customer life will result in the recognition of a deferred charge on our consolidated balance sheets and corresponding impact to the consolidated statement of operations and comprehensive income (loss). In addition, we currently amortize our sales acquisition costs related to our consumer business in our Hughes segment over the contract term. We believe, under the new guidance, the amortization period for these contract acquisition costs will be over the estimated customer life which is a longer period of time.

~~We continue to evaluate the impact of the new standard on~~ our consolidated financial ~~statements and related disclosures. We are not able to reasonably estimate the impact of the new standard on our consolidated financial statements at this time.~~statements.

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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(Unaudited)

NOTE 3. REVENUE RECOGNITION

Contract Balances

~~equity investments and~~The following table presents the ~~fair value~~components 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 periodic changes in fair value of such securities will be 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.contract balances:



	As of
	March 31, 2020			December 31, 2019
Trade accounts receivable and contract assets, net:
Sales and services	$	147,288		$	152,632
Leasing	4,301			4,016
Total trade accounts receivable	151,589			156,648
Contract assets	46,938			63,758
Allowance for doubtful accounts	(10,608		)	(23,777		)
Total trade accounts receivable and contract assets, net	$	187,919		$	196,629

Contract liabilities:
Current	$	99,266		$	101,060
Non-current	9,426			10,572
Total contract liabilities	$	108,692		$	111,632

~~In February 2016,~~For the ~~FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”). This standard requires lessees to recognize assets~~three months ended March 31, 2020 and ~~liabilities~~2019, we recognized revenue of $52.2 million and $39.5 million, respectively, that were previously included in the contract liability balances as of December 31, 2019 and 2018, respectively.

The following table presents the activity in our allowance for ~~all leases with lease terms more than 12 months, including leases classified as operating leases.~~ doubtful accounts:



	Balance at Beginning of Period		Credit Losses ⁽¹⁾			Deductions			Foreign Currency Translation			Balance at End of Period
For the three months ended:
March 31, 2020	$	23,777	$	(5,754	)	$	(6,325	)	$	(1,090	)	$	10,608
March 31, 2019	$	16,604	$	4,177		$	(6,738	)	$	(15	)	$	14,028

⁽¹⁾The standard also modifies the definition of a lease and the criteria for classifying leases as operating leases or financing leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. We are assessing the impact of adopting ~~this new accounting standard~~ASC 326 on January 1, 2020 was a net decrease to our ~~consolidated financial statements~~allowance for doubtful accounts largely driven by a $13.4 million reclassification to Other current assets, net and ~~related disclosures.~~Other non-current assets, net, offset by a $2.9 million adjustment to Accumulated earnings (losses).

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies the accounting for share-based payment awards. This update requires all excess tax benefits and deficiencies to be recognized as income tax expense or benefit and permits an entity to make an entity-wide policy election to either estimate forfeitures or recognize forfeitures as they occur. ASU 2016-09 is effective for 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. Upon adoption of this standard as of January 1, 2017, we recorded a $14.5 million deferred tax asset and a corresponding credit to accumulated earnings for excess tax benefits that had not previously been recognized because the 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 activities 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.

Contract Acquisition Costs

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments rather than 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 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 assessing the impact of adopting this new accounting standard onThe following table presents our ~~consolidated financial statements and related disclosures.~~unamortized contract acquisition costs:



	As of
	March 31, 2020		December 31, 2019
Unamortized contract acquisition costs	$	110,397	$	113,592

In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”), which improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for fiscal years beginning after December 15, 2017 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.

In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement 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. We expect to adopt ASU 2016-18 as of January 1, 2018. Following our adoption of this standard, the beginning and ending balances of cash and cash equivalents presented in our consolidated statements of cash

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

(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 inThe following table presents the amortization of our ~~consolidated statements of cash flows.~~ contract acquisition costs:



	For the three months ended March 31,
	2020		2019
Amortization expense	$	25,431	$	21,115

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This standard simplifies the accounting for goodwill impairment by removing Step 2 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

Transaction Price Allocated 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 2017-04 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, but it may impact the recognition and measurement of a goodwill impairment loss in future periods if we determine that the carrying amount of any reporting units including goodwill exceeds fair value of the reporting unit. Remaining Performance Obligations

InAs of March ~~2017,~~31, 2020, the ~~FASB issued Accounting Standards Update No. 2017-08, Receivables - Nonrefundable Fees~~remaining performance obligations for our customer contracts with original expected durations of more than one year was $736.6 million. We expect to recognize 39.6% of our remaining performance obligations of these contracts as revenue in the next twelve months. This amount excludes agreements with consumer customers in our Hughes segment, our leasing arrangements and ~~Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”). This update shortens~~agreements with certain customers under which collectability of all amounts due through the ~~amortization period~~term of ~~premiums on certain purchased callable debt securities to the earliest call date, effectively reducing interest income on such securities prior to the earliest call date. ASU 2017-08~~contracts 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 on our consolidated financial statements and related disclosures.uncertain.

~~Note 3. Discontinued Operations~~Disaggregation of Revenue

On January 31, 2017, EchoStar Corporation and certain of its subsidiaries entered into 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, 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.Geographic Information

~~As a result of the Share Exchange, the historical financial results of~~The following table presents our ~~EchoStar Technologies segment prior to the closing of the Share Exchange are reflected in our condensed consolidated financial statements as discontinued operations~~revenue from customer contracts disaggregated by primary geographic market and as such, have been excluded from continuing operations and segment results for all periods presented. The noncontrolling interest in HSS Tracking Stock, as reflected in our stockholders equity, was extinguished as of February 28, 2017 as a result of the Share Exchange.by segment:



	Hughes		ESS		Corporate and Other		Consolidated Total
For the three months ended March 31, 2020
North America	$	382,715	$	4,652	$	2,440	$	389,807
South and Central America	33,956		—		92		34,048
Other	41,811		—		—		41,811
Total revenue	$	458,482	$	4,652	$	2,532	$	465,666

For the three months ended March 31, 2019
North America	$	367,829	$	4,033	$	4,872	$	376,734
South and Central America	26,863		—		140		27,003
Other	50,645		—		—		50,645
Total revenue	$	445,337	$	4,033	$	5,012	$	454,382

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

(Unaudited)

Nature of Products and Services

The following table presents our revenue disaggregated by the ~~operating results~~nature of ~~our discontinued operations:~~products and services and by segment:

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



	Hughes		ESS		Corporate and Other		Consolidated Total
For the three months ended March 31, 2020
Services and other revenue:
Services	$	390,000	$	2,765	$	1,288	$	394,053
Lease revenue	11,173		1,887		1,244		14,304
Total services and other revenue	401,173		4,652		2,532		408,357
Equipment revenue:
Equipment	24,839		—		—		24,839
Design, development and construction services	31,557		—		—		31,557
Lease revenue	913		—		—		913
Total equipment revenue	57,309		—		—		57,309
Total revenue	$	458,482	$	4,652	$	2,532	$	465,666

For the three months ended March 31, 2019
Services and other revenue:
Services	$	380,783	$	2,817	$	1,737	$	385,337
Lease revenue	12,840		1,216		3,275		17,331
Total services and other revenue	393,623		4,033		5,012		402,668
Equipment revenue:
Equipment	25,960		—		—		25,960
Design, development and construction services	25,066		—		—		25,066
Lease revenue	688		—		—		688
Total equipment revenue	51,714		—		—		51,714
Total revenue	$	445,337	$	4,033	$	5,012	$	454,382

~~Expenditures for property and equipment~~

Lease Revenue

The following table presents our lease revenue by type of lease:



	For the three months ended March 31,
	2020		2019
Sales-type lease revenue:
Revenue at lease commencement	$	913	$	688
Interest income	69		252
Total sales-type lease revenue	982		940
Operating lease revenue	14,235		17,079
Total lease revenue	$	15,217	$	18,019

Substantially all of our ~~discontinued operations totaled zero and $17.2 million for the three months ended September 30, 2017 and 2016, respectively, and $12.5~~net investment in sales-type leases consisted of lease receivables totaling $6.6 million and ~~$31.8~~$6.5 million ~~for the nine months ended September 30, 2017~~ as of March 31, 2020 and ~~2016,~~December 31, 2019, respectively.

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

(Unaudited)

The following table presents future operating lease payments to be received as of March 31, 2020:



	Amounts
Year ending December 31,
2020 (remainder)	$	32,008
2021	34,910
2022	32,052
2023	30,285
2024	28,219
2025 and beyond	123,520
Total lease payments	$	280,994

The following table presents amounts for assets subject to operating leases, which are included in Property and equipment, net:



	As of
	March 31, 2020							December 31, 2019
	Cost		Accumulated Depreciation			Net		Cost		Accumulated Depreciation			Net
Customer premises equipment	$	1,409,187	$	(1,089,152	)	$	320,035	$	1,377,914	$	(1,043,431	)	$	334,483
Satellites	104,620		(33,104		)	71,516		104,620		(31,360		)	73,260
Real estate	47,243		(16,374		)	30,869		46,930		(16,048		)	30,882
Total	$	1,561,050	$	(1,138,630	)	$	422,420	$	1,529,464	$	(1,090,839	)	$	438,625

The following table presents depreciation expense for assets subject to operating leases, which is included in Depreciation and amortization:



	For the three months ended March 31,
	2020		2019
Customer premises equipment	$	45,721	$	45,812
Satellites	1,744		1,737
Real estate	232		558
Total	$	47,697	$	48,107

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

NOTE 4. DISCONTINUED OPERATIONS

BSS Business

The following table presents the ~~aggregate carrying amounts of assets and liabilities~~financial results of our discontinued ~~operations:~~operations for the BSS Business for the three months ended March 31, 2019:

As of
September 30, 2017 December 31, 2016
(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
Prepaids and deposits —
14,463
Current assets of discontinued operations 145
311,524
Property and equipment, net —
271,108
Goodwill —
6,457
Other intangible assets, net —
7,720
Investments in unconsolidated entities —
26,203
Other noncurrent assets, net —
5,436
Noncurrent assets of discontinued operations —
316,924
Total assets of discontinued operations $ 145
$ 628,448

Liabilities:
Trade accounts payable $ 278
$ 19,518
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
Accrued expenses and other 264
12,810
Current liabilities of discontinued operations 542
71,429
Capital lease obligations —
416
Deferred tax liabilities, net —
7,353
Other noncurrent liabilities —
2,932
Noncurrent liabilities of discontinued operations —
10,701
Total liabilities of discontinued operations $ 542
$ 82,130



	Amounts
Revenue:
Services and other revenue - DISH Network	$	70,826
Services and other revenue - other	5,874
Total revenue	76,700
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	10,224
Selling, general and administrative expenses	20
Depreciation and amortization	35,243
Total costs and expenses	45,487
Operating income (loss)	31,213
Other income (expense):
Interest expense	(6,683		)
Total other income (expense), net	(6,683		)
Income (loss) from discontinued operations before income taxes	24,530
Income tax benefit (provision), net	(5,283		)
Net income (loss) from discontinued operations	$	19,247

No assets or liabilities attributable to our discontinued operations of the BSS Business were held by us as of March 31, 2020 or December 31, 2019.

The following table presents the significant supplemental cash flow information and adjustments to reconcile net income to net cash flow from operating activities for discontinued operations of the BSS Business for the three months ended March 31, 2019:



	Amounts
Operating activities:
Net income (loss) from discontinued operations	$	19,247
Depreciation and amortization	$	35,243

Investing activities:
Expenditures for property and equipment	$	108

Financing activities:
Payment of finance lease obligations	$	9,597
Payment of in-orbit incentive obligations	$	1,035

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(Unaudited)

Terminated or Transferred Related Party Agreements

Effective September 10, 2019, the following agreements were terminated or transferred to DISH Network as part of the BSS Transaction. Unless noted differently below, we have no further obligations and have neither earned additional revenue nor incurred additional expense, as applicable, under or in connection with these agreements after the consummation of the BSS Transaction.

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, as listed below, 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. The terms of each of the agreements are set forth below:


•	EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV — In March 2014, we began leasing certain satellite capacity to DISH Network on the EchoStar VII satellite, the EchoStar X satellite, the EchoStar XI satellite and the EchoStar XIV satellite.

•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 beginning in January 2013.

•

Nimiq 5 Agreement — In September 2009, we entered into an agreement with Telesat Canada to lease satellite capacity from Telesat Canada on all 32 direct broadcast satellite (“DBS”) transponders on the Nimiq 5 satellite at the 72.7 degree west longitude orbital location (the “Telesat Transponder Agreement”). In September 2009, we 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. Following the consummation of the BSS Transaction, we retained certain obligations related to DISH Network’s performance under the Telesat Transponder Agreement.

•

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 “2012 TT&C Agreement”). The fees for services provided under the 2012 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 or subsequent amendments was comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the leases or subsequent amendments and DISH Network was responsible for its portion of the taxes, insurance, utilities and maintenance of the premises.These components of the BSS Transaction do not qualify for discontinued operations treatment, and therefore the revenue from these lease agreements has not been treated as discontinued operations. The terms of each of the leases are set forth below:

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•	Santa Fe Lease Agreement— DISH Network leased from us all of 5701 S. Santa Fe Dr., Littleton, Colorado. In connection with the BSS Transaction, we transferred this property to DISH Network.

•

Cheyenne Lease Agreement — During 2017, we and certain of our subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries whereby we and certain of our subsidiaries received all the shares of preferred tracking stock previously issued by us and one of our subsidiaries (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”). 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.

Real Estate Leases from DISH Network. We entered into a lease agreement pursuant to which we leased from DISH Network certain space at 801 N. DISH Dr. in Gilbert, Arizona for the Satellite Operations Center and Satellite Access Center. 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 or subsequent amendments and included our portion of the taxes, insurance, utilities and certain maintenance of the premises. In connection with the BSS Transaction, we terminated this lease and transferred the Gilbert Satellite Operations Center, including any and all equipment, software, processes, software licenses, hardware licenses, furniture and technical documentation located within, to DISH Network.

~~Note 4.~~NOTE ~~Earnings per Share~~5. BUSINESS COMBINATIONS

In May 2019, we entered into an agreement with Al Yah Satellite Communications Company PrJSC (“Yahsat”) pursuant to which, in November 2019, Yahsat contributed its satellite communications services business in Brazil to one of our Brazilian subsidiaries in exchange for a 20% equity ownership interest in that subsidiary (the “Yahsat Brazil JV Transaction”). The combined business provides broadband internet services and enterprise solutions in Brazil using the Telesat T19V satellite, the Eutelsat 65W satellite and Yahsat’s Al Yah 3 satellite. The results of operations related to the business we acquired from Yahsat have been included in these Condensed Consolidated Financial Statements from the date of acquisition. Through March 31, 2020, we have incurred $1.6 million of costs associated with the closing of the Yahsat Brazil JV Transaction.

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(Unaudited)

All assets and liabilities acquired from Yahsat have been recorded at fair value. The following table presents our updated preliminary allocation of the purchase price:



	Amounts
Assets:
Cash and cash equivalents	$	7,858
Other current assets, net	7,106
Property and equipment	86,983
Regulatory authorization	4,498
Goodwill	6,328
Other non-current assets, net	1,502
Total assets	$	114,275

Liabilities:
Trade accounts payable	$	3,879
Accrued expenses and other current liabilities	4,796
Total liabilities	$	8,675

Total purchase price ⁽¹⁾	$	105,600

(1) Based on the value determined for the equity ownership interest issued by our Brazilian subsidiary as consideration for the business acquired by us in the Yahsat Brazil JV Transaction.

The following preliminary valuation of the acquired assets was derived using primarily unobservable Level 3 inputs, which require significant management judgment and estimation:



	Amounts
Satellite payload	$	49,363
Regulatory authorization	4,498
Total	$	53,861

The satellite payload and regulatory authorization were valued using an income approach and are being amortized over seven and 11 years, respectively.

We recognized goodwill of $6.3 million, including a currency translation adjustment of $1.2 million. The goodwill is attributable to expected synergies, the projected long-term business growth in current and new markets and an assembled workforce. This goodwill has been allocated entirely to our Hughes segment.

NOTE 6. EARNINGS PER SHARE

We present basic and diluted 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”~~ stock by 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~~is 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~~the effect of which would be anti-dilutive, of ~~1.0~~4.8 million and 4.9 million shares for ~~the three and nine months ended September 30, 2017 and 3.6 million shares for the three and nine months ended September 30, 2016.~~

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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.~~

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
(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 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
Dilutive impact of stock awards outstanding 1,234
503
1,310
528
Diluted 96,890
94,401
96,626
94,189

Earnings 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

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~~ECHOSTAR CORPORATION~~

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

~~(Unaudited)~~

~~Note 5. Other Comprehensive Income (Loss) and Related Tax Effects~~

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

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.

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

~~(Unaudited)~~

~~Marketable Investment Securities~~

Our marketable investment securities portfolio consists of various debt and equity instruments, which generally are classified as available-for-sale or trading securities depending on our investment strategy for those securities. The value of our investment portfolio depends on the value of such securities and other instruments comprising the portfolio.

~~Corporate Bonds~~

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

~~Strategic Equity Securities~~

Our strategic investment portfolio consists of investments in shares of common stock of public companies, which are highly speculative and have experienced and continue to experience volatility. We 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.~~2020 and 2019, respectively.

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

~~Restricted Cash and Marketable Investment Securities~~

As of September 30, 2017 and December 31, 2016, our restricted marketable investment securities, together with our restricted cash, included amounts required as collateral for our letters of credit or surety bonds.

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~~ECHOSTAR CORPORATION~~

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

~~(Unaudited)~~

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

~~The components of our available-for-sale 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 for each of the three months ended September 30, 2017 and 2016. We recognized gains from the sales of our available-for-sale securities of $2.8 million and $5.6 million for the nine months ended September 30, 2017 and 2016, respectively. We recognized de minimis losses from the sales of our available-for-sale securities for each of the three and nine months ended September 30, 2017 and 2016.

Proceeds from sales 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.

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(Unaudited)

~~Fair Value Measurements~~The following table presents the calculation of basic and diluted EPS:



	For the three months ended March 31,
	2020			2019
Net income (loss) attributable to EchoStar Corporation common stock:
Net income (loss) from continuing operations	$	(54,295	)	$	(5,045	)
Net income (loss) from discontinued operations	—			19,247
Net income (loss) attributable to EchoStar Corporation common stock	$	(54,295	)	$	14,202

Weighted-average common shares outstanding:
Class A and B common stock:
Basic and diluted	97,811			95,386

Earnings (losses) per share:
Class A and B common stock:
Basic and diluted:
Continuing operations	$	(0.56	)	$	(0.05	)
Discontinued operations	—			0.20
Total basic and diluted earnings (losses) per share	$	(0.56	)	$	0.15

NOTE 7. MARKETABLE INVESTMENT SECURITIES

The following table presents our Marketable investment securities:



	As of
	March 31, 2020			December 31, 2019
Marketable investment securities:
Debt securities:
Available-for-sale:
Corporate bonds	$	446,515		$	568,442
Other debt securities	303,703			335,580
Total available-for-sale debt securities	750,218			904,022
Fair value option - corporate bonds	12,181			9,128
Total debt securities	762,399			913,150
Equity securities	29,673			35,566
Total marketable investment securities, including restricted amounts	792,072			948,716
Less: Restricted marketable investment securities	(1,711		)	(8,093		)
Total marketable investment securities	$	790,361		$	940,623

Debt Securities

Our ~~current marketable investment~~corporate bond portfolio includes debt instruments issued by individual corporations, primarily in the industrial and financial services industries. Our other debt securities ~~are measured at~~portfolio includes investments in various debt instruments, including U.S. government bonds, commercial paper and mutual funds.

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(Unaudited)

Available-for-Sale

The following table presents the components of our available-for-sale debt securities:



	Amortized		Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
As of March 31, 2020
Corporate bonds	$	449,483	$	—	$	(2,968	)	$	446,515
Other debt securities	303,694		9		—			303,703
Total available-for-sale debt securities	$	753,177	$	9	$	(2,968	)	$	750,218

As of December 31, 2019
Corporate bonds	$	567,926	$	518	$	(2	)	$	568,442
Other debt securities	335,572		8		—			335,580
Total available-for-sale debt securities	$	903,498	$	526	$	(2	)	$	904,022

The following table presents the activity on our available-for-sale debt securities:



	For the three months ended March 31,
	2020		2019
Proceeds from sales	$	10,000	$	435,978
Gains (losses) on sales, net	$	—	$	549

As of March 31, 2020, we have $705.7 million of available-for-sale debt securities with contractual maturities of one year or less and $44.5 million with contractual maturities greater than one year.

Fair Value Option

The following table presents the activity on our fair value ~~on a recurring basis as summarized in~~option corporate bonds:



	For the three months ended March 31,
	2020			2019
Gains (losses) on investments, net	$	(4,208	)	$	4,198

For the ~~table below. As of September 30, 2017~~three months ended March 31, 2020 and ~~December 31, 2016,~~2019, we did not have ~~investments that were categorized within Level 3~~any sales of ~~the~~ fair value ~~hierarchy.~~option corporate bonds.

Equity Securities

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~~ The following table presents the activity of our equity securities:— ~~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.



	For the three months ended March 31,
	2020			2019
Proceeds from sales	$	134		$	50,877
Gains (losses) on investments, net	$	(11,115	)	$	30,249

~~Our investments in unconsolidated entities consisted of the following:~~

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

(Unaudited)

~~Note 7. Trade Accounts Receivable~~Fair Value Measurements

~~Our trade accounts receivable consisted~~The following table presents our marketable investment securities categorized by the fair value hierarchy, certain of ~~the following:~~which have historically experienced volatility:

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
	March 31, 2020								December 31, 2019
	Level 1			Level 2		Total			Level 1			Level 2		Total
Debt securities:
Available-for-sale:
Corporate bonds	$	—		$	446,515	$	446,515		$	—		$	568,442	$	568,442
Other debt securities	1,711			301,992		303,703			8,093			327,487		335,580
Total available-for-sale debt securities	1,711			748,507		750,218			8,093			895,929		904,022
Fair value option - corporate bonds	—			12,181		12,181			—			9,128		9,128
Total debt securities	1,711			760,688		762,399			8,093			905,057		913,150
Equity securities	23,090			6,583		29,673			27,933			7,633		35,566
Total marketable investment securities, including restricted amounts	24,801			767,271		792,072			36,026			912,690		948,716
Less: Restricted marketable investment securities	(1,711		)	—		(1,711		)	(8,093		)	—		(8,093		)
Total marketable investment securities	$	23,090		$	767,271	$	790,361		$	27,933		$	912,690	$	940,623

As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016, progress billings offset against contracts in process amounted to $17.4 million and $14.6 million, respectively.~~2019, we did not have any investments that were categorized within Level 3 of the fair value hierarchy.

~~Note~~NOTE 8. ~~Inventory~~PROPERTY AND EQUIPMENT

~~Our inventory consisted~~The following tables presents the components of ~~the following:~~Property and equipment, net:

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



	As of
	March 31, 2020		December 31, 2019
Property and equipment, net:
Satellites, net	$	1,688,827	$	1,749,576
Other property and equipment, net	739,716		779,162
Total property and equipment, net	$	2,428,543	$	2,528,738

~~Note 9. Property and Equipment~~Satellites

~~Property and equipment~~As of March 31, 2020, our operating satellite fleet consisted of 10 satellites, 7 of which are owned and 3 of which are leased. They are all in geosynchronous orbit, approximately 22,300 miles above the ~~following:~~equator.

Depreciable Life (In Years) As of
September 30, 2017 December 31, 2016
(In thousands)
Land — $ 33,682
$ 35,815
Buildings and improvements 1-40 184,511
175,593
Furniture, fixtures, equipment and other 1-12 680,428
514,056
Customer rental equipment 2-4 859,596
689,579
Satellites - owned 2-15 2,764,153
2,381,120
Satellites acquired under capital leases 10-15 794,705
781,761
Construction in progress — 765,062
1,418,763
Total property and equipment 6,082,137
5,996,687
Accumulated depreciation (2,551,678 ) (2,598,492 )
Property and equipment, net $ 3,530,459
$ 3,398,195

1920

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - ~~Continued~~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~~The following table presents our owned and leased ~~satellites under construction or undergoing in-orbit testing as of September 30, 2017.~~

satellites:



~~Satellites~~Satellite	Segment	~~Expected~~ Launch Date	Nominal Degree Orbital Location (Longitude)	Depreciable Life (In Years)
Owned:
SPACEWAY 3 ⁽¹⁾	Hughes	August 2007	95 W	10
EchoStar XVII	Hughes	July 2012	107 W	15
EchoStar XIX	Hughes	December 2016	97.1 W	15
Al Yah 3 ⁽²⁾	Hughes	January 2018	20 W	7
EchoStar IX ⁽³⁾	ESS	August 2003	121 W	12
EUTELSAT 10A ⁽⁴⁾	Corporate and Other	April 2009	10 E	-
EchoStar XXI	Corporate and Other	June 2017 ~~(1)~~	10.25 E	15

Finance 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 ~~(2)~~
~~Telesat T19V (“63 West”) (3)~~	~~Hughes~~105 W	~~Second quarter of 2018~~
~~EchoStar XXIV~~	~~Corporate and Other~~	~~2021~~15


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

(2) Upon consummation of our joint venture with Yahsat in Brazil in November 2019, we acquired the Brazilian Ka-band payload on this satellite. Depreciable life represents the remaining useful life as of November 2019.

(3) We own the Ka-band and Ku-band payloads on this satellite.

(4) We acquired the S-band payload on this satellite in December 2013. Prior to acquisition, the S-band payload experienced an anomaly at the time of launch and, as a result, is not fully operational.

The following table presents the components of our satellites, net:

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
(In thousands)
Satellites $ 61,078
$ 46,965
$ 173,293
$ 140,895
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



	Depreciable Life (In Years)	As of
	Depreciable Life (In Years)	March 31, 2020			December 31, 2019
Satellites, net:
Satellites - owned	7 to 15	$	1,803,878		$	1,816,303
Satellites - acquired under finance leases	15	352,206			381,163
Construction in progress	—	377,369			365,133
Total satellites		2,533,453			2,562,599
Accumulated depreciation:
Satellites - owned		(788,241		)	(756,635		)
Satellites - acquired under finance leases		(56,385		)	(56,388		)
Total accumulated depreciation		(844,626		)	(813,023		)
Total satellites, net		$	1,688,827		$	1,749,576

~~Satellites~~

As of September 30, 2017, our satellite fleet consisted of 18 of our owned and leased satellites 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 our satellites are accounted for as capital leases and are depreciated on a straight-line basis over their respective lease terms. We accounted for one satellite as an operating lease that is not included in property and equipment as of September 30, 2017.

~~Recent Developments~~

~~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.

2021

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

(Unaudited)

~~EchoStar VIII.During~~The following table presents the ~~second quarter of 2017, the EchoStar VIII satellite was removed from its orbital location~~depreciation expense and ~~retired from commercial service. This retirement has not had, and is not expected to have, a material impact on~~capitalized interest associated with our ~~results of operations or financial position.~~satellites:



	For the three months ended March 31,
	2020		2019
Depreciation expense:
Satellites - owned	$	32,073	$	32,015
Satellites acquired under finance leases	6,013		6,490
Total depreciation expense	$	38,086	$	38,505

Capitalized interest	$	6,681	$	4,901

Construction in Progress

In August 2017, we entered into a contract for the design and construction of the EchoStar ~~XIX~~.XXIV satellite, a new, next-generation, high throughput geostationary satellite. The EchoStar ~~XIX~~XXIV 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~~is primarily intended to provide additional capacity for ~~the Hughes broadband services to~~ our ~~customers~~HughesNet satellite internet service (“HughesNet service”) in North, ~~America and added capacity in certain~~ Central and South ~~American countries~~America as well as enterprise broadband services. In the first quarter of 2020, Space Systems/Loral, LLC (“SS/L”), the manufacturer of our EchoStar XXIV satellite, invoked the “force majeure” clause of our contract and ~~has added capability for aeronautical, enterprise~~notified us of a possible delay in completion of the satellite due to “shelter-in-place” orders affecting personnel at SS/L and ~~international broadband services.~~its subcontractors, and other potential impacts of the COVID-19 pandemic. We ~~contributed~~currently expect the EchoStar ~~XIX~~XXIV satellite to be launched no earlier than the second half of 2021. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in Corporate and Other in our ~~Hughes~~ segment ~~in February 2017.~~reporting.

~~EchoStar XXI~~Satellite Commitments. 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~~As of March 31, 2020 and ~~is anticipated~~December 31, 2019, our satellite-related obligations were $402.7 million and $419.0 million, respectively. These primarily include payments pursuant to ~~be placed into service in~~agreements for the ~~fourth quarter~~construction of ~~2017 at the 105 degree west longitude orbital location. Our Ku-band payload on~~ the EchoStar ~~105/SES-11~~XXIV satellite, ~~will replace~~payments pursuant to regulatory authorizations, non-lease costs associated with our ~~current capacity on the AMC-15 satellite.~~finance lease satellites, in-orbit incentives relating to certain satellites and commitments for satellite service arrangements.

~~EchoStar XXIII.~~ In certain circumstances, the dates on which we are obligated to pay our contractual obligations could change.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 and Impairments

Our satellites may experience anomalies from time to time, some of which may have a significant adverse impact on their remaining useful lives, the commercial operation of the satellites or our operating results or financial position. We are not aware of any anomalies with respect to our owned or leased satellites or payloads that have had any ~~such material~~significant adverse effect ~~during~~on their remaining useful lives, the ~~nine~~commercial operation of the satellites or payloads or our operating results or financial position as of and for the three months ended September 30, 2017. There can be no assurance, however, that anomalies will not have any such adverse impacts in the future. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail.March 31, 2020.

Satellite Insurance

We ~~historically have~~generally do not ~~carried~~carry in-orbit insurance on our satellites or payloads 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,~~long-term debt and our joint venture agreements with Yahsat, we are required, subject to certain limitations on coverage, to maintain ~~in-orbit insurance~~only for ~~our~~the SPACEWAY 3 ~~EchoStar XVI, and~~satellite, the EchoStar XVII ~~satellites. Based on economic analysis~~satellite and the Al Yah 3 Brazilian payload, insurance or other contractual arrangements during the commercial in-orbit service of ~~the current insurance market we obtained launch plus one year in-orbit insurance, subject to certain limitations, for the EchoStar XIX, EchoStar XXI~~such satellite or payload. Our other satellites 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,~~payloads, either in orbit or under construction, are not covered by launch or in-orbit ~~insurance.~~insurance or other contractual arrangements. We will continue to assess circumstances going forward and make ~~insurance~~insurance-related decisions on a ~~case by case~~case-by-case basis.

~~Note 10. Goodwill, Regulatory Authorizations and Other Intangible Assets~~

~~Goodwill~~

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

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

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~~ECHOSTAR CORPORATION~~

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

~~(Unaudited)~~

~~Regulatory Authorizations~~

~~Regulatory authorizations included amounts with 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 of September 30, 2017 and December 31, 2016, 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 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 million and $12.8 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - ~~Continued~~CONTINUED

(Unaudited)

~~Note 11. Debt~~Fair Value of In-Orbit Incentives

As of March 31, 2020 and ~~Capital Lease Obligations~~December 31, 2019, 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 $56.2 million and $57.0 million, respectively.

NOTE 9. REGULATORY AUTHORIZATIONS

The following table ~~summarizes~~presents the components of our Regulatory authorizations, net:



	Finite lived
	Cost			Accumulated Amortization			Total			Indefinite lived			Total
Balance, December 31, 2018	$	46,787		$	(16,790	)	$	29,997		$	400,042		$	430,039
Amortization expense	—			(878		)	(878		)	—			(878		)
Foreign currency translation	(854		)	331			(523		)	—			(523		)
Balance, March 31, 2019	$	45,933		$	(17,337	)	$	28,596		$	400,042		$	428,638

Balance, December 31, 2019	$	58,451		$	(20,144	)	$	38,307		$	440,291		$	478,598
Amortization expense	—			(964		)	(964		)	—			(964		)
Foreign currency translation	(1,828		)	366			(1,462		)	(5,008		)	(6,470		)
Balance, March 31, 2020	$	56,623		$	(20,742	)	$	35,881		$	435,283		$	471,164

Weighted average useful life				13 years

Finite Lived Assets

In November 2019, we were granted an S-Band spectrum license for terrestrial rights in Mexico for $7.9 million. The acquired asset is subject to amortization over a period of 15 years.

In November 2019, we also acquired Ka-band spectrum rights for $4.5 million, upon consummation of the Yahsat Brazil JV Transaction, which are subject to amortization over a period of 11 years.

NOTE 10. OTHER INVESTMENTS

The following table presents the components of Other investments, net:



	As of
	March 31, 2020		December 31, 2019
Other investments, net:
Equity method investments	$	163,689	$	166,209
Other equity investments	43,364		66,627
Other debt investments, net	91,094		92,569
Total other investments, net	$	298,147	$	325,405

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Equity Method Investments

Dish Mexico

We own 49% of Dish Mexico and its subsidiaries, a joint venture that we entered into in 2008 to provide direct-to-home satellite services in Mexico. Historically, we provided certain satellite services to Dish Mexico. However, following the consummation of the BSS Transaction, we no longer provide these services.

Deluxe/EchoStar LLC

We own 50% of Deluxe/EchoStar LLC (“Deluxe”), a joint venture that we entered into in 2010 to build an advanced digital cinema satellite distribution network targeting delivery to digitally equipped theaters in the U.S. and Canada. We recognized revenue from Deluxe for transponder services and the sale of broadband equipment of $1.3 million and $0.9 million for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020 and December 31, 2019, we had trade accounts receivable from Deluxe of $1.0 million and $0.6 million, respectively.

Broadband Connectivity Solutions (Restricted) Limited

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 $100.0 million in cash in exchange for a 20% interest in BCS. Under the terms of the agreement, we may also acquire, for further cash investments, additional ownership interests in BCS in the future provided certain conditions are met. We supply network operations and management services and equipment to BCS. We recognized revenue from BCS for such services and equipment of $1.7 million and $2.3 million for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020 and December 31, 2019, we had trade accounts receivable from BCS of $4.5 million and $5.2 million, respectively.

Other Equity Investments

During the three months ended March 31, 2020 and 2019, we recorded a $21.3 million and a $28.7 million, respectively, reduction to the carrying amount of our investments based on circumstances that indicated the fair value of the investment was less than its carrying amount.

Other Debt Investments, Net

The following table presents our other debt investments, net:



	As of
	March 31, 2020			December 31, 2019
Other debt investments, net:
Cost basis	$	103,768		$	102,878
Discount	(10,442		)	(10,309		)
Allowance for credit losses	(2,232		)	—
Total other debt investments, net	$	91,094		$	92,569

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

The following table presents the activity in our allowance for credit losses:



	Balance at Beginning of Period		Credit Losses⁽¹⁾		Deductions		Balance at End of Period
For the three months ended:
March 31, 2020	$	—	$	2,232	$	—	$	2,232

⁽¹⁾The impact of adopting ASC 326 on January 1, 2020 was a $2.1 million adjustment to Accumulated earnings (losses).

During the three months ended March 31, 2020 and 2019, we recorded interest income related to these debt instruments of $3.3 million and 0, respectively.

NOTE11. LONG-TERM DEBT

The following table presents the carrying amounts and fair values of our ~~debt:~~Long-term debt


	Effective Interest Rate		As of
		September 30, 2017								December 31, 2016								Effective interest rates		As of
		Carrying Amount				Fair Value				Carrying Amount				Fair Value					March 31, 2020							December 31, 2019
			(In thousands)																		Carrying Amount			Fair Value			Carrying Amount			Fair Value
Senior Secured Notes:
6 1/2% Senior Secured Notes due 2019		6.959%		$	990,000			$	1,056,825			$	990,000			$	1,084,050
5 1/4% Senior Secured Notes due 2026		5.320%		750,000				783,038				750,000				739,688				5.320%		$	750,000		$	748,133		$	750,000		$	825,308
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			922,527			900,000			963,783
6 5/8% Senior Unsecured Notes due 2026	6.688%		750,000				806,910				750,000				760,245				6.688%		750,000			770,715			750,000			833,903
Less: Unamortized debt issuance costs			(26,756		)		—				(31,821		)		—						(9,782		)				(10,832		)
Subtotal			3,363,244				$	3,670,181			3,358,179				$	3,574,172
Capital lease obligations			280,878								297,268
Total debt and capital lease obligations			3,644,122								3,655,447
Less: Current portion			(38,407		)						(32,984		)
Long-term debt and capital lease obligations, net of unamortized debt issuance costs			$	3,605,715							$	3,622,463
Total long-term debt																					$	2,390,218		$	2,441,375		$	2,389,168		$	2,622,994

~~The fair values of~~No amounts on our long-term debt are ~~estimates categorized within Level 2 of~~due during the ~~fair value hierarchy.~~

Pursuant to the terms of a registration rights agreement, HSS registered notes having substantially identical terms as the 2026 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% of the 2026 Notes being tendered for exchange.next twelve months.

~~Note~~NOTE 12. ~~Income Taxes~~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 partially 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~~benefit was ~~$6.1~~$7.5 million for the three months ended ~~September 30, 2017~~March 31, 2020 compared to an$2.9 million of income tax ~~expense of approximately $17.4 million~~provision for the three months ended ~~September 30, 2016.~~March 31, 2019. Our estimated effective income tax rate was ~~14.5%~~11.5% and ~~34.6%~~(216.1)% for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, 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~~March 31, 2020 were primarily due to the increase in our valuation allowance associated with certain foreign losses and the impact of state and local taxes, partially offset by the change in net unrealized losses that are capital in nature, permanent book tax differences and research and experimentation ~~credits,~~credits. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2019 were primarily due to the increase in our valuation allowance associated with certain foreign losses and the impact of state and local taxes, partially offset by ~~state~~the change in net unrealized losses that are capital in nature and ~~local taxes.~~research and experimentation credits.

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. The variations in our

2325

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

(Unaudited)

~~effective~~The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in March 2020. The CARES Act features significant tax ~~rate from~~provisions and other measures to assist individuals and businesses impacted by the U.S. federal statutory rate for the nine months ended September 30, 2017 was 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 resulteconomic effects of the ~~Share Exchange, the increase in~~COVID-19 pandemic, including a five-year carryback of net operating losses, relaxation of Section 163(j) interest deduction limitations, acceleration of Alternative Minimum Tax refunds, relief for payroll tax and tax credits for employers who retain employees. These provisions did not affect our ~~valuation allowance associated with unrealized gains that are capital in nature, and change in the amount of unrecognized~~income 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 rateprovision for ~~the nine months ended September 30, 2016 were primarily due to research and experimentation credits, partially offset by state and local taxes.~~

~~Note 13. Stock-Based Compensation~~

We maintain stock incentive plans to attract and retain officers, directors and key employees. Stock awards under these plans include both performance based and non-performance based stock incentives. We granted stock options and other incentive awards to our employees and nonemployee directors to acquire 62,600 shares and 137,470 shares of our Class A common stock during the three months ended September 30, 2017 and 2016, respectively, and 1,263,350 shares and 722,350 shares of our Class A common stock for the nine months ended September 30, 2017 and 2016, respectively. On April 24, 2017, Mr. Ergen, our Chairman, voluntarily forfeited options to purchase 600,000 shares of Class A common stock that were granted to him on April 1, 2017, and we canceled such forfeited options.

Total non-cash, stock-based compensation expense is shown in the following table for the three and nine months ended September 30, 2017 and 2016 and was assigned to the same expense categories as the base compensation for such employees:

For the Three Months
Ended September 30, For the Nine Months
Ended September 30,
2017 2016 2017 2016
(In thousands)
Research and development expenses $ 297
$ 297
$ 774
$ 827
Selling, general and administrative expenses 2,965
2,311
7,932
7,627
Total stock-based compensation $ 3,262
$ 2,608
$ 8,706
$ 8,454

~~As of September 30, 2017, total unrecognized stock-based compensation cost, net of estimated forfeitures, related to our unvested stock awards was $22.8 million.~~March 31, 2020.

~~Note 14~~NOTE 13. ~~Commitments and Contingencies~~CONTINGENCIES

~~Commitments~~

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.

~~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.

~~Separation Agreement; Share Exchange~~Certain Arrangements with DISH Network

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~~In connection with the Share Exchange and the 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~~

Litigation

We are involved in a number of legal proceedings ~~(including those described below)~~against us 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,~~proceedings, 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,~~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,

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motions or ~~motions;~~other proceedings; (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, tribunal, other body 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~~In December 2019, we entered into a comprehensive settlement agreement with Elbit pursuant to which we paid a total of $33.0 million in satisfaction of all amounts relating to these matters and all open proceedings, including appeals, were 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; our subsidiary Hughes Satellite ~~Communication Network”~~Services Corporation (“HSSC”); our former subsidiary BSS Corp.; and DISH and its subsidiary Merger Sub. On September 5, 2019, the ~~874 patent is entitled “Infrastructure for Telephony Network.” Elbit alleges that~~defendants filed motions to dismiss. On October 11, 2019, the 073 patent is infringed by broadband satellite systems that practice the Internet Protocol Over Satellite standard. Elbit alleges that the 874 patent is infringed by the manufacture and sale of broadband satellite systems that provide cellular backhaul service via connections to E1 or T1 interfaces at cellular backhaul base stations. On April 2, 2015, Elbitplaintiffs filed an amended complaint removing ~~Helm Hotels Group~~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 and HSSC’s boards of directors to approve the BSS 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 the purported class. On November 11, 2019, we and the other defendants filed separate motions to dismiss plaintiff’s amended complaint and during a ~~defendant, but making similar~~hearing on January 13, 2020 the court denied these motions. On February 10, 2020, we and the other defendants filed answers to the amended complaint. 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 a petition with an administrative tribunal (the “Tribunal”), challenging the DOT’s calculation of its AGR. The

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~~allegations against~~DOT also issued license fee assessments to other telecommunications service providers and a ~~new defendant, Country Home Investments, Inc.~~number of similar petitions were filed by several other such providers with the Tribunal. These petitions were amended, consolidated, remanded and re-appealed several times. On April 23, 2015, the Tribunal issued a judgment affirming the DOT’s calculation of AGR for the telecommunications service providers but reversing the DOT’s imposition of 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. On October 24, 2019, the Supreme Court of India (“Supreme Court”) issued an order (the “Order”) affirming the license fee assessments imposed by the DOT, including its imposition of interest, penalties and interest on the penalties, but without indicating the amount HCPIL is required to pay the DOT, and ordering payment by January 23, 2020. On November 323, 2019, HCIPL and ~~4, 2015, and~~other telecommunication service providers filed a petition asking the Supreme Court to reconsider its decision. The petition was denied on January 20, 2020. On January 22, ~~2016,~~2020, HCIPL and other telecommunication service providers filed an application requesting that the ~~defendants filed petitions~~Supreme Court modify the Order to permit the DOT to calculate the final amount due and extend HCPIL’s and the other telecommunication service providers’ payment deadline. On February 14, 2020, the Supreme Court denied this application and directed us and the other telecommunication service providers to explain why the Supreme Court should not initiate contempt proceedings for failure to pay the amounts due. During a hearing on March 18, 2020, the Supreme Court ordered that all amounts that were due before the ~~United States Patent~~Supreme Court in October 2019 must be paid, including interest, penalties and ~~Trademark Office challenging~~interest on the validity of the patents in suit, which the Patent and Trademark Office subsequently declined to institute. On April 13, 2016, the defendants answered Elbit’s complaint. 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 verdictpenalties. The Supreme Court also ordered that the ~~073 patent~~parties appear for a further hearing addressing, potentially among other things, a proposal by the DOT to allow for extended or deferred payments of amounts due. This hearing was ~~valid~~postponed due to the COVID-19 pandemic and ~~infringed,~~not yet rescheduled. To date, the DOT has issued HCIPL written assessments totaling $28.4 million, comprised of $4.0 million for additional license fees, $4.1 million for penalties and ~~awarded Elbit approximately $21.1 million. As a result~~$20.3 million for interest and interest on penalties. In the first quarter of ~~interest, costs and unit sales through~~2020, HCIPL paid 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 the outcome of any post-trial motions or appeals. For the nine months ended September 30, 2017, we have recorded a charge of $2.5DOT $2.9 million with respect to this matter. As a result of the Supreme Court’s orders in this matter, HCIPL’s payments to date and the impact of foreign exchange rates, and using the DOT’s methodology as reflected in the assessments HCIPL has received as of the date of the Order, we have recorded an accrual of $77.1 million as of March 31, 2020, comprised of $3.8 million for additional license fees, $3.9 million for penalties and $69.4 million for interest and interest on penalties. We had recorded an accrual of $80.2 million as of December 31, 2019. Any eventual payments made with respect to the ultimate outcome of this matter may be different from our ~~accruals~~accrual 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 District Court for the Eastern District of Texas alleging infringement of United States Patent Nos. 7,378,992 (the “992 patent”), entitled “Content Independent Data Compression Method and System”; 7,415,530 (the “530 patent”), entitled “System and Methods for Accelerated Data Storage and Retrieval”; and 8,643,513 (the “513 patent”), entitled “Data Compression System and Methods.” On September 14, 2015, Realtime amended its complaint, additionally alleging infringement of United States 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 Patents, Nos. 7,358,867, entitled “Content Independent Data Compression Method and System;” 8,502,707, entitled “Data Compression Systems and Methods;” 8,717,204, entitled “Methods for Encoding and Decoding Data;” and 9,054,728, entitled “Data Compression System and Methods.” On June 6, 2017, Realtime filed an amended complaint, adding claims of infringement 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., as well as additionally alleging infringement 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. On July 20, 2017, the claims against the newly added parties, with the exception of EchoStar Technologies, L.L.C., were severed into a separate case. On September 1, 2017, EchoStar Technologies, L.L.C. was dismissed 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. Realtime is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein.

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~~Shareholder Derivative Litigation~~

On December 5, 2012, Greg Jacobi, purporting to sue derivatively on behalf of EchoStar Corporation, filed suit (the “Jacobi Litigation”) against Charles W. Ergen, Michael T. Dugan, R. Stanton Dodge, Tom A. Ortolf, C. Michael Schroeder, Joseph P. Clayton, David K. Moskowitz, and EchoStar Corporation in the United States District Court for the District of Nevada. The complaint alleges that a March 2011 attempted grant of 1.5 million stock options to Charles Ergen breached defendants’ fiduciary duties, resulted in unjust enrichment, and constituted a waste of corporate assets.

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

On February 22, 2013, the Chester County Litigation was transferred to the District of Nevada, and on April 3, 2013, the Chester County Litigation was consolidated into the Jacobi Litigation. Oral argument on a motion to dismiss the Jacobi Litigation was held February 21, 2014. On 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.

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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~~Note 15~~NOTE 14. ~~Segment Reporting~~SEGMENT REPORTING

~~Operating~~Business 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 operate in ~~three primary~~2 business segments, Hughes ~~EchoStar Technologies~~ and ~~ESS. Following consummation of the Share Exchange~~ESS, as described in Note 3 ~~of these condensed consolidated financial statements, we no longer operate the EchoStar Technologies business segment.~~ 1. Organization and Business Activities.

The primary measure of segment profitability that is reported regularly to our CODM is earnings before interest, taxes, depreciation and amortization, ~~or EBITDA. Effective in March 2017, we also changed our overhead allocation methodology~~net income (loss) from discontinued operations and net income (loss) attributable 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”non-controlling interests (“EBITDA”). ~~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, 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 operations, and gains (losses) from certain of our investments. Costs and income associated with these departments and activities are accounted for in the “Corporate and Other” column in the table 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:~~business segments. Capital expenditures are net of refunds and other receipts related to our property and equipment.


	Hughes		EchoStar Satellite Services		Corporate and Other			Consolidated Total		Hughes		ESS		Corporate and Other			Consolidated Total
	(In thousands)
For the Three Months Ended September 30, 2017
For the three months ended March 31, 2020
External revenue	$	379,702	$	96,743	$	4,788		$	481,233	$	458,482	$	4,367	$	2,817		$	465,666
Intersegment revenue	$	359	$	350	$	(709	)	$	—	—		285		(285		)	—
Total revenue	$	380,061	$	97,093	$	4,079		$	481,233	$	458,482	$	4,652	$	2,532		$	465,666

EBITDA	$	131,817	$	78,345	$	9,699		$	219,861	$	154,641	$	2,030	$	(65,440	)	$	91,231
Capital expenditures	$	108,428	$	8,203	$	75,500		$	192,131	$	91,517	$	—	$	13,087		$	104,604

For the Three Months Ended September 30, 2016
For the three months ended March 31, 2019
External revenue	$	355,090	$	101,308	$	3,648		$	460,046	$	445,337	$	3,852	$	5,193		$	454,382
Intersegment revenue	$	786	$	172	$	(958	)	$	—	—		181		(181		)	—
Total revenue	$	355,876	$	101,480	$	2,690		$	460,046	$	445,337	$	4,033	$	5,012		$	454,382

EBITDA	$	125,522	$	84,257	$	(20,477	)	$	189,302	$	161,132	$	1,729	$	(17,260	)	$	145,601
Capital expenditures	$	75,682	$	15,730	$	48,162		$	139,574	$	73,821	$	—	$	38,033		$	111,854

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

~~100 Inverness Lease Agreement. In connection with the Share Exchange, effective March 2017, DISH Network leases from us certain space at 100 Inverness Circle~~

•

100 Inverness Occupancy License Agreement — Effective March 2017, DISH Network is licensed to use certain of our space at 100 Inverness 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 and all equipment, hardware licenses, software, processes, software licenses, furniture and technical documentation associated with the satellites transferred in the BSS Transaction.

•

Meridian Lease Agreement —The lease for all of 9601 S. Meridian Blvd., Englewood, Colorado was originally for a period ending in December 2016. We and DISH Network have amended this lease over time to, among other things, extend the term through December 2020. After December 2020, this agreement may be converted by mutual consent to a month-to-month lease agreement with either party having the right to terminate upon 30 days’ notice.

~~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 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.

~~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

~~Table of Contents~~

~~ECHOSTAR CORPORATION~~

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

~~(Unaudited)~~

~~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~~Agreement. . In March 2012, DISH Network completed its acquisition of substantially all the assets of TerreStar Networks Inc. (“TerreStar”). Prior to DISH Network’s acquisition of substantially all the assets of TerreStar and our completion of the Hughes Acquisition, TerreStar and HNS entered into various agreements pursuant to which ~~our Hughes segment provides,~~we provide, among other things, warranty, operations and maintenance and hosting services for TerreStar’s ground-based communications ~~equipment. TerreStar~~equipment (the “TerreStar Agreements”). 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. In March 2020, we entered into an agreement with DISH Network pursuant to which we perform certain work and provide certain credits to amounts owed to us under the TerreStar Agreements in exchange for DISH Network’s granting us rights to use certain satellite capacity under the Amended and Restated Professional Services Agreement (as defined below).

3431

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ECHOSTAR CORPORATION

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

(Unaudited)

Hughes Broadband Distribution ~~Agreement~~Agreement. . Effective October 2012, ~~HNS~~we and ~~dishNET Satellite Broadband L.L.C. (“dishNET”), a wholly-owned subsidiary of~~ DISH Network, entered into a distribution agreement (the “Distribution Agreement”) pursuant to which ~~dishNET~~DISH Network has the right, but not the obligation, to market, sell and distribute ~~the Hughes satellite internet service (the “Hughes service”). dishNET~~our HughesNet service. DISH Network pays ~~HNS~~us a monthly per subscriber wholesale service fee for the ~~Hughes~~HughesNet 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 terms unless terminated by either party with a written notice at least 180 ~~days~~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~~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~~will sell to 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~~HughesNet Service and HughesNet equipment that has been modified to meet DISH Network’s internet-of-things specifications for the ~~governance~~transfer of ~~Sling TV Holding; and (iii) a commercial~~data to DISH Network’s network operations centers. This agreement ~~(“Commercial Agreement”) pursuant~~has an initial term of five years expiring February 2024 with automatic renewal for successive one-year terms unless terminated by DISH Network with at least 180 days‘ written notice to ~~which, among other things, Sling TV Holding had: (a) certain rights and corresponding obligations~~us or by us with ~~respect~~at least 365 days’ written notice to ~~its business; and (b) the right, but not the obligation, to receive certain services from~~DISH Network.

35Operating Expenses — DISH Network

The following table presents our operating expenses related to DISH Network:



	For the three months ended March 31,
	2020		2019
Operating expenses - DISH Network	$	1,455	$	916

The following table presents the related trade accounts payable:



	As of
	March 31, 2020		December 31, 2019
Trade accounts payable - DISH Network	$	1,229	$	1,923

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ECHOSTAR CORPORATION

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

(Unaudited)

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 transferred to DISH Network as part of the Share Exchange and EchoStar has no further obligations and will incur no additional expenses 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).

~~General and 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, all of 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 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 (as amended to date, 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 and DISH further 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 Agreement is through January ~~2019~~2021 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 EstateLeases 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 or subsequent amendments and, ~~for certain properties, we are responsible for~~includes our portion of the taxes, insurance, utilities ~~and~~and/or maintenance of the premises. The terms of each of the leases are set forth below:

•

Cheyenne Lease Agreement — Effective March 2017, we entered into a lease with DISH Network for certain space at 530 EchoStar Drive in Cheyenne, Wyoming for a period ending in February 2019. In August 2018, we exercised our option to renew this lease for a one year period ending in February 2020. In connection with the BSS Transaction, we transferred the Cheyenne Satellite Operations Center, including any equipment, software licenses, and furniture located within, to DISH Network and amended this lease to reduce the space provided to us for the Cheyenne Satellite Access Center for a period ending in September 2021, with the option for us to renew for a one year period upon 180 days’ written notice prior to the end of the term.

•

American Fork Occupancy License Agreement — Effective March 2017, we entered into an agreement with DISH Network for certain space at 796 East Utah Valley Drive in American Fork, Utah for a period ending in August 2017. We exercised our option to renew this agreement for a five-year period ending in August 2022. We and DISH Network amended this agreement to, among other things, terminate this agreement in March 2019.

~~Table of Contents~~

~~ECHOSTAR CORPORATION~~

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

~~(Unaudited)~~

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

~~90 Inverness Lease Agreement~~.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 ~~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~~. In connection with the Share Exchange, effective March 2017 we lease from DISH Network certain space at 530 EchoStar Drive in Cheyenne, Wyoming for a period ending in March 2019. EchoStar has the option to renew this lease for thirteen one-year periods.

~~Gilbert Lease Agreement~~. In connection with the Share Exchange, effective March 2017 we lease from DISH Network certain space at 801 N. DISH Dr. in Gilbert, Arizona for a period ending in March 2019. EchoStar has the option to renew this lease for thirteen one-year periods.

~~American Fork Occupancy License Agreement~~. In connection with the Share Exchange, effective March 2017, we sublease 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.

~~Employee Matters Agreement~~. Effective March 2017 in connection with the Share Exchange, we and DISH Network entered into an Employee Matters Agreement that addresses the transfer of employees from EchoStar 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.

~~Collocation and Antenna Space Agreements. 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

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ECHOSTAR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

certain other agreements pursuant to which DISH Network ~~will provide~~provides additional collocation and antenna space to ~~EchoStar~~us in Monee, Illinois and Spokane, Washington through August 2022. ~~EchoStar~~Generally, we 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, 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~~located at the location.

~~Other agreements — DISH Network~~

~~Satellite and Tracking Stock~~Also in connection with the BSS Transaction,~~. In February 2014,~~ in September 2019, we entered into ~~agreements with DISH Network to implement a transaction~~an agreement pursuant to which ~~among other things: (i)~~DISH Network will provide us with antenna space and power in ~~March 2014, EchoStar and HSS issued shares~~Cheyenne, Wyoming for a period of five years commencing no later than October 2020, with four 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 Tracking Stock to DISH Network in exchange for five satellites owned by DISH Network (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV) (including assumption of related in-orbit incentive obligations) and approximately $11.4 million in cash; and (ii) in March 2014, DISH Network began receiving certain satellite services as discussed above on these five 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.then-current term.

~~Share Exchange Agreement~~. On January 31, 2017, EchoStar Corporation and certain of its subsidiaries entered into the Share Exchange Agreement with DISH and certain of its subsidiaries, pursuant to which on February 28, 2017, EchoStar Corporation and its subsidiaries received all of the shares of the Tracking Stock in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of our EchoStar Technologies businesses and certain other assets. Following consummation of the Share Exchange on February 28, 2017, EchoStar no longer operates the transferred EchoStar Technologies businesses and the Tracking Stock was retired and is no longer outstanding and all agreements, arrangements and policy statements with respect to such Tracking Stock terminated and are of no further effect. Pursuant to the Share Exchange

~~Table of Contents~~

~~ECHOSTAR CORPORATION~~

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

~~(Unaudited)~~

Agreement, EchoStar transferred certain assets, investments in joint ventures, spectrum licenses and real estate properties and DISH Network assumed certain liabilities relating to the transferred assets and businesses. The Share Exchange Agreement contains customary representations and warranties by the parties, including representations by EchoStar related to the transferred assets, assumed liabilities and the financial condition of the transferred businesses. EchoStar and DISH Network 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 it causes the transaction to be taxable to the other party after closing. See ~~Note 3~~ ~~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 offive years ~~until~~through March 2022 with automatic renewal for successive one-year terms. ~~After the first anniversary, either~~Either party has the ability to terminate the Hughes Broadband MSA, in whole or in part, for any reason upon at least 90 days’ notice to the other party. Upon expiration or termination of the Hughes Broadband MSA, ~~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 $4.6 million and $4.8 million for the three months ended March 31, 2020 and 2019, respectively.

~~Intellectual Property Matters~~2019 TT&C Agreement. ~~We entered into an Intellectual Property Matters Agreement with DISH Network~~In September 2019, in connection with the ~~Spin-off. The Intellectual Property Matters Agreement governed our relationship with~~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 ~~respect~~the option for us to ~~patents, trademarks and other intellectual property. Pursuant~~renew for a one-year period upon written notice at least 90 days prior to the ~~Intellectual Property Matters~~initial expiration (the “2019 TT&C Agreement”). The fees for services provided under the 2019 TT&C Agreement ~~DISH Network irrevocably assigned to us all right, title and interest in certain patents, trademarks and other intellectual property necessary for~~are calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which will vary depending on 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 usenature of the ~~name or trademark “DISH Network” or~~services provided. Any party is able to terminate the 2019 TT&C Agreement for any ~~other trademark owned by~~reason upon 12 months’ notice.

Other Receivables - 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~~The following table presents our other receivables owed from DISH Network:. Effective March 2017 in connection with the Share Exchange, we and DISH Network entered into an Intellectual Property and Technology License Agreement (“IPTLA”) pursuant to which we and DISH and their respective subsidiaries 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.



	As of
	March 31, 2020		December 31, 2019
Other receivables - DISH Network	$	93,299	$	92,892

Tax Sharing ~~Agreement~~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,~~ 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;~~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

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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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~~(Unaudited)~~

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~~non-current 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~~non-current receivable from DISH Network in ~~“Other receivable —~~Other receivables - DISH ~~Network”~~Network and 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. We have charged Additional paid-in capital in prior periods when DISH Network ~~expects to utilize these~~has utilized such tax ~~credits to reduce its state income tax payable.~~benefits. We expect to increase ~~additional~~Additional paid-in capital upon receipt of any consideration ~~paid~~that DISH Network pays 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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~~(Unaudited)~~

~~gTLD Bidding Agreement~~. In April 2015, we and DISH Network entered into a gTLD Bidding Agreement whereby, among other things: (i) DISH Network obtained rights from us to participate in a generic top level domain (“gTLD”) auction, assuming all rights and obligations from us related to our application with the Internet Corporation for Assigned Names and Numbers (“ICANN”) for a particular gTLD; (ii) DISH Network agreed to reimburse us for our ICANN application fee and certain out-of-pocket expenses related to the application and the auction; and (iii) we and DISH Network agreed to split equally the net proceeds obtained by DISH Network as the losing bidder in the auction, less such fee reimbursement and out-of-pocket expenses.

~~Patent Cross-License Agreements~~. In December 2011, we and DISH Network entered into separate patent cross-license agreements with the same third party whereby: (i) we and such third party licensed our respective patents to each other subject to certain conditions; and (ii) DISH Network and such third party licensed their respective patents to each other subject to certain conditions (each, a “Cross-License Agreement”). Each Cross-License Agreement covers patents acquired by the respective party prior to January 2017 and aggregate payments under both Cross-License Agreements total less than $10.0 million. Each Cross-License Agreement 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 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

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.

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

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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.

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. 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. This tax matters agreement supplements the Tax Sharing Agreement outlined above and the Share Exchange Tax Matters Agreement outlined below, both of which continue in full force and effect.

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 who transferred to DISH Network in connection with the BSS Transaction.

Share Exchange Agreement. In January 2017, we and certain of our subsidiaries entered into the Share Exchange Agreement with DISH and certain of its subsidiaries pursuant to which, in February 2017, 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, we no longer 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 Agreement, 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 contained customary representations and warranties by the parties, including representations by us related to the transferred assets, assumed liabilities and the financial condition of the transferred businesses. We and DISH Network also agreed to customary indemnification provisions whereby each party indemnifies the other against certain losses with respect to breaches of representations, warranties or covenants and certain liabilities and if certain actions undertaken by us or DISH causes the transaction to be taxable to the other party after closing.

Share Exchange Intellectual Property and Technology License Agreement.Effective March 2017, in connection with the Share Exchange, we and DISH Network entered into an intellectual property and technology license agreement (“IPTLA”) pursuant to which we and DISH Network license to each other certain intellectual property and technology. The IPTLA will continue in perpetuity, unless mutually terminated by the parties. Pursuant to the IPTLA, we 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.

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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 above, which continues in full force and effect.

Share Exchange Employee Matters Agreement. Effective March 2017, in connection with the Share Exchange, 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 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 who transferred to DISH Network in connection with the Share Exchange.

NOTE 16. RELATED PARTY TRANSACTIONS - OTHER

Hughes Systique Corporation ~~(“Hughes Systique”)~~

We contract with Hughes Systique Corporation (“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% 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%, on an undiluted basis, of Hughes Systique’s outstanding shares as of ~~September 30, 2017.~~March 31, 2020. 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.~~these Condensed Consolidated Financial Statements.

~~NagraStar L.L.C.~~

TerreStar Solutions, Inc.

~~Prior~~

DISH Network owns more than 15% of TerreStar Solutions, Inc. (“TSI”). In May 2018, we and TSI entered into an equipment and services agreement pursuant to ~~March 2017,~~which we ~~owned 50.0% of NagraStar L.L.C. (“NagraStar”), a joint venture that was the primary provider of encryption~~design, manufacture and ~~related security technology used in the set-top boxes produced by our former EchoStar Technologies segment. We accounted~~install upgraded ground communications network equipment 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 an entity that provides direct-to-home satellite services in Mexico known as Dish Mexico. We~~TSI’s network and provide, ~~certain satellite services to Dish Mexico~~among other things, warranty and ~~prior to the Share Exchange we also provided certain broadcast services and sold hardware such as digital set-top boxes and related equipment to Dish Mexico.~~support services. We recognized revenue ~~from sales~~ of ~~services we provided to Dish Mexico in continuing operations of approximately $5.8~~$2.2 million and $5.1 million for ~~each of~~ the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016 and $17.5 million for each of the nine months ended September 30, 2017 and 2016.~~2019, respectively. As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, we had trade accounts receivable from ~~continuing operations from Dish Mexico~~TSI of ~~approximately $7.6~~$2.3 million and ~~$10.7~~$2.7 million, respectively.

~~Deluxe/EchoStar LLC~~

Global-IP Cayman

~~We own 50.0% of Deluxe/EchoStar LLC (“Deluxe”), a joint venture that~~In May 2017, 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~~agreement with Global-IP Cayman (“Global IP”) providing for ~~our investment in Deluxe using the equity method. We recognized revenue from Deluxe for transponder services and~~ the sale of ~~broadband~~certain equipment ~~of approximately $1.3 million~~ and $0.7 million for the three months ended September 30, 2017 and 2016, respectively, and $3.6 million and $2.1 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, we had trade accounts receivable from Deluxe of approximately $1.3 million and $0.7 million, respectively.

~~SmarDTV~~

~~In May 2015, we acquired a 22.5% interest in SmarDTV, which we accounted for using the equity method. Pursuant~~services 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 consummation of the Share Exchange, we no longer own our interest in the equity and subordinated debt of SmarDTV and no longer purchase engineering services from SmarDTV.

~~AsiaSat~~

~~We contract with AsiaSat Telecommunications Inc. (“AsiaSat”) for the use of transponder capacity on one of AsiaSat's satellites.~~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 and as an executive advisor to the Chief Executive Officer of ~~AsiaSat in 2016~~Global IP from September 2017 until April 2019 and from September 2017 until December 2019, respectively. 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 ~~senior advisor~~result of Global IP’s defaults resulting from its failure to make payments to us as required

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under the ~~CEO~~terms of ~~AsiaSat through March 2017.~~the agreement and we reserved our rights and remedies against Global IP under the agreement. We ~~incurred expenses payable to AsiaSat~~recognized revenue under this agreement of ~~approximately zero~~0 for each of the three months ended March 31, 2020 and ~~$0.4~~2019. As of both March 31, 2020 and December 31, 2019, we were owed $7.5 million from Global IP.

Maxar Technologies Inc.

Mr. Jeffrey Tarr, who joined our board of directors in March 2019, served as a consultant and advisor to Maxar Technologies Inc. and its subsidiaries (“Maxar Tech”) through May 2019. We previously entered into agreements with Maxar Tech for the manufacture and certain other services of the EchoStar IX satellite, the EchoStar XVII satellite, the EchoStar XIX satellite, the EchoStar XXI satellite and the EchoStar XXIV satellite and our former EchoStar XI satellite, EchoStar XIV satellite, EchoStar XVI satellite and EchoStar XXIII satellite. 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 $7.9 million and $35.7 million for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively,~~2019, respectively. At both March 31, 2020 and ~~$0.1 million~~December 31, 2019, we had 0 trade accounts payable to Maxar Tech.

NOTE 17. SUPPLEMENTAL FINANCIAL INFORMATION

Research and ~~$1.1 million for~~Development

The following table presents the ~~nine months ended September 30, 2017~~research and ~~2016, respectively.~~development costs incurred in connection with customers’ orders:



	For the three months ended March 31,
	2020		2019
Cost of sales - equipment (exclusive of depreciation and amortization)	$	6,692	$	5,395
Research and development expenses	$	6,254	$	6,888

Cash and Cash Equivalents and Restricted Cash

The following table reconciles Cash and cash equivalents and restricted cash, as presented in the Condensed Consolidated Balance Sheets, to the total of the same as presented in the Condensed Consolidated Statements of Cash Flows:



	For the three months ended March 31,
	2020		2019
Cash and cash equivalents, including restricted amounts, beginning of period:
Cash and cash equivalents	$	1,519,431	$	928,306
Restricted cash	2,458		1,189
Total cash and cash equivalents, included restricted amounts, beginning of period	$	1,521,889	$	929,495

Cash and cash equivalents, including restricted amounts, end of period:
Cash and cash equivalents	$	1,599,025	$	1,349,724
Restricted cash	8,278		982
Total cash and cash equivalents, included restricted amounts, end of period	$	1,607,303	$	1,350,706

4138

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(Unaudited)

Other Current Assets, Net and Other Non-Current Assets, Net

The following table presents the components of Other current assets, net and Other non-current assets, net:



	As of
	March 31, 2020		December 31, 2019
Other current assets, net:
Trade accounts receivable - DISH Network	$	10,948	$	10,683
Inventory	88,446		79,621
Prepaids and deposits	52,380		50,145
Contract acquisition costs, net	14,290		16,869
Other, net	23,823		22,213
Total other current assets, net	$	189,887	$	179,531

Other non-current assets, net:
Other receivables - DISH Network	$	93,299	$	92,892
Restricted marketable investment securities	1,711		8,093
Restricted cash	8,278		2,458
Deferred tax assets, net	7,145		7,251
Capitalized software, net	104,401		101,786
Contract acquisition costs, net	96,107		96,723
Contract fulfillment costs, net	2,782		3,010
Other, net	25,917		22,628
Total other non-current assets, net	$	339,640	$	334,841

The following table presents the activity in our allowance for doubtful accounts, which is included within Other, net in each of Other current assets, net and Other non-current assets, net in the table above:



	Balance at Beginning of Period		Credit Losses ⁽¹⁾		Deductions		Foreign Currency Translation			Balance at End of Period
For the three months ended March 31, 2020
Other current assets, net	$	—	$	1,595	$	—	$	—		$	1,595
Other non-current assets, net	$	—	$	13,379	$	—	$	(358	)	$	13,021

⁽¹⁾ The impact of adopting ASC 326 on January 1, 2020 was a net increase to our allowance for doubtful accounts largely driven by a $13.4 million reclassification from Trade accounts receivables and contracts assets, net.

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(Unaudited)

Accrued Expenses and Other Current Liabilities

The following table presents the components of Accrued expenses and other current liabilities:



	As of
	March 31, 2020		December 31, 2019
Accrued expenses and other current liabilities:
Trade accounts payable - DISH Network	$	1,229	$	1,923
Accrued interest	36,072		42,622
Accrued compensation	38,542		50,787
Accrued taxes	18,183		18,525
Operating lease obligation	13,527		14,651
Other	132,153		142,371
Total accrued expenses and other current liabilities	$	239,706	$	270,879

Inventory

The following table presents the components of inventory:



	As of
	March 31, 2020		December 31, 2019
Raw materials	$	8,399	$	4,240
Work-in-process	9,421		6,979
Finished goods	70,626		68,402
Total inventory	$	88,446	$	79,621

Supplemental and Non-cash Investing and Financing Activities

The following table presents the supplemental and non-cash investing and financing activities:



	For the three months ended March 31,
	2020			2019
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	43,847		$	54,572
Cash paid for income taxes	$	716		$	772

Non-cash investing and financing activities:
Employee benefits paid in Class A common stock	$	6,920		$	6,654
Increase (decrease) in capital expenditures included in accounts payable, net	$	(5,549	)	$	(15,320	)
Non-cash net assets received in exchange for a 20% ownership interest in our existing Brazilian subsidiary	$	2,824		$	—

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


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 dollars.~~ The following ~~management’s discussion~~Management’s Discussion and ~~analysis~~Analysis of our ~~financial condition~~Financial Condition and ~~results~~Results of ~~operations~~Operations (“Management’s Discussion and Analysis”) should be read in conjunction with ~~the condensed consolidated financial statements~~our accompanying Condensed Consolidated Financial Statements and notes ~~to our financial statements included elsewhere~~thereto (“Accompanying Condensed Consolidated Financial Statements”) in Item 1 of this Quarterly Report on Form ~~10-Q.~~10-Q (“Form 10-Q”). This ~~management’s discussion~~Management’s Discussion and ~~analysis~~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~~Management’s Discussion and ~~analysis~~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~~Refer to the 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~~refer to 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 most recent Annual Report on Form 10-K ~~for~~(“Form 10-K”) filed with the ~~year ended December 31, 2016.~~Securities and Exchange Commission (“SEC”). 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 consumer customers, which include home and small ~~office customers.~~to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and ~~various~~ communications solutions for enterprise customers, which include aeronautical and government ~~customers.~~enterprises.

~~Prior~~In September 2019, pursuant 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 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”), (i) we transferred certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily related to the former portion of our ESS segment that managed, marketed and provided (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”) to one of our former subsidiaries, EchoStar BSS Corporation (“~~DISH”~~BSS Corp.”) ~~and certain of its subsidiaries. Pursuant~~, (ii) we distributed to ~~the Share Exchange Agreement, on February 28, 2017, among other things, EchoStar Corporation and certain~~each holder of ~~its subsidiaries received all of the~~ 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 with DISH then owning and operating 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 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 areBSS Business, which was a substantial portion of ~~no further effect.~~our ESS segment. As a result of the ~~Share Exchange,~~BSS Transaction, the ~~condensed consolidated~~ financial ~~statements~~results of the ~~EchoStar Technologies businesses have been~~BSS Business, except for certain real estate that transferred in the transaction, are presented as discontinued operations and, as such, ~~have been~~ excluded from continuing operations and segment results for ~~all periods presented. See~~the three months ended March 31, 2019 in our Accompanying Condensed Consolidated Financial Statements. Refer to Note 34. Discontinued Operations in ~~the notes to condensed consolidated financial statements~~our Accompanying Condensed Consolidated Financial Statements in Item 1 of this ~~report for further discussion of our discontinued operations.~~Form 10-Q.

~~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, Accounting, Real Estate and Legal) ~~as well as~~and other activities that have not been assigned to our ~~operating~~business 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.

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

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

All amounts presented in this Management’s Discussion and Analysis reference results from continuing operations unless otherwise noted and are expressed in thousands of United States (“U.S.”) dollars, except share and per share amounts and unless otherwise noted.

Highlights from our financial results are as follows:

~~2017 Third Quarter~~ Consolidated Results of Operations for the Three Months Ended March 31, 2020:


•	Revenue of ~~$481.2~~$465.7 million


•	Operating income (loss) of ~~$56.4~~$10.6 million


•	Net income (loss) from continuing operations of ~~$35.9~~$(57.7) million


•	Net income (loss) attributable to EchoStar common stock of ~~$34.7~~$(54.3) million and basic earnings (loss) per share of common stock of ~~$0.36~~$(0.56)

~~EBITDA~~Earnings before interest, taxes, depreciation and amortization, net income (loss) from discontinued operations and net income (loss) attributable to non-controlling interests (“EBITDA”) of ~~$219.9~~$91.2 million ~~(see~~(refer to the reconciliation of this non-GAAP measure ~~on page 51)~~in Results of Operations)

Consolidated Financial Condition as of ~~September 30, 2017~~March 31, 2020:


•	Total assets of ~~$8.81~~$7.0 billion


•	Total liabilities of ~~$4.91~~$3.4 billion


•	Total stockholders’ equity of ~~$3.90~~$3.6 billion


•	Cash, cash equivalents and current marketable investment securities of ~~$3.28~~$2.4 billion

Hughes Segment

Our Hughes segment is a global provider of broadband satellite technologies and broadband internet services ~~for home~~to consumer customers and ~~small office customers. We deliver~~broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to ~~domestic~~consumer and ~~international consumers and aeronautical,~~ enterprise ~~and government~~ customers. ~~In addition, our~~The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite ~~systems~~systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals ~~for other satellite systems, including~~to mobile system ~~operators.~~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 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 ~~Hughes segment~~ consumer revenue by maximizing utilization of our existing satellites while planning for new satellites to be ~~launched.~~launched or acquired. Our consumer revenue growth depends on our success in adding new and retaining existing subscribers in our domestic and ~~driving higher average revenue per subscriber~~international markets across ~~our~~ wholesale and retail channels. Service costs related to ongoing support for our direct and indirect customers and partners are typically impacted most significantly by our growth. The growth of our enterprise businesses relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. As a result of the COVID-19 pandemic, in accordance with orders received from our enterprise customers, we have deferred or canceled the delivery of some products or services and we, thus, may not be able to recognize revenue for such products or services.

Our Hughes segment currently uses capacity from three of our satellites ~~the~~(the SPACEWAY 3 satellite, the EchoStar XVII satellite and the EchoStar XIX ~~satellite,~~satellite), our Al Yah 3 Brazilian payload and additional satellite capacity acquired from ~~multiple~~ third-party providers to provide ~~satellite broadband internet access and communications~~ services to our customers. Growth of our consumer subscriber base continues

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

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 revenue growth in all areas and consumer subscriber growth in the areas where we have available capacity.

In ~~December 2016,~~May 2019, we ~~launched~~entered into an agreement with Al Yah Satellite Communications Company PrJSC (“Yahsat”) pursuant to which, in November 2019, Yahsat contributed its satellite communications services business in Brazil to us in exchange for a 20% ownership interest in our ~~EchoStar XIX~~existing Brazilian subsidiary that conducts our satellite ~~a next-generation, high throughput geostationary~~communications services business in Brazil (the “Yahsat Brazil JV Transaction”). The combined business provides broadband internet services and enterprise solutions in Brazil using the Telesat T19V satellite, the Eutelsat 65W satellite 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.

In May 2019, we also entered into an agreement with Bharti Airtel Limited (“BAL”) and its subsidiary, Bharti Airtel Services Limited (together with BAL, “Bharti”), pursuant to which ~~provides significant capacity for continued subscriber growth. The EchoStar XIX satellite employs a multi-spot beam, bent pipe Ka-band architecture~~Bharti will contribute its very small aperture terminal (“VSAT”) telecommunications services and ~~provides additional capacity for the Hughes broadband services~~hardware business in India to our ~~customers~~two existing Indian subsidiaries that conduct our VSAT services and hardware business. The combined entities will provide broadband satellite and hybrid solutions for enterprise networks. Upon consummation of the transaction, Bharti will have a 33% ownership interest in ~~North America~~the combined business. The completion of the transaction is subject to customary regulatory approvals and ~~added capacity in certain Central and South American countries and has added capability for aeronautical, enterprise and international broadband services.~~closing conditions. No assurance can be given that the transaction will be consummated on the terms agreed to or at all.

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. The EchoStar XXIV satellite ~~with a planned 2021 launch, that~~ 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~~enterprise broadband services. In the first quarter of 2020, Space Systems/Loral, LLC (“SS/L”), the manufacturer of our EchoStar XXIV satellite, invoked the “force majeure” clause of our contract and ~~enterprise services.~~notified us of a possible delay in completion of the satellite due to “shelter-in-place” orders affecting personnel at SS/L and its subcontractors, and other potential impacts of the COVID-19 pandemic. We currently expect the EchoStar XXIV satellite to be launched no earlier than the second half of 2021. This or other delays or impediments to SS/L’s meeting its obligations as a result of the COVID-19 pandemic and various economic and other consequences or otherwise could have a material adverse impact on our business operations, future revenues, financial position and prospects, the completion of 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 ~~this~~the EchoStar XXIV satellite ~~will be~~are included in ~~“Corporate~~Corporate and ~~Other”~~Other in our segment reporting.

~~Our wholly-owned subsidiary, Hughes Network Systems, L.L.C.~~In March 2017, we and DISH Network ~~L.L.C. (“DNLLC”), a wholly-owned subsidiary of DISH, have~~ entered into a master service agreement (the ~~“MSA”~~“Hughes Broadband MSA”) ~~pursuant~~. Pursuant to ~~which DNLLC,~~the Hughes Broadband MSA, DISH Network, among other things: (i) has the right, but not the obligation, to market, promote and solicit orders and upgrades for ~~the Hughes satellite internet~~our HughesNet service and related equipment and other telecommunication ~~services~~services; and (ii) ~~will install Hughes~~installs HughesNet service equipment with respect to activations generated by ~~DNLLC.~~DISH Network. 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~~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.~~DISH Network.

~~In addition~~We continue our efforts to expand our ~~broadband~~ consumer ~~service offerings, our Hughes segment also provides network technologies, managed services, hardware, equipment and~~ satellite services ~~to large enterprise~~business outside of the U.S. We have been delivering high-speed consumer satellite broadband services in Brazil since July 2016 and ~~government customers globally. Examples~~are also providing satellite broadband internet service in several other Latin American countries. Additionally, in September 2015, we entered into 15-year agreements with affiliates of ~~such~~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 satellite and the EchoStar XIX satellite in South America.

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

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 enterprise customers have contracts with us for the services they purchase.

Developments toward the launch of next-generation 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~~Our broadband subscribers include customers that subscribe to our HughesNet ~~broadband services~~service in North and Latin America through retail, wholesale and small/medium enterprise service channels. ~~Gross~~In connection with the COVID-19 pandemic, in March 2020, we voluntarily signed on to the Federal Communications Commissions’ (“FCC”) Keep Americans Connected Pledge (the “Pledge”), promising not to terminate HughesNet service for certain consumer customers for 60 days even if they are unable to pay. We have removed from our subscriber numbers as of March 31, 2020 any subscribers whose HughesNet service would have ordinarily been terminated in the absence of the Pledge. In April 2020, we voluntarily agreed with the FCC’s request to extend the Pledge through June 30, 2020. As a result, we may be required to provide HughesNet service to consumers who do not have the ability to pay for such services.

The following table presents our approximate subscriber numbers:

As of March 31, 2020 and December 31, 2019, approximately 267,000 and 238,000 of our subscribers, respectively, were in Latin America.

The following table presents our approximate subscriber net additions:

During the first quarter of 2020, our net subscriber additions increased by approximately ~~9,000 in the third quarter of 2017~~19,000 compared to the ~~second~~fourth quarter of ~~2017 primarily due to an increase in new~~2019, reflecting increased gross subscriber 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. The increase was partially offset by a decrease in new subscribers additions in our international retail channel. Our average monthly subscriber churn percentage for the third quarter of 2017 decreased compared to the ~~second~~fourth quarter of 2017. As a result of higher gross subscriber additions and lower churn, total net subscriber additions were approximately 53,000 for the quarter ended September 30, 2017 compared to approximately 41,000 for the second quarter of 2017. Subscriber additions and churn include only subscribers through our retail and wholesale channels.2019.

As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, our Hughes segment had ~~approximately $1.74~~$1.2 billion and ~~$1.52~~$1.4 billion ~~respectively,~~ of contracted revenue ~~backlog.~~backlog, respectively. We define Hughes contracted revenue backlog as our expected future revenue under enterprise customer contracts that are non-cancelable, ~~excluding agreements~~including lease revenue. Our contracted revenue backlog as of March 31, 2020 decreased primarily due to the bankruptcy of a certain customer and the effects of the COVID-19 pandemic, including lengthened or delayed sales cycles with ~~customers in~~some of our ~~consumer market.~~enterprise customers.

~~EchoStar Satellite Services~~ESS Segment

Our ESS segment isprovides satellite services on a ~~global provider of satellite~~full-time and/or occasional-use basis to U.S. government service ~~operations~~providers, internet service providers, broadcast news organizations, content providers and ~~video delivery solutions.~~private enterprise customers. We operate our ESS business using ~~our owned~~primarily the EchoStar IX satellite and ~~leased in-orbit satellites~~the EchoStar 105/SES-11 satellite and related ~~licenses.~~infrastructure. Revenue ~~growth~~ in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity ~~available for sale. We provide~~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 ~~a full-time~~transponder rates 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.demand.

As of March 31, 2020 and December 31, 2019, our ESS segment had contracted revenue backlog of $9.5 million and $11.4 million respectively. We ~~depend on DISH Network for a significant portion of the~~define contracted revenue backlog for our ESS segment ~~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 in DISH Network’s~~as contracted future 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.lease revenue.

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

We entered into: (i) a construction contract with Airbus Defence and Space SAS for the construction of the EchoStar 105/SES-11 satellite with C-band, Ku-band and Ka-band payloads; (ii) an agreement with SES Satellite Leasing Limited for the procurement 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 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 costs 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.

As of September 30, 2017 and December 31, 2016, our ESS segment had contracted revenue backlog attributable to satellites currently in orbit of approximately $1.26 billion and $1.16 billion, respectively.

~~New~~Other Business Opportunities

Our industry ~~is evolving~~continues to evolve with the ~~increase in~~increasing worldwide demand for broadband internet access for information, entertainment and commerce. The current COVID-19 pandemic has made even more evident the worldwide need and demand for connectivity and communications to facilitate an ever-increasing virtual global community and workplace. In addition to fiber and wireless systems, ~~other~~ technologies such as geostationary high throughput satellites, ~~LEO~~low-earth orbit (“LEO”) networks, medium-earth orbit (“MEO”) systems, balloons and High Altitude Platform Systems ~~have begun~~are expected to continue 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, education, remote-connectivity and commerce across many industries and communities in North America and internationally for ~~consumers, enterprises~~consumer and ~~governments.~~enterprise customers. We are closely tracking the developments in next-generation satellite businesses, and we are seeking to utilize our services, technologies, licenses 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 ~~acquisitions,~~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 satellite and other technologies, 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 ~~initiatives~~value that may not have a short or medium-term or any positive impact on our revenue, results of operations, or cash flow.

In 2012, we acquired the right 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 rights to utilize Ku-band spectrum. In April 2014, we entered into an agreement with Space Systems Loral, LLC for the construction of the EchoStar XXIII satellite, a high powered broadcast satellite service satellite. The EchoStar XXIII satellite was launched in March 2017 and placed into service at the 45 degree west longitude orbital location 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.

S-Band Strategy

We continue to explore the development and deployment of S-band technologies and believe that our products and services will be integrated into new global, hybrid networks that leverage multiple satellites and terrestrial technologies. The current COVID-19 pandemic has made even more evident the worldwide need and demand for such networks. In December 2013, we acquired ~~100% of Solaris~~EchoStar Mobile ~~which is~~Limited (“EML”), an entity based in Dublin, Ireland, ~~and~~which is licensed ~~by the European Union and its member states (“EU”)~~ to provide mobile satellite ~~services~~service (“MSS”) and complementary ground component (“CGC”) services covering the ~~entire EU~~European Union and its member states (“EU”) using the S-band spectrum. ~~Solaris Mobile changed its name to EchoStar Mobile Limited (“EchoStar Mobile”)~~EML’s services in the ~~first quarter of 2015. We~~EU are insupported by the ~~process of developing commercial services utilizing the operable payload we own on~~EchoStar XXI satellite and the EUTELSAT 10A 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 ~~along~~spectrum rights for MSS. Additionally, we have entered into a contract with Tyvak Nano-Satellite Systems, Inc. for the design and construction of S-band nano-satellites. The contracted launches for these satellites have been postponed as a result of the COVID-19 pandemic and we are awaiting notice from the launch providers regarding when they will be rescheduled, which we expect will be during 2020. We expect our ~~EchoStar XXI S-band satellite. The EchoStar XXI satellite will provide space segment capacity~~nano-satellites to ~~EchoStar Mobile~~facilitate our continued growth in the ~~EU. We believe~~global S-band market and enable us to leverage our acquisition of EchoStar Global. In addition, in November 2019, we ~~are in a unique position to deploy a European wide MSS/CGC network and maximize the long-term value of our~~were granted an S-band spectrum license for terrestrial rights in ~~Europe~~Mexico.As of March 31, 2020, 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 ~~regions within~~parties may result in significant costs to us and may expose our customers to financial or other harm that have the ~~scope of~~potential to significantly increase 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.liability.

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

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

WeDue to the COVID-19 pandemic, a large portion of our workforce has been working remotely and is likely to continue to do so for some time. While we have cybersecurity risk management tools to help protect our technology, information and networks that our employees access remotely, we cannot guarantee the security of the network that they will be using, the security status of the other non-company managed devices that might be on the network to which they are ~~tracking closely~~connected or the ~~developments~~devices or networks used by third parties with whom our employees conduct business, such as customers, suppliers, vendors and other persons. Additionally, there has been a major global increase in ~~next-generation satellite businesses,~~COVID-19 related cyber-fraud and phishing attacks that continue to target our employees, vendors, suppliers, customers and others. Accordingly, we ~~are seeking~~have increased our efforts and resources relating 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.~~cybersecurity as a result of the COVID-19 pandemic.

~~Capital expenditures associated~~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. Additionally, we provide resources to assist employees in better securing their home networks and remote connections. We also maintain agreements with ~~the construction~~third party vendors and ~~launch of the EchoStar XXIII, EchoStar XXI and EchoStar XXIV satellites are included in “Corporate and Other”~~experts to assist in our ~~segment reporting.~~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 months ended March 31, 2020 and through May 6, 2020. 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.

Table of Contents


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

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

RESULTS OF OPERATIONS

Three Months Ended ~~September 30, 2017~~March 31, 2020 Compared to the Three Months Ended ~~September 30, 2016~~March 31, 2019

The following table presents our consolidated results of operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019:

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



	For the three months ended March 31,						Variance
Statements of Operations Data	2020			2019			Amounts			%
Revenue:
Services and other revenue	$	408,357		$	402,668		$	5,689		1.4
Equipment revenue	57,309			51,714			5,595			10.8
Total revenue	465,666			454,382			11,284			2.5
Costs and expenses:
Cost of sales - services and other	145,252			143,347			1,905			1.3
% of total services and other revenue	35.6		%	35.6		%
Cost of sales - equipment	45,908			45,007			901			2.0
% of total equipment revenue	80.1		%	87.0		%
Selling, general and administrative expenses	125,281			112,114			13,167			11.7
% of total revenue	26.9		%	24.7		%
Research and development expenses	6,254			6,888			(634		)	(9.2	)
% of total revenue	1.3		%	1.5		%
Depreciation and amortization	132,368			118,978			13,390			11.3
Total costs and expenses	455,063			426,334			28,729			6.7
Operating income (loss)	10,603			28,048			(17,445		)	(62.2	)
Other income (expense):
Interest income, net	15,583			24,429			(8,846		)	(36.2	)
Interest expense, net of amounts capitalized	(36,233		)	(53,199		)	16,966			31.9
Gains (losses) on investments, net	(46,672		)	6,936			(53,608		)	*
Equity in earnings (losses) of unconsolidated affiliates, net	2,613			(6,353		)	8,966			*
Foreign currency transaction gains (losses), net	(10,844		)	(1,160		)	(9,684		)	*
Other, net	(279		)	(42		)	(237		)	*
Total other income (expense), net	(75,832		)	(29,389		)	(46,443		)	*
Income (loss) from continuing operations before income taxes	(65,229		)	(1,341		)	(63,888		)	*
Income tax benefit (provision), net	7,492			(2,898		)	(10,390		)	*
Net income (loss) from continuing operations	(57,737		)	(4,239		)	(53,498		)	*
Net income (loss) from discontinued operations	—			19,247			(19,247		)	(100.0	)
Net income (loss)	(57,737		)	15,008			(72,745		)	*
Less: Net loss (income) attributable to non-controlling interests	3,442			(806		)	4,248			*
Net income (loss) attributable to EchoStar Corporation common stock	$	(54,295	)	$	14,202		$	(68,497	)	*

Other data:
EBITDA ⁽¹⁾	$	91,231		$	145,601		$	(54,370	)	(37.3	)
Subscribers, end of period	1,516,000			1,388,000			128,000			9.2

* Percentage is not meaningful.


(1)	A reconciliation of EBITDA to Net income (loss), the most directly comparable generally accepted accounting principles in the U.S. (“U.S. GAAP”) measure in our Accompanying Condensed Consolidated Financial Statements, is included in Results of Operations. For further information on our use of EBITDA, refer to the Explanation of Key Metrics and Other Items.

~~(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.~~

Table of Contents

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

The following discussion relates to our continuing operations for the three months ended March 31, 2020 and 2019 unless otherwise stated.

Services and other revenue ~~- DISH Network~~. ~~“Services~~Services and other revenue ~~- DISH Network”~~ totaled ~~$111.1~~$408.4 million for the three months ended ~~September 30, 2017, a decrease~~March 31, 2020, an increase of ~~$4.0~~$5.7 million, or ~~3.5%~~1.4%, 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.~~2019.

~~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~~March 31, 2020 increased by ~~$38.2~~$7.5 million, or ~~14.5%~~1.9%, to ~~$301.1~~$401.2 million compared to ~~the same period in 2016.~~2019. The increase was primarily attributable to increases in sales of broadband services ~~of $31.5 million~~ to our ~~domestic and international consumers, $5.8~~consumer customers of $19.5 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~~broadband services ~~due~~ to ~~expired service contracts.~~our enterprise customers of $12.6 million. Both of these variances include the negative impact of exchange rate fluctuations.


•	Services and other revenue from Corporate and Other for the three months ended March 31, 2020 decreased by $2.5 million, or 49.5%, to $2.5 million compared to 2019 primarily attributable to a decrease in income from certain real estate previously leased to DISH Network and transferred as part of the BSS Transaction.

Equipment ~~revenue - DISH Network.~~revenue. “Equipment revenue ~~- DISH Network”~~ totaled ~~$0.1~~$57.3 million for the three months ended ~~September 30, 2017, a decrease~~March 31, 2020, an increase of ~~$2.0~~$5.6 million, or ~~94.1%~~10.8%, compared to ~~the same period in 2016~~2019. The increase was primarily ~~from~~attributable to our Hughes ~~segment. The decrease in revenue was primarily~~segment due to ~~the decrease~~increases in ~~unit~~hardware 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.~~customers.

Cost of sales - services and other. ~~“Cost~~Cost of sales - services and ~~other”~~other totaled ~~$138.6~~$145.3 million for the three months ended ~~September 30, 2017,~~March 31, 2020, an increase of ~~$7.0~~$1.9 million, or ~~5.4%~~1.3%, compared to ~~the same period in 2016 primarily from our Hughes segment.~~2019. The increase was primarily attributable to our Hughes segment due 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 ~~consumers and domestic enterprise customers as~~markets, partially offset by a ~~result of~~decrease in the ~~increase in sales~~costs of broadband ~~services.~~services provided to our enterprise customers.

Cost of sales - ~~equipment.~~ equipment“. Cost of sales - ~~equipment”~~equipment totaled ~~$52.1~~$45.9 million for the three months ended ~~September 30, 2017, a decrease~~March 31, 2020, an increase of ~~$1.5~~$0.9 million, or ~~2.9%~~2.0%, compared to ~~the same period in 2016 primarily from our Hughes segment.~~2019. The ~~decrease~~increase was primarily attributable to ~~a decrease of $3.9 million in equipment costs related~~our Hughes segment due 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~~hardware sales to our ~~domestic consumers and domestic~~ enterprise customers.

Selling, general and administrative ~~expenses~~expenses.~~. “~~Selling, general and administrative ~~expenses”~~expenses totaled ~~$91.0~~$125.3 million for the three months ended ~~September 30, 2017,~~March 31, 2020, an increase of ~~$10.3~~$13.2 million, or ~~12.8%~~11.7%, compared to ~~the same period in 2016.~~2019. The increase was primarily ~~due~~attributable to ~~an increase of $15.2 million~~(i) increases in marketing and promotional ~~costs primarily attributable to our domestic and international consumer broadband sales in~~expenses of $8.3 million from our Hughes segment ~~partially offset by a decrease~~mainly associated with our consumer business in Latin America, (ii) increases in bad debt expense of ~~$4.9~~$1.9 million and (iii) increases in other general and administrative ~~expenses.~~expenses of $3.0 million.

~~Research~~Depreciation and ~~development expenses.~~amortization. ~~“Research~~Depreciation and ~~development expenses”~~amortization expenses totaled ~~$8.3~~$132.4 million for the three months ended ~~September 30, 2017, a decrease~~March 31, 2020, an increase of ~~$0.7~~$13.4 million, or ~~8.1%~~11.3%, compared to 2019. The increase was primarily from our Hughes segment and due to increases in depreciation expense of $6.4 million relating to our customer premises equipment and $6.1 million relating to the ~~same period~~depreciation of assets acquired in ~~2016. Our research and development activities vary based on~~ the ~~activity level and scope of other engineering and customer related development contracts.~~Yahsat Brazil JV Transaction.

~~Depreciation and amortization.~~Interest income, net ~~“Depreciation and amortization” expenses~~. Interest income, net totaled ~~$134.8~~$15.6 million for the three months ended ~~September 30, 2017, an increase~~March 31, 2020, a decrease of ~~$26.3~~$8.8 million, or ~~24.2%~~36.2%, compared to 2019 primarily attributable to the ~~same period~~decrease in ~~2016.~~our marketable investment securities.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized totaled $36.2 million for the three months ended March 31, 2020, a decrease of $17.0 million, or 31.9%, compared to 2019. The ~~increase~~decrease was primarily ~~related~~due to ~~an increase~~a decrease of ~~$15.3~~$16.0 million in ~~depreciation~~interest expense and in amortization of deferred financing cost as a result of the ~~EchoStar XIX~~repurchase and ~~EchoStar XXIII satellites that were placed into service in the first and second quarters~~maturity 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,our 6 1/2% Senior Secured Notes due 2019 and an increase of ~~$2.9~~$1.8 million in ~~amortization expense~~capitalized interest relating to the ~~development~~construction of ~~externally marketed~~the EchoStar XXIV satellite.

Gains (losses) on investments, net. Gains (losses) on investments, net totaled $46.7 million of net losses for the three months ended March 31, 2020, a negative change of $53.6 million compared to 2019. The change was primarily attributable to $50.3 million of net negative variances on marketable investment securities compared to 2019.

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~~Item~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ~~Continued~~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 (losses) of unconsolidated affiliates, net. ~~“Equity~~Equity in earnings (losses) of unconsolidated affiliates, ~~net”~~net totaled ~~$4.4~~$2.6 million in earnings for the three months ended ~~September 30, 2017, an increase of $0.2 million or 5.2%,~~March 31, 2020 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~~$6.4 million in ~~income~~losses for the three months ended ~~September 30, 2017,~~March 31, 2019. The increase was related to increased earnings from our investments in our equity method investees.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), nettotaled $10.8 million in losses for the three months ended March 31, 2020, an increase in losses of ~~$4.3~~$9.7 million compared to 2019. The change was due to the ~~same period~~net strengthening of the U.S. dollar against certain foreign currencies in ~~2016. The increase was primarily related~~2020 compared 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.~~ 2019.

Income tax ~~provision~~benefit (provision), net. Income tax ~~expense~~benefit (provision), net was ~~$6.1~~$7.5 million in benefit for the three months ended ~~September 30, 2017, a decrease in expense of $11.3 million or 65.0%,~~March 31, 2020 compared to $2.9 million in provision for the ~~same period in 2016.~~three months ended March 31, 2019. Our effective income tax rate was ~~14.5%~~11.5% and ~~34.6%~~(216.1)% for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, 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~~March 31, 2020 were primarily due to ~~various permanent tax differences,~~ the increase in our valuation allowance associated with certain foreign losses and the impact of state and local taxes, partially offset by the change in net unrealized ~~gains~~losses that are capital in nature, permanent book tax differences and ~~a change in the amount of unrecognized tax benefit from uncertain tax positions.~~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, 2016 was~~March 31, 2019 were primarily due to the increase in our valuation allowance associated with certain foreign losses and the impact of state and local taxes, partially offset by the change in net unrealized losses that are capital in nature and research and experimentation ~~credits, partially offset by state and local taxes.~~credits.

Net income (loss) attributable to EchoStar Corporation common stock. “Net ~~income~~loss attributable to EchoStar~~” was $34.7~~ Corporation common stock totaled $54.3 million for the three months ended ~~September 30, 2017, a decrease of $2.1 million or 5.8%,~~March 31, 2020, 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~~attributable to EchoStar Corporation common stock 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~~$14.2 million for the three months ended ~~September 30, 2017, an increase~~March 31, 2019, a decrease of ~~$30.6~~$68.5 million ~~or 16.1%, compared to~~as set forth in the ~~same period in 2016. The increase was primarily due to (i) an increase~~following table:



	Amounts
Net income (loss) attributable to EchoStar Corporation for the three months ended March 31, 2019	$	14,202
Decrease (increase) in interest expense, net of amounts capitalized	16,966
Decrease (increase) in income tax provision, net	10,390
Decrease (increase) in equity in losses of unconsolidated affiliates, net	8,966
Decrease (increase) in net income attributable to non-controlling interests	4,248
Increase (decrease) in other, net	(237		)
Increase (decrease) in interest income, net	(8,846		)
Increase (decrease) in foreign currency transaction gains, net	(9,684		)
Increase (decrease) in operating income, including depreciation and amortization	(17,445		)
Increase (decrease) in net income from discontinued operations	(19,247		)
Increase (decrease) in gains on investments, net	(53,608		)
Net income (loss) attributable to EchoStar Corporation for the three months ended March 31, 2020	$	(54,295	)

Table 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.Contents

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

EBITDA. 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 (loss), the most directly comparable U.S. GAAP measure in our Accompanying Condensed Consolidated Financial Statements, to EBITDA:



	For the three months ended March 31,						Variance
	2020			2019			Amounts			%
Net income (loss)	$	(57,737	)	$	15,008		$	(72,745	)	*
Interest income, net	(15,583		)	(24,429		)	8,846			(36.2	)
Interest expense, net of amounts capitalized	36,233			53,199			(16,966		)	(31.9	)
Income tax provision (benefit), net	(7,492		)	2,898			(10,390		)	*
Depreciation and amortization	132,368			118,978			13,390			11.3
Net loss (income) from discontinued operations	—			(19,247		)	(19,247		)	100.0
Net loss (income) attributable to non-controlling interests	3,442			(806		)	4,248			*
EBITDA	$	91,231		$	145,601		$	(54,370	)	(37.3	)

* Percentage is not meaningful.

EBITDA was $91.2 million for the ~~accompanying financial statements.~~three months ended March 31, 2020, a decrease of $54.4 million, or 37.3%, compared to 2019 as set forth in the following table:



	Amounts
EBITDA for the three months ended March 31, 2019	$	145,601
Decrease (increase) in equity in losses of unconsolidated affiliates, net	8,966
Decrease (increase) in net income attributable to non-controlling interests	4,248
Increase (decrease) in other, net	(237		)
Increase (decrease) in operating income, excluding depreciation and amortization	(4,055		)
Increase (decrease) in foreign currency transaction gains, net	(9,684		)
Increase (decrease) in gains on investments, net	(53,608		)
EBITDA for the three months ended March 31, 2020	$	91,231

Segment Operating Results and Capital Expenditures

The following tables present our operating results, capital expenditures and EBITDA by segment for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Capital expenditures in the table below are net of refunds and other receipts related to our property and equipment.



	Hughes		ESS		Corporate and Other			Consolidated Total
For the three months ended March 31, 2020
Total revenue	$	458,482	$	4,652	$	2,532		$	465,666
Capital expenditures	91,517		—		13,087			104,604
EBITDA	154,641		2,030		(65,440		)	91,231

For the three months ended March 31, 2019
Total revenue	$	445,337	$	4,033	$	5,012		$	454,382
Capital expenditures	73,821		—		38,033			111,854
EBITDA	161,132		1,729		(17,260		)	145,601

4950

Table of Contents

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

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

* Percentage is not meaningful.

~~Segment Operating Results and Capital Expenditures~~

~~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		%	For the three months ended March 31,				Variance
	(Dollars in thousands)							2020		2019		Amounts			%
Total revenue	$	380,061	$	355,876	$	24,185	6.8	$	458,482	$	445,337	$	13,145		3.0
Capital expenditures	$	108,428	$	75,682	$	32,746	43.3	91,517		73,821		17,696			24.0
EBITDA	$	131,817	$	125,522	$	6,295	5.0	154,641		161,132		(6,491		)	(4.0	)



	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



	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



	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		$	—



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


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



	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



Period	Total Number of Shares (Or Units) Purchased	Average Price Paid Per Share (or Unit)		Total Number of Shares (or Units) Purchased As Part of Publicly Announced Plans or Program	Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under The Plans or Program (1)
January 1 - 31	—	$	—	—	$	500,000
February 1 - 29	—	—		—	500,000
March 1 - 31	196,999	29.90		196,999	494,109
Total	196,999	$	29.90	196,999	$	494,109



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 May 7, 2020 issued by EchoStar Corporation regarding financial results for the period ended March 31, 2020
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.


**	Constitutes a management contract or compensatory plan or arrangement.



		ECHOSTAR CORPORATION


Date: ~~November 8, 2017~~May 7, 2020	By:	/s/ Michael T. Dugan
		Michael T. Dugan
		Chief Executive Officer, President and Director
		(Principal Executive Officer)


Date: ~~November 8, 2017~~May 7, 2020	By:	/s/ David J. Rayner
		David J. Rayner
		Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer
		(Principal Financial and Accounting Officer)

March 31, 2020

December 31, 2019

Broadband subscribers