Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 28, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | Hughes Satellite Systems Corp | |
Entity Central Index Key | 1,533,758 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,000 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash and cash equivalents | $ 278,102 | $ 225,557 |
Marketable investment securities, at fair value | 333,957 | 394,992 |
Trade accounts receivable, net of allowance for doubtful accounts of $12,355 and $11,950, respectively | 146,411 | 140,193 |
Trade accounts receivable - DISH Network, net of allowance for doubtful accounts of zero | 19,466 | 19,249 |
Deferred tax assets | 176,535 | 157,949 |
Inventory | 61,657 | 51,597 |
Prepaids and deposits | 32,262 | 30,938 |
Advances to affiliates, net | 30,436 | 736 |
Other current assets | 12,015 | 7,625 |
Total current assets | 1,090,841 | 1,028,836 |
Noncurrent Assets: | ||
Restricted cash and cash equivalents | 17,965 | 17,652 |
Property and equipment, net of accumulated depreciation of $2,060,214 and $2,053,636, respectively | 2,264,539 | 2,274,568 |
Regulatory authorizations, net | 471,658 | 471,658 |
Goodwill | 504,173 | 504,173 |
Other intangible assets, net | 124,970 | 157,100 |
Investments in unconsolidated entities | 37,921 | 32,969 |
Other noncurrent assets, net | 225,544 | 177,628 |
Total noncurrent assets | 3,646,770 | 3,635,748 |
Total assets | 4,737,611 | 4,664,584 |
Current Liabilities: | ||
Trade accounts payable | 94,969 | 93,783 |
Trade accounts payable - DISH Network | 20 | 18 |
Current portion of long-term debt and capital lease obligations | 29,426 | 39,746 |
Advances from affiliates, net | 3,805 | 23,792 |
Deferred revenue and prepayments | 63,812 | 61,063 |
Accrued interest | 41,166 | 8,890 |
Accrued compensation | 19,889 | 20,128 |
Accrued expenses and other | 85,312 | 82,533 |
Total current liabilities | 338,399 | 329,953 |
Noncurrent Liabilities: | ||
Long-term debt and capital lease obligations, net of current portion | 2,193,997 | 2,325,417 |
Deferred tax liabilities | 613,976 | 539,560 |
Advances from affiliates | 12,153 | 8,352 |
Other noncurrent liabilities | 84,531 | 91,705 |
Total noncurrent liabilities | 2,904,657 | 2,965,034 |
Total liabilities | $ 3,243,056 | $ 3,294,987 |
Commitments and Contingencies (Note 12) | ||
Shareholders' Equity: | ||
Common stock, $0.01 par value; 1,000,000 shares authorized, 1,000 shares issued and outstanding at each of September 30, 2015 and December 31, 2014 | ||
Additional paid-in capital | $ 1,416,766 | $ 1,361,599 |
Accumulated other comprehensive loss | (55,316) | (31,346) |
Accumulated earnings | 122,406 | 29,331 |
Total HSS shareholders' equity | 1,483,856 | 1,359,584 |
Noncontrolling interests | 10,699 | 10,013 |
Total shareholders' equity | 1,494,555 | 1,369,597 |
Total liabilities and shareholders' equity | $ 4,737,611 | $ 4,664,584 |
Preferred Stock | ||
Shareholders' Equity: | ||
Preferred Stock, $0.001 par value; 1,000,000 shares authorized: Hughes Retail Preferred Tracking Stock, $0.001 par value; 300 shares authorized, 81.128 shares issued and outstanding at each of September 30, 2015 and December 31, 2014 | ||
Hughes Retail Preferred Tracking Stock | ||
Shareholders' Equity: | ||
Preferred Stock, $0.001 par value; 1,000,000 shares authorized: Hughes Retail Preferred Tracking Stock, $0.001 par value; 300 shares authorized, 81.128 shares issued and outstanding at each of September 30, 2015 and December 31, 2014 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Allowance for doubtful accounts on trade accounts receivable (in dollars) | $ 12,355 | $ 11,950 |
Allowance for doubtful accounts on trade accounts receivable - DISH Network (in dollars) | 0 | 0 |
Property and equipment, accumulated depreciation (in dollars) | $ 2,060,214 | $ 2,053,636 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Common stock, shares issued (in shares) | 1,000 | 1,000 |
Common stock, shares outstanding (in shares) | 1,000 | 1,000 |
Preferred Stock | ||
Preferred Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Hughes Retail Preferred Tracking Stock | ||
Preferred Stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred Stock, shares authorized (in shares) | 300 | 300 |
Preferred Stock, shares issued (in shares) | 81.128 | 81.128 |
Preferred Stock, shares outstanding (in shares) | 81.128 | 81.128 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue: | ||||
Services and other revenue - other | $ 276,307 | $ 273,361 | $ 817,307 | $ 803,843 |
Services and other revenue - DISH Network | 132,013 | 129,389 | 394,937 | 357,494 |
Equipment revenue - other | 52,605 | 56,580 | 154,505 | 152,078 |
Equipment revenue - DISH Network | 3,106 | 6,350 | 6,992 | 24,249 |
Total revenue | 464,031 | 465,680 | 1,373,741 | 1,337,664 |
Costs and Expenses: | ||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 131,861 | 134,884 | 394,327 | 400,199 |
Cost of sales - equipment (exclusive of depreciation and amortization) | 48,543 | 54,693 | 142,537 | 154,890 |
Selling, general and administrative expenses | 68,303 | 63,790 | 203,871 | 191,589 |
Research and development expenses | 6,809 | 5,168 | 18,876 | 14,314 |
Depreciation and amortization | 109,158 | 115,828 | 324,797 | 339,831 |
Total costs and expenses | 364,674 | 374,363 | 1,084,408 | 1,100,823 |
Operating income | 99,357 | 91,317 | 289,333 | 236,841 |
Other Income (Expense): | ||||
Interest income | 1,135 | 836 | 3,391 | 2,411 |
Interest expense, net of amounts capitalized | (40,907) | (47,468) | (129,559) | (144,810) |
Loss from partial redemption of debt | (5,044) | |||
Other-than-temporary impairment loss on available-for-sale securities | (1,201) | (5,850) | ||
Equity in earnings of unconsolidated affiliate | 2,305 | 1,725 | 4,943 | 3,739 |
Other, net | (1,290) | (247) | (4,613) | 229 |
Total other expense, net | (39,958) | (45,154) | (136,732) | (138,431) |
Income before income taxes | 59,399 | 46,163 | 152,601 | 98,410 |
Income tax provision, net | (22,167) | (9,436) | (58,520) | (22,060) |
Net income | 37,232 | 36,727 | 94,081 | 76,350 |
Less: Net income attributable to noncontrolling interests | 209 | 376 | 1,006 | 1,103 |
Net income attributable to HSS | 37,023 | 36,351 | 93,075 | 75,247 |
Comprehensive Income: | ||||
Net income | 37,232 | 36,727 | 94,081 | 76,350 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | (17,688) | (5,644) | (26,935) | (2,293) |
Unrealized gains on available-for-sale securities and other | (6,507) | (1,976) | (3,194) | (2,803) |
Recognition of other-than-temporary loss on available-for-sale securities in net income | 1,201 | 5,850 | ||
Recognition of realized gains (losses) on available-for-sale securities included in net income | 52 | (11) | 42 | |
Total other comprehensive loss, net of tax | (22,994) | (7,568) | (24,290) | (5,054) |
Comprehensive income | 14,238 | 29,159 | 69,791 | 71,296 |
Less: Comprehensive income (loss) attributable to noncontrolling interests | (111) | 170 | 686 | 1,146 |
Comprehensive income attributable to HSS | $ 14,349 | $ 28,989 | $ 69,105 | $ 70,150 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS $ in Thousands | 9 Months Ended | |
Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | |
Cash Flows from Operating Activities: | ||
Net income | $ 94,081 | $ 76,350 |
Adjustments to reconcile net income to net cash flows from operating activities: | ||
Depreciation and amortization | 324,797 | 339,831 |
Equity in earnings of unconsolidated affiliate | (4,943) | (3,739) |
Amortization of debt issuance costs | 4,533 | 4,319 |
Loss from partial redemption of debt | 5,044 | |
Losses (gains) and other-than-temporary impairment on marketable investment securities, net | 11,384 | 42 |
Stock-based compensation | 3,893 | 1,944 |
Deferred tax provision | 55,597 | 13,331 |
Changes in current assets and current liabilities, net | (49,051) | 100,924 |
Changes in noncurrent assets and noncurrent liabilities, net | 4,623 | (7,041) |
Other, net | (3,150) | 3,840 |
Net cash flows from operating activities | 446,808 | 529,801 |
Cash Flows from Investing Activities: | ||
Purchases of marketable investment securities | (132,741) | (269,215) |
Sales and maturities of marketable investment securities | 197,899 | 130,997 |
Purchases of property and equipment | (292,347) | (166,002) |
Expenditures for externally marketed software | (16,905) | (17,401) |
Changes in restricted cash and cash equivalents | (313) | (2,688) |
Other, net | (9) | (130) |
Net cash flows from investing activities | (244,416) | (324,439) |
Cash Flows from Financing Activities: | ||
Repayment of 6 1/2% Senior Notes Due 2019 and related premium | (113,300) | |
Repayment of other long-term debt and capital lease obligations | (31,578) | (49,904) |
Net proceeds from issuance of Hughes Retail Preferred Tracking Stock (Note 2) | 10,601 | |
Advances from affiliates | 3,699 | |
Other, net | (1,688) | (1,116) |
Net cash flows from financing activities | (142,867) | (40,419) |
Effect of exchange rates on cash and cash equivalents | (6,980) | (348) |
Net increase in cash and cash equivalents | 52,545 | 164,595 |
Cash and cash equivalents, beginning of period | 225,557 | 163,709 |
Cash and cash equivalents, end of period | 278,102 | 328,304 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for interest (including capitalized interest) | 102,132 | 106,100 |
Capitalized interest | 10,047 | 903 |
Cash paid for income taxes | 3,964 | 7,608 |
Satellites and other assets financed under capital lease obligations | 401 | 1,527 |
Reduction of capital lease obligation for AMC-15 and AMC-16 satellites | 4,500 | |
Increase in capital expenditures included in accounts payable, net | 3,704 | 696 |
Net noncash assets transferred from DISH Network in exchange for HSS Tracking stock (Note 2) | 71,048 | |
Net assets transferred from EchoStar related to Tracking Stock Transaction (Note 2) | $ 315,643 | |
Transfer from EchoStar XXI launch contract from EchoStar to HNS | $ 52,250 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) | Sep. 30, 2015 | Jun. 12, 2015 | Dec. 31, 2014 |
6 1/2% Senior Secured Notes due 2019 | |||
Interest rate (as a percent) | 6.50% | 6.50% | 6.50% |
Organization and Business Activ
Organization and Business Activities | 9 Months Ended |
Sep. 30, 2015 | |
Organization and Business Activities | |
Organization and Business Activities | Note 1. Organization and Business Activities Principal Business Hughes Satellite Systems Corporation (which, together with its subsidiaries, is referred to as “HSS,” the “Company,” “we,” “us” and/or “our”) is a holding company and a direct subsidiary of EchoStar Corporation (“EchoStar”). We are a global provider of satellite operations, video delivery solutions, and broadband satellite technologies and services for home and office, delivering innovative network technologies, managed services, and solutions for enterprises and governments. We currently operate in the following two business segments: · Hughes — which provides satellite broadband internet access to North American consumers and broadband network services and equipment to domestic and international enterprise markets. The Hughes segment also provides managed services to large enterprises and solutions to customers for mobile satellite systems. · EchoStar Satellite Services (“ESS”) — which uses certain of our owned and leased in-orbit satellites and related licenses to provide satellite services on a full-time and occasional-use basis primarily to DISH Network, Dish Mexico, S. de R.L. de C.V. (“Dish Mexico”), a joint venture that EchoStar entered into in 2008, United States (“U.S.”) government service providers, internet service providers, broadcast news organizations, programmers, and private enterprise customers. We were formed as a Colorado corporation in March 2011 to facilitate the acquisition (the “Hughes Acquisition”) of Hughes Communications, Inc. and its subsidiaries (“Hughes Communications”) and related financing transactions. In connection with our formation, EchoStar contributed the assets and liabilities of its satellite services business, including its principal operating subsidiary of its satellite services business, EchoStar Satellite Services L.L.C., to us. In addition, as a result of the Satellite and Tracking Stock Transaction described in Note 2 below, DISH Network owns shares of our preferred tracking stock representing a 28.11% economic interest in the residential retail satellite broadband business of our Hughes segment. |
Hughes Retail Preferred Trackin
Hughes Retail Preferred Tracking Stock | 9 Months Ended |
Sep. 30, 2015 | |
Hughes Retail Preferred Tracking Stock | |
Hughes Retail Preferred Tracking Stock | Note 2. Hughes Retail Preferred Tracking Stock Satellite and Tracking Stock Transaction On February 20, 2014, HSS and EchoStar entered into agreements with certain subsidiaries of DISH Network pursuant to which, effective March 1, 2014, (i) EchoStar issued shares of its newly authorized Hughes Retail Preferred Tracking Stock (the “EchoStar Tracking Stock”) and HSS issued shares of its newly authorized Hughes Retail Preferred Tracking Stock (the “HSS Tracking Stock” and together with the EchoStar Tracking Stock, the “Tracking Stock”) to DISH Network in exchange for five satellites (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI, and EchoStar XIV), including the assumption of related in-orbit incentive obligations, and $11.4 million in cash and (ii) DISH Network began receiving certain satellite services on these five satellites from us (the “Satellite and Tracking Stock Transaction”). Immediately upon receipt of net assets (consisting of two of the five satellites and related in-orbit incentive obligations) from DISH Network in exchange for EchoStar Tracking Stock, EchoStar transferred such net assets to us. The Tracking Stock tracks the residential retail satellite broadband business of our Hughes segment, including certain operations, assets and liabilities attributed to such business (collectively, the “Hughes Retail Group” or “HRG”). The Satellite and Tracking Stock Transaction is consistent with the long-term strategy of the Company to increase the scale of its satellite services business, which provides high-margin revenues, while continuing to benefit from the growth of the satellite broadband business. As a result of the additional satellites received in the Satellite and Tracking Stock Transaction, HSS has been able to increase short-term cash flow that it believes will better position it to achieve its strategic objectives. HSS has adopted a policy statement (the “Policy Statement”) setting forth management and allocation policies for purposes of attributing all of the business and operations of HSS to either the Hughes Retail Group or the “HSSC Group,” which is defined as all other operations of HSS, including all existing and future businesses, other than the Hughes Retail Group. Among other things, the Policy Statement governs how assets, liabilities, revenue and expenses are attributed or allocated between HRG and the HSSC Group. Such attributions and allocations generally do not affect the amounts reported in our consolidated financial statements, except for the attribution of shareholders’ equity and net income or loss between the holders of Tracking Stock and common stock. The Policy Statement also does not significantly affect the way that management assesses operating performance and allocates resources within our Hughes segment. We provide unaudited attributed financial information for HRG and the HSSC Group in an exhibit to our periodic reports on Form 10-Q and Form 10-K. Set forth below is information about certain terms of the Tracking Stock and the initial recording of the Satellite and Tracking Stock Transaction in our consolidated financial statements. Description of the Tracking Stock Tracking stock is a type of capital stock that the issuing company intends to reflect or “track” the economic performance of a particular business component within the company, rather than reflect the economic performance of the company as a whole. The Tracking Stock is intended to track the economic performance of the Hughes Retail Group. The shares of the Tracking Stock issued to DISH Network represent an aggregate 80.0% economic interest in the Hughes Retail Group (the shares issued as HSS Tracking Stock represent a 28.11% economic interest in the Hughes Retail Group and the shares issued as EchoStar Tracking Stock represent a 51.89% economic interest in the Hughes Retail Group). In addition to the remaining 20.0% economic interest in the Hughes Retail Group, HSS retains all economic interest in the wholesale satellite broadband business and other businesses of HSS. The 80.0% economic interest was determined at the time of issuance based on the estimated fair value of the consideration received from DISH Network in exchange for the Tracking Stock, consisting of the five satellites and $11.4 million in cash, relative to the estimated fair value of the Hughes Retail Group. The allocation of economic interest represented by the Tracking Stock of 51.89% issued as EchoStar Tracking Stock and 28.11% issued as HSS Tracking Stock reflected the relative assignment to HSS Tracking Stock and EchoStar Tracking Stock of the aggregate increase in equity resulting from DISH Network’s contribution of the satellites and cash. The tracking stock structure and the allocation of the tracking stock economic interest between EchoStar and HSS was advantageous to EchoStar from an economic and tax perspective by allowing the Company to increase cash flow by using the value of the Hughes Retail Group to purchase the satellites from DISH Network. While DISH Network, as the holder of the Tracking Stock, holds an aggregate 80.0% economic interest in the Hughes Retail Group, the Hughes Retail Group is not a separate legal entity and therefore cannot own assets, issue securities or enter into legally binding agreements. Holders of the Tracking Stock have no direct claim to the assets of the Hughes Retail Group; rather, holders of the Tracking Stock are stockholders of its respective issuer (EchoStar or HSS) and are subject to all risks and liabilities of the issuer. The HSS Tracking Stock is a series of HSS preferred stock consisting of 300 authorized shares with a par value of $0.001 per share, of which 81.128 shares were issued to DISH Network on March 1, 2014. The EchoStar Tracking Stock is a series of EchoStar preferred stock consisting of 13,000,000 authorized shares with a par value of $0.001 per share, of which 6,290,499 shares were issued to DISH Network on March 1, 2014. Following the issuance of the shares of the EchoStar Tracking Stock and the HSS Tracking Stock, DISH Network held 6.5% and 7.5% of the aggregate number of outstanding shares of EchoStar and HSS capital stock, respectively. Holders of shares of the Tracking Stock vote with holders of the outstanding shares of common stock of its respective issuer, as a single class, with respect to any and all matters presented to stockholders for their action or consideration. Each share of the Tracking Stock is entitled to one-tenth (1/10th) of one vote. In the event of a liquidation of HSS, holders of shares of HSS common stock and HSS Tracking Stock are entitled to receive their respective proportionate interests in the net assets of HSS, if any, remaining for distribution upon liquidation, pro rata based upon the aggregate market value of outstanding shares of HSS Tracking Stock as compared to the aggregate market value of outstanding shares of HSS common stock. Market values of HSS Tracking Stock and HSS common stock are to be determined by an independent appraisal to the extent such shares are not then listed or quoted on any U.S. national or regional securities exchange or quotation system. Similarly, in the event of a liquidation of EchoStar, holders of shares of EchoStar Class A common stock, EchoStar Class B common stock and the EchoStar Tracking Stock are entitled to receive their respective proportionate interests in the net assets of EchoStar, if any, remaining for distribution upon liquidation, pro rata based upon the aggregate market value of outstanding shares of the EchoStar Tracking Stock (determined by an independent appraisal to the extent such shares are not then listed or quoted on any U.S. national or regional securities exchange or quotation system) as compared to the aggregate market value of outstanding shares of EchoStar Class A common stock and EchoStar Class B common stock. Should our board of directors, or the board of directors of EchoStar, make a future determination to pay a dividend on any shares of capital stock, the respective board of directors may, in its sole discretion, declare dividends only on shares of common stock, only on shares of the Tracking Stock or on shares of both the common stock and the Tracking Stock of the respective company. No dividend or other distribution may be paid on any shares of EchoStar Tracking Stock unless a dividend or distribution in an equivalent amount is paid on shares of HSS Tracking Stock and no dividend or other distribution may be paid on any shares of HSS Tracking Stock unless a dividend or distribution in an equivalent amount is paid on shares of EchoStar Tracking Stock. EchoStar and HSS may each, at its option, redeem all of the outstanding shares of its Tracking Stock in exchange for shares of common stock in an HRG Holding Company (as defined below), which EchoStar is required to establish pursuant to the Investor Rights Agreement discussed below. Investor Rights Agreement In connection with the Satellite and Tracking Stock Transaction, EchoStar, HSS and DISH Network entered into an agreement (the “Investor Rights Agreement”) setting forth certain rights and obligations of the parties with respect to the Tracking Stock. Among other provisions, the Investor Rights Agreement provides: (i) certain information and consultation rights for DISH Network; (ii) certain transfer restrictions on the Tracking Stock and certain rights and obligations to offer and sell under certain circumstances (including a prohibition on transfer of the Tracking Stock until March 1, 2015), with continuing transfer restrictions (including a right of first offer in favor of EchoStar) thereafter, an obligation to sell the Tracking Stock to us in connection with a change of control of DISH Network and a right to require us to repurchase the Tracking Stock in connection with a change of control of EchoStar, in each case subject to certain terms and conditions; (iii) certain protective covenants afforded to holders of the Tracking Stock; and (iv) a requirement for EchoStar to establish a holding company subsidiary (an “HRG Holding Company”) that is directly or indirectly wholly-owned by EchoStar and that will hold the Hughes Retail Group. In addition, the Investor Rights Agreement provides that DISH Network may, on or after September 1, 2016, require EchoStar to use its commercially reasonable efforts to register some or all of the outstanding shares of the Tracking Stock under the Securities Act of 1933, as amended, subject to certain terms and conditions (including our right, upon the receipt of a demand for registration, to offer to repurchase all of the Tracking Stock). In connection with any demand for registration, DISH Network may require any outstanding shares of the HSS Tracking Stock to be exchanged for shares of the EchoStar Tracking Stock with an equivalent economic interest in the Hughes Retail Group. In the event that a registration of shares of Tracking Stock is effected, EchoStar is required to use its reasonable best efforts to amend the terms of the Tracking Stock so that the Tracking Stock will be convertible or exchangeable for shares of EchoStar Class A common stock with equivalent market value. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in accordance with GAAP. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Our results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2014. Principles of Consolidation We consolidate all majority owned susidiaries, investments in entities in which we have controlling interest and variable interest entities where we are the primary beneficiary . For entities we control but do not wholly own, we record a noncontrolling interest within shareholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests. We use the equity method to account for investments in entities that we do not control but have the ability to significantly influence the operating decisions of the investee. We use the cost method when we do not have the ability to significantly influence the operating decisions of the investee. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, the reported amounts of revenue and expense for each reporting period, and certain information disclosed in the notes to our condensed consolidated financial statements. Estimates are used in accounting for, among other things, amortization periods for deferred revenue and deferred subscriber acquisition costs, revenue recognition using the percentage-of-completion method, allowances for doubtful accounts, allowances for sales returns and rebates, warranty obligations, self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair value of financial instruments, fair value of awards granted under EchoStar’s stock-based compensation plans, fair value of assets and liabilities acquired in business combinations, lease classifications, asset impairments, useful lives and methods for depreciation and amortization of long-lived assets, goodwill impairment testing, royalty obligations, and allocations that affect the net income or loss attributable to the Tracking Stock. 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. Weakened economic conditions may increase the inherent uncertainty in the estimates and assumptions indicated above. We review our estimates and assumptions periodically and the effects of revisions are reflected in the period they occur or prospectively if the revised estimate affects future periods. Fair Value Measurements We determine fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. We utilize the highest level of inputs available according to the following hierarchy in determining fair value: · Level 1, defined as observable inputs being quoted prices in active markets for identical assets; · Level 2, defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and · Level 3, defined as unobservable inputs for which little or no market data exists, consistent with characteristics of the asset or liability that would be considered by market participants in a transaction to purchase or sell the asset or liability. Transfers between levels in the fair value hierarchy are considered to occur at the beginning of the quarterly accounting period. There were no transfers between levels for each of the nine months ended September 30, 2015 or 2014. As of September 30, 2015 and December 31, 2014, the carrying amounts of our cash and cash equivalents, trade accounts receivable, net of allowance for doubtful accounts, accounts payable and accrued liabilities were equal to or approximated fair value due to their short-term nature or proximity to current market rates. Fair values of our current marketable investment securities are based on a variety of observable market inputs. For our investments in publicly traded equity securities and U.S. government securities, fair value ordinarily is determined based on a Level 1 measurement that reflects quoted prices for identical securities in active markets. Fair values of our investments in other marketable debt securities generally are based on Level 2 measurements, as the markets for such debt securities are less active. Trades of identical debt securities on or near the measurement date are considered a strong indication of fair value. Matrix pricing techniques that consider par value, coupon rate, credit quality, maturity and other relevant features also may be used to determine fair value of our investments in marketable debt securities. Fair values for our publicly traded long-term debt are based on quoted market prices in less active markets and are categorized as Level 2 measurements. The fair values of our privately held debt are Level 2 measurements and are estimated to approximate their carrying amounts based on the proximity of their interest rates to current market rates. As of September 30, 2015 and December 31, 2014, 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 $80.3 million and $85.8 million, respectively. We use fair value measurements from time-to-time in connection with impairment testing and the assignment of purchase consideration to assets and liabilities of acquired companies. Those fair value measurements typically include significant unobservable inputs and are categorized within Level 3 of the fair value hierarchy. Research and Development In addition to research and development expenses reported in our condensed consolidated statements of operations and comprehensive income (loss), our cost of sales includes research and development costs funded by customers of approximately $4.8 million and $6.8 million for the three months ended September 30, 2015 and 2014, respectively, and $15.7 million and $19.0 million for the nine months ended September 30, 2015 and 2014, respectively. Capitalized Software Costs Development costs related to software for internal-use and externally marketed software are capitalized and amortized using the straight-line method over the estimated useful life of the software, not in excess of five years. Capitalized costs of internal-use software are included in “Property and equipment, net” and capitalized costs of externally marketed software are included in “Other noncurrent assets, net” in our condensed consolidated balance sheets. Externally marketed software is generally installed in the equipment we sell to customers. We conduct software program reviews for externally marketed capitalized software costs at least annually, or as events and circumstances warrant such a review, to determine if capitalized software development costs are recoverable and to ensure that costs associated with programs that are no longer generating revenue are expensed. As of September 30 , 2015 and December 31, 2014, the net carrying amount of externally marketed software was $ 59.7 million and $ 48.9 million, respectively. We capitalized costs of $5.3 million and $ 5.1 million for the three months ended September 30, 2015 and 2014, respectively, and costs of $17.0 million and $ 17.6 million for the nine months ended September 30, 2015 and 2014, respectively, related to the development of externally marketed software. We recorded amortization expense relating to the development of externally marketed software of $2.2 million and $1.9 million for the three months ended September 30, 2015 and 2014, respectively, and $6.1 million and $3.6 million for the nine months ended September 30, 2015 and 2014, respectively. The weighted average useful life of our externally marketed software was approximately four years as of September 30, 2015. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). It outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In August 2015, the FASB issued Accounting Standards Update No. 2015-14, which deferred by one year the mandatory effective date of ASU 2014-09. As a result, public entities are required to adopt the new revenue standard in annual periods beginning after December 15, 2017 and in interim periods within those annual periods. The standard may be applied either retrospectively to prior periods or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted, but not before annual periods beginning after December 15, 2016. We have not determined when we will adopt the new revenue standard or selected the transition method that we will apply upon adoption. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In February 2015, the FASB issued Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). This standard amends the consolidation guidance for variable interest entities (“VIEs”) and general partners’ investments in limited partnerships and similar entities. ASU 2015-02 is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, and requires either a retrospective or a modified retrospective approach as of the beginning of the fiscal year of adoption. Early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements or related disclosures. We do not expect to adopt this standard prior to the effective date. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, (“ASU 2015-03”). This standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, and requires a retrospective approach to adoption. Early adoption is permitted. Based on our preliminary assessment, upon adoption of this standard, we expect to present unamortized deferred costs in other noncurrent assets with a carrying amount of $32.8 million and $39.1 million as of September 30, 2015 and December 31, 2014, respectively, as a reduction of our long-term debt balances. We do not expect to adopt this standard prior to the effective date. |
Other Comprehensive Income (Los
Other Comprehensive Income (Loss) and Related Tax Effects | 9 Months Ended |
Sep. 30, 2015 | |
Other Comprehensive Income (Loss) and Related Tax Effects | |
Other Comprehensive Income (Loss) and Related Tax Effects | Note 4. Other Comprehensive Income (Loss) and Related Tax Effects We have not recognized any tax effects on foreign currency translation adjustments because they are not expected to result in future taxable income or deductions. We have not recognized any tax effects on unrealized gains or losses on available-for-sale securities because such gains or losses would affect the amount of existing capital loss carryforwards for which the related deferred tax asset has been fully offset by a valuation allowance. Accumulated other comprehensive loss includes cumulative foreign currency translation losses of $55.8 million and $29.2 million as of September 30, 2015 and December 31, 2014, respectively. Reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2015 and 2014 were as follows: Affected Line Item in our For the Three Months For the Nine Months Condensed Consolidated Ended September 30, Ended September 30, Accumulated Other Comprehensive Loss Components Statement of Operations 2015 2014 2015 2014 (In thousands) Recognition of realized gains (losses) on available-for-sale securities in net income (1) Other, net $ — $ $ ) $ Recognition of other-than-temporary impairment on available-for-sale securities in net income (2) Other-than-temporary impairment on available-for-sale securities — — Total reclassifications, net of tax and noncontrolling interests $ $ $ $ (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 Other, net on the condensed consolidated statement of operations and comprehensive income (loss). (2) In June 2015 and September 2015, we recorded other-than-temporary impairment losses on shares of certain common stock included in our strategic equity securities. See Note 5 for further discussion. |
Investment Securities
Investment Securities | 9 Months Ended |
Sep. 30, 2015 | |
Investment Securities | |
Investment Securities | Note 5. Investment Securities Our marketable investment securities and investments in unconsolidated entities consisted of the following: As of September 30, December 31, 2015 2014 (In thousands) Marketable investment securities—current, at fair value: Corporate bonds $ $ Strategic equity securities Other Total marketable investment securities—current Investments in unconsolidated entities—noncurrent: Cost method Equity method Total investments in unconsolidated entities—noncurrent Total marketable investment securities and investments in unconsolidated entities $ $ Marketable Investment Securities O ur marketable investment securities portfolio consists of various debt and equity instruments, which generally are classified as available-for-sale. As of September 30, 2015, certain of our equity securities were classified as trading securities in order to reflect 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. As of September 30, 2015 and December 31, 2014, our strategic equity securities included shares of common stock of one of our customers that we received in satisfaction of certain milestone payments that were required to be paid to us under an existing long-term contract. For the three and nine months ended September 30, 2015, “Other-than-temporary impairment loss on available-for-sale securities” included a $1.2 million and $5.9 million other-than-temporary impairment of such common stock in our available-for-sale portfolio, respectively. For the three and nine months ended September 30, 2015, “Other, net” includes $3.9 million and $5.5 million in losses on such common stock in our trading securities portfolio, respectively, which had a fair value of $11.3 million as of September 30, 2015. Other O ur other current marketable investment securities portfolio includes investments in various debt instruments, including U.S. government bonds and variable rate demand notes. Investments in unconsolidated entities- Noncurrent We have several strategic investments in certain non-publicly traded equity securities that are accounted for using either the equity or the cost method of accounting. Our ability to realize value from our strategic investments in companies that are not publicly traded depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them. Unrealized Gains (Losses) on Marketable Investment Securities The components of our available-for-sale investments are summarized in the table below. Amortized Unrealized Estimated Cost Gains Losses Fair Value (In thousands) As of September 30, 2015 Debt securities: Corporate bonds $ $ $ ) $ Other — ) Equity securities - strategic — Total marketable investment securities $ $ $ ) $ As of December 31, 2014 Debt securities: Corporate bonds $ $ $ ) $ Other — Equity security - strategic ) Total marketable investment securities $ $ $ ) $ As of September 30, 2015, restricted and non-restricted marketable investment securities included debt securities of $305.0 million with contractual maturities of one year or less and $8.7 million with contractual maturities greater than one year. We may realize proceeds from certain investments prior to their contractual maturity as a result of our ability to sell these securities prior to their contractual maturity. Marketable Investment 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, 2015. As of September 30, 2015 December 31, 2014 Fair Unrealized Fair Unrealized Value Loss Value Loss (In thousands) Less than 12 months $ $ ) $ $ ) 12 months or more ) — — Total $ $ ) $ $ ) Sales of Marketable Investment Securities We recognized minimal gains from the sales of our available-for-sale marketable investment securities for each of the three and nine months ended September 30, 2015 and 2014. We recognized minimal losses from the sales of our available-for-sale marketable investment securities for each of the three and nine months ended September 30, 2015 and $0.1 million for each of the three and nine months ended September 30, 2014, respectively. Proceeds from sales of our available-for-sale marketable investment securities totaled $4.0 million and zero for the three months ended September 30, 2015 and 2014, respectively, and $14.6 million and $0.1 million for the nine months ended September 30, 2015 and 2014, respectively. Fair Value Measurements Our current marketable investment securities are measured at fair value on a recurring basis as summarized in the table below. As of September 30, 2015 and December 31, 2014, we did not have investments that were categorized within Level 3 of the fair value hierarchy. As of September 30, 2015 December 31, 2014 Total Level 1 Level 2 Total Level 1 Level 2 (In thousands) Cash equivalents $ $ $ $ $ $ Debt securities: Corporate bonds $ $ — $ $ $ — $ Other — — Equity securities - strategic — — Total marketable investment securities $ $ $ $ $ $ |
Trade Accounts Receivable
Trade Accounts Receivable | 9 Months Ended |
Sep. 30, 2015 | |
Trade Accounts Receivable | |
Trade Accounts Receivable | Note 6. Trade Accounts Receivable Our trade accounts receivable consisted of the following: As of September 30, December 31, 2015 2014 (In thousands) Trade accounts receivable $ $ Contracts in process, net Total trade accounts receivable Allowance for doubtful accounts ) ) Trade accounts receivable - DISH Network Total trade accounts receivable, net $ $ As of September 30, 2015 and December 31, 2014, progress billings offset against contracts in process amounted to $0.8 million and $2.5 million, respectively. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2015 | |
Inventory | |
Inventory | Note 7. Inventory Our inventory consisted of the following: As of September 30, December 31, 2015 2014 (In thousands) Finished goods $ $ Raw materials Work-in process Total inventory $ $ |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2015 | |
Property and Equipment | |
Property and Equipment | Note 8. Property and Equipment Property and equipment consisted of the following: Depreciable As of Life September 30, December 31, (In Years) 2015 2014 (In thousands) Land — $ $ Buildings and improvements 1 - 30 Furniture, fixtures, equipment and other 1 - 12 Customer rental equipment 2 - 4 Satellites - owned 2 - 15 Satellites acquired under capital leases 10 - 15 Construction in progress — Total property and equipment Accumulated depreciation ) ) Property and equipment, net $ $ Construction in progress consisted of the following: As of September 30, December 31, 2015 2014 (In thousands) Progress amounts for satellite construction, including prepayments under capital leases and launch services costs $ $ Uplinking equipment Other Construction in progress $ $ Depreciation expense associated with our property and equipment consisted of the following: For the Three Months For the Nine Months Ended September 30, Ended September 30, 2015 2014 2015 2014 (In thousands) Satellites $ $ $ $ Furniture, fixtures, equipment and other Customer rental equipment Buildings and improvements Total depreciation expense $ $ $ $ Satellites As of September 30, 2015, we utilized 17 of our owned and leased satellites in geosynchronous orbit, approximately 22,300 miles above the equator. We depreciate our owned satellites on a straight-line basis over the estimated useful life of each satellite. Two of our satellites are accounted for as capital leases and are depreciated on a straight-line basis over the terms of the satellite service agreements. Two of our satellites are accounted for as operating leases and are not included in property and equipment. Recent Developments AMC-15 and AMC-16. In August 2014, in connection with the execution of agreements related to the EchoStar 105/SES-11 satellite, we entered into amendments that extend the terms of our existing agreements with SES Americom Colorado, Inc. for satellite services on the AMC-15 and AMC-16 satellites. As amended, the term of our agreement for satellite services on certain transponders on the AMC-15 satellite was extended from December 2014 through the in-service date of the EchoStar 105/SES-11 satellite. The amended agreement for the AMC-16 satellite services extends the term for the satellite’s entire communications capacity, subject to available power, for one year following expiration of the initial term in February 2015. The extended terms of these agreements are being accounted for as operating leases. Satellite Anomalies Certain of our satellites have experienced anomalies, some of which have had a significant adverse impact on their remaining useful lives and/or the commercial operation of the satellites. There can be no assurance that existing and future anomalies will not further impact the remaining useful life and/or the commercial operation of any of the satellites in our fleet. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail. We generally do not carry in-orbit insurance on our satellites; therefore, we generally bear the risk of any uninsured in-orbit failures. Pursuant to the terms of the agreements governing certain portions of our indebtedness, we are required, subject to certain limitations on coverage, to maintain launch and in-orbit insurance for our SPACEWAY 3, EchoStar XVI, and EchoStar XVII satellites. We have previously disclosed in our financial statements as of and for the year ended December 31, 2014 anomalies in prior years that affect our in-service owned and leased satellites, including the EchoStar III, EchoStar VI, EchoStar VIII, EchoStar XII, and AMC-16 satellites. In August 2015, SPACEWAY 3 experienced an anomaly causing one of the two on-board computers used to control the satellite payload to temporarily go offline, causing an interruption of service. The issue has since been resolved and the satellite is functioning normally. This anomaly did not affect the long-term commercial operations of the satellite or its estimated useful life. We are not aware of any additional anomalies that have occurred with respect to any of our owned or leased satellites in 2015 as of the date of this report that have materially affected the commercial operation of these satellites or their useful life. The EchoStar III and EchoStar VI satellites are fully depreciated and the EchoStar III satellite is being used as an in-orbit spare; accordingly, the prior anomalies affecting these satellites have not had a significant effect on our operating results and cash flows. The EchoStar XII satellite, as previously disclosed in our Form 10-K, has experienced several anomalies, which have resulted in a loss of electrical power. Those anomalies have not had a significant adverse impact on service under the related satellite services agreement with DISH Network for the EchoStar XII satellite; however, the anomalies have increased the risk of future transponder failures that could result in reductions in our revenue. Satellite Impairments We evaluate our satellites for impairment and test for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Certain of the anomalies previously disclosed, may be considered to represent a significant adverse change in the physical condition of a particular satellite. However, based on the redundancy designed within each satellite, certain of these anomalies are not necessarily considered to be significant events that would require a test of recoverability. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | Note 9. Goodwill 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 our reporting units of 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, 2015 and December 31, 2014, all of our goodwill was assigned to reporting units of our Hughes segment. We test this goodwill for impairment annually in the second quarter. Based on our qualitative assessment of impairment of such goodwill in the second quarter of 2015, 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. Other Intangible Assets Our other intangible assets, which are subject to amortization, consisted of the following: Weighted As of Average September 30, 2015 December 31, 2014 Useful life Accumulated Carrying Accumulated Carrying (in Years) Cost Amortization Amount Cost Amortization Amount (In thousands) Customer relationships 8 $ $ ) $ $ $ ) $ Contract-based 4 ) — ) Technology-based 6 ) ) Trademark portfolio 20 ) ) Favorable leases 4 ) — ) Total other intangible assets $ $ ) $ $ $ ) $ 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. Amortization expense, including amortization of externally marketed capitalized software, was $11.9 million and $13.0 million for the three months ended September 30, 2015 and 2014, respectively, and $38.8 million and $44.4 million for the nine months ended September 30, 2015 and 2014, respectively. |
Debt and Capital Lease Obligati
Debt and Capital Lease Obligations | 9 Months Ended |
Sep. 30, 2015 | |
Debt and Capital Lease Obligations | |
Debt and Capital Lease Obligations | Note 10. Debt and Capital Lease Obligations The following table summarizes the carrying amounts and fair values of our debt: As of September 30, 2015 December 31, 2014 Carrying Fair Carrying Fair Amount Value Amount Value (In thousands) 6 1/2% Senior Secured Notes due 2019 $ $ $ $ 7 5/8% Senior Notes due 2021 Other Subtotal $ $ Capital lease obligations Total debt and capital lease obligations Less: Current portion ) ) Long-term portion of debt and capital lease obligations $ $ On June 12, 2015, we redeemed $110.0 million of our 6 1/2% Senior Secured Notes due 2019 (the “Senior Secured Notes”) at a redemption price equal to 103.0% of the principal amount plus related accrued interest. As a result, we recorded a $5.0 million loss consisting of the $3.3 million redemption premium and $1.7 million representing the write-off of related deferred financing costs. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Taxes | |
Income Taxes | Note 11. Income Taxes Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant volatility due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, income and losses from investments, changes in tax laws and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower. Income tax expense was approximately $58.5 million and $22.1 million for the nine months ended September 30, 2015 and 2014, respectively. Our effective income tax rate was 38.3% and 22.4% for the nine months ended September 30, 2015 and 2014, respectively. The variation in our effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2014 was primarily due to research and experimentation tax credits and lower state effective tax rate. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 12. Commitments and Contingencies Commitments As of September 30, 2015, our satellite-related obligations were approximately $993.4 million. Our satellite-related obligations primarily include payments pursuant to agreements for the construction of the EchoStar 105/SES-11 and EchoStar XXI satellites, payments pursuant to launch services contracts, 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 Separation Agreement In 2008, DISH Network Corporation contributed its digital set-top box business and certain infrastructure and other assets, including certain of its satellites, uplink and satellite transmission assets, real estate, and other assets and related liabilities to EchoStar (the “Spin-off”). In connection with the Spin-off, EchoStar entered into a separation agreement with DISH Network that provides, among other things, for the division of certain liabilities, including liabilities resulting from litigation. Under the terms of the separation agreement, EchoStar has assumed certain liabilities that relate to its business, including certain designated liabilities for acts or omissions that occurred prior to the Spin-off. Certain specific provisions govern intellectual property related claims under which, generally, EchoStar will only be liable for its acts or omissions following the Spin-off and DISH Network will indemnify EchoStar for any liabilities or damages resulting from intellectual property claims relating to the period prior to the Spin-off, as well as DISH Network’s acts or omissions following the Spin-off. Litigation We are involved in a number of legal proceedings (including those described below) concerning matters arising in connection with the conduct of our business activities. Many of these proceedings are at preliminary stages, and many of these proceedings 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. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of the possible loss or range of possible loss can be made. We record an accrual for litigation and other loss contingencies when we determine that a loss is probable and the amount of the loss can be reasonably estimated. Legal fees and other costs of defending litigation are charged to expense as incurred. For certain cases described below, management is unable to provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii) damages have not been sought; (iii) damages are unsupported and/or exaggerated in management’s opinion; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties are involved (as with many patent-related cases). For these cases, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material adverse effect on our financial condition, though the outcomes could be material to our operating results for any particular period, depending, in part, upon the operating results for such period. California Institute of Technology On October 1, 2013, the California Institute of Technology (“Caltech”) filed suit against two of our subsidiaries, Hughes Communications, Inc. and Hughes Network Systems, LLC (“HNS”), as well as against DISH Network, DISH Network L.L.C., and dishNET Satellite Broadband L.L.C., in the United States District Court for the Central District of California alleging infringement of United States Patent Nos. 7,116,710; 7,421,032; 7,916,781; and 8,284,833, each of which is entitled “Serial Concatenation of Interleaved Convolutional Codes forming Turbo-Like Codes.” Caltech asserted that encoding data as specified by the DVB-S2 standard infringes each of the asserted patents. In the operative Amended Complaint, served on March 6, 2014, Caltech claims that the Hopper TM set-top box that we design and sell to DISH Network, as well as certain of our Hughes segment’s satellite broadband products and services, infringe the asserted patents by implementing the DVB-S2 standard. On September 26, 2014, Caltech requested leave to amend its Amended Complaint to add EchoStar Corporation and EchoStar Technologies L.L.C. as defendants, as well as to allege that a number of additional set-top boxes infringe the asserted patents. On November 7, 2014, the Court rejected that request. Additionally, on November 4, 2014, the Court ruled that the patent claims at issue in the suit are directed to patentable subject matter. On February 17, 2015, Caltech filed a second complaint in the same district against the same defendants alleging that HNS’ Gen4 HT1000 and HT1100 products infringe the same patents asserted in the first case. We answered that second complaint on March 24, 2015. The trial for the first case which was scheduled to commence on April 20, 2015, was vacated by the Court on March 16, 2015 and a new trial date has yet to be set. On May 5, 2015, the Court granted summary judgment for us on a number of issues, finding that Caltech’s damages theory improperly apportioned alleged damages, that allegations of infringement against DISH Network, DISH Network L.L.C., and dishNET Satellite Broadband L.L.C. should be dismissed from the case, and affirming that Caltech could not assert infringement under the doctrine of equivalents. The Court also granted motions by Caltech seeking findings that certain of its patents were not indefinite or subject to equitable estoppel. The Court otherwise denied motions for summary judgment, including a motion by Caltech seeking summary judgment of infringement. On May 14, 2015, the judge assigned to the case passed away. A new judge has not yet been formally assigned. The parties are discussing resolving these cases without further litigation. There can be no assurance that a settlement agreement will be reached. If a settlement agreement is not reached, we cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages and we intend to vigorously defend these cases. In the event that a court ultimately determines that we infringe the asserted patents, we may be subject to substantial damages, which may include treble damages, and/or an injunction that could require us to materially modify certain features that we currently 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 HNS, as well as against Black Elk Energy Offshore Operations, LLC, Bluetide Communications, Inc. and Helm Hotels Group, in the United States District Court for the Eastern District of Texas, alleging infringement of United States Patent Nos. 6,240,073 (the “073 patent”) and 7,245,874 (“874 patent”). The 073 patent is entitled “Reverse Link for a Satellite Communication Network” and the 874 patent is entitled “Infrastructure for Telephony Network.” Elbit alleges that the 073 patent is infringed by broadband satellite systems that practice the Internet Protocol Over Satellite standard. Elbit alleges that the 874 patent is infringed by the manufacture and sale of broadband satellite systems that provide cellular backhaul service via connections to E1 or T1 interfaces at cellular backhaul base stations. On March 16, 2015, the defendants filed motions to dismiss portions of Elbit’s complaint. On April 2, 2015, Elbit responded to those motions to dismiss and further filed an amended complaint removing Helm Hotels Group as a defendant, but making similar allegations against a new defendant, Country Home Investments, Inc. On April 20, 2015, the defendants filed motions to dismiss portions of Elbit’s amended complaint. We intend to vigorously defend this case. In the event that a court ultimately determines that we infringe the asserted patents, we may be subject to substantial damages, which may include treble damages, and/or an injunction that could require us to materially modify certain features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. Kappa Digital, LLC On June 1, 2015, Kappa Digital LLC (“Kappa”) filed suit against our subsidiary HNS in the United States District Court for the Eastern District of Texas alleging infringement of United States Patent No. 6,349,135, entitled “Method and System for a Wireless Digital Message Service.” Kappa generally alleges that HNS’ “HughesNet Gen 4 residential internet service/systems” and “HughesNet Business Broadband service/systems” infringe its asserted patent. Kappa is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. We intend to vigorously defend this case. In the event that a court ultimately determines that we infringe the asserted patent, we may be subject to substantial damages, which may include treble damages, and/or an injunction that could cause us to materially modify certain features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of this suit or determine the extent of any potential liability or damages. Phoenix Licensing, L.L.C./LPL Licensing, L.L.C. On July 30, 2015, Phoenix Licensing, L.L.C. and LPL Licensing, L.L.C. (together referred to as “Phoenix”) filed a complaint against our subsidiary HNS in the United States District Court for the Eastern District of Texas, alleging infringement of United States Patent Nos. 5,987,434, entitled “Apparatus and Method for Transacting Marketing and Sales of Financial Products”; 7,890,366, entitled “Personalized Communication Documents, System and Method for Preparing Same”; 8,352,317, entitled “System for Facilitating Production of Variable Offer Communications”; 8,234,184, entitled “Automated Reply Generation Direct Marketing System”; 6,999,938, entitled “Automated Reply Generation Direct Marketing System”; 8,738,435, entitled “Method and Apparatus for Presenting Personalized Content Relating to Offered Products and Services”; and 7,860,744, entitled “System and Method for Automatically Providing Personalized Notices Concerning Financial Products and/or Services.” Phoenix alleged that HNS infringes the asserted patents by making and using products and services that generate customized marketing materials. Phoenix is an entity that seeks to license a patent portfolio without itself practicing any of the claims recited therein against us. On October 16, 2015, Phoenix moved to dismiss the litigation against us without prejudice pursuant to a settlement agreement, and on November 3, 2015, the action was dismissed accordingly. Realtime Data LLC On May 8, 2015, Realtime Data LLC (“Realtime”) filed suit against EchoStar Corporation and our subsidiary HNS in the United States District Court for the Eastern District of Texas alleging infringement of United States Patent Nos. 7,378,992, entitled “Content Independent Data Compression Method and System”; 7,415,530, entitled “System and Methods for Accelerated Data Storage and Retrieval”; and 8,643,513, entitled “Data Compression System and Methods.” Realtime generally alleges that the asserted patents are infringed by certain HNS data compression products and services. Realtime is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. We intend to vigorously defend this case. In the event that a court ultimately determines that we infringe any of the asserted patents, we may be subject to substantial damages, which may include supplemental damages, and/or an injunction that could cause us to materially modify certain features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. TQ Beta LLC On June 30, 2014, TQ Beta LLC (“TQ Beta”) filed suit against DISH Network, DISH DBS Corporation, DISH Network L.L.C., as well as HSS, EchoStar Corporation, EchoStar Technologies, L.L.C, and Sling Media, Inc., a subsidiary of EchoStar, in the United States District Court for the District of Delaware, alleging infringement of United States Patent No. 7,203,456 (the “456 patent”), which is entitled “Method and Apparatus for Time and Space Domain Shifting of Broadcast Signals.” TQ Beta alleges that the Hopper, Hopper with Sling, ViP 722 and ViP 722k DVR devices, as well as the DISH Anywhere service and DISH Anywhere mobile application, infringe the 456 patent , but has not specified the amount of damages that it seeks . TQ Beta is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. During August 2015, EchoStar Corporation and DISH Network L.L.C. filed petitions before the United States Patent and Trademark Office challenging the validity of the 456 patent. Trial is scheduled to commence on December 12, 2016. We intend to vigorously defend this case. In the event that a court ultimately determines that we infringe the asserted patent, we may be subject to substantial damages, which may include treble damages, and/or an injunction that could require us to materially modify certain features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages. 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. In our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial position, results of operations or liquidity, though the outcomes could be material to our operating results for any particular period, depending, in part, upon the operating results for such period. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting | |
Segment Reporting | Note 13. Segment Reporting Operating segments are business components of an enterprise for which separate financial information is available and regularly evaluated by the chief operating decision maker (“CODM”), who for HSS, is the Company’s Chief Executive Officer. Under this definition, we operate the following two primary business segments: · Hughes — which provides satellite broadband internet access to North American consumers and broadband network services and equipment to domestic and international enterprise markets. The Hughes segment also provides managed services to large enterprises and solutions to customers for mobile satellite systems. · EchoStar Satellite Services — which uses certain of our owned and leased in-orbit satellites and related licenses to provide satellite services on a full-time and occasional-use basis primarily to DISH Network, Dish Mexico, U.S. government service providers, internet service providers, broadcast news organizations, programmers, and private enterprise customers. The primary measure of segment profitability that is reported regularly to our CODM is earnings before interest, taxes, depreciation and amortization, or EBITDA. Our segment operating results do not include real estate and other activities, costs incurred in certain satellite development programs and other business development activities, expenses of various corporate departments, and our centralized treasury operations, including income from our investment portfolio and interest expense on our debt. These activities are accounted for in the “All Other and Eliminations” column in the table below. Total assets by segment have not been reported herein because the information is not provided to our CODM on a regular basis. The Hughes Retail Group is included in our Hughes segment and our CODM reviews separate HRG financial information only to the extent such information is included in our periodic filings with the SEC. Therefore, we do not consider HRG to be a separate operating segment. Transactions between segments were not significant for the three and nine months ended September 30, 2015 and 2014. The following table presents revenue, EBITDA, and capital expenditures for each of our operating segments. EchoStar All Satellite Other and Consolidated Hughes Services Eliminations Total (In thousands) For the Three Months Ended September 30, 2015 External revenue $ $ $ $ Intersegment revenue $ $ $ ) $ — Total revenue $ $ $ $ Capital expenditures $ $ $ — $ EBITDA $ $ $ $ For the Three Months Ended September 30, 2014 External revenue $ $ $ $ Intersegment revenue $ $ $ ) $ — Total revenue $ $ $ ) $ Capital expenditures $ $ $ — $ EBITDA $ $ $ $ For the Nine Months Ended September 30, 2015 External revenue $ $ $ $ Intersegment revenue $ $ $ ) $ — Total revenue $ $ $ ) $ Capital expenditures $ $ $ — $ EBITDA $ $ $ ) $ For the Nine Months Ended September 30, 2014 External revenue $ $ $ $ Intersegment revenue $ $ $ ) $ — Total revenue $ $ $ ) $ Capital expenditures $ $ $ — $ EBITDA $ $ $ $ The following table reconciles total consolidated EBITDA to reported “Income before income taxes” in our condensed consolidated statements of operations and comprehensive income (loss): For the Three Months For the Nine Months Ended September 30, Ended September 30, 2015 2014 2015 2014 (In thousands) EBITDA $ $ $ $ Interest income and expense, net ) ) ) ) Depreciation and amortization ) ) ) ) Net income attributable to noncontrolling interests Income before income taxes $ $ $ $ |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions | |
Related Party Transactions | Note 14. Related Party Transactions EchoStar We and EchoStar have agreed that we shall have the right, but not the obligation, to receive from EchoStar certain corporate services, including among other things: treasury, tax, accounting and reporting, risk management, legal, internal audit, human resources, and information technology. In addition, we occupy certain office space in buildings owned by EchoStar and pay a portion of the taxes, insurance, utilities and maintenance of the premises in accordance with the percentage of the space we occupy. These services are provided at cost. We may terminate a particular service we receive from EchoStar for any reason upon at least 30 days’ notice. We recorded expenses for services received from EchoStar of $4.5 million and $3.1 million for the three months ended September 30, 2015 and 2014, respectively, and $12.7 million and $9.3 million for the nine months ended September 30, 2015 and 2014, respectively. EchoStar XXI Launch Facilitation and Operational Control Agreement. To facilitate compliance with certain requirements of the UK Space Agency with respect to the development of EchoStar’s mobile satellite services business in Europe, our subsidiary, Hughes Network Systems, Ltd. (“HNS Ltd.”) and a subsidiary of EchoStar, EchoStar Operating L.L.C. (“EOC”), entered into an agreement in June 2015 to transfer to HNS Ltd., EOC’s launch service contract for the EchoStar XXI satellite and to grant HNS Ltd. certain rights to control the in-orbit operations of the satellite. EOC retained ownership of the EchoStar XXI satellite, which is currently under construction and scheduled to be launched in 2016. We recorded a $52.3 million addition to “Other noncurrent assets, net” and a corresponding increase in “Additional paid-in capital” in our condensed consolidated balance sheet to reflect EOC’s cumulative payments under the launch service contract as of June 30, 2015. EOC also agreed to make future payments to HNS Ltd. totaling $1.9 million plus the remaining amounts that HNS Ltd. is required to pay under the launch service contract. Those payments will be recorded as increases in our “Additional paid-in capital.” HNS Ltd.’s future payments under the launch service contract are included in our disclosure of satellite-related obligations in Note 12. DISH Network Following the Spin-off, EchoStar and DISH Network have operated as separate publicly-traded companies. However, pursuant to the Satellite and Tracking Stock Transaction, described in Note 2 and below, DISH Network owns Hughes Retail Preferred Tracking Stock representing an aggregate 80.0% economic interest in the residential retail satellite broadband business of our Hughes segment, including certain operations, assets and liabilities attributed to such business. In addition, a substantial majority of the voting power of the shares of EchoStar and DISH Network is owned beneficially by Charles W. Ergen, our Chairman, and by certain trusts established by Mr. Ergen for the benefit of his family. In connection with and following the Spin-off, EchoStar and DISH Network have entered into certain agreements pursuant to which we and EchoStar obtain certain products, services and rights from DISH Network; DISH Network obtains certain products, services and rights from us and EchoStar; and we and DISH Network have indemnified each other against certain liabilities arising from our respective businesses. We and/or EchoStar also may enter into additional agreements with DISH Network in the future. Generally, the amounts DISH Network pays for products and services provided under the agreements are based on our cost plus a fixed margin (unless noted differently below), which varies depending on the nature of the products and services provided. The following is a summary of the terms of our principal agreements with DISH Network that may have an impact on our financial condition and results of operations. “Services and other revenue — DISH Network” Satellite Services Provided to DISH Network. Since the Spin-off, we have entered into certain satellite service agreements pursuant to which DISH Network receives satellite services on certain satellites owned or leased by us. The fees for the services provided under these satellite service agreements depend, among other things, upon the orbital location of the applicable satellite, the number of transponders that are providing services on the applicable satellite, and the length of the service arrangements. The terms of each service arrangement is set forth below: EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV. As part of the Satellite and Tracking Stock Transaction discussed in Note 2, on March 1, 2014, we began providing certain satellite services to DISH Network on the EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV satellites. The term of each satellite services agreement generally terminates upon the earlier of: (i) the end of life of the satellite; (ii) the date the satellite fails; or (iii) a certain date, which depends upon, among other things, the estimated useful life of the satellite. DISH Network generally has the option to renew each satellite service agreement on a year-to-year basis through the end of the respective satellite’s life. There can be no assurance that any options to renew such agreements will be exercised. DISH Network has elected not to renew the satellite services agreement relative to the EchoStar I satellite . The agreement for the EchoStar I satellite will expire pursuant to its terms effective November 30, 2015. EchoStar VIII. In May 2013, DISH Network began receiving satellite services from us on the EchoStar VIII satellite as an in-orbit spare. Effective March 1, 2014, this satellite services arrangement converted to a month-to-month service agreement. Both parties have the right to terminate this agreement upon 30 days’ notice. The agreement will terminate in accordance with its terms effective in November 2015. EchoStar IX . Effective January 2008, DISH Network began receiving satellite services from us on the EchoStar IX satellite. Subject to availability, DISH Network generally has the right to continue to receive satellite services from us on the EchoStar IX satellite on a month-to-month basis. EchoStar XII . DISH Network receives satellite services from us on the EchoStar XII satellite. The term of the satellite services agreement terminates upon the earlier of: (i) the end of life of the satellite; (ii) the date the satellite fails or the date the transponder(s) on which the service was being provided under the agreement fails; or (iii) a certain date, which depends upon, among other things, the estimated useful life of the satellite. DISH Network generally has the option to renew the agreement on a year-to-year basis through the end of the satellite’s life. There can be no assurance that any options to renew this agreement will be exercised. EchoStar XVI. During December 2009, we entered into an initial ten-year transponder service agreement with DISH Network, pursuant to which DISH Network has received satellite services from us on the EchoStar XVI satellite since January 2013. Effective December 21, 2012, we and DISH Network amended the transponder service agreement to, among other things, change the initial term to generally expire upon the earlier of: (i) the end-of-life or replacement of the satellite; (ii) the date the satellite fails; (iii) the date the transponder(s) on which service is being provided under the agreement fails; or (iv) four years following the actual service commencement date. Prior to expiration of the initial term, we, upon certain conditions, and DISH Network have the option to renew for an additional six-year period. If either we or DISH Network exercise our respective six-year renewal options, DISH Network has the option to renew for an additional five-year period prior to expiration of the then-current term. There can be no assurance that any option to renew this agreement will be exercised. Nimiq 5 Agreement. During 2009, we entered into a fifteen-year satellite service agreement with Telesat Canada (“Telesat”) to receive service on all 32 DBS transponders on the Nimiq 5 satellite at the 72.7 degree west longitude orbital location (the “Telesat Transponder Agreement”). During 2009, we also entered into a satellite service agreement (the “DISH Nimiq 5 Agreement”) with DISH Network, pursuant to which DISH Network receives satellite services from us on all 32 of the DBS transponders covered by the Telesat Transponder Agreement. Under the terms of the DISH Nimiq 5 Agreement, DISH Network makes certain monthly payments to us that commenced in September 2009, when the Nimiq 5 satellite was placed into service, and continue through the service term. Unless earlier terminated under the terms and conditions of the DISH Nimiq 5 Agreement, the service term will expire ten years following the date the Nimiq 5 satellite was placed into service. Upon expiration of the initial term, DISH Network has the option to renew the DISH Nimiq 5 Agreement on a year-to-year basis through the end of life of the Nimiq 5 satellite. Upon in-orbit failure or end of life of the Nimiq 5 satellite, and in certain other circumstances, DISH Network has certain rights to receive service from us on a replacement satellite. There can be no assurance that any options to renew the DISH Nimiq 5 Agreement will be exercised or that DISH Network will exercise its option to receive service on a replacement satellite. QuetzSat-1 Agreement. During 2008, we entered into a ten-year satellite service agreement with SES Latin America, which provides, among other things, for the provision by SES Latin America to us of service on 32 DBS transponders on the QuetzSat-1 satellite. Concurrently, in 2008, we entered into a transponder service agreement with DISH Network, pursuant to which DISH Network receives satellite services on 24 of the DBS transponders on the QuetzSat-1 satellite. The QuetzSat-1 satellite was launched on September 29, 2011 and was placed into service during the fourth quarter of 2011 at the 67.1 degree west longitude orbital location. In the interim, we provided DISH Network with alternate capacity at the 77 degree west longitude orbital location. During the third quarter of 2012, we and DISH Network entered into an agreement pursuant to which we receive certain satellite services from DISH Network on five DBS transponders on the QuetzSat-1 satellite. In January 2013, the QuetzSat-1 satellite was moved to the 77 degree west longitude orbital location and DISH Network commenced commercial operations at such location in February 2013. Under the terms of our contractual arrangements with DISH Network, we began to provide service to DISH Network on the QuetzSat-1 satellite in February 2013 and will continue to provide service through the remainder of the service term. Unless extended or earlier terminated under the terms and conditions of our agreement with DISH Network for the QuetzSat-1 satellite, the initial service term will expire in November 2021. Upon expiration of the initial service term, DISH Network has the option to renew the agreement for the QuetzSat-1 satellite on a year-to-year basis through the end of life of the QuetzSat-1 satellite. Upon an in-orbit failure or end of life of the QuetzSat-1 satellite, and in certain other circumstances, DISH Network has certain rights to receive service from us on a replacement satellite. There can be no assurance that any options to renew this agreement will be exercised or that DISH Network will exercise its option to receive service on a replacement satellite. 103 Degree Orbital Location/SES-3. During May 2012, we entered into a spectrum development agreement (the “103 Spectrum Development Agreement”) with Ciel Satellite Holdings Inc. (“Ciel”) to develop certain spectrum rights at the 103 degree west longitude orbital location (the “103 Spectrum Rights”). During June 2013, we and DISH Network entered into a spectrum development agreement (the “DISH 103 Spectrum Development Agreement”) pursuant to which DISH Network may use and develop the 103 Spectrum Rights. Unless earlier terminated under the terms and conditions of the DISH 103 Spectrum Development Agreement, the term generally will continue for the duration of the 103 Spectrum Rights. In connection with the 103 Spectrum Development Agreement, during May 2012, we also entered into a ten-year service agreement with Ciel pursuant to which we receive certain satellite services from Ciel on the SES-3 satellite at the 103 degree orbital location. During June 2013, we and DISH Network entered into an agreement pursuant to which DISH Network receives certain satellite services from us on the SES-3 satellite (the “DISH 103 Service Agreement”). Under the terms of the DISH 103 Service Agreement, DISH Network makes certain monthly payments to us through the service term. Unless earlier terminated under the terms and conditions of the DISH 103 Service Agreement, the initial service term will expire on the earlier of: (i) the date the SES-3 satellite fails; (ii) the date the transponder(s) on which service was being provided under the agreement fails; or (iii) ten years following the actual service commencement date. Upon in-orbit failure or end of life of the SES-3 satellite, and in certain other circumstances, DISH Network has certain rights to receive service from us on a replacement satellite. There can be no assurance that DISH Network will exercise its option to receive service on a replacement satellite. Satellite and Tracking Stock Transaction. On February 20, 2014, we entered into agreements with DISH Network to implement a transaction pursuant to which, among other things: (i) on March 1, 2014, EchoStar and HSS issued shares of the Tracking Stock to DISH Network in exchange for five satellites owned by DISH Network (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV) (including related in-orbit incentive obligations and interest payments of approximately $58.9 million) and approximately $11.4 million in cash; and (ii) on March 1, 2014, DISH Network began receiving certain satellite services on these five satellites from us. See Note 2 for further information. TT&C Agreement. Effective January 1, 2012, we entered into a telemetry, tracking and control (“TT&C”) agreement pursuant to which we provide TT&C services to DISH Network and its subsidiaries for a period ending on December 31, 2016 (the “2012 TT&C Agreement”). The 2012 TT&C Agreement replaced the TT&C agreement we entered into with DISH Network in connection with the Spin-off. The fees for services provided under the 2012 TT&C Agreement are calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which will vary depending on the nature of the services provided. DISH Network is able to terminate the 2012 TT&C Agreement for any reason upon 60 days’ notice. In connection with the Satellite and Tracking Stock Transaction, on February 20, 2014, we amended the TT&C Agreement to cease the provision of TT&C services to DISH Network for the EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV satellites. Effective March 1, 2014, we provide TT&C services for DISH Network’s D-1 satellite. Blockbuster Agreements. On April 26, 2011, DISH Network acquired substantially all of the assets of Blockbuster, Inc. (the “Blockbuster Acquisition”). On June 8, 2011, we completed the Hughes Acquisition. HNS provided certain broadband products and services to Blockbuster, Inc. (with its subsidiaries, “Blockbuster”) pursuant to an agreement that was entered into prior to the Blockbuster Acquisition and the Hughes Acquisition. Subsequent to both the Blockbuster Acquisition and the Hughes Acquisition, Blockbuster entered into a new agreement with HNS pursuant to which Blockbuster could continue to purchase broadband products and services from our Hughes segment. Effective February 1, 2014, all services to all Blockbuster locations, including Blockbuster franchisee locations, terminated in connection with the closing of all of the Blockbuster retail locations. Radio Access Network Agreement. On November 29, 2012, HNS entered into an agreement with DISH Network L.L.C. pursuant to which HNS constructed for DISH Network a ground-based satellite radio access network for a fixed fee. The parties mutually agreed to terminate this agreement in the fourth quarter of 2014. TerreStar Agreement . On March 9, 2012, DISH Network completed its acquisition of substantially all the assets of TerreStar Networks Inc. (“TerreStar”). Prior to DISH Network’s acquisition of substantially all the assets of TerreStar and our completion of the Hughes Acquisition, TerreStar and HNS entered into various agreements pursuant to which our Hughes segment provides, among other things, hosting, operations and maintenance services for TerreStar’s satellite gateway and associated ground infrastructure. These agreements generally may be terminated by DISH Network at any time for convenience. Hughes Broadband Distribution Agreement. Effective October 1, 2012, HNS and dishNET Satellite Broadband L.L.C. (“dishNET”), a wholly-owned subsidiary of DISH Network, entered into a distribution agreement (the “Distribution Agreement”) pursuant to which dishNET has the right, but not the obligation, to market, sell and distribute the Hughes satellite internet service (the “Hughes service”). dishNET pays HNS a monthly per subscriber wholesale service fee for the Hughes service based upon a subscriber’s service level, and, beginning January 1, 2014, based upon certain volume subscription thresholds. The Distribution Agreement also provides that dishNET has the right, but not the obligation, to purchase certain broadband equipment from us to support the sale of the Hughes service. The Distribution Agreement had an initial term of five years with automatic renewal for successive one year terms unless terminated by either party with a written notice at least 180 days before the expiration of the then-current term. On February 20, 2014, HNS and dishNET entered into an amendment to the Distribution Agreement which, among other things, extended the initial term of the Distribution Agreement through March 1, 2024. Upon expiration or termination of the Distribution Agreement, the parties will continue to provide the Hughes service to the then-current dishNET subscribers pursuant to the terms and conditions of the Distribution Agreement. DBSD North America Agreement. On March 9, 2012, DISH Network completed its acquisition of 100% of the equity of reorganized DBSD North America, Inc. (“DBSD North America”). Prior to DISH Network’s acquisition of DBSD North America and our completion of the Hughes Acquisition, DBSD North America and HNS entered into an agreement pursuant to which our Hughes segment provides, among other things, hosting, operations and maintenance services of DBSD North America’s satellite gateway and associated ground infrastructure. This agreement automatically renewed for a one-year period ending on February 15, 2016, and will renew for one additional one-year period unless terminated by DBSD North America upon at least 30 days’ notice prior to the expiration of any renewal term. “Cost of sales — services and other — DISH Network” Satellite Services Received from DISH Network. Since the Spin-off, EchoStar entered into certain satellite services agreements pursuant to which, it receives certain satellite services from DISH Network on certain satellites owned or leased by DISH Network. The fees for the services provided under these satellite services agreements depend, among other things, upon the orbital location of the applicable satellite, the number of transponders that are providing services on the applicable satellite and the length of the service term. In November 2012, HNS entered into a satellite service agreement pursuant to which HNS received satellite services from DISH Network on the D-1 satellite for research and development. This agreement terminated on June 30, 2014. “General and administrative expenses — DISH Network” Professional Services Agreement. In connection with the Spin-off, EchoStar entered into various agreements with DISH Network including the Transition Services Agreement, Satellite Procurement Agreement and Services Agreement, which all expired on January 1, 2010 and were replaced by a Professional Services Agreement. During 2009, EchoStar and DISH Network agreed that EchoStar shall continue to have the right, but not the obligation, to receive the following services from DISH Network, among others, certain of which were previously provided under the Transition Services Agreement: information technology, travel and event coordination, internal audit, legal, accounting and tax, benefits administration, program acquisition services and other support services. Additionally, EchoStar and DISH Network agreed that DISH Network would continue to have the right, but not the obligation, to engage us to manage the process of procuring new satellite capacity for DISH Network (previously provided under the Satellite Procurement Agreement), receive logistics, procurement and quality assurance services from EchoStar (previously provided under the Services Agreement) and other support services. A portion of these costs and expenses have been allocated to us in the manner described above under the caption “EchoStar.” The Professional Services Agreement automatically renewed on January 1, 2015 for an additional one-year period and renews automatically for successive one-year periods thereafter, unless terminated earlier by either party upon at least 60 days’ notice. However, either party may terminate the Professional Services Agreement in part with respect to any particular service it receives for any reason upon at least 30 days’ notice. Real Estate Lease Agreements . We have entered into lease agreements pursuant to which we lease certain real estate from DISH Network. The rent on a per square foot basis for each of the leases is comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease, and we are responsible for our portion of the taxes, insurance, utilities and maintenance of the premises. The license for certain space at 796 East Utah Valley Drive in American Fork, Utah is for a period ending on July 31, 2017, subject to the terms of the underlying lease agreement. This license was terminated during the fourth quarter of 2014. “Other agreements — DISH Network” Tax Sharing Agreement. As a subsidiary of EchoStar, we are an indirect party to EchoStar’s tax sharing agreement with DISH Network that was entered into in connection with the Spin-off. This agreement governs EchoStar 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 will indemnify EchoStar for such taxes. However, DISH Network is not liable for and will not indemnify EchoStar 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 EchoStar’s stock, stock options or assets; (ii) any action that EchoStar takes or fails to take; or (iii) any action that EchoStar takes that is inconsistent with the information and representations furnished to the IRS in connection with the request for the private letter ruling, or to counsel in connection with any opinion being delivered by counsel with respect to the Spin-off or certain related transactions. In such case, EchoStar will be solely liable for, and will indemnify DISH Network for, any resulting taxes, as well as any losses, claims and expenses. The tax sharing agreement will only terminate after the later of the full period of all applicable statutes of limitations, including extensions, or once all rights and obligations are fully effectuated or performed. In light of the tax sharing agreement, among other things, and in connection with EchoStar’s consolidated federal income tax returns for certain tax years prior to and for the year of the Spin-off, during the third quarter of 2013, EchoStar and DISH Network agreed upon a supplemental allocation of the tax benefits arising from certain tax items resolved in the course of the IRS’s examination of EchoStar’s consolidated tax returns. As a result, DISH Network agreed to pay EchoStar an amount that includes $93.1 million of the federal tax benefit they received as a result of our operations. Other Agreements Hughes Systique Corporation (“Hughes Systique”) We contract with Hughes Systique for software development services. In February 2008, HNS agreed to make available to Hughes Systique a term loan facility of up to $1.5 million. Also in 2008, HNS funded an initial $0.5 million to Hughes Systique pursuant to the term loan facility. In 2009, HNS funded the remaining $1.0 million of its $1.5 million commitment under the term loan facility. The loans bear interest at 6%, payable annually, and are convertible into shares of Hughes Systique upon non-payment or an event of default. In May 2014, Hughes and Hughes Systique amended the term loan facility to increase the interest rate from 6% to 8%, payable annually, to reflect current market conditions. The loans, as amended, matured on May 1, 2015. In April 2015, Hughes Systique repaid $0.7 million of the outstanding principal of the loan and the maturity date of the loan was extended to May 1, 2016 on the same terms. In July and September 2015, Hughes Systique repaid $0.6 million of the outstanding principal of the loan. As of September 30, 2015, the principal outstanding amount of the loan was $0.9 million. In addition to our 44.0% ownership in Hughes Systique, Mr. Pradman Kaul, the President of Hughes Communications, Inc. and a member of EchoStar’s board of directors and his brother, who is the CEO and President of Hughes Systique, in the aggregate, owned approximately 25.8%, on an undiluted basis, of Hughes Systique’s outstanding shares as of September 30, 2015. Furthermore, Mr. Pradman Kaul serves on the board of directors of Hughes Systique. Hughes Systique is a variable interest entity and we are considered the primary beneficiary of Hughes Systique due to, among other factors, our ability to direct the activities that most significantly impact the economic performance of Hughes Systique. As a result, we consolidate Hughes Systique’s financial statements in our condensed consolidated financial statements. Dish Mexico EchoStar owns 49.0% of an entity that provides direct-to-home satellite services in Mexico known as Dish Mexico, and we provide certain satellite services to Dish Mexico. We recognized satellite services revenue from Dish Mexico of approximately $5.8 million for each of the three months ended September 30, 2015 and 2014 and $17.5 million for each of the nine months ended September 30, 2015 and 2014. As of September 30, 2015 and December 31, 2014, we had trade accounts receivable from Dish Mexico of approximately $8.4 million and $ 3.9 million, respectively. Deluxe/EchoStar LLC We own 50.0% of Deluxe/EchoStar LLC (“Deluxe”), a joint venture that we entered into in 2010 to build an advanced digital cinema satellite distribution network targeting delivery to digitally equipped theaters in the U.S. and Canada. We account for our investment in Deluxe using the equity method. We recognized revenue from Deluxe for transponder services and the sale of broadband equipment of approximately $0.7 million and $0.8 million for the three months ended September 30, 2015 and 2014, respectively, and $2.1 million and $2.5 million for the nine months ended September 30, 2015 and 2014, respectively. As of September 30, 2015 and December 31, 2014, we had trade accounts receivable from Deluxe of approximately $0.1 million and $0.2 million, respectively. |
Supplemental Guarantor and Non-
Supplemental Guarantor and Non-Guarantor Financial Information | 9 Months Ended |
Sep. 30, 2015 | |
Supplemental Guarantor and Non-Guarantor Financial Information | |
Supplemental Guarantor and Non-Guarantor Financial Information | Note 15. Supplemental Guarantor and Non-Guarantor Financial Information Certain of our wholly-owned subsidiaries (together, the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed, on a joint and several basis, the obligations of our 6 1/2% senior secured notes due 2019 and 7 5/8 % senior notes due 2021 (collectively, the “Notes”) , which were issued on September 1, 2011. See Note 10 for further information on the Notes. In lieu of separate financial statements of the Guarantor Subsidiaries, condensed consolidating financial information prepared in accordance with Rule 3-10(f) of Regulation S-X is presented below, including the condensed balance sheet information, the condensed statement of operations and comprehensive income (loss) information and the condensed statement of cash flows information of HSS, the Guarantor Subsidiaries on a combined basis and the non-guarantor subsidiaries of HSS on a combined basis and the eliminations necessary to arrive at the corresponding information of HSS on a consolidated basis. The indentures governing the Notes contain restrictive covenants that, among other things, impose limitations on our ability and the ability of our restricted subsidiaries to pay dividends or make distributions, incur additional debt, make certain investments, create liens or enter into sale and leaseback transactions, merge or consolidate with another company, transfer and sell assets, or enter into transactions with affiliates. The condensed consolidating financial information presented below should be read in conjunction with our condensed consolidated financial statements and notes thereto included herein. Condensed Consolidating Balance Sheet as of September 30, 2015 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Assets Cash and cash equivalents $ $ $ $ — $ Marketable investment securities — — Trade accounts receivable, net — — Trade accounts receivable - DISH Network, net — — Inventory — — Advances to affiliates, net ) Other current assets ) Total current assets ) Restricted cash and cash equivalents — Property and equipment, net — — Regulatory authorizations — — — Goodwill — — — Other intangible assets, net — — — Investment in subsidiaries — ) — Advances to affiliates — ) — Other noncurrent assets, net ) Total assets $ $ $ $ ) $ Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ — $ $ $ — $ Trade accounts payable - DISH Network — — — Current portion of long-term debt and capital lease obligations — — Advances from affiliates, net ) Accrued expenses and other ) Total current liabilities ) Long-term debt and capital lease obligations, net of current portion — Advances from affiliates — — ) Other non-current liabilities — ) Total HSS shareholders’ equity (deficit) ) Noncontrolling interests — — — Total liabilities and shareholders’ equity (deficit) $ $ $ $ ) $ Condensed Consolidating Balance Sheet as of December 31, 2014 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Assets Cash and cash equivalents $ $ $ $ — $ Marketable investment securities — — Trade accounts receivable, net — — Trade accounts receivable - DISH Network, net — — Advances to affiliates, net — ) Inventory — — Other current assets ) Total current assets ) Restricted cash and cash equivalents — Property and equipment, net — — Regulatory authorizations — — — Goodwill — — — Other intangible assets, net — — — Investment in subsidiaries — ) — Advances to affiliates — ) — Other noncurrent assets, net — Total assets $ $ $ $ ) $ Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ $ $ $ — $ Trade accounts payable - DISH Network — — — Current portion of long-term debt and capital lease obligations — — Advances from affiliates, net ) Accrued expenses and other ) Total current liabilities ) Long-term debt and capital lease obligations, net of current portion — Advances from affiliates — — ) Other non-current liabilities — — Total HSS shareholders’ equity (deficit) ) Noncontrolling interests — — — Total liabilities and shareholders’ equity (deficit) $ $ $ $ ) $ Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended September 30, 2015 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Revenue: Services and other revenue - other $ — $ $ $ ) $ Services and other revenue - DISH Network — — Equipment revenue - other — ) Equipment revenue - DISH Network — — — Total revenue — ) Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — ) Cost of sales - equipment (exclusive of depreciation and amortization) — ) Selling, general and administrative expenses — ) Research and development expenses — — — Depreciation and amortization — — Total costs and expenses — ) Operating income — — Other Income (Expense): Interest income ) Interest expense, net of amounts capitalized ) ) ) Equity in earnings (losses) of subsidiaries, net — ) — Other, net ) — ) Total other income (expense), net ) ) ) ) Income (loss) before income taxes ) Income tax benefit (provision), net ) ) — ) Net income (loss) ) Less: Net income attributable to noncontrolling interests — — — Net income (loss) attributable to HSS $ $ $ $ ) $ Comprehensive Income (Loss): Net income (loss) $ $ $ $ ) $ Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — ) — ) Unrealized (gains) losses on available-for-sale securities and other ) ) — ) Recognition of other-than-temporary loss on available-for-sale securities in net income (loss) — — — Equity in other comprehensive income (loss) of subsidiaries, net ) ) — — Total other comprehensive income (loss), net of tax ) ) ) ) Comprehensive income (loss) ) ) Less: Comprehensive income attributable to noncontrolling interests — — ) — ) Comprehensive income (loss) attributable to HSS $ $ $ ) $ ) $ Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended September 30, 2014 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Revenue: Services and other revenue $ — $ $ $ ) $ Services and other revenue - DISH Network — — Equipment revenue — ) Equipment revenue - DISH Network — — — Total revenue — ) Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — ) Cost of sales - equipment (exclusive of depreciation and amortization) — ) Selling, general and administrative expenses — ) Research and development expenses — — — Depreciation and amortization — — Total costs and expenses — ) Operating income — — Other Income (Expense): Interest income ) Interest expense, net of amounts capitalized ) ) ) ) Equity in earnings (losses) of subsidiaries, net — ) — Other, net ) — Total other income (expense), net ) ) ) ) Income (loss) before income taxes ) Income tax provision, net ) ) ) — ) Net income (loss) ) Less: Net income attributable to noncontrolling interests — — — Net income (loss) attributable to HSS $ $ $ $ ) $ Comprehensive Income (Loss): Net income (loss) $ $ $ $ ) $ Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — ) — ) Unrealized losses on AFS securities and other ) — ) — ) Recognition of previously unrealized losses on AFS securities included in net income (loss) — — — Equity in other comprehensive income (loss) of subsidiaries, net ) ) — — Total other comprehensive income (loss), net of tax ) ) ) ) Comprehensive income (loss) ) ) Less: Comprehensive income attributable to noncontrolling interests — — — Comprehensive income (loss) attributable to HSS $ $ $ ) $ ) $ Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Nine Months Ended September 30, 2015 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Revenue: Services and other revenue - other $ — $ $ $ ) $ Services and other revenue - DISH Network — — Equipment revenue - other — ) Equipment revenue - DISH Network — — — Total revenue — ) Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — ) Cost of sales - equipment (exclusive of depreciation and amortization) — ) Selling, general and administrative expenses — ) Research and development expenses — — — Depreciation and amortization — — Total costs and expenses — ) Operating income — — Other Income (Expense): Interest income ) Interest expense, net of amounts capitalized ) ) ) Equity in earnings (losses) of subsidiaries, net — ) — Other, net ) ) — ) Total other income (expense), net ) ) ) ) Income (loss) before income taxes ) Income tax benefit (provision), net ) ) — ) Net income (loss) ) Less: Net income attributable to noncontrolling interests — — — Net income (loss) attributable to HSS $ $ $ $ ) $ Comprehensive Income (Loss): Net income (loss) $ $ $ $ ) $ Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — ) — ) Unrealized (gains) losses on available-for-sale securities and other ) ) — ) Recognition of other-than-temporary loss on available-for-sale securities in net income (loss) — — — Recognition of previously unrealized gains on available-for-sale securities included in net income (loss) ) — — — ) Equity in other comprehensive income (loss) of subsidiaries, net ) ) — — Total other comprehensive income (loss), net of tax ) ) ) ) Comprehensive income (loss) ) ) Less: Comprehensive income attributable to noncontrolling interests — — — Comprehensive income (loss) attributable to HSS $ $ $ ) $ ) $ Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Nine Months Ended September 30, 2014 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Revenue: Services and other revenue $ — $ $ $ ) $ Services and other revenue - DISH Network — — Equipment revenue — ) Equipment revenue - DISH Network — — — Total revenue — ) Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — ) Cost of sales - equipment (exclusive of depreciation and amortization) — ) Selling, general and administrative expenses — ) Research and development expenses — — — Depreciation and amortization — — Total costs and expenses — ) Operating income — — Other Income (Expense): Interest income ) Interest expense, net of amounts capitalized ) ) ) ) Equity in earnings (losses) of subsidiaries, net — ) — Other, net ) — Total other income (expense), net ) ) ) ) Income (loss) before income taxes ) Income tax benefit (provision), net ) ) — ) Net income (loss) ) Less: Net income attributable to noncontrolling interests — — — Net income (loss) attributable to HSS $ $ $ $ ) $ Comprehensive Income (Loss): Net income (loss) $ $ $ $ ) $ Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — ) — ) Unrealized losses on AFS securities and other ) — ) — ) Recognition of previously unrealized losses on AFS securities included in net income (loss) — — — Equity in other comprehensive income (loss) of subsidiaries, net ) ) — — Total other comprehensive income (loss), net of tax ) ) ) ) Comprehensive income (loss) ) Less: Comprehensive income attributable to noncontrolling interests — — — Comprehensive income (loss) attributable to HSS $ $ $ $ ) $ Condensed Consolidating Statement of Cash Flows For the Nine Months Ended September 30, 2015 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Cash Flows from Operating Activities: Net income (loss) $ $ $ $ ) $ Adjustments to reconcile net income (loss) to net cash flows from operating activities Net cash flows from operating activities — Cash Flows from Investing Activities: Purchases of marketable investment securities ) — — — ) Sales and maturities of marketable investment securities — — — Purchases of property and equipment — ) ) — ) Expenditures for externally marketed software — ) — — ) Changes in restricted cash and cash equivalents ) — ) — ) Investment in subsidiary ) ) — — Other, net — — ) ) Net cash flows from investing activities ) ) ) Cash Flows from Financing Activities: Proceeds from capital contribution from parent — ) — Repayment of Senior Secured Notes and related premium ) — — — ) Repayment of other long-term debt and capital lease obligations — ) ) — ) Advances from affiliates — — — Other, net ) ) Net cash flows from financing activities ) ) ) ) Effect of exchange rates on cash and cash equivalents — — ) — ) Net increase (decrease) in cash and cash equivalents ) ) — Cash and cash equivalents, at beginning of period — Cash and cash equivalents, at end of period $ $ $ $ — $ Condensed Consolidating Statement of Cash Flows For the Nine Months Ended September 30, 2014 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Cash Flows from Operating Activities: Net income (loss) $ $ $ $ ) $ Adjustments to reconcile net income (loss) to net cash flows from operating activities Net cash flows from operating activities — Cash Flows from Investing Activities: Purchases of marketable investment securities ) — — — ) Sales and maturities of marketable investment securities — — — Purchases of property and equipment — ) ) — ) Expenditures for externally marketed software — ) — — ) Changes in restricted cash and cash equivalents ) — ) — ) Investment in subsidiary ) — — — Other, net ) ) — — ) Net cash flows from investing activities ) ) ) ) Cash Flows from Financing Activities: Proceeds from issuance of Hughes Retail Preferred Tracking Stock, net of offering cost — ) Repayment of long-term debt and capital lease obligations — ) ) — ) Other, net — ) — ) Net cash flows from financing activities ) ) ) ) Effect of exchange rates on cash and cash equivalents — — ) — ) Net increase (decrease) in cash and cash equivalents ) — Cash and cash equivalents, at beginning of period — Cash and cash equivalents, at end of period $ $ $ $ — $ |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these financial statements do not include all of the information and notes required for complete financial statements prepared in accordance with GAAP. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Our results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2014. |
Principles of Consolidation | Principles of Consolidation We consolidate all majority owned subsidiaries, investments in entities in which we have controlling interest and variable interest entities where we are the primary beneficiary . For entities we control but do not wholly own, we record a noncontrolling interest within shareholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests. We use the equity method to account for investments in entities that we do not control but have the ability to significantly influence the operating decisions of the investee. We use the cost method when we do not have the ability to significantly influence the operating decisions of the investee. All significant intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, the reported amounts of revenue and expense for each reporting period, and certain information disclosed in the notes to our condensed consolidated financial statements. Estimates are used in accounting for, among other things, amortization periods for deferred revenue and deferred subscriber acquisition costs, revenue recognition using the percentage-of-completion method, allowances for doubtful accounts, allowances for sales returns and rebates, warranty obligations, self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair value of financial instruments, fair value of awards granted under EchoStar’s stock-based compensation plans, fair value of assets and liabilities acquired in business combinations, lease classifications, asset impairments, useful lives and methods for depreciation and amortization of long-lived assets, goodwill impairment testing, royalty obligations, and allocations that affect the net income or loss attributable to the Tracking Stock. 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. Weakened economic conditions may increase the inherent uncertainty in the estimates and assumptions indicated above. We review our estimates and assumptions periodically and the effects of revisions are reflected in the period they occur or prospectively if the revised estimate affects future periods. |
Fair Value Measurements | Fair Value Measurements We determine fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. We utilize the highest level of inputs available according to the following hierarchy in determining fair value: · Level 1, defined as observable inputs being quoted prices in active markets for identical assets; · Level 2, defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and · Level 3, defined as unobservable inputs for which little or no market data exists, consistent with characteristics of the asset or liability that would be considered by market participants in a transaction to purchase or sell the asset or liability. Transfers between levels in the fair value hierarchy are considered to occur at the beginning of the quarterly accounting period. There were no transfers between levels for each of the nine months ended September 30, 2015 or 2014. As of September 30, 2015 and December 31, 2014, the carrying amounts of our cash and cash equivalents, trade accounts receivable, net of allowance for doubtful accounts, accounts payable and accrued liabilities were equal to or approximated fair value due to their short-term nature or proximity to current market rates. Fair values of our current marketable investment securities are based on a variety of observable market inputs. For our investments in publicly traded equity securities and U.S. government securities, fair value ordinarily is determined based on a Level 1 measurement that reflects quoted prices for identical securities in active markets. Fair values of our investments in other marketable debt securities generally are based on Level 2 measurements, as the markets for such debt securities are less active. Trades of identical debt securities on or near the measurement date are considered a strong indication of fair value. Matrix pricing techniques that consider par value, coupon rate, credit quality, maturity and other relevant features also may be used to determine fair value of our investments in marketable debt securities. Fair values for our publicly traded long-term debt are based on quoted market prices in less active markets and are categorized as Level 2 measurements. The fair values of our privately held debt are Level 2 measurements and are estimated to approximate their carrying amounts based on the proximity of their interest rates to current market rates. As of September 30, 2015 and December 31, 2014, 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 $80.3 million and $85.8 million, respectively. We use fair value measurements from time-to-time in connection with impairment testing and the assignment of purchase consideration to assets and liabilities of acquired companies. Those fair value measurements typically include significant unobservable inputs and are categorized within Level 3 of the fair value hierarchy. |
Research and Development | Research and Development In addition to research and development expenses reported in our condensed consolidated statements of operations and comprehensive income (loss), our cost of sales includes research and development costs funded by customers of approximately $4.8 million and $6.8 million for the three months ended September 30, 2015 and 2014, respectively, and $15.7 million and $19.0 million for the nine months ended September 30, 2015 and 2014, respectively. |
Capitalized Software Costs | Capitalized Software Costs Development costs related to software for internal-use and externally marketed software are capitalized and amortized using the straight-line method over the estimated useful life of the software, not in excess of five years. Capitalized costs of internal-use software are included in “Property and equipment, net” and capitalized costs of externally marketed software are included in “Other noncurrent assets, net” in our condensed consolidated balance sheets. Externally marketed software is generally installed in the equipment we sell to customers. We conduct software program reviews for externally marketed capitalized software costs at least annually, or as events and circumstances warrant such a review, to determine if capitalized software development costs are recoverable and to ensure that costs associated with programs that are no longer generating revenue are expensed. As of September 30 , 2015 and December 31, 2014, the net carrying amount of externally marketed software was $ 59.7 million and $ 48.9 million, respectively. We capitalized costs of $5.3 million and $ 5.1 million for the three months ended September 30, 2015 and 2014, respectively, and costs of $17.0 million and $ 17.6 million for the nine months ended September 30, 2015 and 2014, respectively, related to the development of externally marketed software. We recorded amortization expense relating to the development of externally marketed software of $2.2 million and $1.9 million for the three months ended September 30, 2015 and 2014, respectively, and $6.1 million and $3.6 million for the nine months ended September 30, 2015 and 2014, respectively. The weighted average useful life of our externally marketed software was approximately four years as of September 30, 2015. |
New Accounting Pronouncements | New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). It outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” In August 2015, the FASB issued Accounting Standards Update No. 2015-14, which deferred by one year the mandatory effective date of ASU 2014-09. As a result, public entities are required to adopt the new revenue standard in annual periods beginning after December 15, 2017 and in interim periods within those annual periods. The standard may be applied either retrospectively to prior periods or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted, but not before annual periods beginning after December 15, 2016. We have not determined when we will adopt the new revenue standard or selected the transition method that we will apply upon adoption. We are assessing the impact of adopting this new accounting standard on our consolidated financial statements and related disclosures. In February 2015, the FASB issued Accounting Standards Update No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). This standard amends the consolidation guidance for variable interest entities (“VIEs”) and general partners’ investments in limited partnerships and similar entities. ASU 2015-02 is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, and requires either a retrospective or a modified retrospective approach as of the beginning of the fiscal year of adoption. Early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements or related disclosures. We do not expect to adopt this standard prior to the effective date. In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, (“ASU 2015-03”). This standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. ASU 2015-03 is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods, and requires a retrospective approach to adoption. Early adoption is permitted. Based on our preliminary assessment, upon adoption of this standard, we expect to present unamortized deferred costs in other noncurrent assets with a carrying amount of $32.8 million and $39.1 million as of September 30, 2015 and December 31, 2014, respectively, as a reduction of our long-term debt balances. We do not expect to adopt this standard prior to the effective date. |
Other Comprehensive Income (L23
Other Comprehensive Income (Loss) and Related Tax Effects (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Other Comprehensive Income (Loss) and Related Tax Effects | |
Schedule of reclassifications out of accumulated other comprehensive loss | Affected Line Item in our For the Three Months For the Nine Months Condensed Consolidated Ended September 30, Ended September 30, Accumulated Other Comprehensive Loss Components Statement of Operations 2015 2014 2015 2014 (In thousands) Recognition of realized gains (losses) on available-for-sale securities in net income (1) Other, net $ — $ $ ) $ Recognition of other-than-temporary impairment on available-for-sale securities in net income (2) Other-than-temporary impairment on available-for-sale securities — — Total reclassifications, net of tax and noncontrolling interests $ $ $ $ (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 Other, net on the condensed consolidated statement of operations and comprehensive income (loss). (2) In June 2015 and September 2015, we recorded other-than-temporary impairment losses on shares of certain common stock included in our strategic equity securities. See Note 5 for further discussion. |
Investment Securities (Tables)
Investment Securities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Investment Securities | |
Schedule of marketable investment securities and investments in unconsolidated entities | As of September 30, December 31, 2015 2014 (In thousands) Marketable investment securities—current, at fair value: Corporate bonds $ $ Strategic equity securities Other Total marketable investment securities—current Investments in unconsolidated entities—noncurrent: Cost method Equity method Total investments in unconsolidated entities—noncurrent Total marketable investment securities and investments in unconsolidated entities $ $ |
Schedule of unrealized gains (losses) on marketable investment securities | Amortized Unrealized Estimated Cost Gains Losses Fair Value (In thousands) As of September 30, 2015 Debt securities: Corporate bonds $ $ $ ) $ Other — ) Equity securities - strategic — Total marketable investment securities $ $ $ ) $ As of December 31, 2014 Debt securities: Corporate bonds $ $ $ ) $ Other — Equity security - strategic ) Total marketable investment securities $ $ $ ) $ |
Schedule of available-for-sale securities in continuous unrealized loss position by length of time and their fair value | As of September 30, 2015 December 31, 2014 Fair Unrealized Fair Unrealized Value Loss Value Loss (In thousands) Less than 12 months $ $ ) $ $ ) 12 months or more ) — — Total $ $ ) $ $ ) |
Schedule of fair value measurements | As of September 30, 2015 December 31, 2014 Total Level 1 Level 2 Total Level 1 Level 2 (In thousands) Cash equivalents $ $ $ $ $ $ Debt securities: Corporate bonds $ $ — $ $ $ — $ Other — — Equity securities - strategic — — Total marketable investment securities $ $ $ $ $ $ |
Trade Accounts Receivable (Tabl
Trade Accounts Receivable (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Trade Accounts Receivable | |
Schedule of trade accounts receivable | As of September 30, December 31, 2015 2014 (In thousands) Trade accounts receivable $ $ Contracts in process, net Total trade accounts receivable Allowance for doubtful accounts ) ) Trade accounts receivable - DISH Network Total trade accounts receivable, net $ $ |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Inventory | |
Schedule of inventory | As of September 30, December 31, 2015 2014 (In thousands) Finished goods $ $ Raw materials Work-in process Total inventory $ $ |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Property and Equipment | |
Schedule of property and equipment | Depreciable As of Life September 30, December 31, (In Years) 2015 2014 (In thousands) Land — $ $ Buildings and improvements 1 - 30 Furniture, fixtures, equipment and other 1 - 12 Customer rental equipment 2 - 4 Satellites - owned 2 - 15 Satellites acquired under capital leases 10 - 15 Construction in progress — Total property and equipment Accumulated depreciation ) ) Property and equipment, net $ $ |
Schedule of construction in progress | As of September 30, December 31, 2015 2014 (In thousands) Progress amounts for satellite construction, including prepayments under capital leases and launch services costs $ $ Uplinking equipment Other Construction in progress $ $ |
Schedule of depreciation expense | For the Three Months For the Nine Months Ended September 30, Ended September 30, 2015 2014 2015 2014 (In thousands) Satellites $ $ $ $ Furniture, fixtures, equipment and other Customer rental equipment Buildings and improvements Total depreciation expense $ $ $ $ |
Goodwill and Other Intangible28
Goodwill and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Other Intangible Assets | |
Schedule of other intangible assets subject to amortization | Weighted As of Average September 30, 2015 December 31, 2014 Useful life Accumulated Carrying Accumulated Carrying (in Years) Cost Amortization Amount Cost Amortization Amount (In thousands) Customer relationships 8 $ $ ) $ $ $ ) $ Contract-based 4 ) — ) Technology-based 6 ) ) Trademark portfolio 20 ) ) Favorable leases 4 ) — ) Total other intangible assets $ $ ) $ $ $ ) $ |
Debt and Capital Lease Obliga29
Debt and Capital Lease Obligations (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt and Capital Lease Obligations | |
Schedule of carrying amounts and fair values of the entity's debt | As of September 30, 2015 December 31, 2014 Carrying Fair Carrying Fair Amount Value Amount Value (In thousands) 6 1/2% Senior Secured Notes due 2019 $ $ $ $ 7 5/8% Senior Notes due 2021 Other Subtotal $ $ Capital lease obligations Total debt and capital lease obligations Less: Current portion ) ) Long-term portion of debt and capital lease obligations $ $ |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting | |
Schedule of revenue, EBITDA, and capital expenditures by operating segments | EchoStar All Satellite Other and Consolidated Hughes Services Eliminations Total (In thousands) For the Three Months Ended September 30, 2015 External revenue $ $ $ $ Intersegment revenue $ $ $ ) $ — Total revenue $ $ $ $ Capital expenditures $ $ $ — $ EBITDA $ $ $ $ For the Three Months Ended September 30, 2014 External revenue $ $ $ $ Intersegment revenue $ $ $ ) $ — Total revenue $ $ $ ) $ Capital expenditures $ $ $ — $ EBITDA $ $ $ $ For the Nine Months Ended September 30, 2015 External revenue $ $ $ $ Intersegment revenue $ $ $ ) $ — Total revenue $ $ $ ) $ Capital expenditures $ $ $ — $ EBITDA $ $ $ ) $ For the Nine Months Ended September 30, 2014 External revenue $ $ $ $ Intersegment revenue $ $ $ ) $ — Total revenue $ $ $ ) $ Capital expenditures $ $ $ — $ EBITDA $ $ $ $ |
Schedule of reconciliation of EBITDA to reported income before income taxes | For the Three Months For the Nine Months Ended September 30, Ended September 30, 2015 2014 2015 2014 (In thousands) EBITDA $ $ $ $ Interest income and expense, net ) ) ) ) Depreciation and amortization ) ) ) ) Net income attributable to noncontrolling interests Income before income taxes $ $ $ $ |
Supplemental Guarantor and No31
Supplemental Guarantor and Non-Guarantor Financial Information (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Supplemental Guarantor and Non-Guarantor Financial Information | |
Schedule of consolidating balance sheet | Condensed Consolidating Balance Sheet as of September 30, 2015 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Assets Cash and cash equivalents $ $ $ $ — $ Marketable investment securities — — Trade accounts receivable, net — — Trade accounts receivable - DISH Network, net — — Inventory — — Advances to affiliates, net ) Other current assets ) Total current assets ) Restricted cash and cash equivalents — Property and equipment, net — — Regulatory authorizations — — — Goodwill — — — Other intangible assets, net — — — Investment in subsidiaries — ) — Advances to affiliates — ) — Other noncurrent assets, net ) Total assets $ $ $ $ ) $ Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ — $ $ $ — $ Trade accounts payable - DISH Network — — — Current portion of long-term debt and capital lease obligations — — Advances from affiliates, net ) Accrued expenses and other ) Total current liabilities ) Long-term debt and capital lease obligations, net of current portion — Advances from affiliates — — ) Other non-current liabilities — ) Total HSS shareholders’ equity (deficit) ) Noncontrolling interests — — — Total liabilities and shareholders’ equity (deficit) $ $ $ $ ) $ Condensed Consolidating Balance Sheet as of December 31, 2014 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Assets Cash and cash equivalents $ $ $ $ — $ Marketable investment securities — — Trade accounts receivable, net — — Trade accounts receivable - DISH Network, net — — Advances to affiliates, net — ) Inventory — — Other current assets ) Total current assets ) Restricted cash and cash equivalents — Property and equipment, net — — Regulatory authorizations — — — Goodwill — — — Other intangible assets, net — — — Investment in subsidiaries — ) — Advances to affiliates — ) — Other noncurrent assets, net — Total assets $ $ $ $ ) $ Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ $ $ $ — $ Trade accounts payable - DISH Network — — — Current portion of long-term debt and capital lease obligations — — Advances from affiliates, net ) Accrued expenses and other ) Total current liabilities ) Long-term debt and capital lease obligations, net of current portion — Advances from affiliates — — ) Other non-current liabilities — — Total HSS shareholders’ equity (deficit) ) Noncontrolling interests — — — Total liabilities and shareholders’ equity (deficit) $ $ $ $ ) $ |
Schedule of consolidating statement of operations and comprehensive income (loss) | Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended September 30, 2015 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Revenue: Services and other revenue - other $ — $ $ $ ) $ Services and other revenue - DISH Network — — Equipment revenue - other — ) Equipment revenue - DISH Network — — — Total revenue — ) Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — ) Cost of sales - equipment (exclusive of depreciation and amortization) — ) Selling, general and administrative expenses — ) Research and development expenses — — — Depreciation and amortization — — Total costs and expenses — ) Operating income — — Other Income (Expense): Interest income ) Interest expense, net of amounts capitalized ) ) ) Equity in earnings (losses) of subsidiaries, net — ) — Other, net ) — ) Total other income (expense), net ) ) ) ) Income (loss) before income taxes ) Income tax benefit (provision), net ) ) — ) Net income (loss) ) Less: Net income attributable to noncontrolling interests — — — Net income (loss) attributable to HSS $ $ $ $ ) $ Comprehensive Income (Loss): Net income (loss) $ $ $ $ ) $ Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — ) — ) Unrealized (gains) losses on available-for-sale securities and other ) ) — ) Recognition of other-than-temporary loss on available-for-sale securities in net income (loss) — — — Equity in other comprehensive income (loss) of subsidiaries, net ) ) — — Total other comprehensive income (loss), net of tax ) ) ) ) Comprehensive income (loss) ) ) Less: Comprehensive income attributable to noncontrolling interests — — ) — ) Comprehensive income (loss) attributable to HSS $ $ $ ) $ ) $ Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended September 30, 2014 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Revenue: Services and other revenue $ — $ $ $ ) $ Services and other revenue - DISH Network — — Equipment revenue — ) Equipment revenue - DISH Network — — — Total revenue — ) Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — ) Cost of sales - equipment (exclusive of depreciation and amortization) — ) Selling, general and administrative expenses — ) Research and development expenses — — — Depreciation and amortization — — Total costs and expenses — ) Operating income — — Other Income (Expense): Interest income ) Interest expense, net of amounts capitalized ) ) ) ) Equity in earnings (losses) of subsidiaries, net — ) — Other, net ) — Total other income (expense), net ) ) ) ) Income (loss) before income taxes ) Income tax provision, net ) ) ) — ) Net income (loss) ) Less: Net income attributable to noncontrolling interests — — — Net income (loss) attributable to HSS $ $ $ $ ) $ Comprehensive Income (Loss): Net income (loss) $ $ $ $ ) $ Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — ) — ) Unrealized losses on AFS securities and other ) — ) — ) Recognition of previously unrealized losses on AFS securities included in net income (loss) — — — Equity in other comprehensive income (loss) of subsidiaries, net ) ) — — Total other comprehensive income (loss), net of tax ) ) ) ) Comprehensive income (loss) ) ) Less: Comprehensive income attributable to noncontrolling interests — — — Comprehensive income (loss) attributable to HSS $ $ $ ) $ ) $ Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Nine Months Ended September 30, 2015 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Revenue: Services and other revenue - other $ — $ $ $ ) $ Services and other revenue - DISH Network — — Equipment revenue - other — ) Equipment revenue - DISH Network — — — Total revenue — ) Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — ) Cost of sales - equipment (exclusive of depreciation and amortization) — ) Selling, general and administrative expenses — ) Research and development expenses — — — Depreciation and amortization — — Total costs and expenses — ) Operating income — — Other Income (Expense): Interest income ) Interest expense, net of amounts capitalized ) ) ) Equity in earnings (losses) of subsidiaries, net — ) — Other, net ) ) — ) Total other income (expense), net ) ) ) ) Income (loss) before income taxes ) Income tax benefit (provision), net ) ) — ) Net income (loss) ) Less: Net income attributable to noncontrolling interests — — — Net income (loss) attributable to HSS $ $ $ $ ) $ Comprehensive Income (Loss): Net income (loss) $ $ $ $ ) $ Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — ) — ) Unrealized (gains) losses on available-for-sale securities and other ) ) — ) Recognition of other-than-temporary loss on available-for-sale securities in net income (loss) — — — Recognition of previously unrealized gains on available-for-sale securities included in net income (loss) ) — — — ) Equity in other comprehensive income (loss) of subsidiaries, net ) ) — — Total other comprehensive income (loss), net of tax ) ) ) ) Comprehensive income (loss) ) ) Less: Comprehensive income attributable to noncontrolling interests — — — Comprehensive income (loss) attributable to HSS $ $ $ ) $ ) $ Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Nine Months Ended September 30, 2014 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Revenue: Services and other revenue $ — $ $ $ ) $ Services and other revenue - DISH Network — — Equipment revenue — ) Equipment revenue - DISH Network — — — Total revenue — ) Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — ) Cost of sales - equipment (exclusive of depreciation and amortization) — ) Selling, general and administrative expenses — ) Research and development expenses — — — Depreciation and amortization — — Total costs and expenses — ) Operating income — — Other Income (Expense): Interest income ) Interest expense, net of amounts capitalized ) ) ) ) Equity in earnings (losses) of subsidiaries, net — ) — Other, net ) — Total other income (expense), net ) ) ) ) Income (loss) before income taxes ) Income tax benefit (provision), net ) ) — ) Net income (loss) ) Less: Net income attributable to noncontrolling interests — — — Net income (loss) attributable to HSS $ $ $ $ ) $ Comprehensive Income (Loss): Net income (loss) $ $ $ $ ) $ Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — ) — ) Unrealized losses on AFS securities and other ) — ) — ) Recognition of previously unrealized losses on AFS securities included in net income (loss) — — — Equity in other comprehensive income (loss) of subsidiaries, net ) ) — — Total other comprehensive income (loss), net of tax ) ) ) ) Comprehensive income (loss) ) Less: Comprehensive income attributable to noncontrolling interests — — — Comprehensive income (loss) attributable to HSS $ $ $ $ ) $ |
Schedule of consolidating statement of cash flows | Condensed Consolidating Statement of Cash Flows For the Nine Months Ended September 30, 2015 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Cash Flows from Operating Activities: Net income (loss) $ $ $ $ ) $ Adjustments to reconcile net income (loss) to net cash flows from operating activities Net cash flows from operating activities — Cash Flows from Investing Activities: Purchases of marketable investment securities ) — — — ) Sales and maturities of marketable investment securities — — — Purchases of property and equipment — ) ) — ) Expenditures for externally marketed software — ) — — ) Changes in restricted cash and cash equivalents ) — ) — ) Investment in subsidiary ) ) — — Other, net — — ) ) Net cash flows from investing activities ) ) ) Cash Flows from Financing Activities: Proceeds from capital contribution from parent — ) — Repayment of Senior Secured Notes and related premium ) — — — ) Repayment of other long-term debt and capital lease obligations — ) ) — ) Advances from affiliates — — — Other, net ) ) Net cash flows from financing activities ) ) ) ) Effect of exchange rates on cash and cash equivalents — — ) — ) Net increase (decrease) in cash and cash equivalents ) ) — Cash and cash equivalents, at beginning of period — Cash and cash equivalents, at end of period $ $ $ $ — $ Condensed Consolidating Statement of Cash Flows For the Nine Months Ended September 30, 2014 (In thousands) Guarantor Non-Guarantor HSS Subsidiaries Subsidiaries Eliminations Total Cash Flows from Operating Activities: Net income (loss) $ $ $ $ ) $ Adjustments to reconcile net income (loss) to net cash flows from operating activities Net cash flows from operating activities — Cash Flows from Investing Activities: Purchases of marketable investment securities ) — — — ) Sales and maturities of marketable investment securities — — — Purchases of property and equipment — ) ) — ) Expenditures for externally marketed software — ) — — ) Changes in restricted cash and cash equivalents ) — ) — ) Investment in subsidiary ) — — — Other, net ) ) — — ) Net cash flows from investing activities ) ) ) ) Cash Flows from Financing Activities: Proceeds from issuance of Hughes Retail Preferred Tracking Stock, net of offering cost — ) Repayment of long-term debt and capital lease obligations — ) ) — ) Other, net — ) — ) Net cash flows from financing activities ) ) ) ) Effect of exchange rates on cash and cash equivalents — — ) — ) Net increase (decrease) in cash and cash equivalents ) — Cash and cash equivalents, at beginning of period — Cash and cash equivalents, at end of period $ $ $ $ — $ |
Organization and Business Act32
Organization and Business Activities (Details) - segment | Mar. 02, 2014 | Sep. 30, 2015 |
Organization and Business Activities | ||
Number of business segments | 2 | |
HSS | Satellite and Tracking Stock Transaction | Hughes Retail Group | ||
Hughes Retail Preferred Tracking Stock | ||
Percentage of economic interest held | 20.00% | |
HSS | Satellite and Tracking Stock Transaction | DISH Network | Hughes Retail Group | ||
Hughes Retail Preferred Tracking Stock | ||
Percentage of economic interest held | 28.11% |
Hughes Retail Preferred Track33
Hughes Retail Preferred Tracking Stock (Details) $ / shares in Units, $ in Thousands | Mar. 02, 2014USD ($)itemshares | Mar. 01, 2014 | Sep. 30, 2015USD ($)item$ / sharesshares | Sep. 30, 2014USD ($) | Dec. 31, 2014$ / sharesshares |
Hughes Retail Preferred Tracking Stock | |||||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | $ 10,601 | ||||
HSS | |||||
Hughes Retail Preferred Tracking Stock | |||||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | $ 10,601 | ||||
Hughes Retail Preferred Tracking Stock | |||||
Hughes Retail Preferred Tracking Stock | |||||
Portion of one vote entitled to each share | 0.10 | ||||
Preferred stock, shares authorized (in shares) | shares | 300 | 300 | |||
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | |||
Preferred stock, shares outstanding (in shares) | shares | 81.128 | 81.128 | |||
Hughes Retail Preferred Tracking Stock | HSS | |||||
Hughes Retail Preferred Tracking Stock | |||||
Dividend or other distributions paid on preferred stock | $ 0 | ||||
Hughes Retail Preferred Tracking Stock | EchoStar | |||||
Hughes Retail Preferred Tracking Stock | |||||
Portion of one vote entitled to each share | 0.10 | ||||
Preferred stock, shares authorized (in shares) | shares | 13,000,000 | ||||
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||
Dividend or other distributions paid on preferred stock | $ 0 | ||||
DISH Network | HSS | |||||
Hughes Retail Preferred Tracking Stock | |||||
Percentage of capital stock held | 7.50% | ||||
DISH Network | EchoStar | |||||
Hughes Retail Preferred Tracking Stock | |||||
Percentage of capital stock held | 6.50% | ||||
DISH Network | Satellite and Tracking Stock Transaction | EchoStar and HSSC | |||||
Hughes Retail Preferred Tracking Stock | |||||
Related Party Transactions Number of Owned Satellites Transferred | item | 5 | 5 | |||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | $ 11,400 | ||||
DISH Network | Satellite and Tracking Stock Transaction | HSS | |||||
Hughes Retail Preferred Tracking Stock | |||||
Number of satellites received | item | 2 | ||||
DISH Network | Satellite and Tracking Stock Transaction | Hughes Retail Preferred Tracking Stock | HSS | |||||
Hughes Retail Preferred Tracking Stock | |||||
Number of shares issued during the period | shares | 81.128 | ||||
DISH Network | Satellite and Tracking Stock Transaction | Hughes Retail Preferred Tracking Stock | EchoStar | |||||
Hughes Retail Preferred Tracking Stock | |||||
Number of shares issued during the period | shares | 6,290,499 | ||||
Hughes Retail Group | Satellite and Tracking Stock Transaction | HSS | |||||
Hughes Retail Preferred Tracking Stock | |||||
Percentage of economic interest held | 20.00% | ||||
Hughes Retail Group | DISH Network | Satellite and Tracking Stock Transaction | HSS | |||||
Hughes Retail Preferred Tracking Stock | |||||
Percentage of economic interest held | 28.11% | ||||
Hughes Retail Group | DISH Network | Satellite and Tracking Stock Transaction | EchoStar | |||||
Hughes Retail Preferred Tracking Stock | |||||
Percentage of economic interest held | 51.89% | ||||
Hughes Retail Group | DISH Network | Satellite and Tracking Stock Transaction | Hughes Retail Preferred Tracking Stock | |||||
Hughes Retail Preferred Tracking Stock | |||||
Percentage of economic interest held | 80.00% | 80.00% |
Summary of Significant Accoun34
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Fair Value Measurements | |||||
Amount of transfers between levels within the fair value hierarchy | $ 0 | $ 0 | |||
Research and Development | |||||
Costs of sales - services and other | $ 131,861 | $ 134,884 | 394,327 | 400,199 | |
Capitalized Software Costs | |||||
Net carrying amount of externally marketed software | 59,700 | 59,700 | $ 48,900 | ||
Capitalized costs related to development of externally marketed software | 5,300 | 5,100 | 17,000 | 17,600 | |
Amortization expense relating to externally marketed software | 2,200 | 1,900 | 6,100 | 3,600 | |
New Accounting Pronouncements | |||||
Unamortized deferred costs | 32,800 | 32,800 | 39,100 | ||
Research and development expense funded by customers | |||||
Research and Development | |||||
Costs of sales - services and other | 4,800 | $ 6,800 | 15,700 | $ 19,000 | |
Level 2 | |||||
Fair Value Measurements | |||||
Orbital incentive obligations | $ 80,300 | $ 80,300 | $ 85,800 | ||
Maximum | |||||
Capitalized Software Costs | |||||
Useful life of the software | 5 years | ||||
Weighted Average | |||||
Capitalized Software Costs | |||||
Useful life | 4 years |
Other Comprehensive Income (L35
Other Comprehensive Income (Loss) and Related Tax Effect s (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Other comprehensive income or loss, tax (expense) benefit | |||||
Tax effects on foreign currency translation adjustments | $ 0 | $ 0 | |||
Tax effects on unrealized gains or losses on available-for-sale securities | 0 | 0 | |||
Cumulative foreign currency translation losses | $ 55,800,000 | 55,800,000 | $ 29,200,000 | ||
Reclassification out of accumulated other comprehensive income (loss) | |||||
Recognition of realized gains (losses) on available-for-sale securities in net income | $ 52,000 | (11,000) | 42,000 | ||
Recognition of other-than-temporary loss on available-for-sale securities in net income | 1,201,000 | 5,850,000 | |||
Total reclassifications, net of tax and noncontrolling interests | 1,201,000 | 52,000 | 5,839,000 | 42,000 | |
HSS | |||||
Reclassification out of accumulated other comprehensive income (loss) | |||||
Recognition of realized gains (losses) on available-for-sale securities in net income | 52,000 | (11,000) | 42,000 | ||
Recognition of other-than-temporary loss on available-for-sale securities in net income | 1,201,000 | 5,850,000 | |||
Other, net | |||||
Reclassification out of accumulated other comprehensive income (loss) | |||||
Recognition of realized gains (losses) on available-for-sale securities in net income | $ 52,000 | (11,000) | $ 42,000 | ||
Other-than-temporary impairment on available-for-sale securities | |||||
Reclassification out of accumulated other comprehensive income (loss) | |||||
Recognition of other-than-temporary loss on available-for-sale securities in net income | $ 1,201,000 | $ 5,850,000 |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | |
Marketable investment securities - current, at fair value: | |||
Marketable investment securities | $ 333,957 | $ 333,957 | $ 394,992 |
Investments in unconsolidated entities - noncurrent: | |||
Cost method | 15,438 | 15,438 | 15,438 |
Equity method | 22,483 | 22,483 | 17,531 |
Total investments in unconsolidated entities - noncurrent | 37,921 | 37,921 | 32,969 |
Total marketable investment securities and investments in unconsolidated entities | 371,878 | 371,878 | 427,961 |
Corporate Bonds | |||
Investments in unconsolidated entities - noncurrent: | |||
Marketable investment securities | 300,715 | 300,715 | 367,291 |
Strategic equity securities | |||
Investments in unconsolidated entities - noncurrent: | |||
Marketable investment securities | 20,295 | 20,295 | 12,669 |
Fair value of trading securities | 11,300 | 11,300 | |
Strategic equity securities | Other-than-temporary impairment on available-for-sale securities | |||
Investments in unconsolidated entities - noncurrent: | |||
Other-than-temporary impairment of available-for-sale shares | 1,200 | 5,900 | |
Strategic equity securities | Other, net | |||
Investments in unconsolidated entities - noncurrent: | |||
Unrealized holding loss on trading securities | 3,900 | 5,500 | |
Other. | |||
Investments in unconsolidated entities - noncurrent: | |||
Marketable investment securities | $ 12,947 | $ 12,947 | $ 15,032 |
Investment Securities (Details
Investment Securities (Details 2) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Unrealized Gains (Losses) on Marketable Investment Securities | ||
Amortized Cost | $ 322,229 | $ 397,156 |
Unrealized Gains | 707 | 1,727 |
Unrealized Losses | (255) | (3,891) |
Total marketable investment securities | 322,681 | 394,992 |
Corporate Bonds | ||
Unrealized Gains (Losses) on Marketable Investment Securities | ||
Amortized Cost | 300,955 | 367,949 |
Unrealized Gains | 14 | 8 |
Unrealized Losses | (254) | (666) |
Estimated Fair Value | 300,715 | 367,291 |
Other. | ||
Unrealized Gains (Losses) on Marketable Investment Securities | ||
Amortized Cost | 12,948 | 15,031 |
Unrealized Gains | 1 | |
Unrealized Losses | (1) | |
Estimated Fair Value | 12,947 | 15,032 |
Strategic equity securities | ||
Unrealized Gains (Losses) on Marketable Investment Securities | ||
Amortized Cost | 8,326 | 14,176 |
Unrealized Gains | 693 | 1,718 |
Unrealized Losses | (3,225) | |
Estimated Fair Value | $ 9,019 | $ 12,669 |
Investment Securities (Detail38
Investment Securities (Details 3) $ in Millions | Sep. 30, 2015USD ($) |
Contractual maturities of debt securities | |
Debt securities with contractual maturities of one year or less | $ 305 |
Debt securities with contractual maturities exceeding one year | $ 8.7 |
Investment Securities (Detail39
Investment Securities (Details 4) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Fair value of marketable investment securities in a loss position | |||||
Less than 12 months | $ 207,763 | $ 207,763 | $ 357,887 | ||
12 months or more | 49,089 | 49,089 | |||
Total | 256,852 | 256,852 | 357,887 | ||
Unrealized losses on marketable investment securities in a loss position | |||||
Less than 12 months | (225) | (225) | (3,891) | ||
12 months or more | (30) | (30) | |||
Total | (255) | (255) | $ (3,891) | ||
Realized losses on the sales of available-for-sale marketable investment securities | $ 100 | $ 100 | |||
Proceeds from sales of available-for-sale marketable investment securities | $ 4,000 | $ 0 | $ 14,600 | $ 100 |
Investment Securities (Detail40
Investment Securities (Details 5) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Corporate Bonds | ||
Fair value of marketable securities | ||
Debt security | $ 300,715 | $ 367,291 |
Other. | ||
Fair value of marketable securities | ||
Debt security | 12,947 | 15,032 |
Strategic equity securities | ||
Fair value of marketable securities | ||
Equity security | 20,295 | 12,669 |
Level 3 | ||
Fair value of marketable securities | ||
Investments | 0 | 0 |
Fair value measurements on recurring basis | ||
Fair value of marketable securities | ||
Cash equivalents | 221,056 | 148,645 |
Total marketable investment securities | 333,957 | 394,992 |
Fair value measurements on recurring basis | Corporate Bonds | ||
Fair value of marketable securities | ||
Debt security | 300,715 | 367,291 |
Fair value measurements on recurring basis | Other. | ||
Fair value of marketable securities | ||
Debt security | 12,947 | 15,032 |
Fair value measurements on recurring basis | Strategic equity securities | ||
Fair value of marketable securities | ||
Equity security | 20,295 | 12,669 |
Fair value measurements on recurring basis | Level 1 | ||
Fair value of marketable securities | ||
Cash equivalents | 2,175 | 18,926 |
Total marketable investment securities | 20,295 | 12,669 |
Fair value measurements on recurring basis | Level 1 | Strategic equity securities | ||
Fair value of marketable securities | ||
Equity security | 20,295 | 12,669 |
Fair value measurements on recurring basis | Level 2 | ||
Fair value of marketable securities | ||
Cash equivalents | 218,881 | 129,719 |
Total marketable investment securities | 313,662 | 382,323 |
Fair value measurements on recurring basis | Level 2 | Corporate Bonds | ||
Fair value of marketable securities | ||
Debt security | 300,715 | 367,291 |
Fair value measurements on recurring basis | Level 2 | Other. | ||
Fair value of marketable securities | ||
Debt security | $ 12,947 | $ 15,032 |
Trade Accounts Receivable (Deta
Trade Accounts Receivable (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Trade accounts receivable | ||
Total trade accounts receivables | $ 158,766 | $ 152,143 |
Allowance for doubtful accounts | (12,355) | (11,950) |
Trade accounts receivable - DISH Network, net | 19,466 | 19,249 |
Total trade accounts receivable, net | 165,877 | 159,442 |
Progress billings offset against contracts in process | 800 | 2,500 |
Trade accounts receivables | ||
Trade accounts receivable | ||
Total trade accounts receivables | 124,315 | 135,609 |
Contracts in process, net | ||
Trade accounts receivable | ||
Total trade accounts receivables | $ 34,451 | $ 16,534 |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Inventory | ||
Finished goods | $ 47,714 | $ 39,495 |
Raw materials | 5,650 | 5,170 |
Work-in process | 8,293 | 6,932 |
Total inventory | $ 61,657 | $ 51,597 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Property and equipment | ||
Total property and equipment | $ 4,324,753 | $ 4,328,204 |
Accumulated depreciation | (2,060,214) | (2,053,636) |
Property and equipment, net | 2,264,539 | 2,274,568 |
Land | ||
Property and equipment | ||
Total property and equipment | 12,055 | 12,075 |
Buildings and improvements | ||
Property and equipment | ||
Total property and equipment | $ 73,572 | 73,191 |
Buildings and improvements | Minimum | ||
Property and equipment | ||
Depreciable Life | 1 year | |
Buildings and improvements | Maximum | ||
Property and equipment | ||
Depreciable Life | 30 years | |
Furniture, fixtures, equipment and other | ||
Property and equipment | ||
Total property and equipment | $ 358,677 | 339,330 |
Furniture, fixtures, equipment and other | Minimum | ||
Property and equipment | ||
Depreciable Life | 1 year | |
Furniture, fixtures, equipment and other | Maximum | ||
Property and equipment | ||
Depreciable Life | 12 years | |
Customer rental equipment | ||
Property and equipment | ||
Total property and equipment | $ 581,394 | 498,181 |
Customer rental equipment | Minimum | ||
Property and equipment | ||
Depreciable Life | 2 years | |
Customer rental equipment | Maximum | ||
Property and equipment | ||
Depreciable Life | 4 years | |
Satellites | ||
Property and equipment | ||
Total property and equipment | $ 2,381,120 | 2,381,120 |
Satellites | Minimum | ||
Property and equipment | ||
Depreciable Life | 2 years | |
Satellites | Maximum | ||
Property and equipment | ||
Depreciable Life | 15 years | |
Satellites acquired under capital leases | ||
Property and equipment | ||
Total property and equipment | $ 665,518 | 935,104 |
Satellites acquired under capital leases | Minimum | ||
Property and equipment | ||
Depreciable Life | 10 years | |
Satellites acquired under capital leases | Maximum | ||
Property and equipment | ||
Depreciable Life | 15 years | |
Construction in progress | ||
Property and equipment | ||
Total property and equipment | $ 252,417 | $ 89,203 |
Property and Equipment (Detai44
Property and Equipment (Details 2) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Property and equipment | ||
Construction in progress | $ 252,417 | $ 89,203 |
Progress amounts for satellite construction including prepayments under capital leases and launch services costs | ||
Property and equipment | ||
Construction in progress | 156,085 | 54,620 |
Uplinking equipment | ||
Property and equipment | ||
Construction in progress | 77,292 | 21,124 |
Construction in progress: Other | ||
Property and equipment | ||
Construction in progress | $ 19,040 | $ 13,459 |
Property and Equipment (Detai45
Property and Equipment (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Depreciation expense | ||||
Total depreciation expense | $ 97,219 | $ 100,925 | $ 286,013 | $ 291,817 |
Satellites | ||||
Depreciation expense | ||||
Total depreciation expense | 51,436 | 55,643 | 149,677 | 158,782 |
Furniture, fixtures, equipment and other | ||||
Depreciation expense | ||||
Total depreciation expense | 13,674 | 14,091 | 40,949 | 42,157 |
Customer rental equipment | ||||
Depreciation expense | ||||
Total depreciation expense | 30,839 | 29,892 | 91,550 | 86,800 |
Buildings and improvements | ||||
Depreciation expense | ||||
Total depreciation expense | $ 1,270 | $ 1,299 | $ 3,837 | $ 4,078 |
Property and Equipment (Detai46
Property and Equipment (Details 4) | 9 Months Ended |
Sep. 30, 2015item | |
Satellites | |
Property and equipment | |
Number of satellites utilized in geostationary orbit approximately 22,300 miles above the equator | 17 |
Number of satellites utilized under capital lease | 2 |
Number of satellites utilized under operating lease | 2 |
AMC16 | |
Property and equipment | |
Operating lease, amended agreement term | 1 year |
Goodwill and Other Intangible47
Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Goodwill and Other Intangible Assets | |||||
Cost | $ 420,924 | $ 420,924 | $ 420,924 | ||
Accumulated Amortization | (295,954) | (295,954) | (263,824) | ||
Carrying Amount | 124,970 | 124,970 | 157,100 | ||
Amortization expense | 11,900 | $ 13,000 | $ 38,800 | $ 44,400 | |
Customer relationships | |||||
Goodwill and Other Intangible Assets | |||||
Finite lived intangible assets useful life | 8 years | ||||
Cost | 270,300 | $ 270,300 | 270,300 | ||
Accumulated Amortization | (182,873) | (182,873) | (161,762) | ||
Carrying Amount | 87,427 | $ 87,427 | 108,538 | ||
Contract-based | |||||
Goodwill and Other Intangible Assets | |||||
Finite lived intangible assets useful life | 4 years | ||||
Cost | 64,800 | $ 64,800 | 64,800 | ||
Accumulated Amortization | (64,800) | $ (64,800) | (61,810) | ||
Carrying Amount | 2,990 | ||||
Technology-based | |||||
Goodwill and Other Intangible Assets | |||||
Finite lived intangible assets useful life | 6 years | ||||
Cost | 51,417 | $ 51,417 | 51,417 | ||
Accumulated Amortization | (37,139) | (37,139) | (30,714) | ||
Carrying Amount | 14,278 | $ 14,278 | 20,703 | ||
Trademark portfolio | |||||
Goodwill and Other Intangible Assets | |||||
Finite lived intangible assets useful life | 20 years | ||||
Cost | 29,700 | $ 29,700 | 29,700 | ||
Accumulated Amortization | (6,435) | (6,435) | (5,321) | ||
Carrying Amount | 23,265 | $ 23,265 | 24,379 | ||
Favorable leases | |||||
Goodwill and Other Intangible Assets | |||||
Finite lived intangible assets useful life | 4 years | ||||
Cost | 4,707 | $ 4,707 | 4,707 | ||
Accumulated Amortization | $ (4,707) | $ (4,707) | (4,217) | ||
Carrying Amount | $ 490 |
Debt and Capital Lease Obliga48
Debt and Capital Lease Obligations (Details) - USD ($) $ in Thousands | Jun. 12, 2015 | Sep. 30, 2015 | Dec. 31, 2014 |
Debt | |||
Carrying Amount | $ 1,890,881 | $ 2,001,197 | |
Capital lease obligations | 332,542 | 363,966 | |
Total debt and capital lease obligations | 2,223,423 | 2,365,163 | |
Less: Current portion | (29,426) | (39,746) | |
Long-term debt and capital lease obligations, net of current portion | 2,193,997 | 2,325,417 | |
Fair Value | 2,039,273 | $ 2,172,697 | |
Loss from partial redemption of debt | $ 5,044 | ||
6 1/2% Senior Secured Notes due 2019 | |||
Debt | |||
Interest Rates (as a percent) | 6.50% | 6.50% | 6.50% |
Carrying Amount | $ 990,000 | $ 1,100,000 | |
Fair Value | $ 1,069,200 | $ 1,177,000 | |
Debt redeemed | $ 110,000 | ||
Redemption price (as a percent) | 103.00% | ||
Loss from partial redemption of debt | $ 5,000 | ||
Redemption premium | 3,300 | ||
Write off of deferred financing fees | $ 1,700 | ||
7 5/8% Senior Notes due 2021 | |||
Debt | |||
Interest Rates (as a percent) | 7.625% | 7.625% | |
Carrying Amount | $ 900,000 | $ 900,000 | |
Fair Value | 969,192 | 994,500 | |
Other | |||
Debt | |||
Carrying Amount | 881 | 1,197 | |
Fair Value | $ 881 | $ 1,197 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Taxes | ||||
Income tax expense | $ 22,167 | $ 9,436 | $ 58,520 | $ 22,060 |
Effective income tax rate | 38.30% | 22.40% |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Sep. 30, 2015USD ($) | Oct. 02, 2013item |
Caltech | ||
Commitments and Contingencies | ||
Number of indirect wholly-owned subsidiaries against which lawsuit was filed | 2 | |
Satellite-related obligations | ||
Commitments and Contingencies | ||
Satellite-related obligations | $ | $ 993.4 |
Segment Reporting (Details)
Segment Reporting (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)segment | Sep. 30, 2014USD ($) | |
Segment Reporting | ||||
Number of business segments | segment | 2 | |||
Segment Reporting | ||||
Total revenue | $ 464,031 | $ 465,680 | $ 1,373,741 | $ 1,337,664 |
Capital expenditures | 105,042 | 68,496 | 292,347 | 166,002 |
EBITDA | 208,120 | 208,247 | 602,560 | 579,537 |
Interest income and expense, net | (39,772) | (46,632) | (126,168) | (142,399) |
Depreciation and amortization | (109,158) | (115,828) | (324,797) | (339,831) |
Net income attributable to noncontrolling interests | 209 | 376 | 1,006 | 1,103 |
Income before income taxes | 59,399 | 46,163 | 152,601 | 98,410 |
Hughes Business | ||||
Segment Reporting | ||||
Total revenue | 339,729 | 339,068 | 1,000,194 | 984,097 |
EchoStar Satellite Services Business | ||||
Segment Reporting | ||||
Total revenue | 124,300 | 127,604 | 374,287 | 356,964 |
Operating segments | ||||
Segment Reporting | ||||
Total revenue | 464,031 | 465,680 | 1,373,741 | 1,337,664 |
Operating segments | Hughes Business | ||||
Segment Reporting | ||||
Total revenue | 339,060 | 338,617 | 998,564 | 982,783 |
Capital expenditures | 72,626 | 56,724 | 207,680 | 154,201 |
EBITDA | 101,582 | 94,955 | 296,269 | 267,210 |
Operating segments | EchoStar Satellite Services Business | ||||
Segment Reporting | ||||
Total revenue | 124,126 | 126,944 | 373,726 | 354,558 |
Capital expenditures | 32,416 | 11,772 | 84,667 | 11,801 |
EBITDA | 104,200 | 111,563 | 314,177 | 308,573 |
Operating segments | All other and eliminations | ||||
Segment Reporting | ||||
Total revenue | 845 | 119 | 1,451 | 323 |
All Other and Eliminations | All other and eliminations | ||||
Segment Reporting | ||||
Total revenue | 2 | (992) | (740) | (3,397) |
EBITDA | 2,338 | 1,729 | (7,886) | 3,754 |
Intersegment | Hughes Business | ||||
Segment Reporting | ||||
Total revenue | 669 | 451 | 1,630 | 1,314 |
Intersegment | EchoStar Satellite Services Business | ||||
Segment Reporting | ||||
Total revenue | 174 | 660 | 561 | 2,406 |
Intersegment | All other and eliminations | ||||
Segment Reporting | ||||
Total revenue | $ (843) | $ (1,111) | $ (2,191) | $ (3,720) |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Thousands | Mar. 02, 2014USD ($)item | Dec. 21, 2012 | Oct. 02, 2012 | Jun. 30, 2015USD ($) | May. 31, 2012 | Dec. 31, 2009item | Sep. 30, 2009 | Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)item | Sep. 30, 2014USD ($) | Dec. 31, 2009item | Dec. 31, 2008item | Sep. 30, 2012item | Mar. 09, 2012 |
Related party transactions | |||||||||||||||
Transfer from EchoStar XXI launch contract from EchoStar to HNS | $ | $ 52,250 | ||||||||||||||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | $ | $ 10,601 | ||||||||||||||
Hughes Broadband Distribution Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Agreement term | 5 years | ||||||||||||||
Automatic renewal period | 1 year | ||||||||||||||
Required minimum notice for termination of agreement | 180 days | ||||||||||||||
DBSD North America Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Agreement term | 1 year | ||||||||||||||
Additional term of renewal option | 1 year | ||||||||||||||
Minimum required notice period for termination of agreement by related party | 30 days | ||||||||||||||
Number of additional one-year renewal options | 1 | ||||||||||||||
Ciel | |||||||||||||||
Related party transactions | |||||||||||||||
Agreement term | 10 years | ||||||||||||||
DISH Network | EchoStar VI I I capacity leased to Dish Network | |||||||||||||||
Related party transactions | |||||||||||||||
Required minimum notice period for termination of agreement by the reporting entity | 30 days | ||||||||||||||
Minimum required notice period for termination of agreement by related party | 30 days | ||||||||||||||
DISH Network | EchoStar XVI | |||||||||||||||
Related party transactions | |||||||||||||||
Agreement term | 10 years | ||||||||||||||
Agreement term from commencement of service date | 4 years | ||||||||||||||
Term of renewal option | 6 years | ||||||||||||||
Additional term of renewal option | 5 years | ||||||||||||||
DISH Network | DISH Nimiq 5 Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Agreement term from commencement of service date | 10 years | ||||||||||||||
Number of DBS transponders available to receive services | 32 | 32 | |||||||||||||
DISH Network | Quetz Sat-1 Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Number of DBS transponders currently receiving services | 24 | ||||||||||||||
Number of DBS transponders currently receiving services subleased back from related party | 5 | ||||||||||||||
DISH Network | Satellite and Tracking Stock Transaction | Hughes Retail Preferred Tracking Stock | Hughes Retail Group | |||||||||||||||
Related party transactions | |||||||||||||||
Percentage of economic interest in the Hughes Retail Group | 80.00% | 80.00% | |||||||||||||
DISH Network | TT&C Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Minimum required notice period for termination of agreement by related party | 60 days | ||||||||||||||
DISH Network | DBSD North America Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Ownership interest acquired by related party (as a percent) | 100.00% | ||||||||||||||
DISH Network | EchoStar Professional Services Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Required minimum notice for termination of individual service | 30 days | ||||||||||||||
Agreement term | 1 year | ||||||||||||||
Automatic renewal period | 1 year | ||||||||||||||
Required minimum notice for termination of agreement | 60 days | ||||||||||||||
DISH Network | EchoStar | Satellite and Tracking Stock Transaction | |||||||||||||||
Related party transactions | |||||||||||||||
Liabilities Assumed | $ | $ 58,900 | ||||||||||||||
DISH Network | EchoStar | Satellite and Tracking Stock Transaction | Hughes Retail Group | |||||||||||||||
Related party transactions | |||||||||||||||
Percentage of economic interest in the Hughes Retail Group | 51.89% | ||||||||||||||
DISH Network | EchoStar and HSSC | Satellite and Tracking Stock Transaction | |||||||||||||||
Related party transactions | |||||||||||||||
Related Party Transactions Number of Owned Satellites Transferred | 5 | 5 | |||||||||||||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | $ | $ 11,400 | ||||||||||||||
Telesat | Nimiq 5 Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Agreement term | 15 years | ||||||||||||||
Number of DBS transponders available to receive services | 32 | 32 | |||||||||||||
SES Latin America | QuetzSat-1 Transponder | |||||||||||||||
Related party transactions | |||||||||||||||
Agreement term | 10 years | ||||||||||||||
Number of DBS transponders available to receive services | 32 | ||||||||||||||
EchoStar. | |||||||||||||||
Related party transactions | |||||||||||||||
Required minimum notice period for termination of agreement by the reporting entity | 30 days | ||||||||||||||
Expense recorded for services provided | $ | $ 4,500 | $ 3,100 | $ 12,700 | $ 9,300 | |||||||||||
EchoStar. | HNS | EchoStar XXI Launch Facilitation and Operational Control Agreement | |||||||||||||||
Related party transactions | |||||||||||||||
Transfer from EchoStar XXI launch contract from EchoStar to HNS | $ | $ 52,300 | ||||||||||||||
Future payments to HNS | $ | $ 1,900 |
Related Party Transactions (D53
Related Party Transactions (Details 2) $ in Millions | Sep. 30, 2015USD ($) |
DISH Network | Tax Sharing Agreement | |
Related party transactions | |
Net amount of the allocated tax attributes receivable | $ 93.1 |
Related Party Transactions (D54
Related Party Transactions (Details 3) - USD ($) $ in Thousands | Apr. 30, 2014 | Sep. 30, 2015 | Apr. 30, 2015 | May. 31, 2014 | Feb. 29, 2008 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2009 | Dec. 31, 2014 |
Related party transactions | |||||||||||
Account receivable balance due | $ 30,436 | $ 30,436 | $ 30,436 | $ 736 | |||||||
Hughes Systique | |||||||||||
Related party transactions | |||||||||||
Ownership interest in related party (as a percent) | 44.00% | ||||||||||
Ownership interest percentage by related party | 25.80% | ||||||||||
Hughes Systique | HNS | |||||||||||
Related party transactions | |||||||||||
Amount agreed to be funded under term loan facility | $ 1,500 | ||||||||||
Amount funded | $ 500 | $ 1,000 | |||||||||
Interest rate (as a percent) | 6.00% | 8.00% | 6.00% | ||||||||
Loan repayment | 600 | $ 700 | |||||||||
Remaining balance of loan | 900 | 900 | $ 900 | ||||||||
Dish Mexico | |||||||||||
Related party transactions | |||||||||||
Ownership interest in related party (as a percent) | 49.00% | ||||||||||
Revenue from related parties | 5,800 | $ 5,800 | $ 17,500 | $ 17,500 | |||||||
Account receivable balance due | 8,400 | 8,400 | $ 8,400 | 3,900 | |||||||
Deluxe | |||||||||||
Related party transactions | |||||||||||
Ownership interest in related party (as a percent) | 50.00% | ||||||||||
Revenue from related parties | 700 | $ 800 | $ 2,100 | $ 2,500 | |||||||
Receivables from related parties | $ 100 | $ 100 | $ 100 | $ 200 |
Supplemental Guarantor and No55
Supplemental Guarantor and Non-Guarantor Financial Information (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Jun. 12, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Dec. 31, 2013 |
Assets | |||||
Cash and cash equivalents | $ 278,102 | $ 225,557 | $ 328,304 | $ 163,709 | |
Marketable investment securities, at fair value | 333,957 | 394,992 | |||
Trade accounts receivable, net | 146,411 | 140,193 | |||
Trade accounts receivable - DISH Network, net | 19,466 | 19,249 | |||
Advances to affiliates, net | 30,436 | 736 | |||
Inventory | 61,657 | 51,597 | |||
Other current assets | 220,812 | 196,512 | |||
Total current assets | 1,090,841 | 1,028,836 | |||
Restricted cash and cash equivalents | 17,965 | 17,652 | |||
Property and equipment, net | 2,264,539 | 2,274,568 | |||
Regulatory authorizations | 471,658 | 471,658 | |||
Goodwill | 504,173 | 504,173 | |||
Other intangible assets, net | 124,970 | 157,100 | |||
Other noncurrent assets, net | 263,465 | 210,597 | |||
Total assets | 4,737,611 | 4,664,584 | |||
Liabilities and Shareholders' Equity (Deficit) | |||||
Trade accounts payable | 94,969 | 93,783 | |||
Trade accounts payable - DISH Network | 20 | 18 | |||
Current portion of long-term debt and capital lease obligations | 29,426 | 39,746 | |||
Advances from affiliates, net | 3,805 | 23,792 | |||
Accrued expenses and other | 210,179 | 172,614 | |||
Total current liabilities | 338,399 | 329,953 | |||
Long-term debt and capital lease obligations, net of current portion | 2,193,997 | 2,325,417 | |||
Advances from affiliates | 12,153 | 8,352 | |||
Other non-current liabilities | 698,507 | 631,265 | |||
Total HSS shareholders' equity | 1,483,856 | 1,359,584 | |||
Noncontrolling interests | 10,699 | 10,013 | |||
Total liabilities and shareholders' equity | 4,737,611 | 4,664,584 | |||
Eliminations | |||||
Assets | |||||
Advances to affiliates, net | (434,628) | (190,658) | |||
Other current assets | (4,480) | (4,480) | |||
Total current assets | (439,108) | (195,138) | |||
Investment in subsidiaries | (3,409,037) | (3,122,628) | |||
Advances to affiliates | (1,578) | (2,416) | |||
Other noncurrent assets, net | (42,362) | ||||
Total assets | (3,892,085) | (3,320,182) | |||
Liabilities and Shareholders' Equity (Deficit) | |||||
Advances from affiliates, net | (434,628) | (190,658) | |||
Accrued expenses and other | (4,480) | (4,480) | |||
Total current liabilities | (439,108) | (195,138) | |||
Advances from affiliates | (1,578) | (2,416) | |||
Other non-current liabilities | (42,362) | ||||
Total HSS shareholders' equity | (3,409,037) | (3,122,628) | |||
Total liabilities and shareholders' equity | $ (3,892,085) | $ (3,320,182) | |||
6 1/2% Senior Secured Notes due 2019 | |||||
Condensed Consolidating Balance Sheet | |||||
Interest Rates (as a percent) | 6.50% | 6.50% | 6.50% | ||
7 5/8% Senior Notes due 2021 | |||||
Condensed Consolidating Balance Sheet | |||||
Interest Rates (as a percent) | 7.625% | 7.625% | |||
HSS | |||||
Assets | |||||
Cash and cash equivalents | $ 217,425 | $ 142,762 | 263,270 | 97,674 | |
Marketable investment securities, at fair value | 317,154 | 388,440 | |||
Trade accounts receivable - DISH Network, net | 1,492 | ||||
Advances to affiliates, net | 10 | 10 | |||
Other current assets | 68 | 39 | |||
Total current assets | 536,149 | 531,251 | |||
Restricted cash and cash equivalents | 9,805 | 9,553 | |||
Investment in subsidiaries | 3,267,619 | 3,038,984 | |||
Advances to affiliates | 700 | 700 | |||
Other noncurrent assets, net | 75,147 | 39,062 | |||
Total assets | 3,889,420 | 3,619,550 | |||
Liabilities and Shareholders' Equity (Deficit) | |||||
Trade accounts payable | 295 | ||||
Advances from affiliates, net | 409,444 | 193,671 | |||
Accrued expenses and other | 106,120 | 66,000 | |||
Total current liabilities | 515,564 | 259,966 | |||
Long-term debt and capital lease obligations, net of current portion | 1,890,000 | 2,000,000 | |||
Total HSS shareholders' equity | 1,483,856 | 1,359,584 | |||
Total liabilities and shareholders' equity | 3,889,420 | 3,619,550 | |||
Guarantor Subsidiaries | |||||
Assets | |||||
Cash and cash equivalents | 38,168 | 51,592 | 41,069 | 34,340 | |
Marketable investment securities, at fair value | 16,803 | 6,552 | |||
Trade accounts receivable, net | 109,090 | 96,881 | |||
Trade accounts receivable - DISH Network, net | 17,974 | 19,118 | |||
Advances to affiliates, net | 464,892 | 191,384 | |||
Inventory | 49,857 | 42,996 | |||
Other current assets | 200,279 | 176,657 | |||
Total current assets | 897,063 | 585,180 | |||
Restricted cash and cash equivalents | 7,500 | 7,500 | |||
Property and equipment, net | 2,199,494 | 2,225,085 | |||
Regulatory authorizations | 471,658 | 471,658 | |||
Goodwill | 504,173 | 504,173 | |||
Other intangible assets, net | 124,970 | 157,100 | |||
Investment in subsidiaries | 141,418 | 83,644 | |||
Advances to affiliates | 878 | 1,716 | |||
Other noncurrent assets, net | 171,899 | 161,763 | |||
Total assets | 4,519,053 | 4,197,819 | |||
Liabilities and Shareholders' Equity (Deficit) | |||||
Trade accounts payable | 83,209 | 82,928 | |||
Trade accounts payable - DISH Network | 20 | 18 | |||
Current portion of long-term debt and capital lease obligations | 28,044 | 37,979 | |||
Advances from affiliates, net | 8,693 | 1,494 | |||
Accrued expenses and other | 88,083 | 81,337 | |||
Total current liabilities | 208,049 | 203,756 | |||
Long-term debt and capital lease obligations, net of current portion | 302,567 | 323,889 | |||
Other non-current liabilities | 740,818 | 631,190 | |||
Total HSS shareholders' equity | 3,267,619 | 3,038,984 | |||
Total liabilities and shareholders' equity | 4,519,053 | 4,197,819 | |||
Non-Guarantor Subsidiaries | |||||
Assets | |||||
Cash and cash equivalents | 22,509 | 31,203 | $ 23,965 | $ 31,695 | |
Trade accounts receivable, net | 37,321 | 43,312 | |||
Trade accounts receivable - DISH Network, net | 131 | ||||
Advances to affiliates, net | 162 | ||||
Inventory | 11,800 | 8,601 | |||
Other current assets | 24,945 | 24,296 | |||
Total current assets | 96,737 | 107,543 | |||
Restricted cash and cash equivalents | 660 | 599 | |||
Property and equipment, net | 65,045 | 49,483 | |||
Other noncurrent assets, net | 58,781 | 9,772 | |||
Total assets | 221,223 | 167,397 | |||
Liabilities and Shareholders' Equity (Deficit) | |||||
Trade accounts payable | 11,760 | 10,560 | |||
Current portion of long-term debt and capital lease obligations | 1,382 | 1,767 | |||
Advances from affiliates, net | 20,296 | 19,285 | |||
Accrued expenses and other | 20,456 | 29,757 | |||
Total current liabilities | 53,894 | 61,369 | |||
Long-term debt and capital lease obligations, net of current portion | 1,430 | 1,528 | |||
Advances from affiliates | 13,731 | 10,768 | |||
Other non-current liabilities | 51 | 75 | |||
Total HSS shareholders' equity | 141,418 | 83,644 | |||
Noncontrolling interests | 10,699 | 10,013 | |||
Total liabilities and shareholders' equity | $ 221,223 | $ 167,397 |
Supplemental Guarantor and No56
Supplemental Guarantor and Non-Guarantor Financial Information (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenue: | ||||
Services and other revenue - other | $ 276,307 | $ 273,361 | $ 817,307 | $ 803,843 |
Services and other revenue - DISH Network | 132,013 | 129,389 | 394,937 | 357,494 |
Equipment revenue - other | 52,605 | 56,580 | 154,505 | 152,078 |
Equipment revenue - DISH Network | 3,106 | 6,350 | 6,992 | 24,249 |
Total revenue | 464,031 | 465,680 | 1,373,741 | 1,337,664 |
Costs and Expenses: | ||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 131,861 | 134,884 | 394,327 | 400,199 |
Cost of sales - equipment (exclusive of depreciation and amortization) | 48,543 | 54,693 | 142,537 | 154,890 |
Selling, general and administrative expenses | 68,303 | 63,790 | 203,871 | 191,589 |
Research and development expenses | 6,809 | 5,168 | 18,876 | 14,314 |
Depreciation and amortization | 109,158 | 115,828 | 324,797 | 339,831 |
Total costs and expenses | 364,674 | 374,363 | 1,084,408 | 1,100,823 |
Operating income | 99,357 | 91,317 | 289,333 | 236,841 |
Other Income (Expense): | ||||
Interest income | 1,135 | 836 | 3,391 | 2,411 |
Interest expense, net of amounts capitalized | (40,907) | (47,468) | (129,559) | (144,810) |
Other, net | (186) | 1,478 | (10,564) | 3,968 |
Total other expense, net | (39,958) | (45,154) | (136,732) | (138,431) |
Income before income taxes | 59,399 | 46,163 | 152,601 | 98,410 |
Income tax benefit (provision), net | (22,167) | (9,436) | (58,520) | (22,060) |
Net income (loss) | 37,232 | 36,727 | 94,081 | 76,350 |
Less: Net income attributable to noncontrolling interests | 209 | 376 | 1,006 | 1,103 |
Net income (loss) attributable to HSS | 37,023 | 36,351 | 93,075 | 75,247 |
Comprehensive Income (loss) : | ||||
Net income (loss) | 37,232 | 36,727 | 94,081 | 76,350 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | (17,688) | (5,644) | (26,935) | (2,293) |
Unrealized (gains) losses on available-for-sale securities and other | (6,507) | (1,976) | (3,194) | (2,803) |
Recognition of other-than-temporary loss on available-for-sale securities in net income | 1,201 | 5,850 | ||
Recognition of realized gains (losses) on available-for-sale securities in net income | 52 | (11) | 42 | |
Total other comprehensive loss, net of tax | (22,994) | (7,568) | (24,290) | (5,054) |
Comprehensive income | 14,238 | 29,159 | 69,791 | 71,296 |
Less: Comprehensive income (loss) attributable to noncontrolling interests | (111) | 170 | 686 | 1,146 |
Comprehensive income attributable to HSS | 14,349 | 28,989 | 69,105 | 70,150 |
HSS | ||||
Other Income (Expense): | ||||
Interest income | 785 | 54,937 | 2,486 | 160,682 |
Interest expense, net of amounts capitalized | (34,726) | (36,497) | (107,462) | (109,413) |
Equity in earnings (losses) of subsidiaries, net | 60,213 | 24,583 | 172,082 | 42,533 |
Other, net | 94 | 6 | (16,337) | 15 |
Total other expense, net | 26,366 | 43,029 | 50,769 | 93,817 |
Income before income taxes | 26,366 | 43,029 | 50,769 | 93,817 |
Income tax benefit (provision), net | 10,657 | (6,679) | 42,306 | (18,571) |
Net income (loss) | 37,023 | 36,350 | 93,075 | 75,246 |
Net income (loss) attributable to HSS | 37,023 | 36,350 | 93,075 | 75,246 |
Comprehensive Income (loss) : | ||||
Net income (loss) | 37,023 | 36,350 | 93,075 | 75,246 |
Other comprehensive income (loss), net of tax: | ||||
Unrealized (gains) losses on available-for-sale securities and other | (5,510) | (1,924) | (2,208) | (2,761) |
Recognition of other-than-temporary loss on available-for-sale securities in net income | 1,201 | 5,850 | ||
Recognition of realized gains (losses) on available-for-sale securities in net income | 52 | (11) | 42 | |
Equity in other comprehensive income (loss) of subsidiaries, net | (18,365) | (5,489) | (27,601) | (2,377) |
Total other comprehensive loss, net of tax | (22,674) | (7,361) | (23,970) | (5,096) |
Comprehensive income | 14,349 | 28,989 | 69,105 | 70,150 |
Comprehensive income attributable to HSS | 14,349 | 28,989 | 69,105 | 70,150 |
Guarantor Subsidiaries | ||||
Revenue: | ||||
Services and other revenue - other | 254,696 | 239,490 | 749,436 | 698,344 |
Services and other revenue - DISH Network | 132,012 | 129,211 | 394,818 | 356,991 |
Equipment revenue - other | 48,708 | 53,803 | 147,850 | 141,998 |
Equipment revenue - DISH Network | 3,106 | 6,350 | 6,992 | 24,249 |
Total revenue | 438,522 | 428,854 | 1,299,096 | 1,221,582 |
Costs and Expenses: | ||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 119,635 | 112,280 | 357,429 | 331,032 |
Cost of sales - equipment (exclusive of depreciation and amortization) | 46,419 | 54,004 | 140,306 | 150,014 |
Selling, general and administrative expenses | 60,660 | 56,024 | 180,640 | 168,245 |
Research and development expenses | 6,809 | 5,168 | 18,876 | 14,314 |
Depreciation and amortization | 107,720 | 113,899 | 320,194 | 333,492 |
Total costs and expenses | 341,243 | 341,375 | 1,017,445 | 997,097 |
Operating income | 97,279 | 87,479 | 281,651 | 224,485 |
Other Income (Expense): | ||||
Interest income | 29 | 111 | 148 | 279 |
Interest expense, net of amounts capitalized | (6,747) | (65,463) | (23,643) | (194,202) |
Equity in earnings (losses) of subsidiaries, net | 322 | 1,843 | 3,369 | 6,908 |
Other, net | 2,222 | 2,325 | 9,522 | 4,453 |
Total other expense, net | (4,174) | (61,184) | (10,604) | (182,562) |
Income before income taxes | 93,105 | 26,295 | 271,047 | 41,923 |
Income tax benefit (provision), net | (32,798) | (1,610) | (98,688) | 891 |
Net income (loss) | 60,307 | 24,685 | 172,359 | 42,814 |
Net income (loss) attributable to HSS | 60,307 | 24,685 | 172,359 | 42,814 |
Comprehensive Income (loss) : | ||||
Net income (loss) | 60,307 | 24,685 | 172,359 | 42,814 |
Other comprehensive income (loss), net of tax: | ||||
Unrealized (gains) losses on available-for-sale securities and other | (1,025) | (1,025) | ||
Equity in other comprehensive income (loss) of subsidiaries, net | (17,340) | (5,490) | (26,576) | (2,378) |
Total other comprehensive loss, net of tax | (18,365) | (5,490) | (27,601) | (2,378) |
Comprehensive income | 41,942 | 19,195 | 144,758 | 40,436 |
Comprehensive income attributable to HSS | 41,942 | 19,195 | 144,758 | 40,436 |
Non-Guarantor Subsidiaries | ||||
Revenue: | ||||
Services and other revenue - other | 34,287 | 39,880 | 106,251 | 123,781 |
Services and other revenue - DISH Network | 1 | 178 | 119 | 503 |
Equipment revenue - other | 8,490 | 7,304 | 21,954 | 23,262 |
Total revenue | 42,778 | 47,362 | 128,324 | 147,546 |
Costs and Expenses: | ||||
Cost of sales - services and other (exclusive of depreciation and amortization) | 24,737 | 28,612 | 74,629 | 87,448 |
Cost of sales - equipment (exclusive of depreciation and amortization) | 6,150 | 4,761 | 16,210 | 16,803 |
Selling, general and administrative expenses | 8,375 | 8,222 | 25,200 | 24,600 |
Depreciation and amortization | 1,438 | 1,929 | 4,603 | 6,339 |
Total costs and expenses | 40,700 | 43,524 | 120,642 | 135,190 |
Operating income | 2,078 | 3,838 | 7,682 | 12,356 |
Other Income (Expense): | ||||
Interest income | 340 | 306 | 850 | 1,264 |
Interest expense, net of amounts capitalized | 547 | (27) | 1,453 | (1,009) |
Other, net | (2,502) | (853) | (3,749) | (500) |
Total other expense, net | (1,615) | (574) | (1,446) | (245) |
Income before income taxes | 463 | 3,264 | 6,236 | 12,111 |
Income tax benefit (provision), net | (26) | (1,147) | (2,138) | (4,380) |
Net income (loss) | 437 | 2,117 | 4,098 | 7,731 |
Less: Net income attributable to noncontrolling interests | 209 | 376 | 1,006 | 1,103 |
Net income (loss) attributable to HSS | 228 | 1,741 | 3,092 | 6,628 |
Comprehensive Income (loss) : | ||||
Net income (loss) | 437 | 2,117 | 4,098 | 7,731 |
Other comprehensive income (loss), net of tax: | ||||
Foreign currency translation adjustments | (17,688) | (5,644) | (26,935) | (2,293) |
Unrealized (gains) losses on available-for-sale securities and other | 28 | (52) | 39 | (42) |
Total other comprehensive loss, net of tax | (17,660) | (5,696) | (26,896) | (2,335) |
Comprehensive income | (17,223) | (3,579) | (22,798) | 5,396 |
Less: Comprehensive income (loss) attributable to noncontrolling interests | (111) | 170 | 686 | 1,146 |
Comprehensive income attributable to HSS | (17,112) | (3,749) | (23,484) | 4,250 |
Eliminations | ||||
Revenue: | ||||
Services and other revenue - other | (12,676) | (6,009) | (38,380) | (18,282) |
Equipment revenue - other | (4,593) | (4,527) | (15,299) | (13,182) |
Total revenue | (17,269) | (10,536) | (53,679) | (31,464) |
Costs and Expenses: | ||||
Cost of sales - services and other (exclusive of depreciation and amortization) | (12,511) | (6,008) | (37,731) | (18,281) |
Cost of sales - equipment (exclusive of depreciation and amortization) | (4,026) | (4,072) | (13,979) | (11,927) |
Selling, general and administrative expenses | (732) | (456) | (1,969) | (1,256) |
Total costs and expenses | (17,269) | (10,536) | (53,679) | (31,464) |
Other Income (Expense): | ||||
Interest income | (19) | (54,518) | (93) | (159,814) |
Interest expense, net of amounts capitalized | 19 | 54,519 | 93 | 159,814 |
Equity in earnings (losses) of subsidiaries, net | (60,535) | (26,426) | (175,451) | (49,441) |
Total other expense, net | (60,535) | (26,425) | (175,451) | (49,441) |
Income before income taxes | (60,535) | (26,425) | (175,451) | (49,441) |
Net income (loss) | (60,535) | (26,425) | (175,451) | (49,441) |
Net income (loss) attributable to HSS | (60,535) | (26,425) | (175,451) | (49,441) |
Comprehensive Income (loss) : | ||||
Net income (loss) | (60,535) | (26,425) | (175,451) | (49,441) |
Other comprehensive income (loss), net of tax: | ||||
Equity in other comprehensive income (loss) of subsidiaries, net | 35,705 | 10,979 | 54,177 | 4,755 |
Total other comprehensive loss, net of tax | 35,705 | 10,979 | 54,177 | 4,755 |
Comprehensive income | (24,830) | (15,446) | (121,274) | (44,686) |
Comprehensive income attributable to HSS | $ (24,830) | $ (15,446) | $ (121,274) | $ (44,686) |
Supplemental Guarantor and No57
Supplemental Guarantor and Non-Guarantor Financial Information (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows from Operating Activities: | ||||
Net income (loss) | $ 37,232 | $ 36,727 | $ 94,081 | $ 76,350 |
Adjustments to reconcile net income (loss) to net cash flows from operating activities | 352,727 | 453,451 | ||
Net cash flows from operating activities | 446,808 | 529,801 | ||
Cash Flows from Investing Activities: | ||||
Purchases of marketable investment securities | (132,741) | (269,215) | ||
Sales and maturities of marketable investment securities | 197,899 | 130,997 | ||
Purchases of property and equipment | (105,042) | (68,496) | (292,347) | (166,002) |
Expenditures for externally marketed software | (16,905) | (17,401) | ||
Changes in restricted cash and cash equivalents | (313) | (2,688) | ||
Other, net | (9) | (130) | ||
Net cash flows from investing activities | (244,416) | (324,439) | ||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | 10,601 | |||
Repayment of 6 1/2% Senior Notes Due 2019 and related premium | (113,300) | |||
Repayment of other long-term debt and capital lease obligations | (31,578) | (49,904) | ||
Advances from affiliates | 3,699 | |||
Other, net | (1,688) | (1,116) | ||
Net cash flows from financing activities | (142,867) | (40,419) | ||
Effect of exchange rates on cash and cash equivalents | (6,980) | (348) | ||
Net increase in cash and cash equivalents | 52,545 | 164,595 | ||
Cash and cash equivalents, beginning of period | 225,557 | 163,709 | ||
Cash and cash equivalents, end of period | 278,102 | 328,304 | 278,102 | 328,304 |
HSS | ||||
Cash Flows from Operating Activities: | ||||
Net income (loss) | 37,023 | 36,350 | 93,075 | 75,246 |
Adjustments to reconcile net income (loss) to net cash flows from operating activities | 58,942 | 231,330 | ||
Net cash flows from operating activities | 152,017 | 306,576 | ||
Cash Flows from Investing Activities: | ||||
Purchases of marketable investment securities | (132,741) | (269,215) | ||
Sales and maturities of marketable investment securities | 197,899 | 130,997 | ||
Changes in restricted cash and cash equivalents | (252) | (2,661) | ||
Investment in subsidiary | (29,000) | (10,601) | ||
Other, net | (101) | |||
Net cash flows from investing activities | 35,906 | (151,581) | ||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | 10,601 | |||
Repayment of 6 1/2% Senior Notes Due 2019 and related premium | (113,300) | |||
Other, net | 40 | |||
Net cash flows from financing activities | (113,260) | 10,601 | ||
Net increase in cash and cash equivalents | 74,663 | 165,596 | ||
Cash and cash equivalents, beginning of period | 142,762 | 97,674 | ||
Cash and cash equivalents, end of period | 217,425 | 263,270 | 217,425 | 263,270 |
Guarantor Subsidiaries | ||||
Cash Flows from Operating Activities: | ||||
Net income (loss) | 60,307 | 24,685 | 172,359 | 42,814 |
Adjustments to reconcile net income (loss) to net cash flows from operating activities | 112,751 | 160,259 | ||
Net cash flows from operating activities | 285,110 | 203,073 | ||
Cash Flows from Investing Activities: | ||||
Purchases of property and equipment | (250,365) | (139,317) | ||
Expenditures for externally marketed software | (16,905) | (17,401) | ||
Investment in subsidiary | (29,000) | |||
Other, net | 1,291 | (29) | ||
Net cash flows from investing activities | (294,979) | (156,747) | ||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | 10,601 | |||
Proceeds from capital contributions from parent | 29,000 | |||
Repayment of other long-term debt and capital lease obligations | (26,755) | (44,903) | ||
Other, net | (5,800) | (5,295) | ||
Net cash flows from financing activities | (3,555) | (39,597) | ||
Net increase in cash and cash equivalents | (13,424) | 6,729 | ||
Cash and cash equivalents, beginning of period | 51,592 | 34,340 | ||
Cash and cash equivalents, end of period | 38,168 | 41,069 | 38,168 | 41,069 |
Non-Guarantor Subsidiaries | ||||
Cash Flows from Operating Activities: | ||||
Net income (loss) | 437 | 2,117 | 4,098 | 7,731 |
Adjustments to reconcile net income (loss) to net cash flows from operating activities | 5,583 | 12,421 | ||
Net cash flows from operating activities | 9,681 | 20,152 | ||
Cash Flows from Investing Activities: | ||||
Purchases of property and equipment | (41,982) | (26,685) | ||
Changes in restricted cash and cash equivalents | (61) | (27) | ||
Net cash flows from investing activities | (42,043) | (26,712) | ||
Cash Flows from Financing Activities: | ||||
Proceeds from capital contributions from parent | 29,000 | |||
Repayment of other long-term debt and capital lease obligations | (4,823) | (5,001) | ||
Advances from affiliates | 3,699 | |||
Other, net | 2,772 | 4,179 | ||
Net cash flows from financing activities | 30,648 | (822) | ||
Effect of exchange rates on cash and cash equivalents | (6,980) | (348) | ||
Net increase in cash and cash equivalents | (8,694) | (7,730) | ||
Cash and cash equivalents, beginning of period | 31,203 | 31,695 | ||
Cash and cash equivalents, end of period | 22,509 | 23,965 | 22,509 | 23,965 |
Eliminations | ||||
Cash Flows from Operating Activities: | ||||
Net income (loss) | $ (60,535) | $ (26,425) | (175,451) | (49,441) |
Adjustments to reconcile net income (loss) to net cash flows from operating activities | 175,451 | 49,441 | ||
Cash Flows from Investing Activities: | ||||
Investment in subsidiary | 58,000 | 10,601 | ||
Other, net | (1,300) | |||
Net cash flows from investing activities | 56,700 | 10,601 | ||
Cash Flows from Financing Activities: | ||||
Proceeds from issuance of Hughes Retail Preferred Tracking Stock | (10,601) | |||
Proceeds from capital contributions from parent | (58,000) | |||
Other, net | 1,300 | |||
Net cash flows from financing activities | $ (56,700) | $ (10,601) |