Condensed Income Statement | Condensed Consolidating Statement of Operations and Comprehensive Income (Loss) For the Three Months Ended June 30, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 110,388 $ 533 $ — $ 110,921 Services and other revenue - other — 248,361 43,611 (6,917 ) 285,055 Equipment revenue - DISH Network — 18 — — 18 Equipment revenue - other — 81,813 5,033 (20,575 ) 66,271 Total revenue — 440,580 49,177 (27,492 ) 462,265 Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 108,786 29,941 (5,656 ) 133,071 Cost of sales - equipment (exclusive of depreciation and amortization) — 74,500 4,532 (21,167 ) 57,865 Selling, general and administrative expenses — 75,035 11,749 (669 ) 86,115 Research and development expenses — 7,437 — — 7,437 Depreciation and amortization — 116,193 8,550 — 124,743 Total costs and expenses — 381,951 54,772 (27,492 ) 409,231 Operating income — 58,629 (5,595 ) — 53,034 Other Income (Expense): Interest income 6,733 231 321 (199 ) 7,086 Interest expense, net of amounts capitalized (57,336 ) (4,797 ) 558 199 (61,376 ) Gains on marketable investment securities, net — 1,632 — — 1,632 Equity in earnings of unconsolidated affiliate — 1,639 — — 1,639 Equity in earnings (losses) of subsidiaries, net 33,078 (4,438 ) — (28,640 ) — Other, net — (702 ) (1,520 ) — (2,222 ) Total other income (expense), net (17,525 ) (6,435 ) (641 ) (28,640 ) (53,241 ) Income (loss) before income taxes (17,525 ) 52,194 (6,236 ) (28,640 ) (207 ) Income tax benefit (provision) 17,645 (19,026 ) 1,890 — 509 Net income (loss) 120 33,168 (4,346 ) (28,640 ) 302 Less: Net income attributable to noncontrolling interests — — 182 — 182 Net income (loss) attributable to HSS $ 120 $ 33,168 $ (4,528 ) $ (28,640 ) $ 120 Comprehensive Income (Loss): Net income (loss) $ 120 $ 33,168 $ (4,346 ) $ (28,640 ) $ 302 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (6,736 ) — (6,736 ) Unrealized gains (losses) on available-for-sale securities and other (21 ) 86 (76 ) — (11 ) Equity in other comprehensive income (loss) of subsidiaries, net (6,726 ) (6,812 ) — 13,538 — Total other comprehensive income (loss), net of tax (6,747 ) (6,726 ) (6,812 ) 13,538 (6,747 ) Comprehensive income (loss) (6,627 ) 26,442 (11,158 ) (15,102 ) (6,445 ) Less: Comprehensive income attributable to noncontrolling interests — — 182 — 182 Comprehensive income (loss) attributable to HSS $ (6,627 ) $ 26,442 $ (11,340 ) $ (15,102 ) $ (6,627 ) For the Three Months Ended June 30, 2016 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 112,528 $ — $ — $ 112,528 Services and other revenue - other — 248,005 32,239 (5,681 ) 274,563 Equipment revenue - DISH Network — 2,101 — — 2,101 Equipment revenue - other — 50,636 3,888 (2,998 ) 51,526 Total revenue — 413,270 36,127 (8,679 ) 440,718 Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 108,424 23,958 (5,582 ) 126,800 Cost of sales - equipment (exclusive of depreciation and amortization) — 46,903 3,003 (2,586 ) 47,320 Selling, general and administrative expenses — 60,197 9,499 (511 ) 69,185 Research and development expenses — 7,562 — — 7,562 Depreciation and amortization — 100,679 1,626 — 102,305 Total costs and expenses — 323,765 38,086 (8,679 ) 353,172 Operating income — 89,505 (1,959 ) — 87,546 Other Income (Expense): Interest income 1,404 34 70 (1 ) 1,507 Interest expense, net of amounts capitalized (34,810 ) (3,629 ) 2,379 1 (36,059 ) Gains on marketable investment securities, net 2,985 2,095 — — 5,080 Equity in earnings of unconsolidated affiliate — 2,245 — — 2,245 Equity in earnings (losses) of subsidiaries, net 56,189 620 — (56,809 ) — Other, net — (2,069 ) 569 — (1,500 ) Total other income (expense), net 25,768 (704 ) 3,018 (56,809 ) (28,727 ) Income (loss) before income taxes 25,768 88,801 1,059 (56,809 ) 58,819 Income tax benefit (provision) 11,920 (32,523 ) (217 ) — (20,820 ) Net income (loss) 37,688 56,278 842 (56,809 ) 37,999 Less: Net income attributable to noncontrolling interests — — 311 — 311 Net income (loss) attributable to HSS $ 37,688 $ 56,278 $ 531 $ (56,809 ) $ 37,688 Comprehensive Income (Loss): Net income (loss) $ 37,688 $ 56,278 $ 842 $ (56,809 ) $ 37,999 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 1,643 — 1,643 Unrealized gains (losses) on available-for-sale securities and other 3,116 (905 ) (44 ) — 2,167 Recognition of realized gains on available-for-sale securities in net income (2,985 ) — — — (2,985 ) Equity in other comprehensive income (loss) of subsidiaries, net 880 1,785 — (2,665 ) — Total other comprehensive income (loss), net of tax 1,011 880 1,599 (2,665 ) 825 Comprehensive income (loss) 38,699 57,158 2,441 (59,474 ) 38,824 Less: Comprehensive income attributable to noncontrolling interests — — 125 — 125 Comprehensive income (loss) attributable to HSS $ 38,699 $ 57,158 $ 2,316 $ (59,474 ) $ 38,699 |
Supplemental Guarantor an Non-Guarantor Financial Information | Supplemental Guarantor and Non-Guarantor Financial Information Certain of our wholly-owned subsidiaries (together, the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed, on a joint and several basis, the obligations of our 2019 Senior Secured Notes and 2021 Senior Unsecured Notes, which were issued on June 1, 2011, and our 2026 Notes, which were issued on July 27, 2016. See Note 9 for further information on the 2019 Senior Secured Notes, the 2021 Senior Unsecured Notes and the 2026 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 2019 Senior Secured Notes, the 2021 Senior Unsecured Notes and the 2026 Notes contain restrictive covenants that, among other things, impose limitations on our ability and the ability of certain of our subsidiaries to pay dividends or make distributions, incur additional debt, make certain investments, create liens or enter into sale and leaseback transactions, merge or consolidate with another company, transfer and sell assets, enter into transactions with affiliates or allow to exist certain restrictions on the ability of certain of our subsidiaries to pay dividends, make distributions, make other payments, or transfer assets to us. June 30, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 2,105,680 $ 29,275 $ 32,283 $ — $ 2,167,238 Marketable investment securities, at fair value 56,727 1,622 — — 58,349 Trade accounts receivable, net — 146,461 45,785 — 192,246 Trade accounts receivable - DISH Network, net — 48,252 377 — 48,629 Inventory — 66,374 24,891 — 91,265 Advances to affiliates, net 110,415 39,939 4,246 (43,738 ) 110,862 Other current assets 110 19,019 30,479 (315 ) 49,293 Total current assets 2,272,932 350,942 138,061 (44,053 ) 2,717,882 Restricted cash and cash equivalents 12,274 — 782 — 13,056 Property and equipment, net — 2,564,963 278,237 — 2,843,200 Regulatory authorizations, net — 471,658 — — 471,658 Goodwill — 504,173 — — 504,173 Other intangible assets, net — 65,897 — — 65,897 Investments in unconsolidated entities — 38,410 — — 38,410 Investment in subsidiaries 3,005,011 203,289 — (3,208,300 ) — Advances to affiliates 700 74,701 — (75,401 ) — Deferred tax asset 129,457 — 15,894 (129,457 ) 15,894 Other noncurrent assets, net — 158,414 12,004 — 170,418 Total assets $ 5,420,374 $ 4,432,447 $ 444,978 $ (3,457,211 ) $ 6,840,588 Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ — $ 90,072 $ 21,172 $ — $ 111,244 Current portion of long-term debt and capital lease obligations — 35,390 3,839 — 39,229 Advances from affiliates, net — 4,381 39,572 (43,738 ) 215 Accrued expenses and other 44,189 134,351 45,956 (315 ) 224,181 Total current liabilities 44,189 264,194 110,539 (44,053 ) 374,869 Long-term debt and capital lease obligations, net of unamortized debt issuance costs 3,361,622 244,021 6,103 — 3,611,746 Deferred tax liabilities, net — 811,125 148 (129,457 ) 681,816 Advances from affiliates — — 108,378 (75,401 ) 32,977 Other non-current liabilities — 108,928 2,385 — 111,313 Total HSS shareholders’ equity (deficit) 2,014,563 3,004,179 204,121 (3,208,300 ) 2,014,563 Noncontrolling interests — — 13,304 — 13,304 Total liabilities and shareholders’ equity (deficit) $ 5,420,374 $ 4,432,447 $ 444,978 $ (3,457,211 ) $ 6,840,588 December 31, 2016 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 1,991,949 $ 53,905 $ 25,110 $ — $ 2,070,964 Marketable investment securities, at fair value 177,614 10,309 — — 187,923 Trade accounts receivable, net — 138,861 43,651 — 182,512 Trade accounts receivable - DISH Network, net — 19,323 — — 19,323 Inventory — 45,623 17,015 — 62,638 Advances to affiliates, net 10 999,340 4,968 (893,866 ) 110,452 Other current assets 48 19,183 27,083 — 46,314 Total current assets 2,169,621 1,286,544 117,827 (893,866 ) 2,680,126 Restricted cash and cash equivalents 11,097 — 723 — 11,820 Property and equipment, net — 2,061,831 232,895 — 2,294,726 Regulatory authorizations, net — 471,658 — — 471,658 Goodwill — 504,173 — — 504,173 Other intangible assets, net — 80,734 — — 80,734 Investments in unconsolidated entities — 42,560 — — 42,560 Investment in subsidiaries 3,721,688 314,643 — (4,036,331 ) — Advances to affiliates 700 60,761 — (61,461 ) — Deferred tax asset 92,727 — 9,150 (92,727 ) 9,150 Other noncurrent assets, net — 142,091 144,496 — 286,587 Total assets $ 5,995,833 $ 4,964,995 $ 505,091 $ (5,084,385 ) $ 6,381,534 Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ — $ 94,095 $ 12,321 $ — $ 106,416 Current portion of long-term debt and capital lease obligations — 32,177 807 — 32,984 Advances from affiliates, net 850,807 12,228 31,429 (893,866 ) 598 Accrued expenses and other 44,654 136,921 38,738 — 220,313 Total current liabilities 895,461 275,421 83,295 (893,866 ) 360,311 Long-term debt and capital lease obligations, net of unamortized debt issuance costs 3,358,179 262,883 1,401 — 3,622,463 Deferred tax liabilities, net — 621,061 128 (92,727 ) 528,462 Advances from affiliates — — 93,429 (61,461 ) 31,968 Other non-current liabilities — 80,532 2,775 — 83,307 Total HSS shareholders’ equity (deficit) 1,742,193 3,725,098 311,233 (4,036,331 ) 1,742,193 Noncontrolling interests — — 12,830 — 12,830 Total liabilities and shareholders’ equity (deficit) $ 5,995,833 $ 4,964,995 $ 505,091 $ (5,084,385 ) $ 6,381,534 For the Three Months Ended June 30, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 110,388 $ 533 $ — $ 110,921 Services and other revenue - other — 248,361 43,611 (6,917 ) 285,055 Equipment revenue - DISH Network — 18 — — 18 Equipment revenue - other — 81,813 5,033 (20,575 ) 66,271 Total revenue — 440,580 49,177 (27,492 ) 462,265 Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 108,786 29,941 (5,656 ) 133,071 Cost of sales - equipment (exclusive of depreciation and amortization) — 74,500 4,532 (21,167 ) 57,865 Selling, general and administrative expenses — 75,035 11,749 (669 ) 86,115 Research and development expenses — 7,437 — — 7,437 Depreciation and amortization — 116,193 8,550 — 124,743 Total costs and expenses — 381,951 54,772 (27,492 ) 409,231 Operating income — 58,629 (5,595 ) — 53,034 Other Income (Expense): Interest income 6,733 231 321 (199 ) 7,086 Interest expense, net of amounts capitalized (57,336 ) (4,797 ) 558 199 (61,376 ) Gains on marketable investment securities, net — 1,632 — — 1,632 Equity in earnings of unconsolidated affiliate — 1,639 — — 1,639 Equity in earnings (losses) of subsidiaries, net 33,078 (4,438 ) — (28,640 ) — Other, net — (702 ) (1,520 ) — (2,222 ) Total other income (expense), net (17,525 ) (6,435 ) (641 ) (28,640 ) (53,241 ) Income (loss) before income taxes (17,525 ) 52,194 (6,236 ) (28,640 ) (207 ) Income tax benefit (provision) 17,645 (19,026 ) 1,890 — 509 Net income (loss) 120 33,168 (4,346 ) (28,640 ) 302 Less: Net income attributable to noncontrolling interests — — 182 — 182 Net income (loss) attributable to HSS $ 120 $ 33,168 $ (4,528 ) $ (28,640 ) $ 120 Comprehensive Income (Loss): Net income (loss) $ 120 $ 33,168 $ (4,346 ) $ (28,640 ) $ 302 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (6,736 ) — (6,736 ) Unrealized gains (losses) on available-for-sale securities and other (21 ) 86 (76 ) — (11 ) Equity in other comprehensive income (loss) of subsidiaries, net (6,726 ) (6,812 ) — 13,538 — Total other comprehensive income (loss), net of tax (6,747 ) (6,726 ) (6,812 ) 13,538 (6,747 ) Comprehensive income (loss) (6,627 ) 26,442 (11,158 ) (15,102 ) (6,445 ) Less: Comprehensive income attributable to noncontrolling interests — — 182 — 182 Comprehensive income (loss) attributable to HSS $ (6,627 ) $ 26,442 $ (11,340 ) $ (15,102 ) $ (6,627 ) For the Three Months Ended June 30, 2016 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 112,528 $ — $ — $ 112,528 Services and other revenue - other — 248,005 32,239 (5,681 ) 274,563 Equipment revenue - DISH Network — 2,101 — — 2,101 Equipment revenue - other — 50,636 3,888 (2,998 ) 51,526 Total revenue — 413,270 36,127 (8,679 ) 440,718 Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 108,424 23,958 (5,582 ) 126,800 Cost of sales - equipment (exclusive of depreciation and amortization) — 46,903 3,003 (2,586 ) 47,320 Selling, general and administrative expenses — 60,197 9,499 (511 ) 69,185 Research and development expenses — 7,562 — — 7,562 Depreciation and amortization — 100,679 1,626 — 102,305 Total costs and expenses — 323,765 38,086 (8,679 ) 353,172 Operating income — 89,505 (1,959 ) — 87,546 Other Income (Expense): Interest income 1,404 34 70 (1 ) 1,507 Interest expense, net of amounts capitalized (34,810 ) (3,629 ) 2,379 1 (36,059 ) Gains on marketable investment securities, net 2,985 2,095 — — 5,080 Equity in earnings of unconsolidated affiliate — 2,245 — — 2,245 Equity in earnings (losses) of subsidiaries, net 56,189 620 — (56,809 ) — Other, net — (2,069 ) 569 — (1,500 ) Total other income (expense), net 25,768 (704 ) 3,018 (56,809 ) (28,727 ) Income (loss) before income taxes 25,768 88,801 1,059 (56,809 ) 58,819 Income tax benefit (provision) 11,920 (32,523 ) (217 ) — (20,820 ) Net income (loss) 37,688 56,278 842 (56,809 ) 37,999 Less: Net income attributable to noncontrolling interests — — 311 — 311 Net income (loss) attributable to HSS $ 37,688 $ 56,278 $ 531 $ (56,809 ) $ 37,688 Comprehensive Income (Loss): Net income (loss) $ 37,688 $ 56,278 $ 842 $ (56,809 ) $ 37,999 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 1,643 — 1,643 Unrealized gains (losses) on available-for-sale securities and other 3,116 (905 ) (44 ) — 2,167 Recognition of realized gains on available-for-sale securities in net income (2,985 ) — — — (2,985 ) Equity in other comprehensive income (loss) of subsidiaries, net 880 1,785 — (2,665 ) — Total other comprehensive income (loss), net of tax 1,011 880 1,599 (2,665 ) 825 Comprehensive income (loss) 38,699 57,158 2,441 (59,474 ) 38,824 Less: Comprehensive income attributable to noncontrolling interests — — 125 — 125 Comprehensive income (loss) attributable to HSS $ 38,699 $ 57,158 $ 2,316 $ (59,474 ) $ 38,699 For the Six Months Ended June 30, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash Flows from Operating Activities: Net income (loss) $ 9,255 $ 75,175 $ (10,403 ) $ (64,298 ) $ 9,729 Adjustments to reconcile net income (loss) to net cash flows from operating activities 22,394 80,566 12,257 64,298 179,515 Net cash flows from operating activities 31,649 155,741 1,854 — 189,244 Cash Flows from Investing Activities: Purchases of marketable investment securities (992 ) — — — (992 ) Sales and maturities of marketable investment securities 119,825 — — — 119,825 Expenditures for property and equipment — (141,385 ) (33,959 ) — (175,344 ) Changes in restricted cash and cash equivalents (1,177 ) — (59 ) — (1,236 ) Investment in subsidiary (36,000 ) (39,025 ) — 75,025 — Expenditures for externally marketed software — (17,119 ) — — (17,119 ) Other, net — — — — — Net cash flows from investing activities 81,656 (197,529 ) (34,018 ) 75,025 (74,866 ) Cash Flows from Financing Activities: Proceeds from capital contribution from parent — 36,000 39,025 (75,025 ) — Repayment of debt and capital lease obligations — (15,648 ) (1,463 ) — (17,111 ) Advances from affiliates — — (36 ) — (36 ) Other, net 426 (3,194 ) 886 — (1,882 ) Net cash flows from financing activities 426 17,158 38,412 (75,025 ) (19,029 ) Effect of exchange rates on cash and cash equivalents — — 925 — 925 Net increase (decrease) in cash and cash equivalents 113,731 (24,630 ) 7,173 — 96,274 Cash and cash equivalents, at beginning of period 1,991,949 53,905 25,110 — 2,070,964 Cash and cash equivalents, at end of period $ 2,105,680 $ 29,275 $ 32,283 $ — $ 2,167,238 For the Six Months Ended June 30, 2016 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash Flows from Operating Activities: Net income (loss) $ 71,607 $ 107,446 $ 418 $ (107,442 ) $ 72,029 Adjustments to reconcile net income (loss) to net cash flows from operating activities 19,205 66,295 16,370 107,442 209,312 Net cash flows from operating activities 90,812 173,741 16,788 — 281,341 Cash Flows from Investing Activities: Purchases of marketable investment securities (280,810 ) — — — (280,810 ) Sales and maturities of marketable investment securities 213,913 — — — 213,913 Expenditures for property and equipment — (162,392 ) (58,199 ) — (220,591 ) Expenditures for externally marketed software — (12,299 ) — — (12,299 ) Changes in restricted cash and cash equivalents (1,494 ) — (90 ) — (1,584 ) Investment in unconsolidated entity — (1,636 ) — — (1,636 ) Investment in subsidiary (46,323 ) (46,323 ) — 92,646 — Payment for EchoStar XXI launch services — — (11,875 ) — (11,875 ) Other, net — 340 — (340 ) — Net cash flows from investing activities (114,714 ) (222,310 ) (70,164 ) 92,306 (314,882 ) Cash Flows from Financing Activities: Proceeds from capital contributions from parent — 46,323 46,323 (92,646 ) — Capital contribution from EchoStar 11,875 — — — 11,875 Repayment of debt and capital lease obligations — (14,017 ) (2,182 ) — (16,199 ) Advances from affiliates — — 4,934 — 4,934 Other, net 8 (2,134 ) 988 340 (798 ) Net cash flows from financing activities 11,883 30,172 50,063 (92,306 ) (188 ) Effect of exchange rates on cash and cash equivalents — — 527 — 527 Net decrease in cash and cash equivalents (12,019 ) (18,397 ) (2,786 ) — (33,202 ) Cash and cash equivalents, at beginning of period 300,634 55,767 26,589 — 382,990 Cash and cash equivalents, at end of period $ 288,615 $ 37,370 $ 23,803 $ — $ 349,788 |