Supplemental Guarantor and Non-Guarantor Financial Information | Supplemental Guarantor and Non-Guarantor Financial Information Certain of our wholly-owned subsidiaries (together, the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed, on a joint and several basis, the obligations of our 2019 Senior Secured Notes and 7 5/8% Senior Unsecured Notes due 2021 (the “2021 Senior Unsecured Notes”), which were issued on June 1, 2011, and our 2026 Senior Secured Notes and 6.625% Senior Unsecured Notes due 2016, which were issued on July 27, 2016 (the “2026 Senior Unsecured Notes” and together with the 2026 Senior Secured Notes, the “2026 Notes”). See Note 10 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, accompanying condensed consolidating financial information prepared in accordance with Rule 3-10(f) of Regulation S-X is presented below, including the accompanying condensed balance sheet information, the accompanying condensed statement of operations and comprehensive income (loss) information and the accompanying condensed statement of cash flows information of HSS, the Guarantor Subsidiaries on a combined basis and the non-guarantor subsidiaries of HSS on a combined basis and the eliminations necessary to arrive at the corresponding information of HSS on a consolidated basis. The indentures governing 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. March 31, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 1,700,804 $ 46,731 $ 28,294 $ — $ 1,775,829 Marketable investment securities, at fair value 622,839 708 — — 623,547 Trade accounts receivable and contract assets, net — 101,951 64,231 — 166,182 Trade accounts receivable - DISH Network, net — 53,055 543 — 53,598 Inventory — 57,145 28,850 — 85,995 Advances to affiliates, net 109,787 237,240 10,645 (248,959 ) 108,713 Other current assets 25 22,463 36,550 (109 ) 58,929 Total current assets 2,433,455 519,293 169,113 (249,068 ) 2,872,793 Property and equipment, net — 2,432,825 293,799 — 2,726,624 Regulatory authorizations — 465,658 — — 465,658 Goodwill — 504,173 — — 504,173 Other intangible assets, net — 54,924 — — 54,924 Investments in unconsolidated entities — 32,079 — — 32,079 Investment in subsidiaries 3,203,354 222,567 — (3,425,921 ) — Advances to affiliates 700 80,744 — (81,444 ) — Deferred tax asset 120,969 — 4,452 (120,969 ) 4,452 Other noncurrent assets, net — 225,343 14,634 — 239,977 Total assets $ 5,758,478 $ 4,537,606 $ 481,998 $ (3,877,402 ) $ 6,900,680 Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ — $ 88,294 $ 14,183 $ — $ 102,477 Trade accounts payable - DISH Network — 2,826 — — 2,826 Current portion of long-term debt and capital lease obligations — 36,874 4,550 — 41,424 Advances from affiliates, net — 187,138 62,444 (248,959 ) 623 Accrued expenses and other 58,700 128,551 41,579 (109 ) 228,721 Total current liabilities 58,700 443,683 122,756 (249,068 ) 376,071 Long-term debt and capital lease obligations, net 3,367,078 217,401 1,493 — 3,585,972 Deferred tax liabilities, net — 570,403 979 (120,969 ) 450,413 Advances from affiliates — — 115,590 (81,444 ) 34,146 Other non-current liabilities — 103,327 3,063 — 106,390 Total HSS shareholders’ equity (deficit) 2,332,700 3,202,792 223,129 (3,425,921 ) 2,332,700 Noncontrolling interests — — 14,988 — 14,988 Total liabilities and shareholders’ equity (deficit) $ 5,758,478 $ 4,537,606 $ 481,998 $ (3,877,402 ) $ 6,900,680 December 31, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 1,746,878 $ 42,373 $ 33,310 $ — $ 1,822,561 Marketable investment securities, at fair value 454,500 1,102 — — 455,602 Trade accounts receivable and contract assets, net — 133,735 63,105 — 196,840 Trade accounts receivable - DISH Network, net — 38,286 355 — 38,641 Inventory — 59,711 23,884 — 83,595 Advances to affiliates, net 119,605 229,488 7,313 (241,548 ) 114,858 Other current assets 64 98,890 31,788 (401 ) 130,341 Total current assets 2,321,047 603,585 159,755 (241,949 ) 2,842,438 Property and equipment, net — 2,459,703 293,395 — 2,753,098 Regulatory authorizations — 465,658 — — 465,658 Goodwill — 504,173 — — 504,173 Other intangible assets, net — 58,582 — — 58,582 Investments in unconsolidated entities — 30,587 — — 30,587 Investment in subsidiaries 3,260,790 204,208 — (3,464,998 ) — Advances to affiliates 700 80,744 — (81,444 ) — Deferred tax asset 110,546 — 3,700 (110,546 ) 3,700 Other noncurrent assets, net — 185,839 13,275 — 199,114 Total assets $ 5,693,083 $ 4,593,079 $ 470,125 $ (3,898,937 ) $ 6,857,350 Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ — $ 82,300 $ 20,516 $ — $ 102,816 Trade accounts payable - DISH Network — 3,769 — — 3,769 Current portion of long-term debt and capital lease obligations — 35,886 4,745 — 40,631 Advances from affiliates, net — 185,161 56,864 (241,548 ) 477 Accrued expenses and other 43,518 145,362 46,748 (401 ) 235,227 Total current liabilities 43,518 452,478 128,873 (241,949 ) 382,920 Long-term debt and capital lease obligations, net 3,365,143 226,997 2,073 — 3,594,213 Deferred tax liabilities, net — 549,217 960 (110,546 ) 439,631 Advances from affiliates — — 115,159 (81,444 ) 33,715 Other non-current liabilities — 104,249 3,378 — 107,627 Total HSS shareholders’ equity (deficit) 2,284,422 3,260,138 204,860 (3,464,998 ) 2,284,422 Noncontrolling interests — — 14,822 — 14,822 Total liabilities and shareholders’ equity (deficit) $ 5,693,083 $ 4,593,079 $ 470,125 $ (3,898,937 ) $ 6,857,350 For the three months ended March 31, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 100,087 $ 527 $ — $ 100,614 Services and other revenue - other — 312,108 57,076 (9,850 ) 359,334 Equipment revenue - other — 46,409 4,607 (8,069 ) 42,947 Total revenue — 458,604 62,210 (17,919 ) 502,895 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 114,374 37,726 (9,397 ) 142,703 Cost of sales - equipment (exclusive of depreciation and amortization) — 48,595 3,465 (8,037 ) 44,023 Selling, general and administrative expenses — 83,392 11,743 (485 ) 94,650 Research and development expenses — 7,137 — — 7,137 Depreciation and amortization — 121,339 12,379 — 133,718 Total costs and expenses — 374,837 65,313 (17,919 ) 422,231 Operating income — 83,767 (3,103 ) — 80,664 Other income (expense): Interest income 10,761 316 501 (199 ) 11,379 Interest expense, net of amounts capitalized (57,445 ) (6,956 ) (211 ) 199 (64,413 ) Gains (losses) on investments, net — (392 ) — — (392 ) Equity in earnings of unconsolidated affiliate — 1,492 — — 1,492 Equity in earnings (losses) of subsidiaries, net 56,259 (3,697 ) — (52,562 ) — Other, net 3 (97 ) (519 ) — (613 ) Total other income (expense), net 9,578 (9,334 ) (229 ) (52,562 ) (52,547 ) Income (loss) before income taxes 9,578 74,433 (3,332 ) (52,562 ) 28,117 Income tax benefit (provision) 10,423 (18,084 ) (75 ) — (7,736 ) Net income (loss) 20,001 56,349 (3,407 ) (52,562 ) 20,381 Less: Net income attributable to noncontrolling interests — — 380 — 380 Net income (loss) attributable to HSS $ 20,001 $ 56,349 $ (3,787 ) $ (52,562 ) $ 20,001 Comprehensive income (loss): Net income (loss) $ 20,001 $ 56,349 $ (3,407 ) $ (52,562 ) $ 20,381 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 1,900 — 1,900 Unrealized losses on available-for-sale securities and other (311 ) — (100 ) — (411 ) Equity in other comprehensive income (loss) of subsidiaries, net 2,014 2,014 — (4,028 ) — Total other comprehensive income (loss), net of tax 1,703 2,014 1,800 (4,028 ) 1,489 Comprehensive income (loss) 21,704 58,363 (1,607 ) (56,590 ) 21,870 Less: Comprehensive income attributable to noncontrolling interests — — 166 — 166 Comprehensive income (loss) attributable to HSS $ 21,704 $ 58,363 $ (1,773 ) $ (56,590 ) $ 21,704 For the three months ended March 31, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 111,304 $ 186 $ — $ 111,490 Services and other revenue - other — 241,372 34,363 (5,512 ) 270,223 Equipment revenue - other — 51,235 4,677 (7,507 ) 48,405 Total revenue — 403,911 39,226 (13,019 ) 430,118 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 106,544 29,710 (5,355 ) 130,899 Cost of sales - equipment (exclusive of depreciation and amortization) — 47,812 3,274 (6,860 ) 44,226 Selling, general and administrative expenses — 65,685 9,497 (804 ) 74,378 Research and development expenses — 7,705 — — 7,705 Depreciation and amortization — 105,447 6,773 — 112,220 Total costs and expenses — 333,193 49,254 (13,019 ) 369,428 Operating income — 70,718 (10,028 ) — 60,690 Other income (expense): Interest income 5,490 202 348 (199 ) 5,841 Interest expense, net of amounts capitalized (57,299 ) (3,222 ) 485 199 (59,837 ) Gains on investments, net — 91 — — 91 Other-than-temporary impairment loss on available-for-sale securities — (3,298 ) — — (3,298 ) Equity in earnings of unconsolidated affiliate — 1,711 — — 1,711 Equity in earnings (losses) of subsidiaries, net 41,859 (6,201 ) — (35,658 ) — Other, net — (138 ) 785 — 647 Total other income (expense), net (9,950 ) (10,855 ) 1,618 (35,658 ) (54,845 ) Income (loss) before income taxes (9,950 ) 59,863 (8,410 ) (35,658 ) 5,845 Income tax benefit (provision) 19,085 (17,856 ) 2,353 — 3,582 Net income (loss) 9,135 42,007 (6,057 ) (35,658 ) 9,427 Less: Net income attributable to noncontrolling interests — — 292 — 292 Net income (loss) attributable to HSS $ 9,135 $ 42,007 $ (6,349 ) $ (35,658 ) $ 9,135 Comprehensive income (loss): Net income (loss) $ 9,135 $ 42,007 $ (6,057 ) $ (35,658 ) $ 9,427 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 12,121 — 12,121 Unrealized gains (losses) on available-for-sale securities and other (27 ) (1,574 ) 101 — (1,500 ) Recognition of other-than-temporary loss on available-for-sale securities in net income (loss) — 3,298 — — 3,298 Equity in other comprehensive income (loss) of subsidiaries, net 13,946 12,222 — (26,168 ) — Total other comprehensive income (loss), net of tax 13,919 13,946 12,222 (26,168 ) 13,919 Comprehensive income (loss) 23,054 55,953 6,165 (61,826 ) 23,346 Less: Comprehensive income attributable to noncontrolling interests — — 292 — 292 Comprehensive income (loss) attributable to HSS $ 23,054 $ 55,953 $ 5,873 $ (61,826 ) $ 23,054 For the three months ended March 31, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 20,001 $ 56,349 $ (3,407 ) $ (52,562 ) $ 20,381 Adjustments to reconcile net income (loss) to net cash flows from operating activities (57,327 ) 127,889 (1,102 ) 52,562 122,022 Net cash flows from operating activities (37,326 ) 184,238 (4,509 ) — 142,403 Cash flows from investing activities: Purchases of marketable investment securities (358,543 ) — — — (358,543 ) Sales and maturities of marketable investment securities 197,686 — — — 197,686 Expenditures for property and equipment — (76,974 ) (10,803 ) — (87,777 ) Refunds and other receipts related to capital expenditures — 77,524 — — 77,524 Expenditures for externally marketed software — (7,148 ) — — (7,148 ) Payment for satellite launch services — — (7,125 ) — (7,125 ) Distributions (contributions) and advances from (to) subsidiaries, net 144,984 (18,425 ) — (126,559 ) — Net cash flows from investing activities (15,873 ) (25,023 ) (17,928 ) (126,559 ) (185,383 ) Cash flows from financing activities: Contributions (distributions) and advances (to) from parent, net — (144,984 ) 18,425 126,559 — Repayment of debt and capital lease obligations — (8,608 ) (760 ) — (9,368 ) Capital contribution from EchoStar 7,125 — — — 7,125 Other, net — (1,265 ) — — (1,265 ) Net cash flows from financing activities 7,125 (154,857 ) 17,665 126,559 (3,508 ) Effect of exchange rates on cash and cash equivalents — — (249 ) — (249 ) Net increase (decrease) in cash and cash equivalents, including restricted amounts (46,074 ) 4,358 (5,021 ) — (46,737 ) Cash and cash equivalents, including restricted amounts, beginning of period 1,746,878 42,373 34,103 — 1,823,354 Cash and cash equivalents, including restricted amounts, end of period $ 1,700,804 $ 46,731 $ 29,082 $ — $ 1,776,617 For the three months ended March 31, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 9,135 $ 42,007 $ (6,057 ) $ (35,658 ) $ 9,427 Adjustments to reconcile net income (loss) to net cash flows from operating activities 11,863 27,173 7,956 35,658 82,650 Net cash flows from operating activities 20,998 69,180 1,899 — 92,077 Cash flows from investing activities: Sales and maturities of marketable investment securities 91,747 — — — 91,747 Expenditures for property and equipment — (53,634 ) (20,541 ) — (74,175 ) Expenditures for externally marketed software — (10,832 ) — — (10,832 ) Investment in subsidiary (24,500 ) (27,500 ) — 52,000 — Net cash flows from investing activities 67,247 (91,966 ) (20,541 ) 52,000 6,740 Cash flows from financing activities: Proceeds from capital contributions from parent — 24,500 27,500 (52,000 ) — Repayment of debt and capital lease obligations — (7,717 ) (412 ) — (8,129 ) Other, net 600 (1,853 ) 82 — (1,171 ) Net cash flows from financing activities 600 14,930 27,170 (52,000 ) (9,300 ) Effect of exchange rates on cash and cash equivalents — — 689 — 689 Net increase (decrease) in cash and cash equivalents, including restricted amounts 88,845 (7,856 ) 9,217 — 90,206 Cash and cash equivalents, including restricted amounts, beginning of period 1,991,949 53,905 25,833 — 2,071,687 Cash and cash equivalents, including restricted amounts, end of period $ 2,080,794 $ 46,049 $ 35,050 $ — $ 2,161,893 |