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. June 30, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 1,439,619 $ 42,385 $ 27,234 $ — $ 1,509,238 Marketable investment securities, at fair value 991,913 1,213 — — 993,126 Trade accounts receivable and contract assets, net — 122,726 64,230 — 186,956 Trade accounts receivable - DISH Network, net — 25,217 486 — 25,703 Inventory — 54,030 27,358 — 81,388 Advances to affiliates, net 7,829 399,924 17,431 (321,553 ) 103,631 Other current assets 109 25,111 34,792 (87 ) 59,925 Total current assets 2,439,470 670,606 171,531 (321,640 ) 2,959,967 Property and equipment, net — 2,371,631 271,033 — 2,642,664 Regulatory authorizations — 465,658 — — 465,658 Goodwill — 504,173 — — 504,173 Other intangible assets, net — 51,267 — — 51,267 Investments in unconsolidated entities — 28,317 — — 28,317 Investment in subsidiaries 3,249,869 187,349 — (3,437,218 ) — Advances to affiliates 700 86,661 — (87,361 ) — Deferred tax asset 130,728 — 8,229 (130,728 ) 8,229 Other noncurrent assets, net — 228,965 10,708 — 239,673 Total assets $ 5,820,767 $ 4,594,627 $ 461,501 $ (3,976,947 ) $ 6,899,948 Liabilities and Shareholders’ Equity (Deficit) Trade accounts payable $ — $ 85,524 $ 11,592 $ — $ 97,116 Trade accounts payable - DISH Network — 445 — — 445 Current portion of long-term debt and capital lease obligations 985,773 37,888 4,458 — 1,028,119 Advances from affiliates, net 63,264 185,102 73,958 (321,553 ) 771 Accrued expenses and other 45,723 132,295 43,259 (87 ) 221,190 Total current liabilities 1,094,760 441,254 133,267 (321,640 ) 1,347,641 Long-term debt and capital lease obligations, net 2,383,275 207,540 1,359 — 2,592,174 Deferred tax liabilities, net — 594,493 957 (130,728 ) 464,722 Advances from affiliates — — 120,886 (87,361 ) 33,525 Other non-current liabilities — 101,884 2,405 — 104,289 Total HSS shareholders’ equity (deficit) 2,342,732 3,249,456 187,762 (3,437,218 ) 2,342,732 Noncontrolling interests — — 14,865 — 14,865 Total liabilities and shareholders’ equity (deficit) $ 5,820,767 $ 4,594,627 $ 461,501 $ (3,976,947 ) $ 6,899,948 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 June 30, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 96,653 $ 487 $ — $ 97,140 Services and other revenue - other — 331,875 57,379 (9,139 ) 380,115 Equipment revenue — 53,643 4,557 (7,859 ) 50,341 Total revenue — 482,171 62,423 (16,998 ) 527,596 Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 122,259 36,509 (8,545 ) 150,223 Cost of sales - equipment (exclusive of depreciation and amortization) — 46,217 3,539 (7,891 ) 41,865 Selling, general and administrative expenses — 82,477 11,460 (562 ) 93,375 Research and development expenses — 6,647 — — 6,647 Depreciation and amortization — 124,249 12,459 — 136,708 Total costs and expenses — 381,849 63,967 (16,998 ) 428,818 Operating income — 100,322 (1,544 ) — 98,778 Other Income (Expense): Interest income 13,768 1,609 508 (1,599 ) 14,286 Interest expense, net of amounts capitalized (57,479 ) (6,574 ) (1,668 ) 1,599 (64,122 ) Gains (losses) on investments, net — 509 — — 509 Equity in earnings of unconsolidated affiliate — 1,238 — — 1,238 Equity in earnings (losses) of subsidiaries, net 74,180 (8,161 ) — (66,019 ) — Other, net 3 9,489 (9,025 ) — 467 Total other income (expense), net 30,472 (1,890 ) (10,185 ) (66,019 ) (47,622 ) Income (loss) before income taxes 30,472 98,432 (11,729 ) (66,019 ) 51,156 Income tax benefit (provision) 9,759 (24,103 ) 3,881 — (10,463 ) Net income (loss) 40,231 74,329 (7,848 ) (66,019 ) 40,693 Less: Net income attributable to noncontrolling interests — — 462 — 462 Net income (loss) attributable to HSS $ 40,231 $ 74,329 $ (8,310 ) $ (66,019 ) $ 40,231 Comprehensive Income (Loss): Net income (loss) $ 40,231 $ 74,329 $ (7,848 ) $ (66,019 ) $ 40,693 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (32,314 ) — (32,314 ) Unrealized gains (losses) on available-for-sale securities and other 470 — (141 ) — 329 Realized gains on available-for-sale securities in net income (3 ) — — — (3 ) Equity in other comprehensive income (loss) of subsidiaries, net (31,870 ) (31,870 ) — 63,740 — Total other comprehensive income (loss), net of tax (31,403 ) (31,870 ) (32,455 ) 63,740 (31,988 ) Comprehensive income (loss) 8,828 42,459 (40,303 ) (2,279 ) 8,705 Less: Comprehensive loss attributable to noncontrolling interests — — (123 ) — (123 ) Comprehensive income (loss) attributable to HSS $ 8,828 $ 42,459 $ (40,180 ) $ (2,279 ) $ 8,828 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 — 81,831 5,033 (20,575 ) 66,289 Total revenue — 440,580 49,177 (27,492 ) 462,265 Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 112,989 29,941 (5,656 ) 137,274 Cost of sales - equipment (exclusive of depreciation and amortization) — 70,297 4,532 (21,167 ) 53,662 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 (losses) on investments, 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 Six Months Ended June 30, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 196,740 $ 1,014 $ — $ 197,754 Services and other revenue - other — 643,983 114,455 (18,989 ) 739,449 Equipment revenue — 100,052 9,164 (15,928 ) 93,288 Total revenue — 940,775 124,633 (34,917 ) 1,030,491 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 241,585 74,235 (17,942 ) 297,878 Cost of sales - equipment (exclusive of depreciation and amortization) — 89,860 7,004 (15,928 ) 80,936 Selling, general and administrative expenses — 165,869 23,203 (1,047 ) 188,025 Research and development expenses — 13,784 — — 13,784 Depreciation and amortization — 245,588 24,838 — 270,426 Total costs and expenses — 756,686 129,280 (34,917 ) 851,049 Operating income — 184,089 (4,647 ) — 179,442 Other income (expense): Interest income 24,529 1,925 1,009 (1,798 ) 25,665 Interest expense, net of amounts capitalized (114,924 ) (13,530 ) (1,879 ) 1,798 (128,535 ) Gains (losses) on investments, net — 117 — — 117 Equity in earnings of unconsolidated affiliate — 2,730 — — 2,730 Equity in earnings (losses) of subsidiaries, net 130,439 (11,858 ) — (118,581 ) — Other, net 6 9,392 (9,544 ) — (146 ) Total other income (expense), net 40,050 (11,224 ) (10,414 ) (118,581 ) (100,169 ) Income (loss) before income taxes 40,050 172,865 (15,061 ) (118,581 ) 79,273 Income tax benefit (provision) 20,182 (42,187 ) 3,806 — (18,199 ) Net income (loss) 60,232 130,678 (11,255 ) (118,581 ) 61,074 Less: Net income attributable to noncontrolling interests — — 842 — 842 Net income (loss) attributable to HSS $ 60,232 $ 130,678 $ (12,097 ) $ (118,581 ) $ 60,232 Comprehensive income (loss): Net income (loss) $ 60,232 $ 130,678 $ (11,255 ) $ (118,581 ) $ 61,074 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (30,414 ) — (30,414 ) Unrealized gains (losses) on available-for-sale securities and other 159 — (241 ) — (82 ) Recognition of realized gains (losses) on available-for-sale securities in net income (3 ) — — — (3 ) Equity in other comprehensive income (loss) of subsidiaries, net (29,856 ) (29,856 ) — 59,712 — Total other comprehensive income (loss), net of tax (29,700 ) (29,856 ) (30,655 ) 59,712 (30,499 ) Comprehensive income (loss) 30,532 100,822 (41,910 ) (58,869 ) 30,575 Less: Comprehensive income attributable to noncontrolling interests — — 43 — 43 Comprehensive income (loss) attributable to HSS $ 30,532 $ 100,822 $ (41,953 ) $ (58,869 ) $ 30,532 For the Six Months Ended June 30, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 221,692 $ 719 $ — $ 222,411 Services and other revenue - other — 489,733 77,974 (12,429 ) 555,278 Equipment revenue — 133,066 9,710 (28,082 ) 114,694 Total revenue — 844,491 88,403 (40,511 ) 892,383 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 222,938 59,651 (11,011 ) 271,578 Cost of sales - equipment (exclusive of depreciation and amortization) — 114,704 7,806 (28,027 ) 94,483 Selling, general and administrative expenses — 140,720 21,246 (1,473 ) 160,493 Research and development expenses — 15,142 — — 15,142 Depreciation and amortization — 221,640 15,323 — 236,963 Total costs and expenses — 715,144 104,026 (40,511 ) 778,659 Operating income — 129,347 (15,623 ) — 113,724 Other income (expense): Interest income 12,223 433 669 (398 ) 12,927 Interest expense, net of amounts capitalized (114,635 ) (8,019 ) 1,043 398 (121,213 ) Gains (losses) on investments, net — (1,575 ) — — (1,575 ) Equity in earnings of unconsolidated affiliate — 3,350 — — 3,350 Equity in earnings (losses) of subsidiaries, net 74,937 (10,639 ) — (64,298 ) — Other, net — (840 ) (735 ) — (1,575 ) Total other income (expense), net (27,475 ) (17,290 ) 977 (64,298 ) (108,086 ) Income (loss) before income taxes (27,475 ) 112,057 (14,646 ) (64,298 ) 5,638 Income tax benefit (provision) 36,730 (36,882 ) 4,243 — 4,091 Net income (loss) 9,255 75,175 (10,403 ) (64,298 ) 9,729 Less: Net income attributable to noncontrolling interests — — 474 — 474 Net income (loss) attributable to HSS $ 9,255 $ 75,175 $ (10,877 ) $ (64,298 ) $ 9,255 Comprehensive income (loss): Net income (loss) $ 9,255 $ 75,175 $ (10,403 ) $ (64,298 ) $ 9,729 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 5,385 — 5,385 Unrealized gains (losses) on available-for-sale securities and other (48 ) (1,488 ) 25 — (1,511 ) 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 7,220 5,410 — (12,630 ) — Total other comprehensive income (loss), net of tax 7,172 7,220 5,410 (12,630 ) 7,172 Comprehensive income (loss) 16,427 82,395 (4,993 ) (76,928 ) 16,901 Less: Comprehensive income attributable to noncontrolling interests — — 474 — 474 Comprehensive income (loss) attributable to HSS $ 16,427 $ 82,395 $ (5,467 ) $ (76,928 ) $ 16,427 For the Six Months Ended June 30, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 60,232 $ 130,678 $ (11,255 ) $ (118,581 ) $ 61,074 Adjustments to reconcile net income (loss) to net cash flows from operating activities (143,241 ) 305,364 19,347 118,581 300,051 Net cash flows from operating activities (83,009 ) 436,042 8,092 — 361,125 Cash flows from investing activities: Purchases of marketable investment securities (1,098,527 ) — — — (1,098,527 ) Sales and maturities of marketable investment securities 560,194 — — — 560,194 Expenditures for property and equipment — (148,208 ) (27,436 ) — (175,644 ) Refunds and other receipts related to property and equipment — 77,524 — — 77,524 Expenditures for externally marketed software — (15,000 ) — — (15,000 ) Payment for satellite launch services — — (7,125 ) — (7,125 ) Distributions (contributions) and advances from (to) subsidiaries, net 306,958 (23,215 ) — (283,743 ) — Net cash flows from investing activities (231,375 ) (108,899 ) (34,561 ) (283,743 ) (658,578 ) Cash flows from financing activities: Contributions (distributions) and advances (to) from parent, net — (306,958 ) 23,215 283,743 — Repayment of debt and capital lease obligations — (17,455 ) (962 ) — (18,417 ) Capital contribution from EchoStar 7,125 — — — 7,125 Payment of in-orbit incentive obligations — (2,718 ) — — (2,718 ) Net cash flows from financing activities 7,125 (327,131 ) 22,253 283,743 (14,010 ) Effect of exchange rates on cash and cash equivalents — — (1,865 ) — (1,865 ) Net increase (decrease) in cash and cash equivalents, including restricted amounts (307,259 ) 12 (6,081 ) — (313,328 ) 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 $ 1,439,619 $ 42,385 $ 28,022 $ — $ 1,510,026 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 118,648 — — — 118,648 Expenditures for property and equipment — (141,385 ) (33,959 ) — (175,344 ) Expenditures for externally marketed software — (17,119 ) — — (17,119 ) Investment in subsidiary (36,000 ) (39,025 ) — 75,025 — Net cash flows from investing activities 81,656 (197,529 ) (33,959 ) 75,025 (74,807 ) Cash flows from financing activities: Proceeds from capital contributions 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 ) Payment of in-orbit incentive obligations — (3,194 ) — — (3,194 ) Other, net 426 — 886 — 1,312 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, including restricted amounts 113,731 (24,630 ) 7,232 — 96,333 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 $ 2,105,680 $ 29,275 $ 33,065 $ — $ 2,168,020 |