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. September 30, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 1,291,333 $ 40,695 $ 29,527 $ — $ 1,361,555 Marketable investment securities, at fair value 1,201,132 1,358 — — 1,202,490 Trade accounts receivable and contract assets — 151,535 65,946 — 217,481 Trade accounts receivable - DISH Network, net — 10,096 492 — 10,588 Inventory — 58,097 11,964 — 70,061 Advances to affiliates, net 7,829 498,705 22,693 (428,497 ) 100,730 Other current assets 116 23,345 35,572 — 59,033 Total current assets 2,500,410 783,831 166,194 (428,497 ) 3,021,938 Property and equipment, net — 2,352,820 290,651 — 2,643,471 Regulatory authorizations — 465,658 — — 465,658 Goodwill — 504,173 — — 504,173 Other intangible assets, net — 47,609 — — 47,609 Investments in unconsolidated entities — 30,301 — — 30,301 Investment in subsidiaries 3,308,536 181,408 — (3,489,944 ) — Advances to affiliates 700 86,614 — (87,314 ) — Deferred tax asset 140,216 — 10,168 (140,216 ) 10,168 Other noncurrent assets, net — 230,502 11,415 — 241,917 Total assets $ 5,949,862 $ 4,682,916 $ 478,428 $ (4,145,971 ) $ 6,965,235 Liabilities and Shareholders’ Equity Trade accounts payable $ — $ 101,470 $ 15,271 $ — $ 116,741 Trade accounts payable - DISH Network — 456 — — 456 Current portion of long-term debt and capital lease obligations 986,843 38,928 4,317 — 1,030,088 Advances from affiliates, net 159,157 185,431 84,838 (428,497 ) 929 Accrued expenses and other 56,233 129,319 52,445 — 237,997 Total current liabilities 1,202,233 455,604 156,871 (428,497 ) 1,386,211 Long-term debt and capital lease obligations, net 2,384,210 197,410 1,199 — 2,582,819 Deferred tax liabilities, net — 618,915 972 (140,216 ) 479,671 Advances from affiliates — — 120,836 (87,314 ) 33,522 Other noncurrent liabilities — 102,773 2,095 — 104,868 Total HSS shareholders’ equity 2,363,419 3,308,214 181,730 (3,489,944 ) 2,363,419 Noncontrolling interests — — 14,725 — 14,725 Total liabilities and shareholders’ equity $ 5,949,862 $ 4,682,916 $ 478,428 $ (4,145,971 ) $ 6,965,235 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 — 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 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 noncurrent liabilities — 104,249 3,378 — 107,627 Total HSS shareholders’ equity 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 $ 5,693,083 $ 4,593,079 $ 470,125 $ (3,898,937 ) $ 6,857,350 For the Three Months Ended September 30, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 84,298 $ 491 $ — $ 84,789 Services and other revenue - other — 345,466 57,312 (9,558 ) 393,220 Equipment revenue — 57,138 7,625 (7,917 ) 56,846 Total revenue — 486,902 65,428 (17,475 ) 534,855 Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 123,696 36,206 (8,855 ) 151,047 Cost of sales - equipment (exclusive of depreciation and amortization) — 47,736 6,499 (7,917 ) 46,318 Selling, general and administrative expenses — 85,222 13,156 (703 ) 97,675 Research and development expenses — 6,544 — — 6,544 Depreciation and amortization — 125,748 13,203 — 138,951 Total costs and expenses — 388,946 69,064 (17,475 ) 440,535 Operating income — 97,956 (3,636 ) — 94,320 Other Income (Expense): Interest income 15,019 930 670 (922 ) 15,697 Interest expense, net of amounts capitalized (57,514 ) (7,277 ) (1,221 ) 922 (65,090 ) Gains and losses on investments, net — 145 — — 145 Equity in earnings of unconsolidated affiliate — 992 — — 992 Equity in earnings (losses) of subsidiaries, net 61,476 (6,701 ) — (54,775 ) — Other, net 1 (15 ) (3,604 ) — (3,618 ) Total other income (expense), net 18,982 (11,926 ) (4,155 ) (54,775 ) (51,874 ) Income (loss) before income taxes 18,982 86,030 (7,791 ) (54,775 ) 42,446 Income tax benefit (provision) 9,488 (24,463 ) 1,449 — (13,526 ) Net income (loss) 28,470 61,567 (6,342 ) (54,775 ) 28,920 Less: Net income attributable to noncontrolling interests — — 450 — 450 Net income (loss) attributable to HSS $ 28,470 $ 61,567 $ (6,792 ) $ (54,775 ) $ 28,470 Comprehensive Income (Loss): Net income (loss) $ 28,470 $ 61,567 $ (6,342 ) $ (54,775 ) $ 28,920 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (9,460 ) — (9,460 ) Unrealized gains (losses) on available-for-sale securities and other 27 — (144 ) — (117 ) Realized gains on available-for-sale securities (1 ) — — — (1 ) Equity in other comprehensive income (loss) of subsidiaries, net (9,014 ) (9,014 ) — 18,028 — Total other comprehensive income (loss), net of tax (8,988 ) (9,014 ) (9,604 ) 18,028 (9,578 ) Comprehensive income (loss) 19,482 52,553 (15,946 ) (36,747 ) 19,342 Less: Comprehensive loss attributable to noncontrolling interests — — (140 ) — (140 ) Comprehensive income (loss) attributable to HSS $ 19,482 $ 52,553 $ (15,806 ) $ (36,747 ) $ 19,482 For the Three Months Ended September 30, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 107,765 $ 499 $ — $ 108,264 Services and other revenue - other — 273,821 47,333 (10,181 ) 310,973 Equipment revenue — 59,645 6,242 (6,762 ) 59,125 Total revenue — 441,231 54,074 (16,943 ) 478,362 Costs and Expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 116,069 35,625 (9,624 ) 142,070 Cost of sales - equipment (exclusive of depreciation and amortization) — 49,730 4,623 (6,709 ) 47,644 Selling, general and administrative expenses — 72,492 11,630 (610 ) 83,512 Research and development expenses — 8,302 — — 8,302 Depreciation and amortization — 117,702 10,213 — 127,915 Total costs and expenses — 364,295 62,091 (16,943 ) 409,443 Operating income — 76,936 (8,017 ) — 68,919 Other Income (Expense): Interest income 7,667 200 653 (199 ) 8,321 Interest expense, net of amounts capitalized (57,372 ) (4,282 ) 672 199 (60,783 ) Equity in earnings of unconsolidated affiliate — 1,948 — — 1,948 Equity in earnings (losses) of subsidiaries, net 42,830 (2,705 ) — (40,125 ) — Other, net — (85 ) 1,889 — 1,804 Total other income (expense), net (6,875 ) (4,924 ) 3,214 (40,125 ) (48,710 ) Income (loss) before income taxes (6,875 ) 72,012 (4,803 ) (40,125 ) 20,209 Income tax benefit (provision) 17,826 (29,092 ) 2,540 — (8,726 ) Net income (loss) 10,951 42,920 (2,263 ) (40,125 ) 11,483 Less: Net income attributable to noncontrolling interests — — 532 — 532 Net income (loss) attributable to HSS $ 10,951 $ 42,920 $ (2,795 ) $ (40,125 ) $ 10,951 Comprehensive Income (Loss): Net income (loss) $ 10,951 $ 42,920 $ (2,263 ) $ (40,125 ) $ 11,483 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 8,571 — 8,571 Unrealized gains (losses) on available-for-sale securities and other (20 ) 24 (70 ) — (66 ) Equity in other comprehensive income (loss) of subsidiaries, net 8,525 8,501 — (17,026 ) — Total other comprehensive income (loss), net of tax 8,505 8,525 8,501 (17,026 ) 8,505 Comprehensive income (loss) 19,456 51,445 6,238 (57,151 ) 19,988 Less: Comprehensive income attributable to noncontrolling interests — — 532 — 532 Comprehensive income (loss) attributable to HSS $ 19,456 $ 51,445 $ 5,706 $ (57,151 ) $ 19,456 For the Nine Months Ended September 30, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 281,038 $ 1,505 $ — $ 282,543 Services and other revenue - other — 989,449 171,767 (28,547 ) 1,132,669 Equipment revenue — 157,190 16,789 (23,845 ) 150,134 Total revenue — 1,427,677 190,061 (52,392 ) 1,565,346 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 365,281 110,441 (26,797 ) 448,925 Cost of sales - equipment (exclusive of depreciation and amortization) — 137,596 13,503 (23,845 ) 127,254 Selling, general and administrative expenses — 251,091 36,359 (1,750 ) 285,700 Research and development expenses — 20,328 — — 20,328 Depreciation and amortization — 371,336 38,041 — 409,377 Total costs and expenses — 1,145,632 198,344 (52,392 ) 1,291,584 Operating income — 282,045 (8,283 ) — 273,762 Other income (expense): Interest income 39,548 2,855 1,679 (2,720 ) 41,362 Interest expense, net of amounts capitalized (172,438 ) (20,807 ) (3,100 ) 2,720 (193,625 ) Gains and losses on investments, net — 262 — — 262 Equity in earnings of unconsolidated affiliate — 3,722 — — 3,722 Equity in earnings (losses) of subsidiaries, net 191,915 (18,559 ) — (173,356 ) — Other, net 7 9,377 (13,148 ) — (3,764 ) Total other income (expense), net 59,032 (23,150 ) (14,569 ) (173,356 ) (152,043 ) Income (loss) before income taxes 59,032 258,895 (22,852 ) (173,356 ) 121,719 Income tax benefit (provision) 29,670 (66,650 ) 5,255 — (31,725 ) Net income (loss) 88,702 192,245 (17,597 ) (173,356 ) 89,994 Less: Net income attributable to noncontrolling interests — — 1,292 — 1,292 Net income (loss) attributable to HSS $ 88,702 $ 192,245 $ (18,889 ) $ (173,356 ) $ 88,702 Comprehensive income (loss): Net income (loss) $ 88,702 $ 192,245 $ (17,597 ) $ (173,356 ) $ 89,994 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (39,874 ) — (39,874 ) Unrealized gains (losses) on available-for-sale securities and other 186 — (385 ) — (199 ) Recognition of realized losses on available-for-sale securities in net income (4 ) — — — (4 ) Equity in other comprehensive income (loss) of subsidiaries, net (38,870 ) (38,870 ) — 77,740 — Total other comprehensive income (loss), net of tax (38,688 ) (38,870 ) (40,259 ) 77,740 (40,077 ) Comprehensive income (loss) 50,014 153,375 (57,856 ) (95,616 ) 49,917 Less: Comprehensive income attributable to noncontrolling interests — — (97 ) — (97 ) Comprehensive income (loss) attributable to HSS $ 50,014 $ 153,375 $ (57,759 ) $ (95,616 ) $ 50,014 For the Nine Months Ended September 30, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 329,457 $ 1,218 $ — $ 330,675 Services and other revenue - other — 763,554 125,307 (22,610 ) 866,251 Equipment revenue — 192,711 15,952 (34,844 ) 173,819 Total revenue — 1,285,722 142,477 (57,454 ) 1,370,745 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 339,007 95,276 (20,635 ) 413,648 Cost of sales - equipment (exclusive of depreciation and amortization) — 164,434 12,429 (34,736 ) 142,127 Selling, general and administrative expenses — 213,212 32,876 (2,083 ) 244,005 Research and development expenses — 23,444 — — 23,444 Depreciation and amortization — 339,342 25,536 — 364,878 Total costs and expenses — 1,079,439 166,117 (57,454 ) 1,188,102 Operating income — 206,283 (23,640 ) — 182,643 Other income (expense): Interest income 19,890 633 1,322 (597 ) 21,248 Interest expense, net of amounts capitalized (172,007 ) (12,301 ) 1,715 597 (181,996 ) Gains and losses on investments, net — (1,575 ) — — (1,575 ) Equity in earnings of unconsolidated affiliate — 5,298 — — 5,298 Equity in earnings (losses) of subsidiaries, net 117,767 (13,344 ) — (104,423 ) — Other, net — (925 ) 1,154 — 229 Total other income (expense), net (34,350 ) (22,214 ) 4,191 (104,423 ) (156,796 ) Income (loss) before income taxes (34,350 ) 184,069 (19,449 ) (104,423 ) 25,847 Income tax benefit (provision) 54,556 (65,974 ) 6,783 — (4,635 ) Net income (loss) 20,206 118,095 (12,666 ) (104,423 ) 21,212 Less: Net income attributable to noncontrolling interests — — 1,006 — 1,006 Net income (loss) attributable to HSS $ 20,206 $ 118,095 $ (13,672 ) $ (104,423 ) $ 20,206 Comprehensive income (loss): Net income (loss) $ 20,206 $ 118,095 $ (12,666 ) $ (104,423 ) $ 21,212 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 13,956 — 13,956 Unrealized losses on available-for-sale securities and other (68 ) (1,464 ) (45 ) — (1,577 ) 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 15,745 13,911 — (29,656 ) — Total other comprehensive income (loss), net of tax 15,677 15,745 13,911 (29,656 ) 15,677 Comprehensive income (loss) 35,883 133,840 1,245 (134,079 ) 36,889 Less: Comprehensive income attributable to noncontrolling interests — — 1,006 — 1,006 Comprehensive income (loss) attributable to HSS $ 35,883 $ 133,840 $ 239 $ (134,079 ) $ 35,883 For the Nine Months Ended September 30, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 88,702 $ 192,245 $ (17,597 ) $ (173,356 ) $ 89,994 Adjustments to reconcile net income (loss) to net cash flows from operating activities (201,774 ) 438,805 55,249 173,356 465,636 Net cash flows from operating activities (113,072 ) 631,050 37,652 — 555,630 Cash flows from investing activities: Purchases of marketable investment securities (1,546,479 ) — — — (1,546,479 ) Sales and maturities of marketable investment securities 799,250 — — — 799,250 Expenditures for property and equipment — (223,484 ) (62,739 ) — (286,223 ) Refunds and other receipts related to property and equipment — 77,524 — — 77,524 Expenditures for externally marketed software — (24,568 ) — — (24,568 ) Payment for satellite launch services — — (7,125 ) — (7,125 ) Distributions (contributions) and advances from (to) subsidiaries, net 397,631 (32,985 ) — (364,646 ) — Other — (991 ) — — (991 ) Net cash flows from investing activities (349,598 ) (204,504 ) (69,864 ) (364,646 ) (988,612 ) Cash flows from financing activities: Contributions (distributions) and advances (to) from parent, net — (397,631 ) 32,985 364,646 — Repayment of debt and capital lease obligations — (26,545 ) (1,219 ) — (27,764 ) Capital contribution from EchoStar 7,125 — — — 7,125 Repayment of in-orbit incentive obligations — (4,048 ) — — (4,048 ) Net cash flows from financing activities 7,125 (428,224 ) 31,766 364,646 (24,687 ) Effect of exchange rates on cash and cash equivalents — — (3,350 ) — (3,350 ) Net increase (decrease) in cash and cash equivalents, including restricted amounts (455,545 ) (1,678 ) (3,796 ) — (461,019 ) 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 $ 1,291,333 $ 40,695 $ 30,307 $ — $ 1,362,335 For the Nine Months Ended September 30, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 20,206 $ 118,095 $ (12,666 ) $ (104,423 ) $ 21,212 Adjustments to reconcile net income (loss) to net cash flows from operating activities 66,702 160,917 16,592 104,423 348,634 Net cash flows from operating activities 86,908 279,012 3,926 — 369,846 Cash flows from investing activities: Purchases of marketable investment securities (170,158 ) — — — (170,158 ) Sales and maturities of marketable investment securities 151,141 — — — 151,141 Expenditures for property and equipment — (243,409 ) (48,566 ) — (291,975 ) Expenditures for externally marketed software — (25,447 ) — — (25,447 ) Distributions (contributions) and advances from (to) subsidiaries, net (44,000 ) (47,500 ) — 91,500 — Net cash flows from investing activities (63,017 ) (316,356 ) (48,566 ) 91,500 (336,439 ) Cash flows from financing activities: Contributions (distributions) and advances (to) from parent, net — 44,000 47,500 (91,500 ) — Repayment of debt and capital lease obligations — (23,800 ) (1,987 ) — (25,787 ) Advances from affiliates — — (36 ) — (36 ) Payment of in-orbit incentive obligations — (4,583 ) — — (4,583 ) Other, net 186 — 886 — 1,072 Net cash flows from financing activities 186 15,617 46,363 (91,500 ) (29,334 ) Effect of exchange rates on cash and cash equivalents — — 923 — 923 Net increase (decrease) in cash and cash equivalents, including restricted amounts 24,077 (21,727 ) 2,646 — 4,996 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 $ 2,016,026 $ 32,178 $ 28,479 $ — $ 2,076,683 |