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 Notes. See Note 10 for further information on our 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 our 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. December 31, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 771,718 $ 46,353 $ 29,752 $ — $ 847,823 Marketable investment securities, at fair value 1,608,123 1,073 — — 1,609,196 Trade accounts receivable and contract assets, net — 128,831 72,265 — 201,096 Trade accounts receivable - DISH Network, net — 13,240 310 — 13,550 Inventory — 58,607 16,772 — 75,379 Advances to affiliates, net 109,433 536,600 27,174 (569,657 ) 103,550 Other current assets 72 26,331 41,378 (561 ) 67,220 Total current assets 2,489,346 811,035 187,651 (570,218 ) 2,917,814 Property and equipment, net — 2,280,804 301,377 — 2,582,181 Regulatory authorizations — 465,658 — — 465,658 Goodwill — 504,173 — — 504,173 Other intangible assets, net — 43,952 — — 43,952 Investments in unconsolidated entities — 126,369 — — 126,369 Investment in subsidiaries 3,362,589 192,370 — (3,554,959 ) — Advances to affiliates 700 86,280 — (86,980 ) — Deferred tax asset 54,001 — 3,581 (54,001 ) 3,581 Other noncurrent assets, net — 236,675 12,769 — 249,444 Total assets $ 5,906,636 $ 4,747,316 $ 505,378 $ (4,266,158 ) $ 6,893,172 Liabilities and Shareholders’ Equity Trade accounts payable $ — $ 88,342 $ 16,409 $ — $ 104,751 Trade accounts payable - DISH Network — 752 — — 752 Current portion of long-term debt and capital lease obligations 918,916 39,995 666 — 959,577 Advances from affiliates, net 181,926 282,268 106,331 (569,657 ) 868 Accrued expenses and other 43,410 147,055 48,307 (561 ) 238,211 Total current liabilities 1,144,252 558,412 171,713 (570,218 ) 1,304,159 Long-term debt and capital lease obligations, net 2,385,164 187,002 1,038 — 2,573,204 Deferred tax liabilities, net — 541,903 834 (54,001 ) 488,736 Advances from affiliates — — 120,418 (86,980 ) 33,438 Other noncurrent liabilities — 98,661 2,479 — 101,140 Total HSS shareholders’ equity 2,377,220 3,361,338 193,621 (3,554,959 ) 2,377,220 Noncontrolling interests — — 15,275 — 15,275 Total liabilities and shareholders’ equity $ 5,906,636 $ 4,747,316 $ 505,378 $ (4,266,158 ) $ 6,893,172 Consolidating Balance Sheet as of 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 December 31, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 364,182 $ 1,973 $ — $ 366,155 Services and other revenue - other — 1,333,104 230,900 (37,906 ) 1,526,098 Equipment revenue — 221,996 29,137 (45,723 ) 205,410 Total revenue — 1,919,282 262,010 (83,629 ) 2,097,663 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 487,997 147,952 (35,736 ) 600,213 Cost of sales - equipment (exclusive of depreciation and amortization) — 200,620 21,703 (45,723 ) 176,600 Selling, general and administrative expenses — 345,380 54,943 (2,170 ) 398,153 Research and development expenses — 27,570 — — 27,570 Depreciation and amortization — 498,861 52,555 — 551,416 Impairment of assets — — — — — Total costs and expenses — 1,560,428 277,153 (83,629 ) 1,753,952 Operating income — 358,854 (15,143 ) — 343,711 Other income (expense): Interest income 56,487 3,806 2,472 (3,661 ) 59,104 Interest expense, net of amounts capitalized (229,481 ) (29,418 ) (4,483 ) 3,661 (259,721 ) Other-than-temporary impairment loss on available-for-sale securities — — — — — Gains (losses) on investments, net — 187 — — 187 Equity in earnings of unconsolidated affiliate — 4,874 — — 4,874 Equity in earnings (losses) of subsidiaries, net 224,405 (33,525 ) — (190,880 ) — Other, net (970 ) 9,155 (12,628 ) — (4,443 ) Total other income (expense), net 50,441 (44,921 ) (14,639 ) (190,880 ) (199,999 ) Income (loss) before income taxes 50,441 313,933 (29,782 ) (190,880 ) 143,712 Income tax benefit (provision), net 45,060 (89,984 ) (1,445 ) — (46,369 ) Net income (loss) 95,501 223,949 (31,227 ) (190,880 ) 97,343 Less: Net income attributable to noncontrolling interests — — 1,842 — 1,842 Net income (loss) attributable to HSS $ 95,501 $ 223,949 $ (33,069 ) $ (190,880 ) $ 95,501 Comprehensive income (loss): Net income (loss) $ 95,501 $ 223,949 $ (31,227 ) $ (190,880 ) $ 97,343 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (31,938 ) — (31,938 ) Unrealized gains (losses) on available-for-sale securities and other (665 ) — 41 — (624 ) Realized gains on available-for-sale securities (212 ) — — — (212 ) Equity in other comprehensive income (loss) of subsidiaries, net (30,508 ) (30,508 ) — 61,016 — Total other comprehensive income (loss), net of tax (31,385 ) (30,508 ) (31,897 ) 61,016 (32,774 ) Comprehensive income (loss) 64,116 193,441 (63,124 ) (129,864 ) 64,569 Less: Comprehensive income attributable to noncontrolling interests — — 453 — 453 Comprehensive income (loss) attributable to HSS $ 64,116 $ 193,441 $ (63,577 ) $ (129,864 ) $ 64,116 Consolidating Statement of Operations and Comprehensive Income (Loss) For the Year Ended December 31, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 432,090 $ 1,739 $ — $ 433,829 Services and other revenue - other — 1,056,914 178,857 (32,220 ) 1,203,551 Equipment revenue — 255,610 27,205 (43,326 ) 239,489 Total revenue — 1,744,614 207,801 (75,546 ) 1,876,869 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 458,139 131,177 (29,632 ) 559,684 Cost of sales - equipment (exclusive of depreciation and amortization) — 218,299 20,318 (43,178 ) 195,439 Selling, general and administrative expenses — 293,810 46,517 (2,736 ) 337,591 Research and development expenses — 31,745 — — 31,745 Depreciation and amortization — 458,483 38,315 — 496,798 Impairment of assets — 6,000 — — 6,000 Total costs and expenses — 1,466,476 236,327 (75,546 ) 1,627,257 Operating income — 278,138 (28,526 ) — 249,612 Other income (expense): Interest income 28,146 96,992 1,986 (95,172 ) 31,952 Interest expense, net of amounts capitalized (229,415 ) (112,855 ) 1,620 95,172 (245,478 ) Gains (losses) on marketable investment securities, net — (1,574 ) — — (1,574 ) Equity in earnings of unconsolidated affiliate — 7,027 — — 7,027 Equity in earnings (losses) of subsidiaries, net 471,602 (35,142 ) — (436,460 ) — Other, net — (956 ) (1,232 ) — (2,188 ) Total other income (expense), net 270,333 (46,508 ) 2,374 (436,460 ) (210,261 ) Income (loss) before income taxes 270,333 231,630 (26,152 ) (436,460 ) 39,351 Income tax benefit (provision), net 25,637 240,392 (7,827 ) — 258,202 Net income (loss) 295,970 472,022 (33,979 ) (436,460 ) 297,553 Less: Net income attributable to noncontrolling interests — — 1,583 — 1,583 Net income (loss) attributable to HSS $ 295,970 $ 472,022 $ (35,562 ) $ (436,460 ) $ 295,970 Comprehensive income (loss): Net income (loss) $ 295,970 $ 472,022 $ (33,979 ) $ (436,460 ) $ 297,553 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 7,196 — 7,196 Unrealized gains (losses) on available-for-sale securities and other (273 ) (2,007 ) 92 — (2,188 ) 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 8,170 6,879 — (15,049 ) — Total other comprehensive income (loss), net of tax 7,897 8,170 7,288 (15,049 ) 8,306 Comprehensive income (loss) 303,867 480,192 (26,691 ) (451,509 ) 305,859 Less: Comprehensive income attributable to noncontrolling interests — — 1,992 — 1,992 Comprehensive income (loss) attributable to HSS $ 303,867 $ 480,192 $ (28,683 ) $ (451,509 ) $ 303,867 Consolidating Statement of Operations and Comprehensive Income (Loss) For the Year Ended December 31, 2016 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 449,547 $ — $ — $ 449,547 Services and other revenue - other — 992,480 133,508 (22,861 ) 1,103,127 Equipment revenue — 265,201 24,859 (42,941 ) 247,119 Total revenue — 1,707,228 158,367 (65,802 ) 1,799,793 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 454,185 101,288 (22,168 ) 533,305 Cost of sales - equipment (exclusive of depreciation and amortization) — 210,439 19,512 (40,546 ) 189,405 Selling, general and administrative expenses — 246,399 37,737 (3,088 ) 281,048 Research and development expenses — 31,170 — — 31,170 Depreciation and amortization — 401,688 12,445 — 414,133 Total costs and expenses — 1,343,881 170,982 (65,802 ) 1,449,061 Operating income — 363,347 (12,615 ) — 350,732 Other income (expense): Interest income 10,826 199 1,649 (76 ) 12,598 Interest expense, net of amounts capitalized (177,625 ) (14,538 ) 4,889 76 (187,198 ) Gains (losses) on investments, net — 6,995 — — 6,995 Equity in earnings of unconsolidated affiliate — 9,444 — — 9,444 Equity in earnings (losses) of subsidiaries, net 218,125 (4,906 ) — (213,219 ) — Other, net 9,749 (6,956 ) 116 — 2,909 Total other income (expense), net 61,075 (9,762 ) 6,654 (213,219 ) (155,252 ) Income (loss) before income taxes 61,075 353,585 (5,961 ) (213,219 ) 195,480 Income tax benefit (provision), net 58,940 (135,081 ) 2,382 — (73,759 ) Net income (loss) 120,015 218,504 (3,579 ) (213,219 ) 121,721 Less: Net income attributable to noncontrolling interests — — 1,706 — 1,706 Net income (loss) attributable to HSS $ 120,015 $ 218,504 $ (5,285 ) $ (213,219 ) $ 120,015 Comprehensive income (loss): Net income (loss) $ 120,015 $ 218,504 $ (3,579 ) $ (213,219 ) $ 121,721 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (5,377 ) — (5,377 ) Unrealized gains (losses) on available-for-sale securities and other 3,290 (1,642 ) (64 ) — 1,584 Recognition of realized loss on available-for-sale securities included in net income (loss) (2,996 ) — — — (2,996 ) Equity in other comprehensive income (loss) of subsidiaries, net (6,897 ) (5,255 ) — 12,152 — Total other comprehensive income (loss), net of tax (6,603 ) (6,897 ) (5,441 ) 12,152 (6,789 ) Comprehensive income (loss) 113,412 211,607 (9,020 ) (201,067 ) 114,932 Less: Comprehensive income attributable to noncontrolling interests — — 1,520 — 1,520 Comprehensive income (loss) attributable to HSS $ 113,412 $ 211,607 $ (10,540 ) $ (201,067 ) $ 113,412 December 31, 2018 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 95,501 $ 223,949 $ (31,227 ) $ (190,880 ) $ 97,343 Adjustments to reconcile net income (loss) to net cash flows from operating activities (160,236 ) 536,404 78,312 190,880 645,360 Net cash flows from operating activities (64,735 ) 760,353 47,085 — 742,703 Cash flows from investing activities: Purchases of marketable investment securities (2,063,042 ) — — — (2,063,042 ) Sales and maturities of marketable investment securities 909,996 — — — 909,996 Expenditures for property and equipment — (304,376 ) (86,689 ) — (391,065 ) Refund and other receipts related to capital expenditures — 77,524 — — 77,524 Investment in subsidiary 305,669 (50,540 ) — (255,129 ) — Payment for satellite launch services — — (7,125 ) — (7,125 ) Expenditures for externally marketed software — (31,639 ) — — (31,639 ) Investment in unconsolidated entity — (100,991 ) — — (100,991 ) Net cash flows from investing activities (847,377 ) (410,022 ) (93,814 ) (255,129 ) (1,606,342 ) Cash flows from financing activities: Contribution (distributions) and advances (to) from parent, net — (305,669 ) 50,540 255,129 — Capital contribution from EchoStar 7,125 — — — 7,125 Repayment of Senior Secured Notes and related premium (70,173 ) — — — (70,173 ) Repayment of debt and capital lease obligations — (35,886 ) (5,133 ) — (41,019 ) Repayment of in-orbit incentive obligations (4,796 ) (4,796 ) Net cash flows from financing activities (63,048 ) (346,351 ) 45,407 255,129 (108,863 ) Effect of exchange rates on cash and cash equivalents — — (2,233 ) — (2,233 ) Net increase (decrease) in cash and cash equivalents, including restricted amounts (975,160 ) 3,980 (3,555 ) — (974,735 ) Cash and cash equivalents, including restricted amounts, at beginning of year 1,746,878 42,373 34,103 — 1,823,354 Cash and cash equivalents, including restricted amounts, at end of year $ 771,718 $ 46,353 $ 30,548 $ — $ 848,619 Consolidating Statement of Cash Flows for the Year Ended December 31, 2017 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 295,970 $ 472,022 $ (33,979 ) $ (436,460 ) $ 297,553 Adjustments to reconcile net income (loss) to net cash flows from operating activities (206,014 ) (74,310 ) 43,340 436,460 199,476 Net cash flows from operating activities 89,956 397,712 9,361 — 497,029 Cash flows from investing activities: Purchases of marketable investment securities (535,476 ) — — — (535,476 ) Sales and maturities of marketable investment securities 259,263 — — — 259,263 Expenditures for property and equipment — (340,197 ) (61,341 ) — (401,538 ) Refund and other receipts related to capital expenditures — 4,311 — — 4,311 Investment in subsidiary (59,000 ) (63,000 ) — 122,000 — Expenditures for externally marketed software — (31,331 ) — — (31,331 ) Net cash flows from investing activities (335,213 ) (430,217 ) (61,341 ) 122,000 (704,771 ) Cash flows from financing activities: Payments of debt issuance costs (414 ) — — — (414 ) Proceeds from capital contribution from parent — 59,000 63,000 (122,000 ) — Repayment of debt and capital lease obligations — (32,177 ) (4,886 ) — (37,063 ) Advances from affiliates — (36 ) — (36 ) Repayment of in-orbit incentive obligations (5,850 ) — (5,850 ) Other, net 600 — 886 — 1,486 Net cash flows from financing activities 186 20,973 58,964 (122,000 ) (41,877 ) Effect of exchange rates on cash and cash equivalents — — 1,286 — 1,286 Net increase (decrease) in cash and cash equivalents, including restricted amounts (245,071 ) (11,532 ) 8,270 — (248,333 ) Cash and cash equivalents, including restricted amounts, at beginning of year 1,991,949 53,905 25,833 — 2,071,687 Cash and cash equivalents, including restricted amounts, at end of year $ 1,746,878 $ 42,373 $ 34,103 $ — $ 1,823,354 Consolidating Statement of Cash Flows for the Year Ended December 31, 2016 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash Flows from Operating Activities: Net income (loss) $ 120,015 $ 218,504 $ (3,579 ) $ (213,219 ) $ 121,721 Adjustments to reconcile net income (loss) to net cash flows from operating activities 78,875 127,462 24,594 213,219 444,150 Net ca s h flows from operating activities 198,890 345,966 21,015 — 565,871 Cash Flows from Investing Activities: Purchases of marketable investment securities (396,730 ) — — — (396,730 ) Sales and maturities of marketable investment securities 453,334 7,500 — — 460,834 Expenditures of property and equipment — (292,427 ) (88,860 ) — (381,287 ) Changes in restricted cash and cash equivalents — — — — — Investment in subsidiary (80,846 ) (84,871 ) — 165,717 — Payment for EchoStar XXI launch services — — (23,750 ) — (23,750 ) Expenditures for externally marketed software — (23,252 ) — — (23,252 ) Other, net — (1,296 ) — (340 ) (1,636 ) Net cash flows from investing activities (24,242 ) (394,346 ) (112,610 ) 165,377 (365,821 ) Cash Flows from Financing Activities: Proceeds from issuance of long-term debt 1,500,000 — — — 1,500,000 Payments of debt issuance costs (7,097 ) — — — (7,097 ) Proceeds from capital contribution from parent — 80,846 84,871 (165,717 ) — Capital contribution from EchoStar 23,750 — — — 23,750 Repayment debt and capital lease obligations — (28,829 ) (2,840 ) — (31,669 ) Advances from affiliates — 6,982 — 6,982 Repayment of in-orbit incentive obligations (5,499 ) (5,499 ) Other, net 14 — 988 340 1,342 Net cash flows from financing activities 1,516,667 46,518 90,001 (165,377 ) 1,487,809 Effect of exchange rates on cash and cash equivalents — — 183 — 183 Net increase (decrease) in cash and cash equivalents, including restricted amounts 1,691,315 (1,862 ) (1,411 ) — 1,688,042 Cash and cash equivalents, including restricted amounts, at beginning of year 300,634 55,767 27,244 — 383,645 Cash and cash equivalents, including restricted amounts, at end of year $ 1,991,949 $ 53,905 $ 25,833 $ — $ 2,071,687 |