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 Secured Notes, 7 5/8% Senior Unsecured Notes due 2021 and 6 5/8% Senior Unsecured Notes due August 1, 2026 (the “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 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, 2019 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 1,069,699 $ 44,728 $ 24,284 $ — $ 1,138,711 Marketable investment securities, at fair value 1,381,688 341 — — 1,382,029 Trade accounts receivable and contract assets — 139,445 77,112 — 216,557 Trade accounts receivable - DISH Network, net — 18,085 513 — 18,598 Inventory — 56,205 19,909 — 76,114 Advances to affiliates, net 109,433 652,379 10,318 (691,219 ) 80,911 Other current assets 42 28,048 46,182 — 74,272 Total current assets 2,560,862 939,231 178,318 (691,219 ) 2,987,192 Property and equipment, net — 2,214,920 301,217 — 2,516,137 Regulatory authorizations — 465,658 — — 465,658 Goodwill — 504,173 — — 504,173 Other intangible assets, net — 40,294 — — 40,294 Investments in unconsolidated entities — 125,384 — — 125,384 Investment in subsidiaries 3,420,127 212,662 — (3,632,789 ) — Advances to affiliates 700 76,923 19,221 (76,887 ) 19,957 Operating lease assets — 89,628 23,346 — 112,974 Deferred tax asset 62,671 — 7,274 (62,671 ) 7,274 Other noncurrent assets, net — 227,944 12,749 — 240,693 Total assets $ 6,044,360 $ 4,896,817 $ 542,125 $ (4,463,566 ) $ 7,019,736 Liabilities and Shareholders’ Equity Trade accounts payable $ — $ 94,036 $ 18,784 $ — $ 112,820 Trade accounts payable - DISH Network — 1,698 — — 1,698 Current portion of long-term debt and capital lease obligations 911,985 41,090 561 — 953,636 Advances from affiliates, net 293,657 279,732 118,612 (691,219 ) 782 Accrued expenses and other 53,529 147,106 47,484 — 248,119 Total current liabilities 1,259,171 563,662 185,441 (691,219 ) 1,317,055 Long-term debt and capital lease obligations, net 2,386,136 176,309 984 — 2,563,429 Deferred tax liabilities, net — 564,100 110 (62,671 ) 501,539 Operating lease liability — 76,682 18,391 — 95,073 Advances from affiliates — 1,862 108,308 (76,887 ) 33,283 Other noncurrent liabilities — 95,232 3,638 — 98,870 Total HSS shareholders’ equity 2,399,053 3,418,970 213,819 (3,632,789 ) 2,399,053 Noncontrolling interests — — 11,434 — 11,434 Total liabilities and shareholders’ equity $ 6,044,360 $ 4,896,817 $ 542,125 $ (4,463,566 ) $ 7,019,736 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 — 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 For the Three Months Ended March 31, 2019 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue - DISH Network $ — $ 81,858 $ 513 $ — $ 82,371 Services and other revenue - other — 347,959 59,183 (8,802 ) 398,340 Equipment revenue — 52,649 9,415 (10,350 ) 51,714 Total revenue — 482,466 69,111 (19,152 ) 532,425 Costs and expenses: Costs of sales - services and other (exclusive of depreciation and amortization) — 121,079 39,333 (8,109 ) 152,303 Cost of sales - equipment (exclusive of depreciation and amortization) — 48,499 6,858 (10,350 ) 45,007 Selling, general and administrative expenses — 86,486 16,565 (693 ) 102,358 Research and development expenses — 6,743 145 — 6,888 Depreciation and amortization — 127,823 15,707 — 143,530 Total costs and expenses — 390,630 78,608 (19,152 ) 450,086 Operating income — 91,836 (9,497 ) — 82,339 Other income (expense): Interest income 17,409 926 559 (897 ) 17,997 Interest expense, net of amounts capitalized (56,361 ) (7,632 ) (1,317 ) 897 (64,413 ) Gains (losses) on investments, net — (346 ) — — (346 ) Equity in earnings (losses) of unconsolidated affiliates, net — (1,072 ) — — (1,072 ) Equity in earnings (losses) of subsidiaries, net 52,199 (8,788 ) — (43,411 ) — Other, net 309 (418 ) 154 — 45 Total other income (expense), net 13,556 (17,330 ) (604 ) (43,411 ) (47,789 ) Income (loss) before income taxes 13,556 74,506 (10,101 ) (43,411 ) 34,550 Income tax benefit (provision) 8,670 (22,214 ) 2,026 — (11,518 ) Net income (loss) 22,226 52,292 (8,075 ) (43,411 ) 23,032 Less: Net income attributable to noncontrolling interests — — 806 — 806 Net income (loss) attributable to HSS $ 22,226 $ 52,292 $ (8,881 ) $ (43,411 ) $ 22,226 Comprehensive income (loss): Net income (loss) $ 22,226 $ 52,292 $ (8,075 ) $ (43,411 ) $ 23,032 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (838 ) — (838 ) Unrealized gains (losses) on available-for-sale securities and other 2,354 — 32 — 2,386 Recognition of realized gains on available-for-sale securities in net income (385 ) — — — (385 ) Equity in other comprehensive income (loss) of subsidiaries, net (806 ) (806 ) — 1,612 — Total other comprehensive income (loss), net of tax 1,163 (806 ) (806 ) 1,612 1,163 Comprehensive income (loss) 23,389 51,486 (8,881 ) (41,799 ) 24,195 Less: Comprehensive income attributable to noncontrolling interests — — 806 — 806 Comprehensive income (loss) attributable to HSS $ 23,389 $ 51,486 $ (9,687 ) $ (41,799 ) $ 23,389 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 — 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) — 119,326 37,726 (9,397 ) 147,655 Cost of sales - equipment (exclusive of depreciation and amortization) — 43,643 3,465 (8,037 ) 39,071 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, 2019 (In thousands) HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 22,226 $ 52,292 $ (8,075 ) $ (43,411 ) $ 23,032 Adjustments to reconcile net income (loss) to net cash flows from operating activities (48,467 ) 163,032 (10,043 ) 43,411 147,933 Net cash flows from operating activities (26,241 ) 215,324 (18,118 ) — 170,965 Cash flows from investing activities: Purchases of marketable investment securities (240,188 ) — — — (240,188 ) Sales and maturities of marketable investment securities 468,748 (3 ) — — 468,745 Expenditures for property and equipment — (54,207 ) (19,722 ) — (73,929 ) Expenditures for externally marketed software — (7,600 ) — — (7,600 ) Distributions (contributions) and advances from (to) subsidiaries, net 111,020 (32,949 ) — (78,071 ) — Net cash flows from investing activities 339,580 (94,759 ) (19,722 ) (78,071 ) 147,028 Cash flows from financing activities: Contributions (distributions) and advances (to) from parent, net — (111,020 ) 32,949 78,071 — Repayment of debt and finance lease obligations — (9,597 ) (285 ) — (9,882 ) Noncontrolling interest purchase (7,312 ) — — — (7,312 ) Repurchase of the 2019 Senior Secured Notes (8,046 ) — — — (8,046 ) Repayment of in-orbit incentive obligations — (1,573 ) — — (1,573 ) Net cash flows from financing activities (15,358 ) (122,190 ) 32,664 78,071 (26,813 ) Effect of exchange rates on cash and cash equivalents — — (117 ) — (117 ) Net increase (decrease) in cash and cash equivalents, including restricted amounts 297,981 (1,625 ) (5,293 ) — 291,063 Cash and cash equivalents, including restricted amounts, beginning of period 771,718 46,353 30,548 — 848,619 Cash and cash equivalents, including restricted amounts, end of period $ 1,069,699 $ 44,728 $ 25,255 $ — $ 1,139,682 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 Payment of in-orbit incentive obligations — (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 |