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 14 . Long-term Debt and Finance Lease Obligations 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 to pay dividends, make distributions, make other payments, or transfer assets. The accompanying condensed consolidating financial information (amounts in thousands) presented below should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto included herein. Consolidating Balance Sheet as of December 31, 2019 HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 1,057,903 $ 32,338 $ 49,194 $ — $ 1,139,435 Marketable investment securities 652,594 241 — — 652,835 Trade accounts receivable and contract assets, net — 129,722 66,798 — 196,520 Advances to affiliates 93,493 523,116 17,501 (502,218 ) 131,892 Other current assets 43 79,221 90,458 38 169,760 Total current assets 1,804,033 764,638 223,951 (502,180 ) 2,290,442 Property and equipment, net — 1,459,151 398,430 — 1,857,581 Operating lease right-of-use assets — 89,106 24,293 — 113,399 Goodwill — 504,173 2,780 — 506,953 Regulatory authorizations, net — 400,000 12,363 — 412,363 Other intangible assets, net — 29,321 — — 29,321 Other investments, net — 110,040 — — 110,040 Investment in subsidiaries 2,876,572 282,163 — (3,158,735 ) — Advances to affiliates, net 700 565,412 17,161 (563,514 ) 19,759 Other non-current assets, net 9,972 206,781 25,396 (9,972 ) 232,177 Total assets $ 4,691,277 $ 4,410,785 $ 704,374 $ (4,234,401 ) $ 5,572,035 Liabilities and Shareholders’ Equity Trade accounts payable $ — $ 102,744 $ 18,808 $ — $ 121,552 Current portion of long-term debt and finance lease obligations — — 486 — 486 Advances from affiliates, net 202,994 240,887 69,469 (502,218 ) 11,132 Contract liabilities — 96,485 4,575 — 101,060 Accrued expenses and other current liabilities 40,700 73,696 132,365 38 246,799 Total current liabilities 243,694 513,812 225,703 (502,180 ) 481,029 Long-term debt and finance lease obligations, net of current portion 2,389,168 — 565 — 2,389,733 Deferred tax liabilities, net — 390,288 — (9,972 ) 380,316 Operating lease liabilities — 77,366 19,513 — 96,879 Advances from affiliates, net — 488,488 99,006 (563,514 ) 23,980 Other non-current liabilities — 65,030 905 — 65,935 Total HSS shareholders’ equity 2,058,415 2,875,801 282,934 (3,158,735 ) 2,058,415 Non-controlling interests — — 75,748 — 75,748 Total liabilities and shareholders’ equity $ 4,691,277 $ 4,410,785 $ 704,374 $ (4,234,401 ) $ 5,572,035 Consolidating Balance Sheet as of December 31, 2018 HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Assets Cash and cash equivalents $ 771,718 $ 46,353 $ 29,752 $ — $ 847,823 Marketable investment securities 1,608,123 1,073 — — 1,609,196 Trade accounts receivable and contract assets, net — 128,831 72,265 — 201,096 Advances to affiliates 109,433 536,600 27,174 (569,657 ) 103,550 Other current assets 72 94,695 58,460 (561 ) 152,666 Current assets of discontinued operations — 3,483 — — 3,483 Total current assets 2,489,346 811,035 187,651 (570,218 ) 2,917,814 Property and equipment, net — 1,620,534 301,377 — 1,921,911 Goodwill — 504,173 — — 504,173 Regulatory authorizations, net — 400,043 — — 400,043 Other intangible assets, net — 43,952 — — 43,952 Other investments, net — 126,369 — — 126,369 Investment in subsidiaries 3,362,589 192,370 — (3,554,959 ) — Advances to affiliates, net 700 86,280 — (86,980 ) — Deferred tax asset 54,001 — 3,581 (54,001 ) 3,581 Other non-current assets, net — 220,099 12,769 — 232,868 Non-current assets of discontinued operations — 742,461 — — 742,461 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 Current portion of long-term debt and finance lease obligations 918,916 — 666 — 919,582 Advances from affiliates, net 181,926 282,268 106,331 (569,657 ) 868 Contract liabilities — 67,636 4,613 — 72,249 Accrued expenses and other current liabilities 43,410 71,111 43,694 (561 ) 157,654 Current liabilities of discontinued operations — 49,055 — — 49,055 Total current liabilities 1,144,252 558,412 171,713 (570,218 ) 1,304,159 Long-term debt and finance lease obligations, net of current portion 2,385,164 — 1,038 — 2,386,202 Deferred tax liabilities, net — 409,116 834 (54,001 ) 355,949 Advances from affiliates, net — — 120,418 (86,980 ) 33,438 Other non-current liabilities — 69,168 2,479 — 71,647 Non-current liabilities of discontinued operations — 349,282 — — 349,282 Total HSS shareholders’ equity 2,377,220 3,361,338 193,621 (3,554,959 ) 2,377,220 Non-controlling 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 Statement of Operations and Comprehensive Income (Loss) For the Year Ended December 31, 2019 HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue $ — $ 1,417,659 $ 242,257 $ (36,458 ) $ 1,623,458 Equipment revenue — 283,792 32,864 (49,953 ) 266,703 Total revenue — 1,701,451 275,121 (86,411 ) 1,890,161 Costs and expenses: Cost of sales - services and other (exclusive of depreciation and amortization) — 438,214 151,493 (34,006 ) 555,701 Cost of sales - equipment (exclusive of depreciation and amortization) — 250,700 24,357 (49,954 ) 225,103 Selling, general and administrative expenses 6,720 375,309 88,291 (2,451 ) 467,869 Research and development expenses — 25,082 657 — 25,739 Depreciation and amortization — 391,464 73,333 — 464,797 Total costs and expenses 6,720 1,480,769 338,131 (86,411 ) 1,739,209 Operating income (loss) (6,720 ) 220,682 (63,010 ) — 150,952 Other income (expense): Interest income 54,341 4,441 2,798 (3,850 ) 57,730 Interest expense, net of amounts capitalized (190,685 ) (7,832 ) (77,551 ) 3,850 (272,218 ) Gains (losses) on investments, net 455 (8,919 ) — — (8,464 ) Equity in earnings (losses) of unconsolidated affiliates, net — (3,333 ) — — (3,333 ) Equity in earnings (losses) of subsidiaries, net 75,047 (135,258 ) — 60,211 — Foreign currency transaction gains (losses), net — (344 ) (9,511 ) — (9,855 ) Other, net (100 ) (351 ) (182 ) — (633 ) Total other income (expense), net (60,942 ) (151,596 ) (84,446 ) 60,211 (236,773 ) Income (loss) from continuing operations before income taxes (67,662 ) 69,086 (147,456 ) 60,211 (85,821 ) Income tax benefit (provision), net 38,120 (50,242 ) 527 — (11,595 ) Net income (loss) from continuing operations (29,542 ) 18,844 (146,929 ) 60,211 (97,416 ) Net income (loss) from discontinued operations — 56,539 — — 56,539 Net income (loss) (29,542 ) 75,383 (146,929 ) 60,211 (40,877 ) Less: Net income (loss) attributable to non-controlling interests — — (11,335 ) — (11,335 ) Net income (loss) attributable to HSS $ (29,542 ) $ 75,383 $ (135,594 ) $ 60,211 $ (29,542 ) Comprehensive income (loss): Net income (loss) $ (29,542 ) $ 75,383 $ (146,929 ) $ 60,211 $ (40,877 ) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — 1,182 — 1,182 Unrealized gains (losses) on available-for-sale securities 1,817 — — — 1,817 Other — — (114 ) — (114 ) Amounts reclassified to net income (loss): Realized gains on available-for-sale securities (419 ) — — — (419 ) Equity in other comprehensive income (loss) of subsidiaries, net (2,260 ) (2,260 ) — 4,520 — Total other comprehensive income (loss), net of tax (862 ) (2,260 ) 1,068 4,520 2,466 Comprehensive income (loss) (30,404 ) 73,123 (145,861 ) 64,731 (38,411 ) Less: Comprehensive income (loss) attributable to non-controlling interests — — (8,007 ) — (8,007 ) Comprehensive income (loss) attributable to EchoStar Corporation $ (30,404 ) $ 73,123 $ (137,854 ) $ 64,731 $ (30,404 ) Consolidating Statement of Operations and Comprehensive Income (Loss) For the Year Ended December 31, 2018 HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue $ — $ 1,366,459 $ 232,873 $ (37,906 ) $ 1,561,426 Equipment revenue — 221,996 29,137 (45,723 ) 205,410 Total revenue — 1,588,455 262,010 (83,629 ) 1,766,836 Costs and expenses: Cost of sales - services and other (exclusive of depreciation and amortization) — 447,622 147,952 (35,736 ) 559,838 Cost of sales - equipment (exclusive of depreciation and amortization) — 200,620 21,703 (45,723 ) 176,600 Selling, general and administrative expenses — 345,221 54,943 (2,170 ) 397,994 Research and development expenses — 27,570 — — 27,570 Depreciation and amortization — 374,297 52,555 — 426,852 Total costs and expenses — 1,395,330 277,153 (83,629 ) 1,588,854 Operating income (loss) — 193,125 (15,143 ) — 177,982 Other income (expense): Interest income 56,487 3,806 2,472 (3,661 ) 59,104 Interest expense, net of amounts capitalized (229,481 ) (866 ) (4,483 ) 3,661 (231,169 ) Gains (losses) on investments, net — 187 — — 187 Equity in earnings (losses) of unconsolidated affiliates, net — 4,874 — — 4,874 Equity in earnings (losses) of subsidiaries, net 224,405 (33,525 ) — (190,880 ) — Foreign currency transaction gains (losses), net — (104 ) (12,380 ) — (12,484 ) Other, net (970 ) 9,259 (248 ) — 8,041 Total other income (expense), net 50,441 (16,369 ) (14,639 ) (190,880 ) (171,447 ) Income (loss) from continuing operations before income taxes 50,441 176,756 (29,782 ) (190,880 ) 6,535 Income tax benefit (provision), net 45,060 (62,230 ) (1,445 ) — (18,615 ) Net income (loss) from continuing operations 95,501 114,526 (31,227 ) (190,880 ) (12,080 ) Net income (loss) from discontinued operations — 109,423 — — 109,423 Net income (loss) 95,501 223,949 (31,227 ) (190,880 ) 97,343 Less: Net income (loss) attributable to non-controlling 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 (665 ) — — — (665 ) Other — — 41 — 41 Amounts reclassified to net income (loss): 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 (loss) attributable to non-controlling interests — — 453 — 453 Comprehensive income (loss) attributable to EchoStar Corporation $ 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 $ — $ 1,127,177 $ 180,596 $ (32,220 ) $ 1,275,553 Equipment revenue — 255,610 27,205 (43,326 ) 239,489 Total revenue — 1,382,787 207,801 (75,546 ) 1,515,042 Costs and expenses: Cost of sales - services and other (exclusive of depreciation and amortization) — 395,566 131,177 (29,632 ) 497,111 Cost of sales - equipment (exclusive of depreciation and amortization) — 218,299 20,318 (43,178 ) 195,439 Selling, general and administrative expenses — 293,767 46,517 (2,736 ) 337,548 Research and development expenses — 31,745 — — 31,745 Depreciation and amortization — 332,103 38,315 — 370,418 Impairment of long-lived assets — 6,000 — — 6,000 Total costs and expenses — 1,277,480 236,327 (75,546 ) 1,438,261 Operating income (loss) — 105,307 (28,526 ) — 76,781 Other income (expense): Interest income 28,146 96,992 1,986 (95,172 ) 31,952 Interest expense, net of amounts capitalized (229,415 ) (80,543 ) 1,620 95,172 (213,166 ) Gains (losses) on investments, net — (1,574 ) — — (1,574 ) Equity in earnings (losses) of unconsolidated affiliates, net — 7,027 — — 7,027 Equity in earnings (losses) of subsidiaries, net 471,602 (35,142 ) — (436,460 ) — Foreign currency transaction gains (losses), net — (85 ) (1,073 ) — (1,158 ) Other, net — (871 ) (159 ) — (1,030 ) Total other income (expense), net 270,333 (14,196 ) 2,374 (436,460 ) (177,949 ) Income (loss) from continuing operations before income taxes 270,333 91,111 (26,152 ) (436,460 ) (101,168 ) Income tax benefit (provision), net 25,637 75,956 (7,827 ) — 93,766 Net income (loss) from continuing operations 295,970 167,067 (33,979 ) (436,460 ) (7,402 ) Net income (loss) from discontinued operations — 304,955 — — 304,955 Net income (loss) 295,970 472,022 (33,979 ) (436,460 ) 297,553 Less: Net income (loss) attributable to non-controlling 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 (273 ) (2,007 ) — — (2,280 ) Other — — 92 — 92 Amounts reclassified to net income (loss): Other-than-temporary impairment loss on available-for-sale securities — 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 (loss) attributable to non-controlling interests — — 1,992 — 1,992 Comprehensive income (loss) attributable to EchoStar Corporation $ 303,867 $ 480,192 $ (28,683 ) $ (451,509 ) $ 303,867 Consolidating Statement of Cash Flows for the Year Ended December 31, 2019 HSS Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ (29,542 ) $ 75,383 $ (146,929 ) $ 60,211 $ (40,877 ) Adjustments to reconcile net income (loss) to net cash flows from operating activities (26,693 ) 569,444 191,941 (60,211 ) 674,481 Net cash flows from operating activities (56,235 ) 644,827 45,012 — 633,604 Cash flows from investing activities: Purchases of marketable investment securities (709,350 ) — — — (709,350 ) Sales and maturities of marketable investment securities 1,665,269 — — — 1,665,269 Investments in unconsolidated affiliates — (7 ) 7,858 — 7,851 Dividend received from unconsolidated affiliate — 2,284 — — 2,284 Expenditures for property and equipment — (215,000 ) (94,291 ) — (309,291 ) Expenditures for externally marketed software — (29,310 ) — — (29,310 ) Purchases of regulatory authorizations — — (7,850 ) — (7,850 ) Investment in subsidiaries 307,424 (75,086 ) — (232,338 ) — Net cash flows from investing activities 1,263,343 (317,119 ) (94,283 ) (232,338 ) 619,603 Cash flows from financing activities: Repurchase and maturity of the 2019 Senior Secured Notes (920,923 ) — — — (920,923 ) Repayment of other long-term debt and finance lease obligations — (27,203 ) (2,144 ) — (29,347 ) Payment of in-orbit incentive obligations — (4,430 ) — — (4,430 ) Purchase of non-controlling interest — (2,666 ) (4,647 ) — (7,313 ) Other, net — — 1,172 — 1,172 Contribution (distributions) and advances (to) from parent, net — (307,424 ) 75,086 232,338 — Net cash flows from financing activities (920,923 ) (341,723 ) 69,467 232,338 (960,841 ) Effect of exchange rates on cash and cash equivalents — — (663 ) — (663 ) Net increase (decrease) in cash and cash equivalents 286,185 (14,015 ) 19,533 — 291,703 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 $ 1,057,903 $ 32,338 $ 50,081 $ — $ 1,140,322 Consolidating Statement of Cash Flows for the Year Ended December 31, 2018 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 Investments in unconsolidated affiliates — (100,991 ) — — (100,991 ) Expenditures for property and equipment — (304,376 ) (86,689 ) — (391,065 ) Refunds and other receipts related to property and equipment — 77,524 — — 77,524 Expenditures for externally marketed software — (31,639 ) — — (31,639 ) Payment for EchoStar XXI launch services — — (7,125 ) — (7,125 ) Investment in subsidiaries 305,669 (50,540 ) — (255,129 ) — Net cash flows from investing activities (847,377 ) (410,022 ) (93,814 ) (255,129 ) (1,606,342 ) Cash flows from financing activities: Repurchase and maturity of the 2019 Senior Secured Notes (70,173 ) — — — (70,173 ) Repayment of other long-term debt and finance lease obligations — (35,886 ) (5,133 ) — (41,019 ) Payment of in-orbit incentive obligations — (4,796 ) — — (4,796 ) Capital contribution from EchoStar 7,125 — — — 7,125 Contribution (distributions) and advances (to) from parent, net — (305,669 ) 50,540 255,129 — 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 (975,160 ) 3,980 (3,555 ) — (974,735 ) 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 $ 771,718 $ 46,353 $ 30,548 $ — $ 848,619 Consolidating Statement of Cash Flows for the Year Ended December 31, 2017 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 ) Refunds and other receipts related to property and equipment — 4,311 — — 4,311 Expenditures for externally marketed software — (31,331 ) — — (31,331 ) Investment in subsidiaries (59,000 ) (63,000 ) — 122,000 — Net cash flows from investing activities (335,213 ) (430,217 ) (61,341 ) 122,000 (704,771 ) Cash flows from financing activities: Repayment of other long-term debt and finance lease obligations — (32,177 ) (4,886 ) — (37,063 ) Payment of in-orbit incentive obligations — (5,850 ) — — (5,850 ) Other, net 186 — 850 — 1,036 Contribution (distributions) and advances (to) from parent, net — 59,000 63,000 (122,000 ) — 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 (245,071 ) (11,532 ) 8,270 — (248,333 ) 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 $ 1,746,878 $ 42,373 $ 34,103 $ — $ 1,823,354 |