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 13. Long-term Debt for further information on our Notes. In lieu of separate financial statements of the Guarantor Subsidiaries, accompanying consolidating financial information prepared in accordance with Rule 3-10(f) of Regulation S-X is presented below, including the accompanying balance sheet information, the accompanying statement of operations and comprehensive income (loss) information and the accompanying statement of cash flows information of HSSC, the Guarantor Subsidiaries on a combined basis and the non-guarantor subsidiaries of HSSC on a combined basis and the eliminations necessary to arrive at the corresponding information of HSSC 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 consolidating financial information (amounts in thousands) presented below should be read in conjunction with our consolidated financial statements and notes thereto included herein. Consolidating Balance Sheet as of December 31, 2021 Hughes Satellite Systems Corporation Guarantor Non-Guarantor Eliminations Total Assets Current assets: Cash and cash equivalents $ 324,764 $ 42,550 $ 61,854 $ — $ 429,168 Marketable investment securities 854,502 — — — 854,502 Trade accounts receivable and contract assets, net — 127,350 54,713 — 182,063 Other current assets, net 170,283 1,056,871 94,185 (1,044,495) 276,844 Total current assets 1,349,549 1,226,771 210,752 (1,044,495) 1,742,577 Non-current assets: Property and equipment, net — 1,209,859 313,588 — 1,523,447 Operating lease right-of-use assets — 117,912 30,309 — 148,221 Goodwill — 504,173 6,913 — 511,086 Regulatory authorizations, net — 400,000 8,959 — 408,959 Other intangible assets, net — 13,984 — — 13,984 Other investments, net — 9,600 81,626 — 91,226 Investment in subsidiaries 3,126,926 292,211 — (3,419,137) — Other non-current assets, net 1,191 299,149 97,305 (94,805) 302,840 Total non-current assets 3,128,117 2,846,888 538,700 (3,513,942) 2,999,763 Total assets $ 4,477,666 $ 4,073,659 $ 749,452 $ (4,558,437) $ 4,742,340 Liabilities and Shareholder's Equity Current liabilities: Trade accounts payable $ — $ 92,156 $ 13,321 $ — $ 105,477 Contract liabilities — 134,474 6,869 — 141,343 Accrued expenses and other current liabilities 972,936 218,463 161,975 (1,044,495) 308,879 Total current liabilities 972,936 445,093 182,165 (1,044,495) 555,699 Non-current liabilities: Long-term debt, net 1,495,994 — — — 1,495,994 Deferred tax liabilities, net — 334,148 258 — 334,406 Operating lease liabilities — 108,431 25,570 — 134,001 Other non-current liabilities — 59,623 188,432 (94,804) 153,251 Total non-current liabilities 1,495,994 502,202 214,260 (94,804) 2,117,652 Total liabilities 2,468,930 947,295 396,425 (1,139,299) 2,673,351 Shareholder's equity: Total Hughes Satellite Systems Corporation shareholder's equity 2,008,736 3,126,364 292,774 (3,419,138) 2,008,736 Non-controlling interests — — 60,253 — 60,253 Total shareholder's equity 2,008,736 3,126,364 353,027 (3,419,138) 2,068,989 Total liabilities and shareholder's equity $ 4,477,666 $ 4,073,659 $ 749,452 $ (4,558,437) $ 4,742,340 Consolidating Balance Sheet as of December 31, 2020 Hughes Satellite Systems Corporation Guarantor Non-Guarantor Eliminations Total Assets Current assets: Cash and cash equivalents $ 649,851 $ 46,055 $ 44,584 $ — $ 740,490 Marketable investment securities 1,203,296 — — — 1,203,296 Trade accounts receivable and contract assets, net — 129,572 54,416 — 183,988 Other current assets, net 148,158 830,912 171,676 (858,931) 291,815 Total current assets 2,001,305 1,006,539 270,676 (858,931) 2,419,589 Non-current assets: Property and equipment, net — 1,312,673 378,850 — 1,691,523 Operating lease right-of-use assets — 99,578 28,688 — 128,266 Goodwill — 504,173 7,424 — 511,597 Regulatory authorizations, net — 400,000 10,451 — 410,451 Other intangible assets, net — 18,340 — — 18,340 Other investments, net — 103,924 — — 103,924 Investment in subsidiaries 2,942,178 251,394 — (3,193,572) — Other non-current assets, net 700 307,661 94,031 (94,715) 307,677 Total non-current assets 2,942,878 2,997,743 519,444 (3,288,287) 3,171,778 Total assets $ 4,944,183 $ 4,004,282 $ 790,120 $ (4,147,218) $ 5,591,367 Liabilities and Shareholder's Equity Current liabilities: Trade accounts payable $ — $ 98,914 $ 19,654 $ — $ 118,568 Current portion of long-term debt, net 898,237 — — — 898,237 Contract liabilities — 99,838 4,731 — 104,569 Accrued expenses and other current liabilities 529,661 352,121 302,736 (858,931) 325,587 Total current liabilities 1,427,898 550,873 327,121 (858,931) 1,446,961 Non-current liabilities: Long-term debt, net 1,495,256 — — — 1,495,256 Deferred tax liabilities, net 9,569 357,835 2,536 — 369,940 Operating lease liabilities — 91,241 23,636 — 114,877 Other non-current liabilities — 62,717 119,955 (94,715) 87,957 Total non-current liabilities 1,504,825 511,793 146,127 (94,715) 2,068,030 Total liabilities 2,932,723 1,062,666 473,248 (953,646) 3,514,991 Shareholder's equity: Total Hughes Satellite Systems Corporation shareholder's equity 2,011,460 2,941,616 251,956 (3,193,572) 2,011,460 Non-controlling interests — — 64,916 — 64,916 Total shareholder's equity 2,011,460 2,941,616 316,872 (3,193,572) 2,076,376 Total liabilities and shareholder's equity $ 4,944,183 $ 4,004,282 $ 790,120 $ (4,147,218) $ 5,591,367 Consolidating Statement of Operations and Comprehensive Income (Loss) For the Year Ended December 31, 2021 Hughes Satellite Systems Corporation Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue $ — $ 1,428,960 $ 317,948 $ (22,609) $ 1,724,299 Equipment revenue — 284,139 26,041 (39,753) 270,427 Total revenue — 1,713,099 343,989 (62,362) 1,994,726 Costs and expenses: Cost of sales - services and other (exclusive of depreciation and amortization) — 420,767 147,660 (23,512) 544,915 Cost of sales - equipment (exclusive of depreciation and amortization) — 251,195 17,938 (37,173) 231,960 Selling, general and administrative expenses — 331,973 91,939 (1,677) 422,235 Research and development expenses — 31,159 618 — 31,777 Depreciation and amortization — 333,618 130,528 — 464,146 Impairment of long-lived assets — 210 — — 210 Total costs and expenses — 1,368,922 388,683 (62,362) 1,695,243 Operating income (loss) — 344,177 (44,694) — 299,483 Other income (expense): Interest income 3,367 5,270 4,460 (4,951) 8,146 Interest expense, net of amounts capitalized (120,635) 1,189 (12,004) 4,951 (126,499) Gains (losses) on investments, net 2 2,101 — — 2,103 Equity in earnings (losses) of unconsolidated affiliates, net — 1,714 (7,061) — (5,347) Equity in earnings (losses) of subsidiaries, net 207,895 (65,083) — (142,812) — Foreign currency transaction gains (losses), net — (72) (11,422) — (11,494) Other, net (1,938) 3,380 (106) — 1,336 Total other income (expense), net 88,691 (51,501) (26,133) (142,812) (131,755) Income (loss) before income taxes 88,691 292,676 (70,827) (142,812) 167,728 Income tax benefit (provision), net 32,080 (84,781) (4,410) — (57,111) Net income (loss) from continuing operations 120,771 207,895 (75,237) (142,812) 110,617 Net income (loss) from discontinued operations — — — — — Net income (loss) 120,771 207,895 (75,237) (142,812) 110,617 Less: Net loss (income) attributable to non-controlling interests — — 10,154 — 10,154 Net income (loss) attributable to HSSC $ 120,771 $ 207,895 $ (65,083) $ (142,812) $ 120,771 Comprehensive income (loss): Net income (loss) $ 120,771 $ 207,895 $ (75,237) $ (142,812) $ 110,617 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (31,317) — (31,317) Unrealized gains (losses) on available-for-sale securities 490 — — — 490 Other — — (98) — (98) Amounts reclassified to net income (loss): Realized losses (gains) on available-for-sale securities (5) — — — (5) Equity in other comprehensive income (loss) of subsidiaries, net (27,026) (27,026) — 54,052 — Total other comprehensive income (loss), net of tax (26,541) (27,026) (31,415) 54,052 (30,930) Comprehensive income (loss) 94,230 180,869 (106,652) (88,760) 79,687 Less: Comprehensive loss (income) attributable to non-controlling interests — — 14,543 — 14,543 Comprehensive income (loss) attributable to HSSC $ 94,230 $ 180,869 $ (92,109) $ (88,760) $ 94,230 Consolidating Statement of Operations and Comprehensive Income (Loss) For the Year Ended December 31, 2020 Hughes Satellite Systems Corporation Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Revenue: Services and other revenue $ — $ 1,452,180 $ 274,926 $ (35,349) $ 1,691,757 Equipment revenue — 256,090 26,520 (77,009) 205,601 Total revenue — 1,708,270 301,446 (112,358) 1,897,358 Costs and expenses: Cost of sales - services and other (exclusive of depreciation and amortization) — 443,806 162,561 (33,730) 572,637 Cost of sales - equipment (exclusive of depreciation and amortization) — 223,086 20,352 (77,009) 166,429 Selling, general and administrative expenses — 359,151 75,876 (1,619) 433,408 Research and development expenses — 28,846 602 — 29,448 Depreciation and amortization — 391,319 107,557 — 498,876 Impairment of long-lived assets — — — — — Total costs and expenses — 1,446,208 366,948 (112,358) 1,700,798 Operating income (loss) — 262,062 (65,502) — 196,560 Other income (expense): Interest income, net 14,843 4,049 3,711 (3,801) 18,802 Interest expense, net of amounts capitalized (162,012) (2,691) (11,564) 3,801 (172,466) Gains (losses) on investments, net (82) (150) — — (232) Equity in earnings (losses) of unconsolidated affiliates, net — (6,116) — — (6,116) Equity in earnings (losses) of subsidiaries, net 121,688 (68,916) — (52,772) — Foreign currency transaction gains (losses), net — (269) 3,696 — 3,427 Other, net — (645) 359 — (286) Total other income (expense), net (25,563) (74,738) (3,798) (52,772) (156,871) Income (loss) from continuing operations before income taxes (25,563) 187,324 (69,300) (52,772) 39,689 Income tax benefit (provision), net 34,888 (65,435) (11,571) — (42,118) Net income (loss) from continuing operations 9,325 121,889 (80,871) (52,772) (2,429) Net income (loss) from discontinued operations — — — — — Net income (loss) 9,325 121,889 (80,871) (52,772) (2,429) Less: Net loss (income) attributable to non-controlling interests — — 11,754 — 11,754 Net income (loss) attributable to HSSC $ 9,325 $ 121,889 $ (69,117) $ (52,772) $ 9,325 Comprehensive income (loss): Net income (loss) $ 9,325 $ 121,889 $ (80,871) $ (52,772) $ (2,429) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments — — (77,646) — (77,646) Unrealized gains (losses) on available-for-sale securities (192) — — — (192) Other — — (4) — (4) Amounts reclassified to net income (loss): Realized losses (gains) on available-for-sale securities (1) — — — (1) Equity in other comprehensive income (loss) of subsidiaries, net (62,012) (62,012) — 124,024 — Total other comprehensive income (loss), net of tax (62,205) (62,012) (77,650) 124,024 (77,843) Comprehensive income (loss) (52,880) 59,877 (158,521) 71,252 (80,272) Less: Comprehensive loss (income) attributable to non-controlling interests — — 27,392 — 27,392 Comprehensive income (loss) attributable to HSSC $ (52,880) $ 59,877 $ (131,129) $ 71,252 $ (52,880) Consolidating Statement of Operations and Comprehensive Income (Loss) For the Year Ended December 31, 2019 Hughes Satellite Systems Corporation 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 Impairment of long-lived assets — — — — — 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, net 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 loss (income) attributable to non-controlling interests — — 11,335 — 11,335 Net income (loss) attributable to HSSC $ (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 losses (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 loss (income) attributable to non-controlling interests — — 8,007 — 8,007 Comprehensive income (loss) attributable to HSSC $ (30,404) $ 73,123 $ (137,854) $ 64,731 $ (30,404) Consolidating Statement of Cash Flows For the Year Ended December 31, 2021 Hughes Satellite Systems Corporation Guarantor Non-Guarantor Eliminations Total Cash flows from operating activities: Net income (loss) $ 120,771 $ 207,895 $ (75,237) $ (142,812) $ 110,617 Adjustments to reconcile net income (loss) to net cash flows from operating activities (213,342) 479,663 142,561 142,812 551,694 Net cash provided by (used for) operating activities (92,571) 687,558 67,324 — 662,311 Cash flows from investing activities: Purchases of marketable investment securities (1,517,849) — — — (1,517,849) Sales and maturities of marketable investment securities 1,864,186 — — — 1,864,186 Expenditures for property and equipment — (196,902) (99,401) — (296,303) Expenditures for externally marketed software — (33,543) — — (33,543) Distributions (contributions) and advances from (to) subsidiaries, net 422,965 (44,891) — (378,074) — Sales of other investments — 9,451 — — 9,451 Net cash provided by (used for) investing activities 769,302 (265,885) (99,401) (378,074) 25,942 Cash flows from financing activities: Repurchase and maturity of the 2021 Senior Unsecured Notes (901,818) — — — (901,818) Payment of finance lease obligations — — (670) — (670) Payment of in-orbit incentive obligations — (2,214) — — (2,214) Contribution by non-controlling interest holder — — 9,880 — 9,880 Dividend paid to EchoStar (100,000) — — — (100,000) Other, net — — (966) — (966) Contribution (distributions) and advances (to) from parent, net — (422,965) 44,891 378,074 — Net cash provided by (used for) financing activities (1,001,818) (425,179) 53,135 378,074 (995,788) Effect of exchange rates on cash and cash equivalents — — (3,614) — (3,614) Net increase (decrease) in cash and cash equivalents (325,087) (3,506) 17,444 — (311,149) Cash and cash equivalents, including restricted amounts, beginning of period 649,851 46,055 45,391 — 741,297 Cash and cash equivalents, including restricted amounts, end of period $ 324,764 $ 42,549 $ 62,835 $ — $ 430,148 Consolidating Statement of Cash Flows For the Year Ended December 31, 2020 Hughes Satellite Systems Corporation Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flows from operating activities: Net income (loss) $ 9,325 $ 121,889 $ (80,871) $ (52,772) $ (2,429) Adjustments to reconcile net income (loss) to net cash flows from operating activities (108,780) 480,249 106,528 52,772 530,769 Net cash provided by (used for) operating activities (99,455) 602,138 25,657 — 528,340 Cash flows from investing activities: Purchases of marketable investment securities (2,035,712) — — — (2,035,712) Sales and maturities of marketable investment securities 1,482,704 — — — 1,482,704 Expenditures for property and equipment — (202,083) (153,155) — (355,238) Expenditures for externally marketed software — (38,655) — — (38,655) Distributions (contributions) and advances from (to) subsidiaries, net 244,411 (101,718) — (142,693) — Net cash provided by (used for) investing activities (308,597) (342,456) (153,155) (142,693) (946,901) Cash flows from financing activities: Payment of finance lease obligations — — (811) — (811) Payment of in-orbit incentive obligations — (1,554) — — (1,554) Contribution by non-controlling interest holder — — 18,241 — 18,241 Other, net — — 998 — 998 Contribution (distributions) and advances (to) from parent, net — (244,411) 101,718 142,693 — Net cash provided by (used for) financing activities — (245,965) 120,146 142,693 16,874 Effect of exchange rates on cash and cash equivalents — — 2,662 — 2,662 Net increase (decrease) in cash and cash equivalents (408,052) 13,717 (4,690) — (399,025) Cash and cash equivalents, including restricted amounts, beginning of period 1,057,903 32,338 50,081 — 1,140,322 Cash and cash equivalents, including restricted amounts, end of period $ 649,851 $ 46,055 $ 45,391 $ — $ 741,297 Consolidating Statement of Cash Flows For the Year Ended December 31, 2019 Hughes Satellite Systems Corporation Guarantor Non-Guarantor 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 provided by (used for) 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 Investment 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) Distributions (contributions) and advances from (to) subsidiaries, net 307,424 (75,086) — (232,338) — Net cash provided by (used for) 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) Payment of 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 provided by (used for) 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 |