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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 10-Q
 
(Mark One)
 
ý    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017.
 
OR

o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                TO                
 
Commission File Number:  001-33807
 
EchoStar Corporation
(Exact Name of Registrant as Specified in Its Charter)
 
Nevada
 
26-1232727
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
100 Inverness Terrace East, Englewood, Colorado
 
80112-5308
(Address of Principal Executive Offices)
 
(Zip Code)
 
(303) 706-4000
(Registrant’s Telephone Number, Including Area Code)
 
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý  No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ý  No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer ý
 
Accelerated filer  o
Non-accelerated filer o
(Do not check is a smaller reporting company)
Smaller reporting company o
 
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  ý
 
As of October 31, 2017, the registrant’s outstanding common stock consisted of 48,039,777 shares of Class A common stock and 47,687,039 shares of Class B common stock, each $0.001 par value.


Table of Contents


TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents


DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about our estimates, expectations, plans, objectives, strategies, and financial condition, expected impact of regulatory developments and legal proceedings, opportunities in our industries and businesses and other trends and projections for the next fiscal quarter and beyond. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements may also be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” “continue,” “future,” “will,” “would,” “could,” “can,” “may” and similar terms. These forward-looking statements are based on information available to us as of the date of this Form 10-Q and represent management’s current views and assumptions. Forward-looking statements are not guarantees of future performance, events or results and involve potential known and unknown risks, uncertainties and other factors, many of which may be beyond our control and may pose a risk to our operating and financial condition. Accordingly, actual performance, events or results could differ materially from those expressed or implied in the forward-looking statements due to a number of factors including, but not limited to: 

our reliance on DISH Network Corporation and its subsidiaries (“DISH Network”) for a significant portion of our revenue;
significant risks related to the construction, launch and operation of our satellites, such as the risk of material malfunction on one or more of our satellites, risks resulting from delays or failures of launches of our satellites and potentially missing our regulatory milestones, changes in the space weather environment that could interfere with the operation of our satellites, and our general lack of commercial insurance coverage on our satellites;
our ability to realize the anticipated benefits of our current satellites and any future satellite we may construct or acquire;
our ability to implement our strategic initiatives;
the failure of third-party providers of components, manufacturing, installation services and customer support services to appropriately deliver the contracted goods or services;
our ability to bring advanced technologies to market to keep pace with our customers and competitors; and
risk related to our foreign operations and other uncertainties associated with doing business internationally, including changes in foreign exchange rates between foreign currencies and the United States dollar, economic instability and political disturbances.
 
Other factors that could cause or contribute to such differences include, but are not limited to, those discussed under the caption “Risk Factors” in Part II, Item 1A of this Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”), those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein and in our Form 10-K, and those discussed in other documents we file with the SEC.
 
All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. Investors should consider the risks and uncertainties described herein and should not place undue reliance on any forward-looking statements. We do not undertake, and specifically disclaim, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Although we believe that the expectations reflected in any forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievements. We do not assume responsibility for the accuracy and completeness of any forward‑looking statements. We assume no responsibility for updating forward‑looking information contained or incorporated by reference herein or in any documents we file with the SEC, except as required by law.

Should one or more of the risks or uncertainties described herein or in any documents we file with the SEC occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

i

Table of Contents


PART I — FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
 
 
As of
 
 
September 30, 2017
 
December 31, 2016
Assets
 
 

 
 

Current Assets:
 
 

 
 

Cash and cash equivalents
 
$
2,798,359

 
$
2,570,365

Marketable investment securities, at fair value
 
485,035

 
522,516

Trade accounts receivable, net of allowance for doubtful accounts of $13,211 and $12,956, respectively
 
192,387

 
182,527

Trade accounts receivable - DISH Network, net of allowance for doubtful accounts of zero
 
52,512

 
19,417

Inventory
 
91,232

 
62,620

Prepaids and deposits
 
53,536

 
43,456

Other current assets
 
12,746

 
10,862

Current assets of discontinued operations
 
145

 
311,524

Total current assets
 
3,685,952

 
3,723,287

Noncurrent Assets:
 
 

 
 

Restricted cash and marketable investment securities
 
13,736

 
12,926

Property and equipment, net of accumulated depreciation of $2,551,678 and $2,598,492, respectively
 
3,530,459

 
3,398,195

Regulatory authorizations, net
 
545,557

 
544,633

Goodwill
 
504,173

 
504,173

Other intangible assets, net
 
62,635

 
80,734

Investments in unconsolidated entities
 
165,290

 
171,016

Other receivable - DISH Network
 
92,133

 
90,586

Other noncurrent assets, net
 
207,221

 
166,385

Noncurrent assets of discontinued operations
 

 
316,924

Total noncurrent assets
 
5,121,204

 
5,285,572

Total assets
 
$
8,807,156

 
$
9,008,859

Liabilities and Stockholders’ Equity
 
 

 
 

Current Liabilities:
 
 

 
 

Trade accounts payable
 
$
120,436

 
$
170,297

Trade accounts payable - DISH Network
 
6,556

 
1,072

Current portion of long-term debt and capital lease obligations
 
38,407

 
32,984

Deferred revenue and prepayments
 
56,285

 
59,989

Accrued interest
 
57,837

 
46,487

Accrued compensation
 
37,096

 
53,454

Accrued expenses and other
 
110,872

 
95,726

Current liabilities of discontinued operations
 
542

 
71,429

Total current liabilities
 
428,031

 
531,438

Noncurrent Liabilities:
 
 

 
 

Long-term debt and capital lease obligations, net of unamortized debt issuance costs
 
3,605,715

 
3,622,463

Deferred tax liabilities, net
 
745,965

 
746,667

Other noncurrent liabilities
 
131,626

 
90,785

Noncurrent liabilities of discontinued operations
 

 
10,701

Total noncurrent liabilities
 
4,483,306

 
4,470,616

Total liabilities
 
4,911,337

 
5,002,054

Commitments and Contingencies (Note 14)
 


 


Stockholders’ Equity:
 
 

 
 

Preferred stock, $.001 par value, 20,000,000 shares authorized:
 
 

 
 

Hughes Retail Preferred Tracking Stock, $.001 par value, zero authorized, issued and outstanding at September 30, 2017 and 13,000,000 shares authorized and 6,290,499 issued and outstanding at December 31, 2016
 

 
6

Common stock, $.001 par value, 4,000,000,000 shares authorized:
 
 

 
 

Class A common stock, $.001 par value, 1,600,000,000 shares authorized, 53,564,095 shares issued and 48,031,777 shares outstanding at September 30, 2017 and 52,243,465 shares issued and 46,711,147 shares outstanding at December 31, 2016
 
54

 
52

Class B common stock, $.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at each of September 30, 2017 and December 31, 2016
 
48

 
48

Class C common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2017 and December 31, 2016
 

 

Class D common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2017 and December 31, 2016
 

 

Additional paid-in capital
 
3,660,696

 
3,828,677

Accumulated other comprehensive loss
 
(88,732
)
 
(124,803
)
Accumulated earnings
 
408,079

 
314,247

Treasury stock, at cost
 
(98,162
)
 
(98,162
)
Total EchoStar stockholders’ equity
 
3,881,983

 
3,920,065

Noncontrolling interest in HSS Tracking Stock
 

 
73,910

Other noncontrolling interests
 
13,836

 
12,830

Total stockholders’ equity
 
3,895,819

 
4,006,805

Total liabilities and stockholders’ equity
 
$
8,807,156

 
$
9,008,859

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Table of Contents


ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
 
For the Three Months
Ended September 30,
 
For the Nine Months
Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 

 
 

 
 

 
 

Services and other revenue - DISH Network
 
$
111,135

 
$
115,127

 
$
339,824

 
$
347,440

Services and other revenue - other
 
310,973

 
276,280

 
865,817

 
820,149

Equipment revenue - DISH Network
 
126

 
2,138

 
175

 
7,008

Equipment revenue - other
 
58,999

 
66,501

 
173,644

 
160,081

Total revenue
 
481,233

 
460,046

 
1,379,460

 
1,334,678

Costs and Expenses:
 
 

 
 

 
 

 
 

Cost of sales - services and other (exclusive of depreciation and amortization)
 
138,641

 
131,594

 
404,448

 
384,942

Cost of sales - equipment (exclusive of depreciation and amortization)
 
52,051

 
53,599

 
153,854

 
143,252

Selling, general and administrative expenses
 
91,003

 
80,672

 
263,820

 
240,454

Research and development expenses
 
8,302

 
9,030

 
23,444

 
23,524

Depreciation and amortization
 
134,822

 
108,549

 
379,939

 
324,743

Total costs and expenses
 
424,819

 
383,444

 
1,225,505

 
1,116,915

Operating income
 
56,414

 
76,602

 
153,955

 
217,763

 
 
 
 
 
 
 
 
 
Other Income (Expense):
 
 

 
 

 
 

 
 

Interest income
 
12,012

 
6,259

 
30,342

 
13,726

Interest expense, net of amounts capitalized
 
(55,646
)
 
(37,316
)
 
(156,498
)
 
(80,376
)
Gains on investments, net
 
20,090

 
230

 
33,962

 
8,179

Other-than-temporary impairment loss on available-for-sale securities
 

 

 
(3,298
)
 

Equity in earnings of unconsolidated affiliates, net
 
4,381

 
4,166

 
15,620

 
8,984

Other, net
 
4,686

 
364

 
8,211

 
5,531

Total other expense, net
 
(14,477
)
 
(26,297
)
 
(71,661
)
 
(43,956
)
Income from continuing operations before income taxes
 
41,937

 
50,305

 
82,294

 
173,807

Income tax provision
 
(6,082
)
 
(17,394
)
 
(9,073
)
 
(61,258
)
Net income from continuing operations
 
35,855

 
32,911

 
73,221

 
112,549

Net income (loss) from discontinued operations
 
(654
)
 
4,499

 
6,454

 
29,213

Net income
 
35,201

 
37,410

 
79,675

 
141,762

Less: Net income (loss) attributable to noncontrolling interest in HSS Tracking Stock
 

 
85

 
(655
)
 
(926
)
Less: Net income attributable to other noncontrolling interests
 
532

 
524

 
1,006

 
946

Net income attributable to EchoStar
 
34,669

 
36,801

 
79,324

 
141,742

Less: Net income (loss) attributable to Hughes Retail Preferred Tracking Stock
 

 
157

 
(1,209
)
 
(1,709
)
Net income attributable to EchoStar common stock
 
$
34,669

 
$
36,644

 
$
80,533

 
$
143,451

 
 
 
 
 
 
 
 
 
Amounts attributable to EchoStar common stock:
 
 
 
 
 
 
 
 
Net income from continuing operations
 
$
35,323

 
$
32,145

 
$
74,079

 
$
114,238

Net income (loss) from discontinued operations
 
(654
)
 
4,499

 
6,454

 
29,213

Net income attributable to EchoStar common stock
 
$
34,669

 
$
36,644

 
$
80,533

 
$
143,451

 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding - Class A and B common stock:
 
 

 
 

 
 

 
 

Basic
 
95,656

 
93,898

 
95,316

 
93,661

Diluted
 
96,890

 
94,401

 
96,626

 
94,189

 
 
 
 
 
 
 
 
 
Earnings (loss) per share - Class A and B common stock:
 
 

 
 

 
 

 
 

Basic:
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.37

 
$
0.34

 
$
0.78

 
$
1.22

Discontinued operations
 
(0.01
)
 
0.05

 
0.06

 
0.31

Total basic earnings per share
 
$
0.36

 
$
0.39

 
$
0.84

 
$
1.53

Diluted:
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.36

 
$
0.34

 
$
0.77

 
$
1.21

Discontinued operations
 

 
0.05

 
0.06

 
0.31

Total diluted earnings per share
 
$
0.36

 
$
0.39

 
$
0.83

 
$
1.52



The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Table of Contents


ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
(Unaudited)
 
 
For the Three Months
Ended September 30,
 
For the Nine Months
Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
Comprehensive Income:
 
 

 
 

 
 

 
 

Net income
 
$
35,201

 
$
37,410

 
$
79,675

 
$
141,762

Other comprehensive income (loss), net of tax:
 
 

 
 

 
 

 
 

Foreign currency translation adjustments
 
9,373

 
2,483

 
33,162

 
13,769

Unrealized gains (losses) on available-for-sale securities and other
 
(12,037
)
 
10,180

 
2,369

 
9,695

Recognition of realized gains on available-for-sale securities in net income
 

 
(10
)
 
(2,758
)
 
(5,584
)
Recognition of other-than-temporary impairment loss on available-for-sale securities in net income
 

 

 
3,298

 

Total other comprehensive income (loss), net of tax
 
(2,664
)
 
12,653

 
36,071

 
17,880

Comprehensive income
 
32,537

 
50,063

 
115,746

 
159,642

Less: Comprehensive income (loss) attributable to noncontrolling interest in HSS Tracking Stock
 

 
85

 
(655
)
 
(926
)
Less: Comprehensive income attributable to other noncontrolling interests
 
532

 
524

 
1,006

 
760

Comprehensive income attributable to EchoStar
 
$
32,005

 
$
49,454

 
$
115,395

 
$
159,808































The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents


ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
 
 
Class
A and B
Common
Stock
 
Hughes Retail
Preferred
Tracking
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Accumulated
Earnings
 
Treasury
Stock
 
Noncontrolling
Interest in
HSS Tracking
Stock
 
Other
Noncontrolling
Interests
 
Total
Balance, December 31, 2015
 
$
99

 
$
6

 
$
3,776,451

 
$
(117,233
)
 
$
134,317

 
$
(98,162
)
 
$
74,854

 
$
11,310

 
$
3,781,642

Issuances of Class A common stock:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Exercise of stock options
 
1

 

 
4,678

 

 

 

 

 

 
4,679

Employee benefits
 

 

 
11,126

 

 

 

 

 

 
11,126

Employee Stock Purchase Plan
 

 

 
11,478

 

 

 

 

 

 
11,478

Stock-based compensation
 

 

 
11,953

 

 

 

 

 

 
11,953

R&D tax credits utilized by DISH Network
 

 

 
(1,511
)
 

 

 

 

 

 
(1,511
)
Other, net
 

 

 
(334
)
 

 

 

 

 

 
(334
)
Net income (loss)
 

 

 

 

 
141,742

 

 
(926
)
 
946

 
141,762

Foreign currency translation adjustment
 

 

 

 
13,955

 

 

 

 
(186
)
 
13,769

Unrealized losses on available-for-sale securities, net and other
 

 

 

 
4,111

 

 

 

 

 
4,111

Balance, September 30, 2016
 
$
100

 
$
6

 
$
3,813,841

 
$
(99,167
)
 
$
276,059

 
$
(98,162
)
 
$
73,928

 
$
12,070

 
$
3,978,675

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2016
 
$
100

 
$
6

 
$
3,828,677

 
$
(124,803
)
 
$
314,247

 
$
(98,162
)
 
$
73,910

 
$
12,830

 
$
4,006,805

Issuances of Class A common stock:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Exercise of stock options
 
2

 

 
34,104

 

 

 

 

 

 
34,106

Employee benefits
 

 

 
11,200

 

 

 

 

 

 
11,200

Employee Stock Purchase Plan
 

 

 
6,938

 

 

 

 

 

 
6,938

Stock-based compensation
 

 

 
7,169

 

 

 

 

 

 
7,169

Cumulative effect of adoption of ASU 2016-09 as of January 1, 2017
 

 

 

 

 
14,508

 

 

 

 
14,508

Reacquisition and retirement of Tracking Stock pursuant to Share Exchange Agreement
 

 
(6
)
 
(226,815
)
 

 

 

 
(73,255
)
 

 
(300,076
)
R&D tax credits utilized by DISH Network
 

 

 
(577
)
 

 

 

 

 

 
(577
)
Net income (loss)
 

 

 

 

 
79,324

 

 
(655
)
 
1,006

 
79,675

Foreign currency translation adjustment
 

 

 

 
33,162

 

 

 

 

 
33,162

Unrealized gains and impairment on available-for-sale securities, net and other
 

 

 

 
2,909

 

 

 

 

 
2,909

Balance, September 30, 2017
 
$
102

 
$

 
$
3,660,696

 
$
(88,732
)
 
$
408,079

 
$
(98,162
)
 
$

 
$
13,836

 
$
3,895,819


The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents


ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
For the Nine Months Ended September 30,
 
 
2017
 
2016
Cash Flows from Operating Activities:
 
 

 
 

Net income
 
$
79,675

 
$
141,762

Adjustments to reconcile net income to net cash flows from operating activities:
 
 

 
 

Depreciation and amortization
 
391,598

 
370,872

Equity in earnings of unconsolidated affiliates, net
 
(14,461
)
 
(11,181
)
Gain and impairment on investments, net
 
(30,664
)
 
(8,179
)
Stock-based compensation
 
7,169

 
11,953

Deferred tax provision
 
7,924

 
71,422

Dividends received from unconsolidated entities
 
15,000

 
15,000

Proceeds from sale of trading securities
 
8,922

 
7,140

Changes in current assets and current liabilities, net
 
144,677

 
(47,013
)
Changes in noncurrent assets and noncurrent liabilities, net
 
(23,474
)
 
8,097

Other, net
 
5,570

 
14,836

Net cash flows from operating activities
 
591,936

 
574,709

Cash Flows from Investing Activities:
 
 

 
 

Purchases of marketable investment securities
 
(319,912
)
 
(883,288
)
Sales and maturities of marketable investment securities
 
376,648

 
643,865

Expenditures for property and equipment
 
(422,661
)
 
(533,669
)
Refunds and other receipts related to capital expenditures
 

 
24,087

Changes in restricted cash and marketable investment securities
 
(810
)
 
7,351

Investments in unconsolidated entities
 

 
(1,636
)
Sale of investment in unconsolidated entity
 
17,781

 

Expenditures for externally marketed software
 
(25,447
)
 
(17,991
)
Other, net
 

 
1,462

Net cash flows from investing activities
 
(374,401
)
 
(759,819
)
Cash Flows from Financing Activities:
 
 

 
 

Proceeds from issuance of long-term debt
 

 
1,500,000

Payments of debt issuance costs
 
(414
)
 
(6,275
)
Repayment of debt and capital lease obligations
 
(26,394
)
 
(30,615
)
Net proceeds from Class A common stock options exercised
 
33,156

 
4,679

Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan
 
6,938

 
11,478

Cash exchanged for Tracking Stock
 
(651
)
 

Other, net
 
(3,968
)
 
(3,373
)
Net cash flows from financing activities
 
8,667

 
1,475,894

Effect of exchange rates on cash and cash equivalents
 
1,014

 
684

Net increase in cash and cash equivalents
 
227,216

 
1,291,468

Cash and cash equivalents, beginning of period
 
2,571,143

 
924,240

Cash and cash equivalents, end of period
 
$
2,798,359

 
$
2,215,708

 
 
 
 
 
Supplemental Disclosure of Cash Flow Information:
 
 

 
 

Cash paid for interest (including capitalized interest)
 
$
183,451

 
$
97,044

Capitalized interest
 
$
45,496

 
$
70,386

Cash paid for income taxes
 
$
10,071

 
$
9,187

Employee benefits paid in Class A common stock
 
$
11,200

 
$
11,126

Property and equipment financed under capital lease obligations
 
$
8,423

 
$
7,172

Increase (decrease) in capital expenditures included in accounts payable, net
 
$
(3,494
)
 
$
21,951

Capitalized in-orbit incentive obligations
 
$
43,890

 
$

Noncash net assets exchanged for Tracking Stock
 
$
299,425

 
$



The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents


ECHOSTAR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1.    Organization and Business Activities
 
Principal Business
 
EchoStar Corporation (which, together with its subsidiaries, is referred to as “EchoStar,” the “Company,” “we,” “us” and/or “our”) is a holding company that was organized in October 2007 as a corporation under the laws of the State of Nevada. We are a global provider of satellite service operations, video delivery solutions, broadband satellite technologies and broadband services for home and small office customers. We deliver innovative network technologies, managed services, and various communications solutions for enterprise and government customers. Our Class A common stock is publicly traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “SATS.”

In February 2014, EchoStar Corporation entered into agreements with certain subsidiaries of DISH Network Corporation (“DISH”) pursuant to which, effective March 1, 2014, (i) EchoStar Corporation and our subsidiary Hughes Satellite Systems Corporation (“HSS”) issued the Tracking Stock (as defined below) to subsidiaries of DISH in exchange for five satellites (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI, and EchoStar XIV), including the assumption of related in-orbit incentive obligations, and $11.4 million in cash and (ii) DISH and certain of its subsidiaries began receiving certain satellite services on these five satellites from us (the “Satellite and Tracking Stock Transaction”). The Tracking Stock tracked the economic performance of the residential retail satellite broadband business of our Hughes segment, including certain operations, assets and liabilities attributed to such business (collectively, the “Hughes Retail Group” or “HRG”), and represented an aggregate 80.0% economic interest in HRG (the Hughes Retail Preferred Tracking Stock issued by EchoStar Corporation (the “EchoStar Tracking Stock”) represented a 51.89% economic interest in HRG and the Hughes Retail Preferred Tracking Stock issued by HSS (the “HSS Tracking Stock”, together with the EchoStar Tracking Stock, the “Tracking Stock”) represented a 28.11% economic interest in the Hughes Retail Group). In addition to the remaining 20.0% economic interest in HRG, EchoStar retained all economic interest in the wholesale satellite broadband business and other businesses of EchoStar.
 
On January 31, 2017, EchoStar Corporation and certain of its subsidiaries entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries. Pursuant to the Share Exchange Agreement, on February 28, 2017, among other things, EchoStar Corporation and certain of its subsidiaries received all of the shares of the Tracking Stock in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of our EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Following consummation of the Share Exchange, we no longer operate the EchoStar Technologies business segment and the EchoStar Tracking Stock and HSS Tracking Stock were retired and are no longer outstanding and all agreements, arrangements and policy statements with respect to such tracking stock terminated and are of no further effect. As a result of the Share Exchange, the condensed consolidated financial statements of the EchoStar Technologies businesses have been presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. See Note 3 for further discussion of our discontinued operations.

We currently operate in the following