EchoStar Corporation

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020.

☐ 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

Not Applicable

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Class A common stock

$0.001 par value

The NASDAQ Stock Market LLC

(Title of each class)

(Name of each exchange on which registered)

SATS

(Ticker symbol)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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

☒

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 30, 2020, the registrant’s outstanding common stock consisted of 50,306,575 shares of Class A common stock and 47,687,039 shares of Class B common stock, each $0.001 par value.

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Disclosure Regarding Forward-Looking Statements			i

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019 (audited)	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2020 and 2019 (unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended June 30, 2020 and 2019 (unaudited)	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2020 and 2019 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	71
Item 4.	Controls and Procedures	71

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	72
Item 1A.	Risk Factors	72
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3.	Defaults Upon Senior Securities	74
Item 4.	Mine Safety Disclosures	74
Item 5.	Other Information	74
Item 6.	Exhibits	75
	Signatures	76

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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, 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:

•significant risks related to the construction and operation of our satellites, such as the risk of not being able to timely complete the construction, or a material malfunction on one or more, of our satellites, 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 and the ability of third parties with whom we engage in order to operate our business, including customers, suppliers, vendors, financing sources, governmental entities and others, to successfully or fully operate as a result of outbreaks of viruses or widespread illness, including existing, continuing and future impacts and consequences of the COVID-19 pandemic caused by the novel coronavirus;

•our ability to implement and/or realize benefits of our domestic and/or international investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions;

•legal proceedings relating to the BSS Transaction or AGR matter (each as defined herein), which could result in substantial costs and material adverse effects on our business, results of operations, financial condition and prospects;

•our ability to realize the anticipated benefits of our current satellites and any future satellite we may construct or acquire;

•risks 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 (“U.S.”) dollar, economic instability, political disturbances and the consequences of being subject to foreign regulation and foreign legal proceedings, including increased operations costs and potential fines and penalties for violations, which may be substantial;

•the failure of third-party providers of components, manufacturing, installation services and customer support services to appropriately deliver the contracted goods or services; and

•our ability to bring advanced technologies to market to keep pace with our customers and competitors.

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 in Part I, Item 2 of this Form 10-Q and in Part II, Item 7 of 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

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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.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

(Unaudited)


	As of
	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	1,948,464	$	1,519,431
Marketable investment securities	509,980		940,623
Trade accounts receivable and contract assets, net	183,379		196,629
Other current assets, net	185,699		179,531
Total current assets	2,827,522		2,836,214
Non-current assets:
Property and equipment, net	2,399,711		2,528,738
Operating lease right-of-use assets	125,996		114,042
Goodwill	509,054		506,953
Regulatory authorizations, net	474,463		478,598
Other intangible assets, net	22,667		29,507
Other investments, net	275,873		325,405
Other non-current assets, net	340,904		334,841
Total non-current assets	4,148,668		4,318,084
Total assets	$	6,976,190	$	7,154,298

Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable	$	112,748	$	124,080
Current portion of long-term debt, net	896,386		—
Contract liabilities	89,831		101,060
Accrued expenses and other current liabilities	262,944		270,879
Total current liabilities	1,361,909		496,019
Non-current liabilities:
Long-term debt, net	1,494,902		2,389,168
Deferred tax liabilities, net	349,973		351,692
Operating lease liabilities	110,899		96,941
Other non-current liabilities	74,239		74,925
Total non-current liabilities	2,030,013		2,912,726
Total liabilities	3,391,922		3,408,745

Commitments and contingencies


Stockholders’ equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both June 30, 2020 and December 31, 2019	—		—
Common stock, $0.001 par value, 4,000,000,000 shares authorized:
Class A common stock, $0.001 par value, 1,600,000,000 shares authorized, 56,988,365 shares issued and 50,306,445 shares outstanding at June 30, 2020 and 56,592,251 shares issued and 50,107,330 shares outstanding at December 31, 2019	57		57
Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at both June 30, 2020 and December 31, 2019	48		48
Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both June 30, 2020 and December 31, 2019	—		—
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both June 30, 2020 and December 31, 2019	—		—
Additional paid-in capital	3,311,861		3,290,483
Accumulated other comprehensive income (loss)	(206,810)		(122,138)
Accumulated earnings (losses)	558,034		632,809
Treasury stock, at cost	(137,347)		(131,454)
Total EchoStar Corporation stockholders’ equity	3,525,843		3,669,805
Non-controlling interests	58,425		75,748
Total stockholders’ equity	3,584,268		3,745,553
Total liabilities and stockholders’ equity	$	6,976,190	$	7,154,298

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

(Unaudited)


	For the three months ended June 30,						For the six months ended June 30,
	2020		2019		2020		2019
Revenue:
Services and other revenue	$	417,043	$	402,786	$	825,400	$	805,454
Equipment revenue	42,423		57,645		99,732		109,359
Total revenue	459,466		460,431		925,132		914,813
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	141,019		142,680		286,271		286,027
Cost of sales - equipment (exclusive of depreciation and amortization)	32,542		46,549		78,450		91,556
Selling, general and administrative expenses	113,798		149,209		239,079		261,323
Research and development expenses	7,448		6,388		13,702		13,276
Depreciation and amortization	129,887		120,266		262,255		239,244
Total costs and expenses	424,694		465,092		879,757		891,426
Operating income (loss)	34,772		(4,661)		45,375		23,387
Other income (expense):
Interest income, net	10,760		23,213		26,343		47,642
Interest expense, net of amounts capitalized	(38,258)		(53,749)		(74,491)		(106,948)
Gains (losses) on investments, net	(6,090)		12,855		(52,762)		19,791
Equity in earnings (losses) of unconsolidated affiliates, net	(6,345)		(4,754)		(3,732)		(11,107)
Foreign currency transaction gains (losses), net	1,560		1,753		(9,284)		593
Other, net	(391)		7		(670)		(35)
Total other income (expense), net	(38,764)		(20,675)		(114,596)		(50,064)
Income (loss) from continuing operations before income taxes	(3,992)		(25,336)		(69,221)		(26,677)
Income tax benefit (provision), net	(10,851)		(4,692)		(3,359)		(7,590)
Net income (loss) from continuing operations	(14,843)		(30,028)		(72,580)		(34,267)
Net income (loss) from discontinued operations	—		24,968		—		44,215
Net income (loss)	(14,843)		(5,060)		(72,580)		9,948
Less: Net loss (income) attributable to non-controlling interests	3,431		(632)		6,873		(1,438)
Net income (loss) attributable to EchoStar Corporation common stock	$	(11,412)	$	(5,692)	$	(65,707)	$	8,510

Earnings (losses) per share - Class A and B common stock:
Basic and diluted earnings (losses) from continuing operations per share	$	(0.12)	$	(0.32)	$	(0.67)	$	(0.37)
Total basic and diluted earnings (losses) per share	$	(0.12)	$	(0.06)	$	(0.67)	$	0.09

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

(Unaudited)


	For the three months ended June 30,						For the six months ended June 30,
	2020		2019		2020		2019
Net income (loss)	$	(14,843)	$	(5,060)	$	(72,580)	$	9,948
Other comprehensive income (loss), net of tax:
Foreign currency translation	(20,153)		2,896		(100,515)		3,807
Unrealized gains (losses) on available-for-sale debt securities	3,091		4		(275)		3,291
Other	97		1,868		(2,578)		(932)
Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale debt securities	—		(17)		—		(566)
Total other comprehensive income (loss), net of tax	(16,965)		4,751		(103,368)		5,600
Comprehensive income (loss)	(31,808)		(309)		(175,948)		15,548
Less: Comprehensive loss (income) attributable to non-controlling interests	5,804		(632)		25,569		(1,438)
Comprehensive income (loss) attributable to EchoStar Corporation	$	(26,004)	$	(941)	$	(150,379)	$	14,110

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND 2019

(Amounts in thousands)

(Unaudited)


	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Earnings (Losses)		Treasury Stock, at cost		Non-controlling Interests		Total
Balance, March 31, 2019	$	102	$	3,713,777	$	(124,251)	$	709,928	$	(131,454)	$	11,434	$	4,179,536
Issuances of Class A common stock:
Exercise of stock options	2		59,455		—		—		—		—		59,457

Employee Stock Purchase Plan	—		2,325		—		—		—		—		2,325
Stock-based compensation	—		2,205		—		—		—		—		2,205

Other comprehensive income (loss)	—		—		4,751		—		—		—		4,751
Net income (loss)	—		—		—		(5,692)		—		632		(5,060)
Other, net	—		(263)		—		—		—		—		(263)
Balance, June 30, 2019	$	104	$	3,777,499	$	(119,500)	$	704,236	$	(131,454)	$	12,066	$	4,242,951

Balance, March 31, 2020	$	105	$	3,307,360	$	(192,218)	$	569,446	$	(137,347)	$	58,229	$	3,605,575
Issuances of Class A common stock:
Exercise of stock options	—		328		—		—		—		—		328

Employee Stock Purchase Plan	—		2,376		—		—		—		—		2,376
Stock-based compensation	—		2,125		—		—		—		—		2,125


Contribution by non-controlling interest holder	—		—		—		—		—		6,000		6,000
Other comprehensive income (loss)	—		—		(14,592)		—		—		(2,373)		(16,965)
Net income (loss)	—		—		—		(11,412)		—		(3,431)		(14,843)

Other, net	—		(328)		—		—		—		—		(328)
Balance, June 30, 2020	$	105	$	3,311,861	$	(206,810)	$	558,034	$	(137,347)	$	58,425	$	3,584,268

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ECHOSTAR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(Amounts in thousands)

(Unaudited)


	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Earnings (Losses)		Treasury Stock, at cost		Non-controlling Interests		Total
Balance, December 31, 2018	$	102	$	3,702,522	$	(125,100)	$	694,129	$	(131,454)	$	15,275	$	4,155,474
Issuances of Class A common stock:
Exercise of stock options	2		61,501		—		—		—		—		61,503
Employee benefits	—		6,654		—		—		—		—		6,654
Employee Stock Purchase Plan	—		5,074		—		—		—		—		5,074
Stock-based compensation	—		4,833		—		—		—		—		4,833
Purchase of non-controlling interest	—		(2,666)		—		—		—		(4,647)		(7,313)
Other comprehensive income (loss)	—		—		5,600		—		—		—		5,600
Net income (loss)	—		—		—		8,510		—		1,438		9,948
Other, net	—		(419)		—		1,597		—		—		1,178
Balance, June 30, 2019	$	104	$	3,777,499	$	(119,500)	$	704,236	$	(131,454)	$	12,066	$	4,242,951

Balance, December 31, 2019	$	105	$	3,290,483	$	(122,138)	$	632,809	$	(131,454)	$	75,748	$	3,745,553
Cumulative effect of accounting changes	—		—		—		(9,068)		—		(240)		(9,308)
Balance, January 1, 2020	105		3,290,483		(122,138)		623,741		(131,454)		75,508		3,736,245
Issuances of Class A common stock:
Exercise of stock options