UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)


ý ☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, ~~2018~~2019.


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:~~ File Number: 333-179121

Hughes Satellite Systems Corporation

(Exact name of registrant as specified in its charter)



Colorado			45-0897865
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~organization)			(I.R.S. Employer Identification No.)

100 Inverness Terrace East,	Englewood,	Colorado	80112-5308
(Address of ~~Principal Executive Offices)~~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)

~~Registrant’s telephone number, including area code:~~ ~~(303) 706-4000~~

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý☐ No☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ~~Yes~~ ýYes☒ No o☐

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 o No ýNox*

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 ~~(§232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ~~Yes~~ ýYes☒ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý☐

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 filero	☐	Accelerated filer o	☐	Emerging growth company	☐
Non-accelerated filerx ~~(Do not check if a smaller reporting company)~~	☒	Smaller reporting companyo
☐			~~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☒

The aggregate market value of the registrant’s voting interests held by non-affiliates on June 30, ~~2018~~2019 was $0.

As of February ~~11, 2019,~~10, 2020, the registrant’s outstanding common stock consisted of 1,078 shares of common stock, $0.01 par value per share.

The Registrant meets the conditions set forth in General Instructions (I)(1)(a) and (b) of Form 10-K and is therefore filing this Annual Report on Form 10-K with the reduced disclosure format.

* The Registrant currently is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 and is filing this Annual Report on Form ~~10-K~~10-K/A on a voluntary basis. The Registrant 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 as if it were subject to such filing requirements during such period.

DOCUMENTS INCORPORATED BY REFERENCE None

~~None~~

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TABLE OF CONTENTS



Disclosure Regarding Forward Looking Statements		i

PART I

Item 1.	Business	1
Item 1A.	Risk Factors	23
Item 1B.	Unresolved Staff Comments	2022
Item 2.	Properties	2122
Item 3.	Legal Proceedings	2122
Item 4.	Mine Safety Disclosures	2223

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2324
Item 6.	Selected Financial Data	*
Item 7.	Management’s Narrative Analysis of Results of Operations	2324
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 8.	Financial Statements and Supplementary Data	37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	37
Item 9A.	Controls and Procedures	3738
Item 9B.	Other Information	3839

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	*
Item 11.	Executive Compensation	*
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	*
Item 13.	Certain Relationships and Related Transactions, and Director Independence	*
Item 14.	Principal Accounting Fees and Services	3940

PART IV

Item 15.	Exhibits, Financial Statement Schedules	4041
Item 16.	Form 10K Summary	47
	Signatures	48
	Index to Consolidated Financial Statements	F-1

* This item has been omitted pursuant to the reduced disclosure format as set forth in General Instructions (I) (2) (a) and (c) of Form 10-K.

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DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K (“Form 10-K”) 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-K 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 of or material malfunction on one or more of our satellites, risks resulting from 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 reliance on DISH Network Corporation and its subsidiaries for a significant portion of our revenue;~~


•	significant risks related to the construction and operation of our satellites, such as the risk of not being able to timely complete the construction of or 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 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 including, without limitation, the BSS Transaction (as defined herein);


•	lawsuits relating to the BSS Transaction could result in substantial costs;


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

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;

~~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.

•

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 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 in Part I, Item 1A. — Risk Factors and Item 7. — Management’s Narrative Analysis of Results of Operations of this Form 10-K and Results of Operations of this Form 10-K and those discussed in other documents we file with the Securities and Exchange Commission (“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.

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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

ITEM 1. BUSINESS

OVERVIEW

Hughes Satellite Systems Corporation (which, together with its subsidiaries, is referred to as “HSS,” the “Company,” “we,” “us” ~~and/or~~and “our”) is a holding company and a subsidiary of EchoStar Corporation (“EchoStar”). We were formed as a Colorado corporation in March 2011 to facilitate the acquisition by EchoStar (the “Hughes Acquisition”) of Hughes Communications, Inc. and its subsidiaries and related financing transactions. In connection with our formation, EchoStar contributed the assets and liabilities of its satellite services business to us, including the principal operating subsidiary of its satellite services business, EchoStar Satellite Services L.L.C. A substantial majority of the voting power of the shares of each of EchoStar and DISH Network Corporation (“DISH”) is owned beneficially by Charles W. Ergen, our Chairman, and by certain entities established ~~by Mr. Ergen~~ for the benefit of his family.

We are a global provider of broadband satellite technologies, broadband internet services for consumer customers, which include home and small ~~office customers, satellite operations~~to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and ~~various~~ communications solutions for enterprise customers, which include aeronautical ~~enterprise~~ and government ~~customers.~~enterprises.

Our industry continues to evolve with the increasing worldwide demand for broadband internet access for information, entertainment and commerce. In addition to fiber and wireless systems, other technologies such as geostationary high throughput satellites, low-earth orbit (“LEO”) networks, medium-earth orbit (“MEO”) systems, balloons and High Altitude Platform Systems are ~~playing~~expected to play significant roles in enabling global broadband access, networks and services. We intend to use our expertise, technologies, capital, investments, global presence, relationships and other capabilities to continue to provide broadband internet systems, equipment, networks and services for information, the internet-of-things, entertainment and commerce in North America and internationally for ~~consumers as well as aeronautical,~~consumer and enterprise ~~and government~~ customers. We are closely tracking the developments in next-generation satellite businesses, and we are seeking to utilize our services, technologies, licenses and expertise to find new commercial opportunities for our business.

We currently operate in two business segments: Hughes and ~~EchoStar Satellite Services (“ESS”), as discussed below. Our corporate department operations~~ESS. These segments are consistent with the way we make decisions regarding the allocation of resources, as well as how operating results are reviewed by our chief operating decision maker, who is the Company’s Chief Executive Officer.

Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Accounting, Real Estate and Legal) and other activities that have not been assigned to our operating segments such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments. These activities, costs and income, as well as eliminations of intersegment transactions, are ~~all~~ accounted for in Corporate and Otherin our segment reporting.

In May 2019, EchoStar and one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), entered into a master transaction agreement (the “Master Transaction Agreement”) with DISH and a wholly-owned subsidiary of DISH (“Merger Sub”). Pursuant to the terms of the Master Transaction Agreement, on September 10, 2019: (i) EchoStar and its subsidiaries and we and our subsidiaries transferred to BSS Corp. certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily relating to the former portion of our ESS segment that managed, marketed and provided (1) broadcast satellite services primarily to DISH and its subsidiaries (together with DISH, “DISH Network”) and EchoStar’s joint venture Dish Mexico, S. de R.L. de C.V., (“Dish Mexico”) and its subsidiaries and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of EchoStar’s and our other businesses (collectively, the “BSS Business”); (ii) EchoStar distributed to each holder of shares of EchoStar’s Class A or Class B common stock entitled to receive consideration in the transaction an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to one share of BSS Common Stock for each share of EchoStar’s Class A or Class B common stock owned by such EchoStar stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and DISH owns and operates the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).

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In connection with the BSS Transaction, EchoStar and DISH Network have agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. Additionally, EchoStar and DISH and certain of our, EchoStar’s and DISH’s subsidiaries, as applicable, have (i) entered into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property and the provision of transitional services; (ii) terminated certain previously existing agreements; and (iii) amended certain existing agreements and entered into certain new agreements pursuant to which we, EchoStar and certain of our and its other subsidiaries, on the one hand, and DISH Network, on the other hand, will obtain and provide certain products, services and rights from and to each other.

The BSS Transaction was structured in a manner intended to be tax-free to EchoStar and its stockholders for U.S. federal income tax purposes and was accounted for as a spin-off to EchoStar’s stockholders as we and EchoStar did not receive any consideration. Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. As a result of the BSS Transaction, the financial results of the BSS Business, except for certain real estate that transferred in the transaction, are presented as discontinued operations and, as such, excluded from continuing operations and segment results for all periods presented in our accompanying Consolidated Financial Statements and notes thereto in Item 15 of this Form 10-K (“Accompanying Consolidated Financial Statements”).

During 2017, EchoStar and certain of its and our subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries. EchoStar and certain of its and our subsidiaries received all of the shares of the Hughes Retail Preferred Tracking Stock previously issued by EchoStar and us (together, the “Tracking Stock”) in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of EchoStar’s former EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Following the consummation of the Share Exchange, EchoStar no longer operates its former EchoStar Technologies businesses, the Tracking Stock was retired and is no longer outstanding, and all agreements, arrangements and policy statements with respect to the Tracking Stock terminated.

~~Table~~See Note 5 in our Accompanying Consolidated Financial Statements for further detail of ~~Contents~~our discontinued operations.

The Accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). All amounts reference results from continuing operations unless otherwise noted and are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted. Additionally, certain prior period amounts have been adjusted to conform to the current period presentation.

WHERE YOU CAN FIND MORE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, with respect to the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information that we ~~file~~ with the SEC. Our public filings are maintained on the SEC’s internet site ~~that~~at http://www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. ~~The address of that website is http://www.sec.gov.~~

WEBSITE ACCESS

Our Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, may also be accessed free of charge through EchoStar’s website at http://www.echostar.com, the website of our parent company EchoStar, as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the SEC. ~~The address of that website is http://www.echostar.com.~~

EchoStar has adopted a written code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, in accordance with the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder. This code of ethics is available on EchoStar’s corporate website at http://www.echostar.com. In the event that EchoStar makes changes in, or provides waivers of, the provisions of this code of ethics that the SEC requires EchoStar to disclose, it intends to disclose these events on its website.

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ITEM 1A. RISK FACTORS

The risks and uncertainties described below are not the only ones facing us. If any of the following events occur, our business, financial condition, results of operation, prospects or ability to fund a debt repurchase program, invest capital in or otherwise run our business or execute on our strategic plans could be materially and adversely affected.

GENERAL RISKS AFFECTING OUR BUSINESS

We currently derive a significant portion of our revenue from DISH Network. The loss of, or a significant reduction in, orders from, or a decrease in selling prices of satellite services, broadband equipment and/or other services or products to DISH Network would significantly reduce our revenue and materially adversely impact our results of operations.

~~DISH Network Corporation and its subsidiaries (“DISH Network”) accounted for 17.5%, 23.1% and 25.5% of our total revenue for the years ended December 31, 2018, 2017 and 2016, respectively.~~

DISH Network is the primary customer of the satellite services provided by our ESS segment. For the years ended December 31, 2018, 2017 and 2016 DISH Network accounted for 86.5%, 87.9% and 85.7% of our total ESS segment revenue, and we expect that DISH Network will continue to be the primary source of revenue for our ESS segment as we have entered into certain commercial agreements with DISH Network pursuant to which we provide DISH Network with satellite services at fixed prices for varying lengths of time depending on the satellite. See Note 16 in the notes to consolidated financial statements in Item 15 of this report for further discussion of our related party transactions with DISH Network. The results of operations of our ESS segment are linked to changes in DISH Network’s satellite capacity requirements, which historically have been driven by the addition of new channels and migration of programming to high-definition TV and video on demand services. DISH Network’s future satellite capacity requirements may change for a variety of reasons, including its ability to construct and launch or acquire its own satellites, to continue to add new channels and/or to migrate to the provision of such channels and other video on demand services through streaming and other alternative technologies. There is no assurance that we will continue to provide satellite services to DISH Network beyond the terms of our agreements. Any termination or reduction in the satellite services we provide to DISH Network or the prices that DISH Network pays us for such services would cause us to have unused capacity on our satellites, require us to aggressively pursue alternative sources of revenue for this business and have a material adverse effect on our business, results of operation and financial position.

If we lose DISH Network as a customer of the satellite services provided by our ESS segment, it may be difficult for us to replace, in whole or in part, our historical revenue from DISH Network because there are a relatively small number of potential customers for our specialized services, and we have had limited success in attracting such potential new

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customers in the past. Historically, many potential customers of our ESS segment have perceived us as a competitor due to our affiliation with DISH Network. There can be no assurance that we will be successful in entering into any commercial relationships with potential new customers who are competitors of DISH Network (particularly if we continue to be perceived as affiliated with DISH Network as a result of common ownership and certain shared services). If we do not develop relationships with new customers, we may not be able to expand our customer base or maintain or increase our revenue.

Furthermore, DISH Network has transitioned from being a wholesale distributor of the satellite internet service of our Hughes segment to being a sales agent for such services. DISH Network (i) has the right, but not the obligation, to market, promote and solicit orders and upgrades for our HughesNet service and related equipment and other telecommunications services and (ii) installs HughesNet service equipment with respect to activations generated by DISH Network. For the years ended December 31, 2018, 2017 and 2016, DISH Network accounted for 2.9%, 5.6% and 7.7% of our total Hughes segment revenue. Any material reduction in or termination of sales generated by DISH Network in its capacity as our sale agent could have a material adverse effect on our business, results of operations, and financial position.

~~Our strategic initiatives may not be successfully implemented, may not elicit the expected customer response in the market and may result in competitive reactions.~~

We intend to continue to selectively explore opportunities to pursue investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, domestically and internationally, that we believe may allow us to increase our existing market share, increase our satellite capacity, expand into new markets, obtain new customers, broaden our portfolio of services, products and intellectual property, make our business more valuable, align us for future growth and expansion, maximize the return on our investments and strengthen our business and relationships with our customers. We may allocate significant resources for long-term initiatives that may not have a short or medium-term or any positive impact on our revenue, results of operations, or cash flow.

The successful implementation of our strategic initiatives requires an investment of time, talent and money and is dependent upon a number of factors some of which are not within our control. Those factors include the ability to execute such initiatives in new and existing markets, the response of existing and potential new customers, and the actions or reactions of competitors. If we fail to properly execute or deliver products or services that address customers’ expectations, it may have an adverse effect on our ability to retain and attract customers and may increase our costs and reduce our revenue. Similarly, competitive actions or reactions to our initiatives or advancements in technology or competitive products or services could impair our ability to execute those strategic initiatives or advancements. In addition, new strategic initiatives may face barriers to entering new or existing markets with established or new competitors. There can be no assurance that we will successfully implement these strategic initiatives or that, if successfully pursued, they will have the desired effect on our business or results of operations.

~~We could face decreased demand and increased pricing pressure to our products and services due to competition.~~

Our business operates in an intensely competitive, consumer-driven and rapidly changing environment and competes with a growing number of companies that provide products and services to consumers. There can be no assurance that we will be able to effectively compete against our competitors due to their significant resources and operating history. Risks to our business from competition include, but are not limited to, the following:

Our ESS segment competes against larger, well-established satellite service companies. Because the satellite services industry is relatively mature, our strategy depends largely on our ability to displace current incumbent providers, which often have the benefit of long-term contracts with customers. These long-term contracts and other factors result in relatively high costs for customers to change service providers, making it more difficult for us to displace customers from their current relationships with our competitors. In addition, the supply of satellite capacity available in the market has increased in recent years, which makes it more difficult for us to sell our services in certain markets and to price our capacity at acceptable levels. Competition may cause downward pressure on prices and further reduce the utilization of our capacity, both of which could have an adverse effect on our financial performance. Our ESS segment also competes with both fiber optic cable and terrestrial delivery systems, which may have a cost advantage, particularly in point-to-point applications where such delivery systems have been installed, and with new delivery systems being developed, which may have lower latency and other advantages.

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In our consumer market, our Hughes segment faces competition primarily from digital subscriber line (“DSL”), fiber and cable internet service providers. Also, other telecommunications, satellite and wireless broadband companies have launched or are planning the launch of consumer internet access services in competition with our service offerings in North, Central and South America. Some of these competitors offer consumer services and hardware at lower prices than ours. In addition, terrestrial alternatives do not require our external dish, which may limit customer acceptance of our products. We may be unsuccessful in competing effectively against DSL, fiber and cable internet service providers and other satellite broadband providers, which could harm our business, operating results and financial condition.

In our enterprise network communications market, our Hughes segment faces competition from providers of terrestrial-based networks, such as fiber, DSL, cable modem service, multiprotocol label switching and internet protocol-based virtual private networks, which may have advantages over satellite networks for certain customer applications. Although we also sell terrestrial services to this market, we may not be as cost competitive and it may become more difficult for us to compete. The network communications industry is characterized by competitive pressures to provide enhanced functionality for the same or lower price with each new generation of technology. Terrestrial-based networks are offered by telecommunications carriers and other large companies, many of which have substantially greater financial resources and greater name recognition than us. As the prices of our products decrease, we will need to sell more products and/or reduce the per-unit costs to improve or maintain our results of operations. The costs of a satellite network may exceed those of a terrestrial-based network or other networks, especially in areas that have experienced significant DSL and cable internet build-out. It may become more difficult for us to compete with terrestrial and other providers as the number of these areas continues to increase and the cost of their network and hardware services continues to decline. Terrestrial networks also have a competitive edge because of lower latency for data transmission.

To the extent we have available satellite capacity in our ESS segment, our results of operations may be materially adversely affected if we are not able to provide satellite services on this capacity to third parties, including DISH Network.

While we are currently evaluating various opportunities to make profitable use of our available satellite capacity (including, but not limited to, supplying satellite capacity for new domestic and international ventures), there can be no assurance that we can successfully develop these business opportunities. If we are unable to utilize our available satellite capacity for providing satellite services to third parties, including DISH Network, our margins could be negatively impacted, and we may be required to record impairments related to our satellites.

~~The failure to adequately anticipate the need for satellite capacity or the inability to obtain satellite capacity for our Hughes segment could harm our results of operations.~~

Our Hughes segment has made substantial contractual commitments for satellite capacity based on our existing customer contracts and backlog. If our existing customer contracts were to be terminated prior to their respective expiration dates, we may be committed to maintaining excess satellite capacity for which we will have insufficient revenue to cover our costs, which would have a negative impact on our margins and results of operations. Alternatively, we may not have sufficient satellite capacity available from our satellites or purchased from third parties to meet demand and we may not be able to quickly or easily adjust our capacity to changes in demand. As capacity becomes full on our existing satellites, significant delays in the construction or launch of new satellites and/or satellite anomalies or failures could materially and adversely affect our ability to provide services to customers. We generally only purchase satellite capacity based on existing contracts and bookings. Therefore, capacity for certain types of coverage in the future may not be readily available to us, and we may not be able to satisfy certain needs of our customers, which could result in a loss of possible new business and could negatively impact the margins for those services. In addition, the fixed satellite service (“FSS”) industry has seen consolidation in the past decade, and today, the main FSS providers in North America and a number of smaller regional providers own and operate the current satellites that are available for our capacity needs. The failure of any of these FSS providers to replace existing satellite assets at the end of their useful lives or a downturn in their industry as a whole could reduce the satellite capacity available to us. Our business and results of operations could be adversely affected if we are not able to renew our capacity leases at economically viable rates, or if capacity is not available due to problems experienced by these FSS provider. Our ability to provide additional capacity for subscriber growth in our North American consumer market could also be adversely affected by regulations and/or legislation in the U.S. that enable or propose to enable the use of a portion of the frequency bands, we currently use or in the future intend to use for satellite services, 5G mobile terrestrial services or other uses. These bands include the Ka-band, where we operate our broadband gateway earth stations, and other bands in which we

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may operate in the future. Such regulation or legislation could limit our ability to use the Ka-band and/or other bands, limit our flexibility to change the way in which we use the Ka-band and/or adversely impact our ability to use additional bands in the future. Other countries in which we currently, or may in the future, operate are also considering regulations that could similarly limit access to the Ka-band or other frequency bands

We are dependent upon third-party providers for components, manufacturing, installation services, and customer support services, and our results of operations may be materially adversely affected if any of these third-party providers fail to appropriately deliver the contracted goods or services.

~~We are dependent upon third-party services and products provided to us, including the following:~~

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~~Components~~. A limited number of suppliers manufacture, and in some cases a single supplier manufactures, some of the key components required to build our products. These key components may not be continually available and we may not be able to forecast our component requirements sufficiently in advance, which may have a detrimental effect on supply. If we are required to change suppliers for any reason, we would experience a delay in manufacturing our products if another supplier is not able to meet our requirements on a timely basis. In addition, if we are unable to obtain the necessary volumes of components on favorable terms or prices on a timely basis, we may be unable to produce our products at competitive prices and we may be unable to satisfy demand from our customers. Our reliance on a single or limited group of suppliers, particularly foreign suppliers, and our reliance on subcontractors, involves several risks. These risks include a potential inability to obtain an adequate supply of required components, reduced control over pricing, quality, and timely delivery of these components, and the potential bankruptcy, lack of liquidity or operational failure of our suppliers. We do not generally maintain long-term agreements with any of our suppliers or subcontractors for our products. An inability to obtain adequate deliveries or any other circumstances requiring us to seek alternative sources of supply could affect our ability to ship our products on a timely basis, which could damage our relationships with current and prospective customers and harm our business, resulting in a loss of market share, and reduced revenue and income.

•

~~Commodity Price Risk~~. Fluctuations in pricing of raw materials can affect our product costs. To the extent that component pricing does not decline or increases, whether due to inflation, increased demand, decreased supply or other factors, we may not be able to pass on the impact of increasing raw materials prices, component prices or labor and other costs, to our customers, and we may not be able to operate profitably. Such changes could have an adverse impact on our product costs.


•	~~Manufacturing~~. While we develop and manufacture prototypes for certain of our products, we use contract manufacturers to produce a significant portion of our hardware. If these contract manufacturers fail to provide products that meet our specifications in a timely manner, then our customer relationships and revenue may be harmed.

•

~~Installation and customer support services~~. Some of our products and services, such as our North American and international operations, utilize a network of third-party installers to deploy our hardware. In addition, a portion of our customer support and management is provided by third-party call centers. A decline in levels of service or attention to the needs of our customers could adversely affect our reputation, renewal rates and ability to win new business.

•

~~Other services.~~ Some of our products rely on third parties to provide services necessary for the operation of functionalities of the products, such as third-party cloud computing services and satellite uplink hosting services. The failure of these services could disrupt the operation of certain functionalities of our products, which could harm our customer relationship and result in a loss of sales. In addition, if the agreements for the provision of these services are terminated or not renewed, we could face difficulties replacing these service providers, which would adversely affect our ability to obtain and retain customers and result in reduced revenue and income.

~~Our foreign operations and investments expose us to risks and restrictions not present in our domestic operations.~~

Our sales outside the U.S. accounted for approximately 13.9%, 19.5% and 18.3% of our revenue for the years ended December 31, 2018, 2017 and 2016, respectively. We expect our foreign operations to continue to represent a significant and growing portion of our business. Over the last 10 years, we sold products in over 100 countries and began offering broadband internet services to consumers in in several Central and South American countries. Our

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~~foreign operations involve varying degrees of risk and uncertainties inherent in doing business abroad. Such risks include:~~

•

~~Complications in complying with restrictions on foreign ownership and investment and limitations on repatriation.~~ We may not be permitted to own our operations in some countries and may have to enter into partnership or joint venture relationships. Many foreign legal regimes restrict our repatriation of earnings to the U.S. from our subsidiaries and joint venture entities. Applicable law in such foreign countries may also limit our ability to distribute or access our assets or offer our products and services in certain circumstances. In such event, we will not have access to the cash flow and assets of our subsidiaries and joint ventures.

•

~~Difficulties in following a variety of laws and regulations related to foreign operations~~. Our international operations are subject to the laws and regulations of many different jurisdictions that may differ significantly from U.S. laws and regulations. For example, local privacy or intellectual property laws may hold us responsible for the data that is transmitted over our network by our customers. In addition, we are subject to the Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions that generally prohibit companies and their intermediaries from making improper payments or giving or promising to give anything of value to foreign officials and other individuals for the purpose of obtaining or retaining business or gaining a competitive advantage. Our policies mandate compliance with these laws. However, we operate in many parts of the world that have experienced corruption to some degree. Compliance with these laws may lead to increased operations costs or loss of business opportunities. Violations of these laws could result in fines or other penalties or sanctions, which could have a material adverse impact on our business, financial condition, and results of operations.

•

~~Restrictions on space station landing/terrestrial rights~~. Satellite market access and landing rights and terrestrial wireless rights are dependent on the national regulations established by foreign governments, including, but not limited to obtaining national authorizations or approvals and meeting other regulatory, coordination and registration requirements for satellites. Because regulatory schemes vary by country, we may be subject to laws or regulations in foreign countries of which we are not presently aware. Non-compliance with these requirements may result in the loss of the authorizations and licenses to conduct business in these countries, as well as fines or other financial and non-financial penalties for non-compliance with regulations. If that were to be the case, we could be subject to sanctions, penalties and/or other actions by a foreign government that could materially and adversely affect our ability to operate in that country. There is no assurance that any current regulatory approvals held by us are, or will remain, sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be granted on a timely basis or at all, in all jurisdictions in which we wish to operate new satellites, or that applicable restrictions in those jurisdictions will not be unduly burdensome. Violations of laws or regulations may result in various sanctions including fines, loss of authorizations and the denial of applications for new authorizations or for the renewal of existing authorizations, and the failure to obtain or comply with the authorizations and regulations governing our international operations could have a material adverse effect on our ability to generate revenue and our overall competitive position.

•

~~Financial and legal constraints and obligations~~. Operating pursuant to foreign licenses subjects us to certain financial constraints and obligations, including, but not limited to: (a) tax liabilities that may or may not be dependent on revenue; (b) the burden of creating and maintaining additional entities, branches, facilities and/or staffing in foreign jurisdictions; and (c) legal regulations requiring that we make certain satellite capacity available for “free,” which may impact our revenue. In addition, if we need to pursue legal remedies against our customers or our business partners located outside of the U.S., it may be difficult for us to enforce our rights against them.

•

~~Compliance with applicable export control laws and regulations in the U.S. and other countries~~. We must comply with all applicable export control and trade sanctions laws and regulations of the U.S. and other countries. U.S. laws and regulations applicable to us include the Arms Export Control Act,, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), and trade sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). The export of certain hardware, technical data and services relating to satellites is regulated by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) under the EAR. Other items are controlled for export by the U.S. Department of State’s Directorate of Defense Trade Controls under ITAR. We cannot provide equipment or services to certain countries subject to U.S. trade sanctions unless we first obtain the necessary authorizations from OFAC. Violations of these laws or regulations could result in significant sanctions including fines, more onerous compliance requirements, debarments from export privileges, or loss of authorizations needed to conduct aspects of our international business. A violation of

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~~ITAR or the other regulations enumerated above could materially adversely affect our business, financial condition and results of operations.~~

•

~~Changes in exchange rates between foreign currencies and the U.S. dollar~~. We conduct our business and incur cost in the local currency of a number of the countries in which we operate. Accordingly, our applicable results of operations are reported in the relevant local currency and then translated to U.S. dollars at the applicable currency exchange rate for inclusion in our financial statements. In addition, we sell our products and services and acquire supplies and components from countries that historically have been, and may continue to be, susceptible to recessions, instability or currency devaluation. These fluctuations in currency exchange rates, recessions and currency devaluations have affected, and may in the future affect, revenue, profits and cash earned on international sales.

•

~~Greater exposure to the possibility of economic instability, the disruption of operations from labor and political disturbances, expropriation or war~~. As we conduct operations throughout the world, we could be subject to regional or national economic downturns or instability, acts of terrorism, labor or political disturbances or conflicts of various sizes, including wars. Any of these disruptions could detrimentally affect our sales in the affected region or country or lead to damage to, or expropriation of, our property or danger to our personnel.

•

~~Competition with large or state-owned enterprises and/or regulations that effectively limit our operations and favor local competitors~~. Many of the countries in which we conduct business have traditionally had state owned or state granted monopolies on telecommunications services that favor an incumbent service provider. We face competition from these favored and entrenched companies in countries that have not deregulated. The slower pace of deregulation in these countries, including in Asia, Latin America, Middle East, Africa and Eastern Europe, has adversely affected, and is likely to continue to adversely affect, the development and growth of our business in these regions.


•	~~Customer credit risks~~. Customer credit risks are exacerbated in foreign operations because there is often little information available about the credit histories of customers in certain of the foreign countries in which we operate.

~~We may experience loss from some of our customer contracts.~~

We provide access to our telecommunications networks to customers that use a variety of platforms such as satellite, wireless 3G, 4G, cable, fiber optic and DSL. These customer contracts may require us to provide services at a fixed price for the term of the contract. To facilitate the provision of this access, we may enter into contracts with terrestrial platform providers. Our agreements with these subcontractors may allow for prices to be changed during the term of the contracts. We assume greater financial risk on these customer contracts than on other types of contracts because if we do not estimate costs accurately and there is an increase in our subcontractors’ prices, our net profit may be significantly reduced or there may be a loss on the contracts.

~~We may experience significant financial losses on our existing investments.~~

We have entered into certain strategic transactions and investments. These investments involve a high degree of risk and could diminish our financial condition or our ability to fund a debt repurchase program, invest capital in our business. The overall sustained economic uncertainty, as well as financial, operational and other difficulties encountered by certain companies in which we have invested increases the risk that the actual amounts realized in the future on our debt and equity investments will differ significantly from the fair values currently assigned to them. In addition, the companies in which we invest or with whom we partner may not be able to compete effectively or there may be insufficient demand for the services and products offered by these companies. These investments could also expose us to significant financial losses and may restrict our ability to make other investments or limit alternative uses of our capital resources. If our investments suffer losses, our financial condition could be materially adversely affected.

We may pursue acquisitions, dispositions, capital expenditures, the development, acquisition and launch of new satellites and other strategic transactions to complement or expand our business, which may not be successful and we may lose a portion or all of our investment in these acquisitions and transactions.

Our future success may depend on the existence of, and our ability to capitalize on, opportunities to acquire or develop other businesses or technologies or partner with other companies that could complement, enhance or expand our current business, services or products or that may otherwise offer us growth opportunities. We may pursue investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions or other strategic initiatives and

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transactions or development activities, including, without limitation, the design, development, construction, acquisition and launch of new satellites, to complement or expand our business and satellite fleet. Any such acquisitions, dispositions, activities, transactions or investments that we are able to identify and complete which may become substantial over time, involve a high degree of risk, including, but not limited to, the following:


•	the risks associated with developing and constructing new satellites;


•	the diversion of our management’s attention from our existing business to integrate or divide the operations and personnel of the acquired, disposed or combined business, technology or joint venture and/or to engage in such investments, dispositions and/or other activities;


•	the ability and capacity of our management team to carry out all of our business plans, including with respect to our existing businesses and any businesses we acquire or embark on in the future;


•	possible adverse effects on our and our targets’ and partners’ business, financial condition or operating results during the integration process;


•	exposure to significant financial losses if the transactions, activities, investments, dispositions and/or the underlying ventures are not successful and/or we are unable to achieve the intended objectives of the transaction, disposition or investment;


•	the inability to obtain in the anticipated time frame, or at all, any regulatory approvals required to complete proposed acquisitions, dispositions, activities, transactions or investments;


•	the risks associated with complying with regulations applicable to the acquired or developed business or technologies which may cause us to incur substantial expenses;


•	the inability to realize anticipated benefits or synergies from acquisitions, dispositions, investments, alliances and/or the development and launch of new satellites;


•	the disruption of relationships with employees, vendors or customers; and


•	the risks associated with foreign and international operations and/or investments or dispositions.

~~the risks associated with foreign and international operations and/or investments or dispositions; and~~

~~the risks associated with developing and constructing new satellites.~~

New investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions, development activities, including, without limitation, the design, development, construction and launch of new satellites and other strategic initiatives may require the commitment of significant capital that may otherwise be directed to investments in our existing businesses. ~~Commitment of this capital~~

Our strategic initiatives may ~~cause~~not be successfully implemented, may not elicit the expected customer response in the market and may result in competitive reactions.

We intend to continue to selectively explore opportunities to pursue investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, domestically and internationally, that we believe may allow us to ~~defer~~increase our existing market share, increase our satellite capacity, expand into new markets, obtain new customers, broaden our portfolio of services, products and intellectual property, make our business more valuable, align us for future growth and expansion, maximize the return on our investments and strengthen our business and relationships with our customers. We may allocate significant resources for long-term initiatives that

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may not have a short or ~~suspend~~medium-term or any ~~debt repurchase~~positive impact on our revenue, results of operations, or ~~capital expenditures~~cash flow. The successful implementation of our strategic initiatives requires an investment of time, talent and money and is dependent upon a number of factors some of which are not within our control. Those factors include the ability to execute such initiatives in new and existing markets, the response of existing and potential new customers and the actions or reactions of competitors. If we fail to properly execute or deliver products or services that address customers’ expectations, it may have an adverse effect on our ability to retain and attract customers and may increase our costs and reduce our revenue. Similarly, competitive actions or reactions to our initiatives or advancements in technology or competitive products or services could impair our ability to execute those strategic initiatives or advancements. In addition, new strategic initiatives may face barriers to entering new or existing markets with established or new competitors. There can be no assurance that we ~~otherwise~~will successfully implement these strategic initiatives or that, if successfully pursued, they will have the desired effect on our business or results of operations.

The failure to adequately anticipate the need for satellite capacity or the inability to obtain satellite capacity for our Hughes segment could harm our results of operations.

Our Hughes segment has made substantial contractual commitments for satellite capacity based on our existing customer contracts and backlog. If our existing customer contracts were to be terminated prior to their respective expiration dates, we may be committed to maintaining excess satellite capacity for which we will have ~~made.~~insufficient revenue to cover our costs, which would have a negative impact on our margins and results of operations. Alternatively, we may not have sufficient satellite capacity available from our satellites or purchased from third parties to meet demand and we may not be able to quickly or easily adjust our capacity to changes in demand. At present, until the launch and operation of additional satellites, there is limited availability of capacity on the frequencies we use in North America, including within our own fleet of satellites, which could materially and adversely affect our ability to provide services to customers and grow our revenue and business. In addition, following the consolidation of the fixed satellite services (“FSS”) industry, the main FSS providers in North America and a number of smaller regional providers own and operate the current satellites that are available for our capacity needs. The failure of any of these FSS providers to replace existing satellite assets at the end of their useful lives or a downturn in their industry as a whole could reduce the satellite capacity available to us. Our business and results of operations could be adversely affected if we are not able to renew our capacity leases at economically viable rates, or if capacity is not available due to problems experienced by these FSS providers. Our ability to provide additional capacity for subscriber growth in our North American consumer market could also be adversely affected by regulations and/or legislation in the U.S. that enable or propose to enable the use of a portion of the frequency bands, we currently use or in the future intend to use for satellite services, 5G mobile terrestrial services or other uses. These bands include the Ka-band, where we operate our broadband gateway earth stations and other bands in which we may operate in the future. Such regulation or legislation could limit our ability to use the Ka-band and/or other bands, limit our flexibility to change the way in which we use the Ka-band and/or adversely impact our ability to use additional bands in the future. Other countries in which we currently, or may in the future, operate are also considering regulations that could similarly limit access to the Ka-band or other frequency bands.

We could face decreased demand and increased pricing pressure to our products and services due to competition.

Our business operates in an intensely competitive, consumer- and enterprise-driven and rapidly changing environment and competes with a growing number of companies that provide products and services to consumer and enterprise customers. There can be no assurance that we will be able to effectively compete against our competitors due to their significant resources and operating history. Risks to our business from competition include, but are not limited to, the following:

In our consumer market, our Hughes segment faces competition primarily from digital subscriber line (“DSL”), fiber, fixed wireless and cable internet service providers. Also, other telecommunications, satellite and wireless broadband companies have launched or are planning the launch of consumer internet access services in competition with our service offerings in North, Central and South America. Some of these competitors offer consumer services and hardware at lower prices, higher speeds and/or higher capacity than ours. In addition, terrestrial alternatives do not require our external dish, which may limit customer acceptance of our products. Further, government funding for competing products and services may reduce the demand for our products and services. We may be unsuccessful in competing effectively against DSL, fiber, fixed wireless and cable internet service providers and other satellite broadband providers, which could harm our business, operating results and financial condition.

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In our enterprise network communications market, our Hughes segment faces competition from providers of terrestrial-based networks, such as fiber, DSL, cable modem service, multiprotocol label switching and internet protocol-based virtual private networks, which may have advantages over satellite networks for certain customer applications. Although we also sell terrestrial services to this market, we may not be as cost competitive as other providers and it may become more difficult for us to compete. The network communications industry is characterized by competitive pressures to provide enhanced functionality for the same or lower price with each new generation of technology. Terrestrial-based networks are offered by telecommunications carriers and other large companies, many of which have substantially greater financial resources and greater name recognition than ours. As the prices of our products decrease, we will need to sell more products and/or reduce the per-unit costs to improve or maintain our results of operations. The costs of a satellite network may exceed those of a terrestrial-based network or other networks, especially in areas that have experienced significant DSL and cable internet build-out. It may become more difficult for us to compete with terrestrial and other providers as the number of these areas continues to increase and the cost of their network and hardware services continues to decline. Terrestrial networks also have a competitive edge over satellite networks because of lower latency for data transmission.

Our ESS segment competes against larger, well-established satellite service companies. Because the satellite services industry is relatively mature, our strategy depends largely on our ability to displace current incumbent providers, which often have the benefit of long-term contracts with customers. These long-term contracts and other factors result in relatively high costs for customers to change service providers, making it more difficult for us to displace customers from their current relationships with our competitors. In addition, the supply of satellite capacity available in the market has increased in recent years, which makes it more difficult for us to sell our services in certain markets and to price our capacity at acceptable levels. Competition may continue to cause downward pressure on prices and further reduce the utilization of our capacity, both of which could have an adverse effect on our financial performance. Our ESS segment also competes with both fiber optic cable and terrestrial delivery systems, which may have a cost advantage, particularly in point-to-point applications where such delivery systems have been installed, and with new delivery systems being developed, which may have lower latency and other advantages.

We are dependent upon third-party providers for components, manufacturing, installation services and customer support services, and our results of operations may be materially adversely affected if any of these third-party providers fail to appropriately deliver the contracted goods or services.

We are dependent upon third-party services and products provided to us, including the following:

•

Components. A limited number of suppliers manufacture, and in some cases a single supplier manufactures, some of the key components required to build our products. These key components may not be continually available and we may not be able to forecast our component requirements sufficiently in advance, which may have a detrimental effect on supply. If we are required to change suppliers for any reason, we would experience a delay in manufacturing our products if another supplier is not able to meet our requirements on a timely basis. In addition, if we are unable to obtain the necessary volumes of components on favorable terms or prices on a timely basis, we may be unable to produce our products at competitive prices and we may be unable to satisfy demand from our customers. Our reliance on a single or limited group of suppliers, particularly foreign suppliers, and our reliance on subcontractors, involves several risks. These risks include a potential inability to obtain an adequate supply of required components, reduced control over pricing, quality and timely delivery of these components, and the potential bankruptcy, lack of liquidity or operational failure of our suppliers. We do not generally maintain long-term agreements with any of our suppliers or subcontractors for our products. An inability to obtain adequate deliveries or any other circumstances requiring us to seek alternative sources of supply could affect our ability to ship our products on a timely basis, which could damage our relationships with current and prospective customers and harm our business, resulting in a loss of market share and reduced revenue and income.

•

Commodity Price Risk. Fluctuations in pricing of raw materials can affect our product costs. To the extent that component pricing does not decline or increases, whether due to inflation, increased demand, decreased supply, trade policies, tariffs or other factors, we may not be able to pass on the impact of increasing raw materials prices, component prices or labor and other costs, to our customers, and we may not be able to operate profitably. Such changes could have an adverse impact on our product costs.


•	Manufacturing. While we develop and manufacture prototypes for certain of our products, we use contract manufacturers to produce a significant portion of our hardware. If these contract manufacturers fail to provide

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products that meet our specifications in a timely manner, then our customer relationships and revenue may be harmed.

•

Installation and customer support services. Some of our products and services, such as our North American and international operations, utilize a network of third-party installers to deploy our hardware. In addition, a portion of our customer support and management is provided by third-party call centers. A decline in levels of service or attention to the needs of our customers could adversely affect our reputation, renewal rates and ability to win new business.

•

Other services. Some of our products rely on third parties to provide services necessary for the operation of functionalities of the products, such as third-party cloud computing services and satellite uplink hosting services. The failure of these services could disrupt the operation of certain functionalities of our products, which could harm our customer relationship and result in a loss of sales. In addition, if the agreements for the provision of these services are terminated or not renewed, we could face difficulties replacing these service providers, which would adversely affect our ability to obtain and retain customers and result in reduced revenue and income.

Our foreign operations and investments expose us to risks and restrictions not present in our domestic operations.

Our sales outside the U.S. accounted for 21.3%, 20.2% and 28.5% of our revenue for the years ended December 31, 2019, 2018 and 2017, respectively. We expect our foreign operations to represent a significant and growing portion of our business. Over the last 10 years, we sold products in over 100 countries and began offering broadband internet services to consumers in several Central and South American countries. Our foreign operations involve varying degrees of risk and uncertainties inherent in doing business abroad. Such risks include:

•

Complications in complying with restrictions on foreign ownership and investment and limitations on repatriation. We may not be permitted to own our operations in some countries and may have to enter into partnership or joint venture relationships. Many foreign legal regimes and/or our contractual arrangements restrict our repatriation of earnings to the U.S. from our subsidiaries and joint venture entities. Applicable law in such foreign countries may also limit our ability to distribute or access our assets or offer our products and services in certain circumstances. In such event, we will not have access to the cash flow and assets of our subsidiaries and joint ventures.

•

Difficulties in following a variety of laws and regulations related to foreign operations. Our international operations are subject to the laws and regulations of many different jurisdictions that may differ significantly from U.S. laws and regulations. For example, local privacy or intellectual property laws may hold us responsible for the data that is transmitted over our network by our customers. In addition, we are subject to the Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions that generally prohibit companies and their intermediaries from making improper payments or giving or promising to give anything of value to foreign officials and other individuals for the purpose of obtaining or retaining business or gaining a competitive advantage. Our policies mandate compliance with these laws. However, we operate in many parts of the world that have experienced corruption to some degree. Compliance with these laws may lead to increased operations costs or loss of business opportunities. Violations of these laws could result in fines or other penalties or sanctions, which could have a material adverse impact on our business, financial condition, results of operations or cash flow.

•

Restrictions on space station landing/terrestrial rights. Satellite market access and landing rights and terrestrial wireless rights are dependent on the national regulations established by foreign governments, including, but not limited to obtaining national authorizations or approvals and meeting other regulatory, coordination and registration requirements for satellites. Because regulatory schemes vary by country, we may be subject to laws or regulations in foreign countries of which we may not be aware. Non-compliance with these requirements may result in the loss of the authorizations and licenses to conduct business in these countries, as well as fines or other financial and non-financial penalties for non-compliance with regulations. If that were to be the case, we could be subject to sanctions, penalties and/or other actions by a foreign government that could materially and adversely affect our ability to operate in that country. There is no assurance that any current regulatory approvals held by us are, or will remain, sufficient in the view of foreign regulatory authorities, or that any additional necessary approvals will be granted on a timely basis or at all, in all jurisdictions in which we wish to operate new satellites, or that applicable restrictions in those jurisdictions will not be unduly burdensome. Violations of laws or regulations may result in various sanctions including fines, loss of authorizations and the denial of applications for new authorizations or for the renewal of existing

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authorizations, and the failure to obtain or comply with the authorizations and regulations governing our international operations could have a material adverse effect on our ability to generate revenue and our overall competitive position.

•

Financial and legal constraints and obligations. Operating pursuant to foreign licenses subjects us to certain financial constraints and obligations, including, but not limited to: (a) tax liabilities that may or may not be dependent on revenue; (b) the regulatory requirements associated with maintaining such licenses, which may change over time, are subject to interpretation by foreign courts and regulatory bodies, and may result in additional costs to operate and/or fines, sanctions and penalties being imposed on us or our subsidiaries if found to be violating the terms of such licenses, any or all of which could be material; (c) the burden of creating and maintaining additional entities, branches, facilities and/or staffing in foreign jurisdictions; and (d) legal regulations requiring that we make certain satellite capacity available for “free,” which may impact our revenue. In addition, if we need to pursue legal remedies against our customers or our business partners located outside of the U.S., it may be difficult for us to enforce our rights against them.

•

Compliance with applicable export control laws and regulations in the U.S. and other countries. We must comply with all applicable export control and trade sanctions laws and regulations of the U.S. and other countries. U.S. laws and regulations applicable to us include the Arms Export Control Act, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), and trade sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). The export of certain hardware, technical data and services relating to satellites is regulated by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) under the EAR. Other items are controlled for export by the U.S. Department of State’s Directorate of Defense Trade Controls under ITAR. We cannot provide equipment or services to certain countries subject to U.S. trade sanctions unless we first obtain the necessary authorizations from OFAC. Violations of these laws or regulations could result in significant sanctions including fines, more onerous compliance requirements, debarments from export privileges, or loss of authorizations needed to conduct aspects of our international business. A violation of ITAR or other export or trade-related regulations could materially adversely affect our business, financial condition and results of operations.

•

Changes in exchange rates between foreign currencies and the U.S. dollar. We conduct our business and incur cost in the local currency of a number of the countries in which we operate. Accordingly, our applicable results of operations are reported in the relevant local currency and then translated to U.S. dollars at the applicable currency exchange rate for inclusion in our financial statements. In addition, we sell our products and services and acquire supplies and components from countries that historically have been, and may continue to be, susceptible to recessions, instability or currency devaluation. These fluctuations in currency exchange rates, recessions and currency devaluations have affected, and may in the future affect, revenue, profits and cash earned on international sales.

•

Greater exposure to the possibility of economic instability, the disruption of operations from labor and political disturbances, expropriation or war. As we conduct operations throughout the world, we could be subject to regional or national economic downturns or instability, acts of terrorism, labor or political disturbances or conflicts of various sizes, including wars. Any of these disruptions could detrimentally affect our sales in the affected region or country or lead to damage to, or expropriation of, our property or danger to our personnel.

•

Competition with large or state-owned enterprises and/or regulations that effectively limit our operations and favor local competitors. Many of the countries in which we conduct business have traditionally had state-owned or state-granted monopolies on telecommunications services that favor an incumbent service provider. We face competition from these favored and entrenched companies in countries that have not deregulated. The slower pace of deregulation in these countries, including in Asia, Latin America, Middle East, India, Africa and Eastern Europe, has adversely affected, and is likely to continue to adversely affect, the development and growth of our business in these regions.


•	Customer credit risks. Customer credit risks are exacerbated in foreign operations because there is often little information available about the credit histories of customers in certain of the foreign countries in which we operate.

We may experience loss from some of our customer contracts.

We provide access to our telecommunications networks to customers that use a variety of platforms such as satellite, wireless 4G, 5G, cable, fiber optic and DSL. These customer contracts may require us to provide services at a fixed

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price for the term of the contract. To facilitate the provision of this access, we may enter into contracts with terrestrial platform providers. Our agreements with these subcontractors may allow for prices to be changed during the term of the contracts. We assume greater financial risk on these customer contracts than on other types of contracts because if we do not estimate costs accurately and there is an increase in our subcontractors’ prices, our net profit may be significantly reduced or there may be a loss on the contracts.

We may experience significant financial losses on our existing investments.

We have entered into certain strategic transactions and investments. These investments involve a high degree of risk and could diminish our financial condition or our ability to fund a debt repurchase program or invest capital in our business. The overall sustained economic uncertainty, as well as financial, operational and other difficulties encountered by certain companies in which we have invested increases the risk that the actual amounts realized in the future on our debt and equity investments will differ significantly from the fair values currently assigned to them. In addition, the companies in which we invest or with whom we partner may not be able to compete or operate effectively or may experience bankruptcy or other liquidity or other financial stress or there may be insufficient demand for the services and products offered by these companies. These investments could also expose us to significant financial losses and may restrict our ability to make other investments or limit alternative uses of our capital resources. If our investments suffer losses, our financial condition could be materially adversely affected.

We may not be able to generate cash to meet our debt service needs or fund our operations.

As of December 31, ~~2018,~~2019, our total indebtedness was ~~approximately $3.5~~$2.4 billion. Our ability to make payments on or to refinance our indebtedness and to fund our operations will depend on our ability to generate cash in the future, which is subject in part to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may need to raise additional capital in order to fund ongoing operations or to capitalize on business opportunities. We may not be able to generate sufficient cash flow from operations and future borrowings or equity may not be available in amounts sufficient to enable us to service or repay our indebtedness or to fund our operations or other liquidity needs. If we are unable to generate sufficient cash, we may be forced to take actions such as revising or delaying our strategic plans, reducing or delaying capital expenditures and/or the development, design, acquisition and construction of new satellites, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We may not be able to implement any of these actions on satisfactory terms, or at all. The indentures governing our indebtedness limit our ability to dispose of assets and use the proceeds from such dispositions. Therefore, we may not be able to consummate those dispositions on satisfactory terms, or at all, or to use those proceeds in a manner we may otherwise prefer. The Tax Cuts and Jobs Act of 2017 enacted in December 2017 (the “2017 Tax Act”) limits the deductibility of interest expense for U.S. federal income tax purposes. While the 2017 Tax Act ~~generally is likely to reduce~~has reduced our federal income tax obligations, if these limitations or other newly enacted provisions become applicable to us, they could minimize such reductions or otherwise require us to pay additional federal income taxes, which in turn could result in additional liquidity needs.

In addition, conditions in the financial markets could make it difficult for us to access equity or debt markets at acceptable terms or at all. Instability or other conditions in the equity markets could make it difficult for us to raise equity financing without incurring substantial dilution to ~~our~~EchoStar’s existing shareholders. In addition, sustained or increased economic weaknesses or pressures or new economic conditions may limit our ability to generate sufficient internal cash to fund

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investments, capital expenditures, acquisitions and other strategic transactions and/or the development, design, acquisition and construction of new satellites. We cannot predict with any certainty whether or not we will be impacted by economic conditions. As a result, these conditions make it difficult for us to accurately forecast and plan future business activities because we may not have access to funding sources necessary for us to pursue organic and strategic business development opportunities.

Covenants in our indentures restrict our business in many ways.

The indentures governing our ~~6 1/2% Senior Secured Notes due 2019,~~ 7 5/8% Senior Notes due 2021, 5.250% Senior Secured Notes due August 1, 2026 and 6.625% Senior Unsecured Notes due August 1, 2026 contain various covenants, subject to certain exceptions, that limit our ability and/or certain of our subsidiaries’ ability to, among other things:


•	incur additional debt;


•	pay dividends or make distributions on our capital stock or repurchase our capital stock;


•	make certain investments;

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•	create liens or enter into sale and leaseback transactions;


•	enter into transactions with affiliates;


•	merge or consolidate with another company;


•	transfer and sell assets; and

allow to exist certain restrictions on our or their ability to pay dividends, make distributions, make other payments, or transfer assets.

Failure to comply with these and certain other financial covenants, if not cured or waived, may result in an event of default under the indentures, which could have a material adverse effect on our business, financial condition, results of operations or prospects. If ~~an event~~certain events of default ~~occurs~~occur and isare continuing under the respective indenture, the trustee under that indenture or the requisite holders of the notes under that indenture may declare all such notes to be immediately due and payable and, in the case of the ~~indentures~~indenture governing ~~any of~~ our secured notes, could proceed against the collateral that secures the ~~applicable~~ secured notes. If certain other events of default occur, the indentures will become immediately due and payable. We and certain of our subsidiaries have pledged a significant portion of our assets as collateral to secure ~~the 6 1/2% Senior Secured Notes due 2019 and~~ the 5.250% Senior Secured Notes due August 1, 2026. If we do not have enough cash to service our debt or fund other liquidity needs, we may be required to take actions such as requesting a waiver from the holders of the notes, reducing or delaying capital expenditures, selling assets, restructuring or refinancing all or part of the existing debt, or seeking additional equity capital. We cannot assure you that any of these remedies can be implemented on commercially reasonable terms or at all, which could result in the trustee declaring the notes to be immediately due and payable and/or foreclosing on the collateral.

While we are currently evaluating various opportunities to make profitable use of our available satellite capacity (including, but not limited to, supplying satellite capacity for new domestic and international ventures), there can be no assurance that we can successfully develop these business opportunities. If we are unable to utilize our available satellite capacity for providing satellite services to third parties our margins could be negatively impacted, and we may be required to record impairments related to our satellites.

We rely on key personnel and the loss of their services may negatively affect our businesses.

We believe that our future success depends to a significant extent upon the performance of Mr. Charles W. Ergen, our Chairman, and certain other key executives. The loss of Mr. Ergen or of certain other key executives, the ability to effectively provide for the succession of our senior management, or of the ability of Mr. Ergen or ~~certain~~such other key executives to devote sufficient time and effort to our business could have a material adverse effect on our business, financial condition and results of operations. Although some of our key executives may have agreements relating to their equity compensation that limit their ability to work for or consult with competitors, under certain circumstances, we generally do not have employment agreements with them. To the extent Mr. Ergen ~~or other officers are~~is performing services for both DISH Network and us, ~~their~~his attention may be diverted away from our business and therefore adversely affect our business.

~~We may be subject to risks relating to the referendum of the United Kingdom’s membership of the EU~~.

The formal two-year process governing the United Kingdom’s (the “U.K.”) departure from the EU, commonly referred to as the “Brexit,” began on March 29, 2017. Discussions between the U.K. and the EU focused on finalizing withdrawal issues and transition agreements are ongoing. However, given the limited progress to date in these negotiations and ongoing uncertainty within the U.K. Government and Parliament, it is possible that the U.K. will leave the EU on March 29, 2019 without a withdrawal agreement and associated transition period in place, which is likely to cause significant market and economic disruption. Further, it is possible that there will be greater restrictions on imports and exports between the U.K. and EU countries. Brexit may also cause our customers to closely monitor their costs and reduce

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their spending budgets. The effects of Brexit, the uncertainty regarding the ultimate terms of Brexit and the perceptions as to the impact of the withdrawal of the U.K. from the EU have affected, and may continue to affect, business activity, political stability and economic and market conditions in the U.K., the Eurozone, the EU and elsewhere and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the Euro and the British Pound. Additionally, with the U.K. no longer being a part of the EU, there may be certain regulatory changes that may impact the regulatory regime under which we operate in both the U.K. and the EU. Given that a portion of our business is conducted in the EU, including the U.K., any of these and other changes, implications and consequences may adversely affect our business and results of operations.

A natural disaster could diminish our ability to provide service to our customers.

Natural disasters could damage or destroy our ground stations and/or our other or our vendors’ infrastructure, equipment and facilities, resulting in a disruption of service to our customers. We currently have backup systems and technology in place to safeguard our antennas and protect our ground stations during natural disasters such as tornadoes, but the possibility still exists that our ground facilities and/or our other and our vendors’ infrastructure, equipment and facilities could be impacted during a major natural disaster. If a future natural disaster impairs or destroys any of our ground facilities and/or our other and our vendors’ infrastructure, equipment and facilities, we may be unable to provide service to our customers in the affected area for a period of time which may adversely affect our business and results of operations.

We may have additional tax liabilities and changes in tax laws or regulations may have a material adverse effect on our business, cash flow, financial condition or results of operations.

We are subject to income taxes in the U.S. and foreign jurisdictions. Significant judgments are required in determining our provisions for income taxes. In the course of preparing our tax provisions and returns, we must make calculations

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where the ultimate tax determination may be uncertain. Our tax returns are subject to examination by the Internal Revenue Service (“IRS”), state, and foreign tax authorities. There can be no assurance as to the outcome of these examinations. If the ultimate determination of taxes owed is for an amount in excess of amounts previously accrued, our operating results, cash flows, and financial condition could be adversely affected.

Additionally, new or modified income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which ~~like the 2017 Tax Act,~~ could affect the tax treatment of our domestic and foreign earnings. Any new taxes could adversely affect our domestic and international business operations and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. ~~The 2017 Tax Act contains many significant changes to U.S.~~Future tax laws, including changes in corporate tax rates, the availability of net deferred tax assets relating to our U.S. operations, the taxation and repatriation of foreign earnings, and the deductibility of expenses. The 2017 Tax Act or other tax reform legislation ~~has had and~~ could have a material impact on the value of our deferred tax assets ~~has~~ and could result in ~~significant charges, and could increase~~increases in our future U.S. tax expense. Furthermore, changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings. The foregoing items could have a material adverse effect on our business, cash flow, financial condition or results of operations.

We earn a portion of our operating income from outside the U.S., and any repatriation of funds currently held in foreign jurisdictions may result in higher effective tax rates for us. In addition, ~~recent~~ changes to U.S. tax laws have significantly ~~impacts~~impacted how U.S. multinational corporations are taxed on foreign earnings. Numerous countries are evaluating their existing tax laws due in part, to recommendations made by the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project. Although we cannot predict whether or in what form any legislation based on such proposals may be adopted by the countries in which we do business, future tax reform based on such proposals or otherwise may increase the amount of taxes we pay and adversely affect our operating results and cash flows.

~~Recent developments~~Developments with respect to trade policies, trade agreements, tariffs and related government regulations could continue to increase our costs ~~limit~~and impact the ~~amount~~supply of ~~components~~certain products we ~~can~~ import, decrease demand for certain of our products and have a material adverse impact on our business, financial condition and results of operations.

We source certain parts, components and items used in our products from manufacturers located outside of the U.S. and we sell certain of our products to customers located outside of the U.S. Concerns have been raised about certain countries potentially engaging in unfair trade practices and, as a result, tariffs have been increased on certain goods imported into the U.S. from those countries, including China and other countries from which we import

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components or raw materials, and there is the possibility of additional tariff increases. The ~~announcement~~imposition of tariffs on imported products by the U.S. has triggered actions from certain foreign governments, ~~including~~specifically China, ~~and may trigger additional actions by those and other foreign governments, potentially~~ resulting in a “trade war”. AThis trade war has materially increased the cost of ~~this nature or~~certain products we import, impacted the supply of such products, and may require us to change our manufacturers. Although, the U.S. and China have agreed to a temporary trade deal, a potential long-term trade deal remains subject to ongoing trade talks while many of the tariffs remain in place. The outcome of the trade war, and any other governmental action related to tariffs, government regulations, or international trade agreements or policies could ~~materially increase the cost of certain products we import, impact or limit the availability of such products, require us to change our manufacturers,~~exacerbate adverse impacts incurred thus far and/or decrease demand for certain of our products, any or all of which could have a material adverse impact on our business, financial condition and results of operations.

RISKS RELATED TO OUR SATELLITES

Our owned and leased satellites in orbit are subject to significant operational and environmental risks that could limit our ability to utilize these satellites.

Satellites are subject to significant operational risks while in orbit. These risks include malfunctions, commonly referred to as anomalies, which have occurred and may occur in the future in our satellites and the satellites of other operators as a result of various factors, such as satellite design and manufacturing defects, problems with the power systems or control systems of the satellites, general failures resulting from operating satellites in the harsh environment of space and cyber-attacks on our satellites.

Although we work closely with the satellite manufacturers to determine and eliminate the cause of anomalies in new satellites and provide for redundancies of many critical components in the satellites, we may not be able to prevent anomalies or outages from occurring and may experience anomalies and outages in the future, whether of the types described above or arising from the failure of other systems or components. The failure to perform of any of our manufacturers which provide in-orbit anomaly support for our satellites could result in our inability to determine, eliminate or manage anomalies for our satellites. Even if alternate in-orbit anomaly support services are available, we may have

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difficulty identifying them in a timely manner or we may incur significant additional expense in changing suppliers. Space Systems/Loral (“SSL”), a subsidiary of Maxar ~~through its subsidiary SSL,~~Techonologies Inc. (“Maxar”), provides in-orbit anomaly support for several of our satellites. In the second half of 2018, Maxar announced that it is reviewing strategic alternatives for its geostationary communications satellite business to improve its financial performance and that it is in active discussions with potential buyers of the business. A decision by Maxar to discontinue, wind down or otherwise significantly modify its geostationary communications satellite business could have a material adverse impact on the operation of several of our satellites, including our ability to remedy any anomalies or outages.

Any single anomaly or outage or series of anomalies or outages could materially and adversely affect our ability to utilize the satellite, our operations, services and revenue as well as our relationships with current customers and our ability to attract new customers. In particular, future anomalies or outages may result in, among other things, the loss of individual transponders/beams and/or functional solar array circuits on a satellite, a group of transponders/beams on that satellite or the entire satellite, depending on the nature of the anomaly or outage. Anomalies or outages may also reduce the expected capacity, commercial operation and/or useful life of a satellite, thereby reducing the revenue that could be generated by that satellite, or create additional expenses due to the need to provide replacement or back-up satellites or satellite capacity earlier than planned and could have a material adverse effect on our business, financial condition and results of operations.

The loss of a satellite or other satellite malfunctions or anomalies or outages could have a material adverse effect on our financial performance, which we may not be able to mitigate by using available capacity on other satellites. There can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail. In addition, the loss of a satellite or other satellite malfunctions or anomalies or outages could affect our ability to comply with ~~FCC~~Federal Communications Commission (“FCC”) and other regulatory obligations and our ability to fund the construction or acquisition of replacement satellites for our in-orbit fleet in a timely fashion, or at all. There can be no assurance that anomalies or outages will not impact the remaining useful life and/or the commercial operation of any of the satellites in our fleet. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail.

Meteoroid events pose a potential threat to all in-orbit satellites. The probability that meteoroids will damage those satellites increases significantly when the Earth passes through the particulate stream left behind by comets. Occasionally, increased solar activity also poses a potential threat to all in-orbit satellites.

Some decommissioned satellites are in uncontrolled orbits, which pass through the geostationary belt at various points and present hazards to operational satellites, including our satellites. We may be required to perform maneuvers to

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avoid collisions and these maneuvers may prove unsuccessful or could reduce the useful life of the satellite through the expenditure of fuel to perform these maneuvers. The loss, damage or destruction of any of our satellites as a result of an electrostatic storm, collision with space debris, malfunction or other event could have a material adverse effect on our business, financial condition and results of operations.

We ~~historically have~~generally do not ~~carried~~carry in-orbit insurance on ~~many of~~ our satellites or payloads because we have assessed that the cost of ~~such~~ insurance is ~~uneconomical~~not economical relative to the risk of failures. If one or more of our in-orbit uninsured satellites or payloads fail, we could be required to record significant impairment charges for the ~~satellite.~~satellite or payload.

Our satellites have minimum design lives of 15 years, but could fail or suffer reduced capacity before then.

Generally, the minimum design life of each of our satellites is 15 years. We can provide no assurance, however, as to the actual operational lives of our satellites, which may be shorter or longer than their design lives. Our ability to earn revenue depends on the continued operation of our satellites, each of which has a limited useful life. Several factors affect the useful lives of the satellites, including, among other things, the quality of their design and construction, the durability of their component parts, the ability to continue to maintain proper orbit and control over the satellite’s functions, the efficiency of the launch vehicle used, and the remaining on-board fuel following orbit insertion. In addition, continued improvements in satellite technology may make obsolete our existing satellites, or any satellites we may acquire in the future, prior to the end of their design lives.

In the event of a failure or loss of any of our satellites, we may relocate another satellite and use it as a replacement for the failed or lost satellite, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, such relocation would require governmental approval. We cannot be certain that we could obtain such governmental approval. In addition, we cannot guarantee that another satellite will be available for use as a replacement for a failed or lost satellite, or that such relocation can be accomplished without a substantial utilization of fuel. Any such utilization of fuel would reduce the operational life of the replacement satellite.

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Our satellites under construction are subject to risks related to construction, technology, regulations and launch that could limit our ability to utilize these satellites and adversely affect our business and financial condition.

Satellite construction and launch are subject to significant risks, including delays, anomalies, launch failure and incorrect orbital placement. The technologies in our satellite designs are very complex and difficulties in constructing our designs could result in delays in the deployment of our satellites or increased or unanticipated costs. There also can be no assurance that the technologies in our existing satellites or in new satellites that we design, acquire and build will work as we expect and/or will not become obsolete, that we will realize any or all of the anticipated benefits of our satellite designs or our new satellites, or that we will obtain all regulatory approvals required to operate our new or acquired satellites. In addition, certain launch vehicles that may be used by us have either unproven track records or have experienced launch failures in the past. The risks of launch delay, launch anomalies and launch failure are usually greater when the launch vehicle does not have a track record of previous successful flights. Launch anomalies and failures can result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take ~~more than three years,~~significant amounts of time, and to obtain other launch opportunities. Such significant delays could materially and adversely affect our business, expenses and results of operations, our ability to meet regulatory or contractual required milestones, the availability and our use of other or replacement satellite resources and our ability to provide services to customers as capacity becomes full on existing satellites. In addition, significant delays in a satellite program could give customers who have purchased or reserved capacity on that satellite a right to terminate their service contracts relating to the satellite. We may not be able to accommodate affected customers on other satellites until a replacement satellite is available. A customer’s termination of its service contracts with us as a result of a launch delay or failure would reduce our contracted backlog and our ability to generate revenue. One of our potential launch services providers is a Russian Federation state-owned company. Certain ongoing political events have created uncertainty as to the stability of U.S. and Russian Federation relations. This could add to risks relative to scheduling uncertainties and timing. If a launch delay, anomaly or failure were to occur, it could result in the revocation of the applicable license to operate the satellite, undermine our ability to implement our business strategy or develop or pursue existing or future business opportunities with applicable licenses and otherwise have a material adverse effect on our business, expenses, assets, revenue, results of operations and ability to fund future satellite procurement and launch opportunities. Historically, we have not always carried launch insurance for the launch of our satellites and the occurrence of launch anomalies and failures, whether on our satellites or those of others, may significantly reduce our ability to place launch insurance for our satellites or make launch insurance uneconomical.

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Our use of certain satellites is often dependent on satellite coordination agreements, which may be difficult to obtain.

Satellite transmissions and the use of frequencies often are dependent on coordination with other satellite systems and telecommunications providers operated by U.S. or foreign ~~satellite operators,~~entities, including governments, and it can be difficult to determine the outcome of these coordination agreements with these other entities and governments. The impact of a coordination agreement may result in the loss of rights to the use of certain frequencies or access to certain markets. The significance of such a loss would vary and it can therefore be difficult to determine which portion of our revenue will be impacted.

In the event the international coordination process that is triggered by ~~ITU~~the International Telecommunication Union (“ITU”) filings under applicable rules is not successfully completed, or that the requests for modification of the broadcast satellite services plan regarding the allocation of orbital locations and frequencies are not granted by the ITU, we will have to operate the applicable satellite(s) on a non-interference basis, which could have an adverse impact on our business operations. If we cannot do so, we may have to cease operating such satellite(s) at the affected orbital locations, which could have a material adverse effect on our business, results of operations and financial position.

Furthermore, the satellite coordination process is conducted under the guidance of the ITU radio regulations and the national regulations of the satellites involved in the coordination process. These rules and regulations could be amended and could therefore materially adversely affect our business, financial condition and results of operations.

We may face interference from other services sharing satellite spectrum.

The FCC and other regulators have adopted rules or may adopt rules in the future that allow non-geostationary orbit satellite services and/or fixed and mobile terrestrial systems to operate on a co-primary basis in the same frequency band as ~~DBS~~mobile satellite services (“MSS”) and FSS. ~~The~~In addition, the FCC ~~has also authorized~~and other regulators may make changes that could affect the use of ~~multichannel video~~spectrum for MSS and ~~data distribution service in the DBS band. Several multichannel video and data distribution service systems are now being commercially deployed.~~FSS. Despite regulatory provisions designed to protect ~~DBS~~MSS and FSS

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operations from harmful interference, there can be no assurance that operations by other satellites or terrestrial communication services in the ~~DBS~~MSS and FSS bands will not interfere with our ~~DBS~~MSS and FSS operations and adversely affect our business.

Our dependence on outside contractors could result in delays related to the design, manufacture and launch of our new satellites, which could in turn adversely affect our operating results.

There are a limited number of manufacturers that are able to design and build satellites according to the technical specifications and standards of quality we require, including Airbus Defence and Space, Boeing Satellite Systems, Lockheed Martin, SSL and Thales Alenia Space. There are also a limited number of launch service providers that are able to launch such satellites, including International Launch Services, Arianespace, Lockheed Martin Commercial Launch Services and Space Exploration. The failure to perform of any of our manufacturers or launch service providers could increase the cost and result in the delay of the design, construction or launch of our satellites. Even if alternate suppliers for such services are available, we may have difficulty identifying them in a timely manner or we may incur significant additional expense in changing suppliers, and this could result in difficulties or delays in the design, construction or launch of our satellites. For example, inif SSL, the ~~second half~~manufacturer of 2018, Maxar announced that it is reviewing strategic alternatives for its geostationary communications satellite business to improve its financial performance and that it is in active discussions with potential buyers of the business. SSL has indicated to us that it intends to meet its contractual obligations regarding the timely manufacture and delivery of theour EchoStar XXIV ~~satellite. However, if SSL~~satellite, or any potential successor fails to meet or is delayed in meeting ~~these~~its contractual obligations regarding the timely manufacture and delivery of the satellite for any reason, including if Maxar decides to discontinue, wind down or otherwise significantly modify its geostationary communications satellite business, such failure could have a material adverse effect on completing the manufacture of the EchoStar XXIV satellite and, like any other delays in the design, construction or launch of our other satellites, could have a material adverse impact on our business operations, future revenues, financial position and prospects.

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RISKS RELATED TO OUR PRODUCTS AND TECHNOLOGY

If we are unable to properly respond to technological changes, our business could be significantly harmed.

Our business and the markets in which we operate are characterized by rapid technological changes, evolving industry standards and frequent product and service introductions and enhancements. If we or our suppliers are unable to properly respond to or keep pace with technological developments, fail to develop new technologies, or if our competitors obtain or develop proprietary technologies that are perceived by the market as being superior to ours, our existing products and services may become obsolete and demand for our products and services may decline. Even if we keep up with technological innovation, we may not meet the demands of the markets we serve. Furthermore, after we have incurred substantial research and development costs, one or more of the technologies under our development, or under development by one or more of our strategic partners, could become obsolete prior to its introduction. If we are unable to respond to or keep pace with technological advances on a cost-effective and timely basis, or if our products, applications or services are not accepted by the market, then our business, financial condition and results of operations could be adversely affected.

Our response to technological developments depends, to a significant degree, on the work of technically skilled employees. Competition for the services of such employees has become more intense as demand for these types of employees grows. We compete with other companies for these employees and although we strive to attract and retain these employees, we may not succeed in these respects. Additionally, if we were to lose certain key technically skilled employees, the loss of knowledge and intellectual capital might have an adverse impact on business, financial condition and results of operations.

We have made and will continue to make significant investments in research, development, and marketing for new products, services, satellites and related technologies, as well as entry into new business areas. Investments in new technologies, satellites and business areas are inherently speculative and commercial success thereof depends on numerous factors including innovativeness, quality of service and support, and effectiveness of sales and marketing. We may not achieve revenue or profitability from such investments for a number of years, if at all. Moreover, even if such products, services, satellites, technologies and business areas become profitable, their operating margins may be minimal.

Our future growth depends on growing demand for advanced technologies.

Future demand and effective delivery for our products will depend significantly on the growing demand for advanced technologies, such as broadband internet connectivity. If the deployment of, or demand for, advanced technologies is not as widespread or as rapid as we or our customers expect, our revenue growth will be negatively impacted.

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Our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others. The loss of our intellectual property rights or our infringement of the intellectual property rights of others could have a significant adverse impact on our business.

We rely on our patents, copyrights, trademarks and trade secrets, as well as licenses and other agreements with our vendors and other parties, to use our technologies, conduct our operations and sell our products and services. Legal challenges to our intellectual property rights and claims by third parties of intellectual property infringement could require that we enter into royalty or licensing agreements on unfavorable terms, incur substantial monetary liability or be enjoined preliminarily or permanently from further use of the intellectual property in question or from the continuation of our businesses as currently conducted or as we plan to conduct it, which could require us to change our business practices or limit our ability to compete effectively or could otherwise have an adverse effect on our business, financial condition, results of operations or prospects. Even if any such challenges or claims prove to be without merit, they can be time-consuming and costly to defend and may divert management’s attention and resources away from our business.

Moreover, due to the rapid pace of technological change, we rely in part on technologies developed or licensed by third parties, and if we are unable to obtain or continue to obtain licenses or other required intellectual property rights from these third parties on reasonable terms, our business, financial position and results of operations could be adversely affected. Technology licensed from third parties or developed by us may have undetected errors that impair the functionality or prevent the successful integration of our products or services. As a result of any such changes or

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loss, we may need to incur additional development costs to ensure continued performance of our products or suffer delays until replacement technology, if available, can be obtained and integrated.

In addition, we work with third parties such as vendors, contractors and suppliers for the development and manufacture of components that are integrated into our products and our products may contain technologies provided to us by these third parties. We may have little or no ability to determine in advance whether any such technology infringes the intellectual property rights of ~~others.~~others, or whether such vendors have obtained or continue to obtain the appropriate licenses or other intellectual property rights to use such technology. Our vendors, contractors and suppliers may not be required to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would be responsible for any further costs or damages. Legal challenges to these intellectual property rights may impair our ability to use the products and technologies that we need in order to operate our business and may materially and adversely affect our business, financial condition and results of operations.

We are, and may become, party to various lawsuits which, if adversely decided, could have a significant adverse impact on our business, particularly lawsuits regarding intellectual property.

We are, and may become, subject to various legal proceedings and claims, which arise both in and out of the ordinary course of our business. Many entities, including some of our competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or services related to those that we offer. In general, if a court determines that one or more of our products or services infringes valid intellectual property rights held by others, we may be required to cease developing or marketing those products or services, to obtain licenses from the holders of the intellectual property at a material cost, to pay damages or to redesign those products or services in such a way as to avoid infringement. If those intellectual property rights are held by a competitor, we may be unable to license the necessary intellectual property rights at any price, which could adversely affect our competitive position.

We may not be aware of all patents and other intellectual property rights that our products and services may potentially infringe. In addition, patent applications in the U.S. and foreign countries are confidential until the ~~Patent and Trademark Office~~appropriate patent governing body either publishes the application or issues a patent (whichever arises first) and, accordingly, our products may infringe claims contained in pending patent applications of which we are not aware. Further, the process of determining definitively whether a patent claim is valid and whether a particular product infringes a valid patent claim often involves expensive and protracted litigation, even if we are ultimately successful on the merits.

We cannot estimate the extent to which we may be required in the future to obtain licenses with respect to intellectual property rights held by others and the availability and cost of any such licenses. Those costs, and their impact on our results of operations, could be material. Damages in patent infringement cases can be substantial, and in certain circumstances, can be trebled. To the extent that we are required to pay unanticipated royalties to third parties, these increased costs of doing business could negatively affect our liquidity and operating results. We from time to time

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may defend patent infringement actions and may from time to time assert our own actions against parties we suspect of infringing our patents and trademarks. We cannot be certain the courts will conclude these companies do not own the rights they claim, that these rights are not valid, or that our products and services do not infringe on these rights. We also cannot be certain that we will be able to obtain licenses from these persons on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products and services to avoid infringement. The legal costs associated with defending patent suits and pursuing patent claims against others may be borne by us if we are not awarded reimbursement through the legal process. See further discussion under Item 3. —- Legal Proceedings of this ~~Annual Report on~~ Form 10-K.

~~Future litigation~~Litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.

We ~~may become~~are involved in lawsuits, regulatory inquiries, audits, consumer claims and governmental and other legal proceedings arising from of our business, including new products and services that we may offer. Some of these proceedings may raise difficult and complicated factual and legal issues and can be subject to uncertainties and complexities. The timing of the final resolutions to lawsuits, regulatory inquiries, audits, and governmental and other legal proceedings is typically uncertain. Additionally, the possible outcomes of, or resolutions to, these proceedings could include adverse judgments, settlements, injunctions or liabilities, any of which could require substantial payments or have other adverse impacts on our revenue, results of operations or cash flow.

If the encryption and related security technology used in our products is compromised, sales of our products may decline.

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Our customers use encryption and related security technology obtained from us or our suppliers in the products that they purchase from us to protect their data and products from unauthorized access to the features or functionalities of such products. Such encryption and related security technology has been compromised in the past and may be compromised in the future even though we continue to respond with significant investment in security measures, such as updates in security software, that are intended to make data theft more difficult. It has been our prior experience that security measures may only be effective for short periods of time or not at all. We cannot ensure that we will be successful in reducing or controlling theft of our customers’ data. As a result, sales of our products may decline, our reputation and customer relationship could be damaged and we may incur additional costs or financial liability in the future if security of our customers’ system is compromised.

We may be exposed to financial and reputational damage to our business by cybersecurity incidents.

We and third parties with whom we work face a constantly developing landscape of cybersecurity threats in which hackers and other parties use a complex assortment of techniques and methods to execute cyber-attacks, including but not limited to the use of stolen access credentials, social engineering, malware, ransomware, phishing, insider threats (which may be malicious or erroneous), structured query language injection attacks and distributed denial-of-service attacks. Cybersecurity incidents such as these have increased significantly in quantity and severity and are expected to continue to increase. Additionally, the risk of cyber-attacks and compromises will likely increase as we continue to expand our business into other areas of the world outside of North America, some of which are still developing their cybersecurity infrastructure maturity. Should we be affected by ~~such an~~a material cyber-related incident, we may incur substantial costs and suffer other negative consequences, which may include:


•	significant remediation costs, such as liability for stolen assets or information, repairs of system damage and/or incentives to customers or business partners in an effort to maintain relationships after an attack;


•	significant increased cybersecurity protection costs, which may include the costs of making organizational changes, deploying additional personnel and protection technologies, training employees and engaging third party experts and consultants;


•	material increased liability due to financial or other harm inflicted on our partners;


•	~~lost~~loss of material revenues resulting from attacks on our satellites or technology, the unauthorized use of proprietary information or the failure to retain or attract customers following an attack;


•	significant litigation and legal risks, including regulatory actions by state, federal and international regulators; and


•	loss of or damage to reputation.

Our business is subject to varying degrees of regulation that include programs designed to review our protections against cybersecurity threats and risks. If it is determined that our systems do not reasonably protect our partners’

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assets and data and/or that we have violated these regulations, we could be subject to enforcement activity and sanctions.

We regularly review and revise our internal cybersecurity policies and procedures, invest in and maintain internal and external cybersecurity teams and systems and software to detect, deter, prevent and/or mitigate cyber-attacks and review, modify and supplement our defenses through the use of various services, programs and outside vendors. It is impossible, however, for us to know when or if any particular cyber-attack may arise or the impact on our business and operations of any such incident. We expect to continue to incur increasing costs in preparing our infrastructure and maintaining it to resist any such attacks. There can be no assurance that we can successfully detect, deter, prevent or mitigate the effects of cyber-attacks, any of which could have a material adverse effect on our business, costs, operations, prospects, results of operation or financial position. Furthermore, the amount and scope of insurance that we maintain against losses resulting from these events may not be sufficient to compensate us adequately for any disruptions to our business or otherwise cover our losses, including reputational harm and negative publicity as well as any litigation liability.

Compliance with data privacy laws may be costly, and non-compliance with such laws may result in significant liability.

The personal information and data that we process and store is increasingly subject to the data security and data privacy laws of many jurisdictions. These laws may conflict with one another, and many of them are subject to frequent modification and differing interpretations. The laws impose a significant compliance burden and complying with them has required us to change our business practices or the functionality of our products and services. Although we have made efforts to design our policies, procedures, and systems to comply with the current requirements of applicable state, federal, and foreign laws, changes to applicable laws and regulations and the implementation of new laws and regulations in this area could subject us to additional regulation and oversight, any of which could significantly increase our operating costs, restrict our business operations and result in changes that are adverse to our customers. In addition, violations of these laws can result in significant fines, penalties, claims by regulators or other third parties, and damage to our brand and business.

If our products contain defects, we could be subject to significant costs to correct such defects and our product and network service contracts could be delayed or cancelled, which could adversely affect our revenue.

The products and the networks we deploy are highly complex, and some may contain defects when first introduced or when new versions or enhancements are released, despite testing and our quality control procedures. For example, our products may contain software “bugs” that can unexpectedly interfere with their operation. Defects may also occur in components and products that we purchase from third parties. In addition, many of our products and network services are designed to interface with our customers’ existing networks, each of which has different specifications

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and utilize multiple protocol standards. Our products and services must interoperate with the other products and services within our customers’ networks, as well as with future products and services that might be added to these networks, to meet our customers’ requirements. There can be no assurance that we will be able to detect and fix all defects in the products and networks we sell. The occurrence of any defects, errors or failures in our products or network services could result ~~in:~~in (i) additional costs to correct such defects; (ii) cancellation of orders and lost revenue; (iii) a reduction in revenue backlog; (iv) product returns or recalls; (v) diversion of our resources; (vi) the issuance of credits to customers and other losses to us, our customers or end-users; (vii) liability for harm to persons and property caused by defects in or failures of our products or services; and (viii) harm to our reputation if we fail to detect or effectively address such issues through design, testing or warranty repairs. Any of these occurrences could also result in the loss of or delay in market acceptance of our products and services and loss of sales, which would harm our reputation and our business and materially adversely affect our revenue and profitability.

RISKS RELATED TO THE REGULATION OF OUR BUSINESS

Our business is subject to risks of adverse government regulation.

Our business is subject to varying degrees of regulation in the U.S. by the FCC, and other federal, state and local entities, and in foreign countries by similar entities and internationally by the ITU. These regulations are subject to the administrative and political process and do change, for political and other reasons, from time to time and may limit or constrain and/or have other adverse effects on and implications for our business and operations. The U.S. and foreign countries in which we currently, or may in the future, operate may not authorize us access to all of the spectrum

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that we need to provide service in a particular country. Moreover, the U.S. and a substantial number of foreign countries in which we have, or may in the future make, an investment, regulate, in varying degrees, the ownership of satellites and other telecommunication facilities/networks and foreign investment in telecommunications companies. Violations of laws or regulations may result in various sanctions including fines, loss of authorizations and the denial of applications for new authorizations or for the renewal of existing authorizations. Further material changes in law and regulatory requirements may also occur, and there can be no assurance that our business and the business of our subsidiaries and affiliates will not be adversely affected by future legislation, new regulation or deregulation. The failure to obtain or comply with the authorizations and regulations governing our operations could have a material adverse effect on our ability to generate revenue or pursue our business strategies and our overall competitive position and could result in our suffering serious harm to our reputation.

Our business depends on regulatory authorizations issued by the FCC and state and foreign regulators that can expire, be revoked or modified, and applications for licenses and other authorizations that may not be granted.

Generally all satellite, earth stations and other licenses granted by the FCC and most other countries are subject to expiration unless renewed by the regulatory agency. Our satellite licenses are currently set to expire at various times. In addition, we occasionally receive special temporary authorizations that are granted for limited periods of time (e.g., 180 days or less) and subject to possible renewal. Generally, our licenses and special temporary authorizations have been renewed on a routine basis, but there can be no assurance that this will continue. In addition, we must obtain new licenses from the FCC and other countries’ regulators for the operation of new satellites that we may build and/or acquire. There can be no assurance that the FCC or other regulators will continue granting applications for new licenses or for the renewal of existing ones. If the FCC or other regulators were to cancel, revoke, suspend, or fail to renew any of our licenses or authorizations, fail to grant or impose conditions on our applications for FCC or other licenses, it could have a material adverse effect on our business, financial condition and results of operations. Specifically, loss of a frequency authorization or limitations on our ability to use the frequencies we currently use and/or intend to use in the future would reduce the amount of spectrum available to us, potentially reducing the amount of services we provide to our customers. The significance of such a loss of authorizations would vary based upon, among other things, the orbital location, the frequency band and the availability of replacement spectrum. In addition, the legislative and executive branches of the U.S. government and foreign governments often consider legislation and regulatory requirements that could affect us, as could the actions that the FCC and foreign regulatory bodies take. We cannot predict the outcomes of these legislative or regulatory proceedings or their effect on our business.

In addition, third parties have or may oppose some of our license applications and pending and future requests for extensions, modifications, waivers and approvals of our licenses. Even if we have fully complied with all of the required reporting, filing and other requirements in connection with our authorizations, it is possible a regulator could decline to grant certain of our applications or requests for authority, or could revoke, terminate, condition or decline to modify, extend or renew certain of our authorizations or licenses.

~~Table~~Further, we rely on subcontractors to provide us with certain goods and services that may require their compliance with our licenses and other authorizations. In the event that their provision of ~~Contents~~these goods and services are not in compliance with such licenses and other authorizations, we may be subject to fines or other penalties and/or the applicable regulator may cancel, revoke, suspend, or fail to renew any of our licenses or authorizations.

We may face difficulties in accurately assessing and collecting contributions towards the USF.

Because our customer contracts often include both telecommunications services, which create obligations to contribute to the USF, and other goods and services, which do not, it can be difficult to determine what portion of our revenue forms the basis for our required contribution to the USF and the amount that we can recover from our customers. If the FCC, which oversees the USF, or a court or other governmental entity were to determine that we computed our USF contribution obligation incorrectly or passed the wrong amount onto our customers, we could become subject to additional assessments, liabilities, or other financial penalties. In addition, the FCC is considering substantial changes to its USF contribution and distribution rules. These changes could impact our future contribution obligations and those of third parties that provide communication services to our business. Any such change to the USF contribution rules could adversely affect our costs of providing service to our customers. In addition, changes to the USF distribution rules could intensify the competition we face by offering subsidies to competing firms and/or technologies.

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Restrictions on immigration or increased enforcement of immigration laws could limit our access to qualified and skilled professionals, increase our cost of doing business or otherwise disrupt our operations.

The success of our business is dependent on our ability to recruit engineers and other professionals. Immigration laws in the U.S. and other countries in which we operate are subject to legislative changes, as well as variations in the standards of application and enforcement due to political forces and economic conditions. It is difficult to predict the political and economic events that could affect immigration laws, or the restrictive impact they could have on obtaining or renewing work visas for our professionals. If immigration laws are changed or if new more restrictive government regulations are enacted or increased, our access to qualified and skilled professionals may be limited, the costs of doing business may increase and our operations may be disrupted.

RISKS RELATING TO THE BSS TRANSACTION

~~RISKS RELATED TO THE SHARE EXCHANGE~~Certain of our directors and executive officers have interests in the BSS Transaction.

Certain of our directors and executive officers have interests in the BSS Transaction. Our directors and executive officers who own shares of EchoStar’s common stock participated in the Distribution and the Merger on the same terms as EchoStar’s other stockholders. Additionally, Mr. Ergen, director of both us and DISH, serves as a director and executive officer of BSS Corp. following the consummation of the BSS Transaction. We and the EchoStar parties that approved the BSS Transaction, as described below, were aware of and considered these interests, among other things, in deciding to approve the terms of the Master Transaction Agreement and the BSS Transaction.

The BSS Transaction was approved, in accordance with EchoStar’s longstanding related party transaction policy, by (i) EchoStar’s independent management, (ii) EchoStar’s non-interlocking directors (i.e., directors who are not also directors or employees of DISH Network), with EchoStar’s director, Mr. R. Stanton Dodge, recusing himself to avoid the appearance of any potential conflict resulting from his prior employment with DISH Network and EchoStar’s director, Mr. Anthony M. Federico, recusing himself to avoid the appearance of any potential conflict resulting from his service on DISH’s special litigation committee, (iii) EchoStar’s audit committee, with Mr. Federico recusing himself and, after all such approvals were obtained (iv) our and EchoStar’s board of directors, with, our and EchoStar’s chairman, Mr. Ergen, recusing himself. Applicable portions of BSS Transaction were also approved by our board of directors.

If the Distribution and the Merger do not qualify as a tax‑free distribution and merger under the Internal Revenue Code of 1986, as amended (the “Code”), then we and/or EchoStar stockholders may be required to pay substantial U.S. federal income taxes and under certain circumstances we may have indemnification obligations to DISH Network.

The parties to the BSS Transaction received a tax opinion from their respective counsels as to the tax‑free nature of the transactions. They did not obtain a private letter ruling from the IRS with respect to the Distribution and the Merger and instead are relying solely on their respective tax opinions for comfort that the Distribution and the Merger qualify for tax‑free treatment for U.S. federal income tax purposes under the Code.

The tax opinions were based on, among other things, certain undertakings made by EchoStar and DISH Network, as well as certain representations and assumptions as to factual matters made by EchoStar, DISH Network, and Mr. and Mrs. Ergen. The failure of any factual representation or assumption to be true, correct and complete, or any undertaking to be fully complied with, could affect the validity of the tax opinions. An opinion of counsel represents counsel’s best legal judgment, is not binding on the IRS or the courts, and the IRS or the courts may not agree with the conclusions set forth in the tax opinions. In addition, the tax opinions were based on then-current law, and cannot be relied upon if current law changes with retroactive effect.

If the Distribution does not qualify as a tax‑free distribution under Section 355 of the Code, then EchoStar would recognize a substantial gain on the Distribution, we and EchoStar’s stockholders could incur significant U.S. federal income tax liabilities, and EchoStar could be required to indemnify DISH Network for the tax on such gain if the failure of the Distribution to so qualify is the result of certain actions or misrepresentations by EchoStar, but EchoStar will not be required to indemnify any of its stockholders. In the event EchoStar is required to indemnify DISH Network for taxes incurred in connection with the BSS Transaction, the indemnification obligation could have a material adverse effect on our and EchoStar’s business, financial conditions, results or operations and cash flow.

Even if the Distribution otherwise qualifies as a tax-free distribution, the Distribution would be taxable to us and EchoStar (but not to its stockholders) pursuant to Section 355(e) of the Code if one or more persons acquire a 50% or greater

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interest (measured by vote or value) in EchoStar’s or BSS Corp.’s stock, directly or indirectly (including through acquisitions of the BSS Common Stock or DISH Common Stock after the completion of the BSS Transaction), as part of a plan or series of related transactions that includes the Distribution. If there is a change of control of DISH Network or BSS Corp. after the completion of the BSS Transaction or a transfer of stock or assets of DISH Network or BSS Corp. that results in the Distribution being taxable to us and/or EchoStar under Section 355(e) of the Code, DISH Network would be required to indemnify EchoStar (but not its stockholders) for such taxes only if DISH Network took an action or knowingly facilitated, consented to or assisted with an action by a DISH shareholder that caused the Distribution to fail to qualify as a tax-free distribution. In addition, the Merger being taxable could cause the Distribution to fail to qualify as a tax-free distribution.

A putative class action lawsuit relating to the BSS Transaction has been filed against EchoStar, Hughes Satellite Systems Corporation, DISH Network, Mr. Ergen and certain of our and EchoStar’s officers and other lawsuits related to the BSS Transaction may be filed against us, EchoStar, DISH Network and other persons which could result in substantial costs.

On July 2, 2019, a complaint was filed by purported EchoStar stockholders. See Note 17 in our Accompanying Consolidated Financial Statements for more information about litigation related to the BSS Transaction that has been commenced prior to the date of this report. There can be no assurance that additional complaints will not be filed with respect to the BSS Transaction.

Even if this lawsuit and any others that may be filed are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition.

Our ability to operate and control our satellites is subject to risks related to DISH Network’s operation of the BSS Business.

In connection with the BSS Transaction, we transferred our satellite operation centers, which are used to monitor and control our satellites, to DISH Network. DISH Network may not be able to successfully or profitably operate, maintain and manage the BSS Business and its employees, including the operations and employees of the satellite operations centers. DISH Network may not be able to maintain uniform standards, controls, procedures and policies or comply with regulations with respect to the satellite operations centers, and this may lead to operational failures or inefficiencies. A failure or inefficiency at any of the satellite operations centers could cause a significant loss of service for our customers or might cause the transmission of incorrect commands to the affected satellite(s), which could lead to a temporary or permanent degradation in satellite performance or to the loss of one or more of our satellites. Any such failure could have a material adverse impact on our business, financial condition, and results of operations.

We may be more susceptible to adverse events as a result of the BSS Transaction.

We have divested the BSS Business and our business will be subject to increased concentration of risks that affect our retained businesses. We are now a smaller, less diversified and more narrowly focused business, which makes us more vulnerable to changing market and economic conditions. Operating as a smaller entity may reduce or eliminate some of the benefits and synergies which previously existed across our business platforms, including our operating diversity, purchasing and borrowing leverage, available capital, and relationships and opportunities to pursue integrated strategies within our businesses and attract, retain and motivate key employees. In addition, as a smaller company, our ability to absorb costs may be negatively impacted, including the significant cost of the BSS Transaction and/or litigations or other adverse rulings or proceedings, and we may be unable to obtain financing, goods or services at prices or on terms as favorable as those obtained prior to the BSS Transaction. Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows, business prospects and the trading price of our common stock.

We might not be able to engage in certain strategic transactions because ~~we have~~EchoStar has agreed to certain restrictions to comply with U.S. federal income tax requirements for a ~~tax-free split-off.~~tax‑free spin‑off.

To preserve the intended ~~tax-free~~tax treatment of the ~~Share Exchange,~~Distribution, EchoStar ~~must~~has agreed to comply with certain restrictions under current U.S. federal income tax laws for ~~split-offs, including~~spin‑offs, including: (i) refraining from engaging in certain transactions that would result in a fifty percent or greater change by vote or by value in ~~EchoStar’s stock ownership,~~its and our ownership; (ii) continuing to own and manage ~~EchoStar’s~~its and our historic ~~businesses,~~business; and (iii) limiting sales or redemptions of its common stock. These restrictions could prevent EchoStar or us from pursuing otherwise attractive business opportunities, result in our or EchoStar’s

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inability to respond effectively to competitive pressures, industry developments and future opportunities and may otherwise harm its or our ~~common stock.~~business, financial results and operations. If these restrictions, among others, are not followed, the ~~Share Exchange~~Distribution could be taxable to us and EchoStar and possibly ~~EchoStar’s~~its stockholders.

OTHER RISKS

We are a wholly owned subsidiary of EchoStar and do not operate as an independent company.

We rely on EchoStar for a substantial portion of our administrative and management functions and services including human resources-related functions, accounting, tax administration, legal, external reporting, treasury administration, internal audit and insurance functions, information technology and telecommunications services and other support services. We do not have systems and resources in place to perform all of these functions or services. Instead, we generally receive these services pursuant to arrangements between us and EchoStar and its other subsidiaries. EchoStar and its other subsidiaries in turn receive certain of these services from DISH Network pursuant to a professional services agreement entered into between them. If our intercompany arrangements with EchoStar and its other subsidiaries were to terminate, or if EchoStar and its other subsidiaries no longer receive certain services from DISH Network, we would need to obtain agreements with third-party service providers or obtain additional internal resources, neither of which may be available on acceptable terms or at all.

Our parent, EchoStar, is controlled by one principal stockholder who is our Chairman.

Charles W. Ergen, our Chairman, beneficially owns approximately ~~50.9%~~51% of EchoStar’s total equity securities (assuming conversion of only the EchoStar Class B common stock beneficially owned by Mr. Ergen into EchoStar Class A common stock and giving effect to the exercise of options held by Mr. Ergen that are either currently exercisable as of, or may become exercisable within 60 days after, February ~~11, 2019)~~10, 2020) and beneficially owns approximately ~~88.3%~~91% of the total voting power of all classes of shares of EchoStar (assuming no conversion of any EchoStar Class B common stock and giving effect to the exercise of options held by Mr. Ergen that are either currently exercisable as of, or may become exercisable within 60 days after, February ~~11, 2019)~~10, 2020). Through his beneficial ownership of EchoStar’s equity securities, Mr. Ergen has the ability to elect a majority of EchoStar’s directors and to control all other matters requiring the approval of EchoStar’s stockholders. As a result of Mr. Ergen’s voting power, EchoStar is a “controlled company” as defined in the ~~Nasdaq~~NASDAQ listing rules and, therefore, is not subject to ~~Nasdaq~~NASDAQ requirements that would otherwise require EchoStar to have (i) a majority of independent directors; (ii) a nominating committee composed solely of independent directors; (iii) compensation of our or EchoStar’s executive officers determined by a majority of the independent directors or a compensation committee composed solely of independent directors; (iv) a compensation committee charter which provides the compensation committee with the authority and funding to retain compensation consultants and other ~~advisors~~advisors; and/or (v) director nominees selected, or recommended for the ~~Board’s~~EchoStar board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors.

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We have potential conflicts of interest with DISH Network due to EchoStar and DISH Network’s common ownership.

Questions relating to conflicts of interest may arise between DISH Network and us in a number of areas relating to our past and ongoing relationships. Areas in which conflicts of interest between DISH Network and us could arise include, but are not limited to, the following:

•

Cross directorships and stock ownership. ~~We have overlap in our Chairman position with DISH, which may lead to conflicting interests.~~ ~~EchoStar’s~~ ~~board of directors includes persons who are members of the board of directors of DISH, including~~ Charles W. Ergen ~~who~~ serves as the Chairman of ~~these companies~~our, EchoStar’s and DISH’s boards of ~~us and~~directors, is employed by both EchoStar and ~~DISH. Our Chairman~~DISH and ~~the other members of~~ ~~EchoStar’s~~ ~~board of directors who overlap with DISH also have~~has fiduciary duties to EchoStar’s and DISH’s ~~shareholders.~~ shareholders~~Therefore, these individuals~~.Mr. Ergen may have actual or apparent conflicts of interest with respect to matters involving or affecting each company. For example, there is potential for a conflict of interest when we or DISH Network look at acquisitions and other corporate opportunities that may be suitable for both companies. In addition, our Chairman and certain other EchoStar directors and certain of our officers own DISH stock and options to purchase DISH stock, certain of which they acquired or were granted prior to our spin-off from DISH in 2008 (the “Spin-off”)~~, including Mr. Ergen.~~. These ownership interests could create actual, apparent or potential conflicts of interest when these individuals are faced with decisions that could have different implications for our company and DISH Network.

•

Intercompany agreements with DISH ~~Network~~Network. WeWe and EchoStar and its other subsidiaries have entered into various agreements with DISH Network. Pursuant to certain agreements, we and EchoStar and its other subsidiaries obtain certain products, services and rights from DISH Network; DISH Network obtains certain products, services and rights from us and EchoStar; and we and EchoStar and DISH Network, respectively, indemnify each other against certain liabilities arising from our respective businesses. Generally, the amounts paid for products and services provided under the agreements are based on cost plus a fixed margin, which varies depending on the nature of the products and services provided. Certain other intercompany agreements cover matters such as tax sharing and EchoStar’s responsibility for certain liabilities previously undertaken by DISH Network for certain of EchoStar’s businesses. We and EchoStar have ~~also entered into certain commercial agreements with DISH Network. The terms of certain of these agreements were established while~~ ~~EchoStar was~~ a wholly-owned subsidiary of DISH Network and were not the result of arm’s length negotiations. The allocation of assets, liabilities, rights, indemnifications and other obligations between DISH Network and ~~EchoStar~~ ~~under the separation and ancillary agreements~~entered into with DISH Network in connection with the Spin-Off and the Share Exchange did not necessarily reflect what two unaffiliated parties might have agreed to. Had these agreements been negotiated with unaffiliated third parties, their terms may have been more favorable, or less favorable, to ~~us or EchoStar.~~ ~~In addition, DISH Network or its affiliates will likely continu~~e to enter into transactions, including joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, with EchoStar or its subsidiaries, us or our subsidiaries, or other affiliates. Although the terms of any such transactions will be established based upon negotiations between DISH Network and us and, when appropriate, subject to approval by a committee of EchoStar’s non-interlocking directors or in certain instances non-interlocking management, there can be no assurance that the terms of any such transactions will be as favorable to us or our subsidiaries or affiliates as may otherwise be obtained in negotiations between unaffiliated third parties.

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products, services and rights from us and EchoStar and its other subsidiaries; and we and EchoStar, its other subsidiaries and DISH Network, as applicable, indemnify each other against certain liabilities arising from our respective businesses. Generally, the amounts paid for products and services provided under the agreements are based on cost plus a fixed margin, which varies depending on the nature of the products and services provided. Certain other intercompany agreements cover matters such as tax sharing and our and EchoStar’s responsibility for certain liabilities previously undertaken by DISH Network for certain of our and EchoStar’s businesses. We and EchoStar and its other subsidiaries have also entered into certain commercial agreements with DISH Network. The terms of certain of these agreements were established while EchoStar was a wholly-owned subsidiary of DISH and were not the result of arm’s length negotiations. The allocation of assets, liabilities, rights, indemnifications and other obligations between DISH Network, EchoStar and its other subsidiaries and/or us under certain agreements we and/or EchoStar and its other subsidiaries have entered into with DISH Network may not necessarily reflect what two unaffiliated parties might have agreed to. Had these agreements been negotiated with unaffiliated third parties, their terms may have been more or less favorable to us or EchoStar and its other subsidiaries. In addition, DISH Network or its affiliates will likely continue to enter into transactions, including joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, with EchoStar or its subsidiaries, us or other affiliates. Although the terms of any such transactions will be established based upon negotiations between us and DISH Network and, when appropriate, subject to approval by committees of our and EchoStar’s non-interlocking directors or in certain instances non-interlocking management, there can be no assurance that the terms of any such transactions will be as favorable to EchoStar or its subsidiaries, us or our subsidiaries, or other affiliates as may otherwise be obtained in negotiations between unaffiliated third parties.

•

Competition for business opportunities. DISH Network may have interests in various companies that have subsidiaries or controlled affiliates that own or operate domestic or foreign services that may compete with services offered by our businesses. DISH Network also has a distribution agreement with ViaSat, a competitor of our Hughes segment, to sell services similar to those offered by our Hughes segment. We and EchoStar and its other subsidiaries may also compete with DISH Network when we participate in auctions for spectrum or orbital slots for our ~~satellites.~~satellites or other business opportunities.

We may not be able to resolve any potential conflicts of interest with DISH Network and, even if we do so, the resolution may be less favorable to us than if we were dealing with an unaffiliated party.

We do not have any agreements not to compete with DISH Network. However, many of our potential customers who compete with DISH Network have historically perceived us as a competitor due to our affiliation with DISH Network. There can be no assurance that we will be successful in entering into any commercial relationships with potential customers who are competitors of DISH Network (particularly if we continue to be perceived as affiliated with DISH Network as a result of common ownership, certain shared management services and other arrangements with DISH Network).

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~~We are a wholly owned subsidiary of EchoStar and do not operate as an independent company.~~

We rely on EchoStar for a substantial portion of our administrative and management functions and services including human resources-related functions, accounting, tax administration, legal, external reporting, treasury administration, internal audit and insurance functions, information technology and telecommunications services and other support services. We do not have systems and resources in place to perform all of these functions or services. Instead, we generally receive these services pursuant to arrangements between us and EchoStar. EchoStar in turn receives certain of these services from DISH Network pursuant to a professional services agreement entered into between them. If our intercompany arrangements with EchoStar were to terminate, or if EchoStar no longer receives certain services from DISH Network, we would need to obtain agreements with third-party service providers or obtain additional internal resources, neither of which may be available on acceptable terms or at all.

It may be difficult for a third party to acquire us, even if doing so may be beneficial to ~~our~~EchoStar’s shareholders, because of our and EchoStar’s capital ~~structure.~~structure and certain provisions of the BSS Transaction.

Certain provisions of EchoStar and our respective articles of incorporation and bylaws, such as a provision that authorizes the issuance of “blank check” preferred stock, which could be issued by our or EchoStar’s ~~boards~~board of directors to increase the number of outstanding shares and thwart a takeover attempt and EchoStar’s capital structure with multiple classes of common stock some of which entitle the holders to multiple votes per share, may discourage delay or prevent a change in control of our company that ~~a shareholder~~ may ~~consider~~be considered favorable. Both we and EchoStar also have a significant amount of authorized and unissued stock under our respective articles of incorporation that would allow our respective boards of directors to issue shares to persons friendly to current management, thereby protecting the continuity of management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us. In addition, Charles W. Ergen, our Chairman, has the power to elect all of EchoStar’s directors and control shareholder decisions of EchoStar on matters on which all classes of EchoStar’s common stock vote together, and as our parent, EchoStar in turn holds all of our issued and outstanding equity and has the power to elect all of our directors and control shareholder decision on all ~~matters.~~matters, all of which may make it impractical for any third party to obtain control of us.

Additionally, in order to preserve the intended tax treatment of the Distribution, EchoStar has agreed to comply with certain restrictions under current U.S. federal income tax laws for spin‑offs, including, refraining from engaging in

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certain transactions that would result in a fifty percent or greater change by vote or by value in our and its stock ownership. This restriction could discourage third parties from seeking to acquire us.

We may face other risks described from time to time in periodic and current reports we file with the SEC.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

Our principal executive offices are located at 100 Inverness Terrace East, Englewood, Colorado 80112-5308 and our telephone number is (303) 706-4000. The following table sets forth certain information concerning our principal properties related to our Hughes segment (“Hughes”) and EchoStar Satellite Services segment (“ESS”) and to our other operations and administrative functions (“Corporate and Other”) as of December 31, ~~2018.~~2019. We operate various facilities in the United States and abroad. We believe that our facilities are well maintained and are sufficient to meet our current and projected needs.



Location ~~(4)~~	Segment(s)	~~Leased/~~ ~~Owned~~ Function
	~~Function~~
Owned:
Englewood, Colorado	ESS/Corporate and Other	Corporate headquarters and engineering offices
Germantown, Maryland	Hughes	Hughes corporate headquarters, engineering offices, network operations and shared hubs
Griesheim, Germany	Hughes/Corporate and Other	Shared hub, operations, administrative offices and warehouse

Leased:
Gilbert, Arizona	Hughes	Gateways
San Diego, California	Hughes	~~Leased~~	Engineering and sales offices
Englewood, Colorado ~~(1)(4)~~	Hughes	~~Leased~~	Gateways and equipment
Gaithersburg, Maryland	Hughes	~~Leased~~	Manufacturing and testing facilities ~~engineering~~ and logistics offices
Gaithersburg, Maryland	Hughes	Engineering and administrative offices
Southfield, Michigan ~~(1)~~	Hughes	~~Leased~~	Shared hub and regional network management center
Las Vegas, Nevada ~~(1)~~	Hughes	~~Leased~~	Shared hub, antennae yards, gateway, backup network operation and control center for Hughes corporate headquarters
~~American Fork, Utah~~Cheyenne, Wyoming	~~Hughes~~Hughes/ESS	~~Leased~~Satellite access center, gateways and equipment
Barueri, Brazil	~~Office space, engineering offices~~Hughes/Corporate and Other	Shared hub, warehouse, operations center and spacecraft operations center
Sao Paulo, Brazil	Hughes	~~Leased~~	Hughes Brazil corporate headquarters, sales offices and warehouse
Bangalore, India ~~(2)~~	Hughes	~~Leased~~	Engineering office and office space
Gurgaon, India ~~(1)(2)~~	Hughes	~~Leased~~	Administrative offices, shared hub, operations, warehouse, and development center
New Delhi, India	Hughes	~~Leased~~	Hughes India corporate headquarters
Milton Keynes, United Kingdom	Hughes	~~Leased~~	Hughes Europe corporate headquarters and operations
~~Germantown, Maryland (1)~~	~~Hughes~~	~~Owned~~	~~Hughes corporate headquarters, engineering offices, network operations and shared hubs~~
~~Griesheim, Germany (1)~~	~~Hughes~~	~~Owned~~	~~Shared hub, operations, administrative offices and warehouse~~
~~Cheyenne, Wyoming (1)~~	~~Hughes/ESS~~	~~Leased~~	~~Spacecraft operations center, satellite access center and gateway~~
~~Gilbert, Arizona (1)~~	~~Hughes/ESS~~	~~Leased~~	~~Spacecraft operations center, satellite access center and gateway~~
~~Barueri, Brazil (1)~~	~~Hughes/Other~~	~~Leased~~	~~Shared hub, warehouse, operations center and spacecraft operations center~~
~~Black Hawk, South Dakota (1)(3)~~	~~ESS~~	~~Owned~~	~~Spacecraft auto-track operations center~~
~~Englewood, Colorado (3)~~	~~ESS/Other~~	~~Owned~~	~~Corporate headquarters, engineering offices~~
~~Campinas, Brazil~~	~~Other~~	~~Leased~~	~~Uplink facility~~
~~Cheyenne, Wyoming~~	~~Other~~	~~Owned~~	~~Data Center~~


~~(1)~~	~~We perform network services and customer support functions 24 hours a day, 365 days a year at these locations.~~


~~(2)~~	~~These properties are used by subsidiaries that are less than wholly-owned by the Company.~~


~~(3)~~	~~These properties are owned by EchoStar Corporation or its subsidiaries.~~


~~(4)~~	~~We also have multiple gateways throughout the Western part of the U.S., Mexico and Canada that support the SPACEWAY 3, EchoStar XVII, and EchoStar XIX satellites.~~

ITEM 3. LEGAL PROCEEDINGS

For a discussion of legal proceedings, see Note 1317 in ~~the notes to~~ our ~~accompanying~~Accompanying Consolidated Financial ~~Statements in Item 15 of this Annual Report on Form 10-K.~~

Statements.

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information. As of February ~~11, 2019,~~10, 2020, all of our 1,078 issued and outstanding shares of common stock were held by EchoStar. There is currently no established trading market for our common stock. Our Articles of Incorporation authorize the issuance of 1,000,000 shares of preferred stock and as of February ~~11, 2019,~~10, 2020, no shares of our preferred stock were issued and outstanding.

Dividends. We have not paid any cash dividends on our common stock in the past two years. Payment of any future dividends will depend upon our earnings, capital requirements, contractual restrictions and other factors the board of directors considers appropriate. We currently intend to retain our earnings, if any, to support operations, future growth and expansion. Our ability to declare dividends is affected by the covenants in our indentures.

ITEM 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

~~Unless the context indicates otherwise, as used herein, the terms “we,” “us,” “HSS,” the “Company” and “our” refer to~~ ~~Hughes Satellite Systems~~ ~~Corporation and its subsidiaries. References to “$” are to United States (“U.S.”) dollars.~~ The following management’s narrative analysis of results of operations should be read in conjunction with our ~~accompanying~~Accompanying Consolidated Financial Statements and notes ~~thereto included elsewhere in this Annual Report on Form 10-K (“Form 10-K”).~~thereto. This management’s narrative analysis is intended to help provide an understanding of our financial condition, changes in our financial condition and our results of operations. Many of the statements in this management’s narrative analysis are forward-looking statements that involve assumptions and are subject to risks and uncertainties that are often difficult to predict and beyond our control. Actual results could differ materially from those expressed or implied by such forward-looking statements. See Disclosure Regarding Forward-Looking Statements in this Form 10-K for further discussion. For a discussion of additional risks, uncertainties and other factors that could impact our results of operations or financial condition, see ~~the caption~~Item 1A. Risk Factors ~~in Item 1A~~ of this Form 10-K. Further, such forward-looking statements speak only as of the date of this Form 10-K and we undertake no obligation to update them.

EXECUTIVE SUMMARY

We are a holding company and a subsidiary of ~~EchoStar Corporation (“EchoStar”).~~EchoStar. We were formed as a Colorado corporation in March 2011. We are a global provider of broadband satellite technologies, broadband internet services for consumer customers, which include home and small ~~office customers, satellite operations~~to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and ~~various~~ communications solutions for enterprise customers, which include aeronautical ~~enterprise~~ and government ~~customers. We currently operate in two business segments: Hughes~~enterprises.

In May 2019, EchoStar and BSS Corp. entered into the Master Transaction Agreement with DISH and Merger Sub with respect to the BSS Transaction. Pursuant to the terms of the Master Transaction Agreement, on September 10, 2019: (i) we and EchoStar ~~Satellite Services (“ESS”). These segments are consistent~~and its other subsidiaries transferred the BSS Business to BSS Corp.; (ii) EchoStar completed the Distribution; and (iii) immediately after the Distribution, (1) BSS Corp. became a wholly-owned subsidiary of DISH such that DISH owns and operates the BSS Business and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Common Stock.

In connection with the ~~way~~BSS Transaction, EchoStar and DISH Network have agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. Additionally, EchoStar and DISH and certain of our, EchoStar’s and DISH’s subsidiaries, as applicable, have (i) entered into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property and the provision of transitional services; (ii) terminated certain previously existing agreements; and (iii) amended certain existing agreements and entered into certain new agreements pursuant to which we, ~~make decisions regarding the allocation of resources, as well as how operating results are reviewed by our chief operating decision maker, who is the Company’s Chief Executive Officer.~~

~~During 2017,~~ EchoStar and certain of our and its other subsidiaries, on the one hand, and ~~our subsidiaries entered into~~DISH Network, on the other hand, will obtain and provide certain products, services and rights from and to each other.

The BSS Transaction was structured in a ~~share exchange agreement with DISH and certain of its subsidiaries.~~manner intended to be tax-free to EchoStar and ~~certain of~~ its stockholders for U.S. federal income tax purposes and ~~our subsidiaries received all of the shares of the Hughes Retail Preferred Tracking Stock previously issued by~~was accounted for as a spin-off to EchoStar’s stockholders as we and EchoStar and us (together, the “Tracking Stock”) in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of EchoStar’s former EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”).did not receive any consideration. Following the consummation of the ~~Share Exchange, EchoStar~~BSS Transaction, we no longer ~~operates its former EchoStar Technologies businesses,~~operate the ~~Tracking Stock~~BSS Business, which was ~~retired and is no longer outstanding, and all agreements, arrangements and policy statements with respect to the Tracking Stock terminated.~~

Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Real Estate, Accounting and Legal) and other activities that have not been assigned to our operating segments such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certaina substantial portion of our ~~investments. These activities, costs~~ESS segment. As a result of the BSS Transaction, the financial results of the BSS Business, except for certain real estate that transferred in the transaction, are presented as discontinued operations and, ~~income,~~ as ~~well as eliminations of intersegment transactions, are accounted~~such, excluded from continuing operations and segment results for ~~in Corporate and Other~~all periods presented in our ~~segment reporting.~~

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Accompanying Consolidated Financial Statements. See Note 5 in our Accompanying Consolidated Financial Statements for further discussion of our discontinued operations.

During 2017, EchoStar and certain of its and our subsidiaries entered into a share exchange agreement with DISH and certain of its subsidiaries. EchoStar and certain of its and our subsidiaries received all the shares of the Tracking Stock in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of EchoStar’s former EchoStar Technologies businesses and certain other assets. Following the consummation of the Share Exchange, EchoStar no longer operates its former EchoStar Technologies businesses, the Tracking Stock was retired and is no longer outstanding, and all agreements, arrangements and policy statements with respect to the Tracking Stock terminated.

We currently operate in two business segments: Hughes and ESS. These segments are consistent with the way we make decisions regarding the allocation of resources, as well as how operating results are reviewed by our chief operating decision maker, who is the Company’s Chief Executive Officer.

Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Accounting, Real Estate and Legal) and other activities that have not been assigned to our operating segments such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other in our segment reporting.

Highlights from our financial results are as follows:

Consolidated Results of Operations for the Year Ended December 31, ~~2018~~2019


•	Revenue of $1.9 billion


•	Operating income of $151.0 million


•	Net loss from continuing operations of $40.9 million


•	Net loss attributable to HSS of $29.5 million

~~Revenue~~Earnings before interest, taxes, depreciation and amortization (“EBITDA”) of ~~$2.1 billion~~

~~Operating income of $344 million~~

~~Net income of $97 million~~

~~Net income attributable to HSS of $96 million~~

~~EBITDA of $894~~$604.8 million (see reconciliation of this non-GAAP measure ~~on page 32)~~in Results of Operations)

Consolidated Financial Condition as of December 31, ~~2018~~2019


•	Total assets of ~~$6.9~~$5.6 billion


•	Total liabilities of ~~$4.5~~$3.4 billion


•	Total shareholders’ equity of ~~$2.4~~$2.1 billion


•	Cash, cash equivalents and current marketable investment securities of ~~$2.5~~$1.8 billion

Hughes Segment

Our Hughes segment is a global provider of broadband satellite technologies and broadband internet services to ~~home and small office~~consumer customers and broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to ~~consumers, aeronautical,~~consumer and enterprise ~~and government~~ customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.

We incorporate advances in technology to reduce costs and to increase the functionality and reliability of our products and services. Through advanced and proprietary methodologies, technologies, software and techniques, we continue to improve the efficiency of our networks. We invest in technologies to enhance our system and network management capabilities, specifically our managed services for enterprises. We also continue to invest in next generation technologies that can be applied to our future products and services.

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Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued

We continue to focus our efforts on growing our consumer revenue by maximizing utilization of our existing satellites while planning for new satellites to be launched or acquired. Our consumer revenue growth depends on our success in adding new and retaining existing subscribers in our domestic and international markets across wholesale and retail channels. The growth of our enterprise businesses ~~including aeronautical,~~ relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. Service costs related to ongoing support for our direct and indirect customers and partners are typically impacted most significantly by our growth.

Our Hughes segment currently uses capacity from three of our satellites (the SPACEWAY 3 satellite, the EchoStar XVII satellite and the EchoStar XIX satellite), our Al Yah 3 Brazilian payload and additional satellite capacity acquired from ~~multiple~~ third-party providers to provide services to our customers. ~~In Dec~~ember 2016, EchoStar launched the EchoStar XIX satellite, a high throughput geostationary satellite employing a multi-spot beam, bent pipe Ka-band architecture. EchoStar contributed the EchoStar XIX satelliteGrowth of our consumer subscriber base continues to usbe constrained in ~~February 2017. The EchoStar XIX satellite provides capacity for the Hughes broadband services~~areas where we are nearing or have reached maximum capacity. While these constraints are expected to ~~our current~~be resolved when we launch new satellites, we continue to focus on revenue growth in all areas and future customers in North America and certain Central and South American countries and our aeronautical and enterprise broadband services. Until new satellite launches or acquisitions provide additional capacity forconsumer subscriber growth in the areas where we ~~manage subscriber growth across our existing satellite platform.~~have available capacity.

In ~~August 2018,~~May 2019, we entered into an agreement with Al Yah Satellite Communications Company PrJSC (“Yahsat”) pursuant to which, in November 2019, Yahsat contributed its satellite communications services business in Brazil to us in exchange for a 20% ownership interest in our existing Brazilian subsidiary that conducts our satellite communications services business in Brazil. The combined business provides broadband internet services and enterprise solutions in Brazil using the Telesat T19V satellite, the Eutelsat 65W satellite and Yahsat’s Al Yah 3 satellite. Under the terms of the agreement, Yahsat may also acquire, for further cash investments, additional minority ownership interests in the business in the future provided certain conditions are met.

In May 2019, we also entered into an agreement with Bharti Airtel Limited (“BAL”) and its subsidiary, Bharti Airtel Services Limited (together with BAL, “Bharti”), pursuant to which Bharti will contribute its very small aperture terminal (“VSAT”) telecommunications services and hardware business in India to our two existing Indian subsidiaries that conduct our VSAT services and hardware business. The combined entities will provide broadband satellite and hybrid solutions for enterprise networks. Upon consummation of the transaction, Bharti will have a 33% ownership interest in the combined business. The completion of the transaction is subject to customary regulatory approvals and closing conditions. No assurance can be given that the transaction will be consummated on the terms agreed to or at all.

In August 2018, we entered into an agreement with Yahsat to establish a new entity, Broadband Connectivity Solutions (Restricted) Limited (together with its subsidiaries, “BCS”), to provide commercial Ka-band satellite broadband services across Africa, the Middle East and southwest Asia operating over Yahsat's Al Yah 2 and Al Yah 3 Ka-band satellites. The transaction was consummated in December 2018 when we invested ~~$100~~$100.0 million in cash in exchange for a 20% interest in BCS. Under the terms of the agreement,

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we may also acquire, for further cash investments, additional ownership interests in BCS in the future provided certain conditions are met. We supply network operations and management services and equipment to BCS.

In August 2017, a subsidiary of EchoStar entered into a contract for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite, with a planned 2021 launch. The EchoStar XXIV satellite is primarily intended to provide additional capacity for our ~~Hughes~~HughesNet satellite internet service (“~~HughesNet”~~HughesNet service”) ~~service~~ in North, Central and South America as well as ~~aeronautical and~~ enterprise broadband services. ~~In March 2018,~~If the Federal Communications Commission (“FCC”) granted authorization to construct, deploy and operate the EchoStar XXIV satellite. In the second half of 2018, Maxar Technologies Inc. (“Maxar”), the parent company of Space Systems/Loral (“SSL”), the manufacturer of our EchoStar XXIV satellite, announced that it was reviewing strategic alternatives for its geostationary communications satellite business to improve its financial performance and that it was in active discussions with potential buyers of the business. SSL has indicated to us that it intends to meet its contractual obligations regarding the timely manufacture ~~and~~and/or delivery of the EchoStar XXIV ~~satellite. However, if SSL or any potential successor fails to meet~~satellite is not met or is delayed, ~~in meeting these obligations for any reason, including if Maxar decides to discontinue, wind down or otherwise significantly modify its geostationary communications satellite business,~~ such failure could have a material adverse impact on our business operations, future revenues, financial position and prospects ~~completing the manufacture of the EchoStar XXIV satellite~~ and our planned expansion of satellite broadband services throughout North, South and Central America. Capital expenditures associated with the construction and launch of ~~this~~the EchoStar XXIV satellite are included in EchoStar’s Corporate and Other in its segment reporting.

In March 2017, we and ~~a wholly-owned subsidiary of~~ DISH Network entered into a master service agreement (the “Hughes Broadband MSA”). Pursuant to the Hughes Broadband MSA, ~~DISH’s subsidiary,~~DISH Network, among other ~~things:~~things, (i) has the right, but not the obligation, to market, promote and solicit orders and upgrades for ~~the~~our HughesNet service and related equipment and other telecommunication ~~services~~services; and (ii) installs HughesNet service equipment with respect to activations generated by ~~DNLLC.~~DISH Network. As a result of the Hughes Broadband MSA, we have not earned, and do not expect to earn in the future, significant equipment revenue from our distribution agreement with ~~another wholly-owned subsidiary of DISH.~~ DISH Network. We expect churn in the existing wholesale subscribers to continue to reduce Services and other revenue ~~– DISH Network~~ in the future.

Developments toward the launch of next-generation satellite systems including low-earth orbit (“LEO”), medium-earth orbit (“MEO”) and geostationary systems could provide additional opportunities to drive the demand for our equipment, hardware, technology and services. In June 2015, a subsidiary of EchoStar made an equity investment in WorldVu Satellites Limited (“OneWeb”), a global LEO satellite service company, In addition, we have an agreement with OneWeb to provide certain equipment and services in connection with the ground network system for OneWeb’s LEO satellites. We expect to continue delivering additional equipment and services to OneWeb.

We continue our efforts to expand our consumer satellite services business outside of the U.S. In April 2014, we entered into a 15-year agreement with Eutelsat do Brasil for Ka-band capacity into Brazil on the EUTELSAT 65 West A satellite, which was launched in March 2016. We began delivering high-speed consumer satellite broadband services in Brazil in July 2016. Additionally, in September 2015, we entered into 15-year agreements pursuant to which affiliates of Telesat Canada will provide to us Ka-band capacity on a satellite to be located at the 63 degree west longitude orbital location. This satellite was launched in July 2018, placed in service during the fourth quarter of 2018 and augmented the capacity being provided by the EUTELSAT 65 West A and EchoStar XIX satellites in Central and South America. We currently provide satellite broadband internet service in several Central and South American countries, and expect to continue to launch similar services in other Central and South American countries.

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~~Our subscriber metrics as~~We continue our efforts to expand our consumer satellite services business outside of ~~December 31,~~the U.S. We have been delivering high-speed consumer satellite broadband services in Brazil since July 2016 and are also providing satellite broadband internet service in several other Central and South American countries. Additionally, in September 2015, we entered into 15-year agreements with affiliates of Telesat Canada for Ka-band capacity on the Telesat T19V satellite located at the 63 degree west longitude orbital location, which was launched in July 2018. Telesat T19V was placed in service during the fourth quarter of 2018 and ~~for~~augmented the ~~quarter then ended are as follows were:~~capacity being provided by the EUTELSAT 65 West A satellite and the EchoStar XIX satellite in Central and South America.

As of December 31,
2018 2017 2016
Total broadband subscribers 1,361,000
1,208,000
1,036,000

For the three months ended
December 31, 2018 September 30, 2018
Net additions 29,000
33,000

~~These~~Our broadband subscribers include customers that subscribe to our HughesNet services in North, Central and South America through retail, wholesale and small/medium enterprise service channels. Our ~~total gross~~approximate subscriber ~~additions for the fourth quarter~~numbers as of ~~2018 decreased by approximately 7,000 compared to the third quarter of 2018 primarily due to reduced satellite capacity available for sale. Our total net subscriber additions for the quarter ended~~ December 31, 2019, 2018 decreased by approximately 4,000 compared to the quarter ended September 30, 2018 primarily due to lower gross consumer subscriber additions, partially offset by a lower average monthly subscriber churn percentage.and 2017 are as follows:



	As of December 31,
	2019	2018	2017

Broadband subscribers	1,477,000	1,361,000	1,208,000

As of December 31, 2019, approximately 237,000 of our subscribers were in South and Central America. During the fourth quarter of 2019, we acquired approximately 20,000 new subscribers in connection with the consummation of our joint venture with Yahsat in Brazil (the “Acquired Subscribers”).

The approximate subscriber net additions for each quarter in 2019 are as follows:



	For the Three Months Ended
	December 31	September 30	June 30	March 31

Net additions, excluding Acquired Subscribers	20,000	22,000	26,000	28,000

During the fourth quarter of 2019, excluding the Acquired Subscribers:


•	our gross subscriber additions were generally flat compared to the third quarter of 2019; and


•	our net subscriber additions decreased by approximately 2,000 compared to the third quarter of 2019, reflecting increased churn in the fourth quarter compared to the third quarter.

As of December 31, 2019 and 2018, ~~and 2017,~~ our Hughes segment had ~~approximately~~ $1.4 billion ~~and $1.6 billion, respectively,~~ of contracted revenue backlog. We define Hughes contracted revenue backlog as our expected future revenue, including lease revenue, under customer contracts that are non-cancelable, excluding agreements with customers in our consumer market. ~~The decrease in our contracted revenue backlog reflects our recognition of revenue in excess of additions to backlog resulting from new orders from our customers.~~ Of the total Hughes contracted revenue backlog as of December 31, ~~2018,~~2019, we expect to recognize ~~approximately $430~~$455.6 million of revenue in ~~2019.~~2020.

ESS Segment

Our ESS segment isprovides satellite services on a ~~global provider of satellite operations~~full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and ~~satellite services.~~private enterprise customers. We operate our ESS business using ~~our owned~~primarily the EchoStar IX satellite and ~~leased in-orbit satellites~~the EchoStar 105/SES-11 satellite and related ~~licenses.~~infrastructure. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. Our ESS segment, like others in the fixed satellite services industry, has encountered, and may continue to encounter, negative pressure on transponder rates and demand. We are also pursuing other opportunities such as providing value added services such as telemetry, tracking and control (“TT&C”) services to third parties, which leverage the ground monitoring networks and personnel currently within our ESS segment.

~~We provide satellite operations~~As of December 31, 2019 and satellite services on a full-time and/or occasional-use basis primarily to DISH Network Corporation and its subsidiaries (“DISH Network”), Dish Mexico, S. de R.L. de C.V., a joint venture EchoStar entered into in 2008 (“Dish Mexico”), U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers.

~~We depend on DISH Network for a significant portion of the revenue for~~2018, our ESS segment had contracted revenue backlog of $11.4 million and ~~we expect that DISH Network will continue to be the primary source of~~$5.8 million respectively. We define contracted revenue backlog for our ESS segment as we have entered into certain commercial agreements with DISH Network pursuant to which we provide DISH Network with satellite services at fixed prices for varying lengths of time depending on the satellite. Therefore, the results of operations of our ESS segment are linked to changes in DISH Network’s satellite capacity requirements, which historically have been driven by the addition of new channels and migration of programming to high-definition television and video on demand services. DISH Network’scontracted future satellite ~~capacity requirements may change for a variety~~lease revenue. Of the total ESS contracted revenue backlog as of ~~reasons, including its ability~~December 31, 2019, we expect to construct and launch or acquire its own satellites, to continue to add new channels and/or to migrate to the provision of such channels and other video on demand services through streaming and other alternative technologies. There is no assurance that we will continue to provide satellite services to DISH Network beyond the terms of our agreements. Any termination or reduction in the satellite services we provide to DISH Network would cause us to have unused capacity on our satellites and require that we aggressively pursue alternative sourcesrecognize $7.2 million of revenue ~~for this business. The agreement with DISH Network to lease satellite capacity on the EchoStar VII satellite expired~~ in ~~June 2018. As~~2020.

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~~a result, we expect a $43 million annualized decrease in our revenue. We are exploring other opportunities to utilize this satellite in the future.~~ Other Business Opportunities

In August 2014, we entered into: (i) a contract with Airbus Defence and Space SAS for the construction of the EchoStar 105/SES-11 satellite with C-, Ku- and Ka-band payloads; (ii) an agreement with SES Satellite Leasing Limited for the procurement of the related launch services; and (iii) an agreement with SES Americom Inc. pursuant to which we transferred the title to the payloads to two affiliates of SES Americom Inc. We retained the right to use the entire Ku-band payload on the satellite for an initial ten-year term, with an option for us to renew the agreement on a year-to-year basis. The EchoStar 105/SES-11 satellite was launched in October 2017 and placed into service in November 2017 at the 105 degree west longitude orbital location. Our Ku-band payload on the EchoStar 105/SES-11 satellite replaced and augments the capacity we had on the AMC-15 satellite. We transferred activities from the AMC-15 satellite to the EchoStar 105/SES-11 satellite in the fourth quarter of 2017 and our agreement for satellite services on certain transponders on the AMC-15 satellite terminated according to its terms in December 2017.

As of December 31, 2018 and 2017, our ESS segment had contracted revenue backlog of approximately $832 million and $1.2 billion, respectively. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue. The decrease is primarily driven by the fixed-term nature of the satellite services agreements with DISH Network and Dish Mexico. Of the total contracted revenue backlog as of December 31, 2018, we expect to recognize approximately $288 million of revenue in 2019.

~~New Business Opportunities~~

Our industry continues to evolve with the increasing worldwide demand for broadband internet access for information, entertainment and commerce. In addition to fiber and wireless systems, other technologies such as geostationary high throughput satellites, ~~low-earth orbit (“LEO”)~~LEO networks, ~~medium-earth orbit (“MEO”)~~MEO systems, balloons and High Altitude Platform Systems are ~~playing~~expected to play significant roles in enabling global broadband access, networks and services. We intend to use our expertise, technologies, capital, investments, global presence, relationships and other capabilities to continue to provide broadband internet systems, equipment, networks and services for information, the internet-of-things, entertainment and commerce in North America and internationally for ~~consumers as well as aeronautical,~~consumer and enterprise ~~and government~~ customers. We are closely tracking the developments in next-generation satellite businesses, and we are seeking to utilize our services, technologies, licenses and expertise to find new commercial opportunities for our business.

We intend to continue to selectively explore opportunities to pursue investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, domestically and internationally, that we believe may allow us to increase our existing market share, increase our satellite capacity, expand into new markets and new customers, broaden our portfolio of services, products and intellectual property, make our business more valuable, align us for future growth and expansion, maximize the return on our investments and strengthen our business and relationships with our customers. We may allocate or dispose of significant resources for long-term value that may not have a short or medium-term or any positive impact on our revenue, results of operations, or cash flow.

Cybersecurity

As a global provider of satellite technologies and services, internet services and communications equipment and networks, we may be prone to more targeted and persistent levels of cyber-attacks than other businesses. These risks may be more prevalent as we continue to expand and grow our business into other areas of the world outside of North America, some of which are still developing their cybersecurity infrastructure maturity. Detecting, deterring, preventing and mitigating incidents caused by hackers and other parties may result in significant costs to us and may expose our customers to financial or other harm that have the potential to significantly increase our liability.

We treat cybersecurity risk seriously and are focused on maintaining the security of our and our partners’ systems, networks, technologies and data. We regularly review and revise our relevant policies and procedures, invest in and maintain internal resources, personnel and systems and review, modify and supplement our defenses through the use of various services, programs and outside vendors. EchoStar also maintains agreements with third party vendors and experts to assist in our remediation and mitigation efforts if we experience or identify a material incident or threat. In addition, senior management and the Audit Committee of EchoStar’s Board of Directors are regularly briefed on cybersecurity matters.

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We are not aware of any cyber-incidents with respect to our owned or leased satellites or other networks, equipment or systems that have had a material adverse effect on our business, costs, operations, prospects, results of operation or financial position during the year ended December 31, ~~2018.~~2019. There can be no assurance, however, that any such incident can be detected or thwarted or will not have such a material adverse effect in the future.

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RESULTS OF OPERATIONS

~~Basis of Presentation~~

~~The following discussion and analysis of our consolidated results of operations is presented on a historical basis.~~

Year Ended December 31, ~~2018~~2019 Compared to the Year Ended December 31, ~~2017~~2018

The following table presents our consolidated results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018:


	For the years ended December 31,						Variance					For the years ended December 31,						Variance
Statements of Operations Data (1)	2018			2017			Amount			%		2019			2018			Amount			%
	(Dollars in thousands)
Revenue:
Services and other revenue - DISH Network	$	366,155		$	433,829		(67,674		)	(15.6	)
Services and other revenue - other	1,526,098			1,203,551			322,547			26.8
Services and other revenue												$	1,623,458		$	1,561,426		$	62,032		4.0
Equipment revenue	205,410			239,489			(34,079		)	(14.2	)	266,703			205,410			61,293			29.8
Total revenue	2,097,663			1,876,869			220,794			11.8		1,890,161			1,766,836			123,325			7.0
Costs and expenses:
Cost of sales - services and other	600,213			559,684			40,529			7.2		555,701			559,838			(4,137		)	(0.7	)
% of total services and other revenue	31.7		%	34.2		%						34.2		%	35.9		%
Cost of sales - equipment	176,600			195,439			(18,839		)	(9.6	)	225,103			176,600			48,503			27.5
% of total equipment revenue	86.0		%	81.6		%						84.4		%	86.0		%
Selling, general and administrative expenses	398,153			337,591			60,562			17.9		467,869			397,994			69,875			17.6
% of total revenue	19.0		%	18.0		%						24.8		%	22.5		%
Research and development expenses	27,570			31,745			(4,175		)	(13.2	)	25,739			27,570			(1,831		)	(6.6	)
% of total revenue	1.3		%	1.7		%						1.4		%	1.6		%
Depreciation and amortization	551,416			496,798			54,618			11.0		464,797			426,852			37,945			8.9
Impairment of long-lived assets	—			6,000			(6,000		)	(100.0	)
Total costs and expenses	1,753,952			1,627,257			126,695			7.8		1,739,209			1,588,854			150,355			9.5
Operating income	343,711			249,612			94,099			37.7
Operating income (loss)												150,952			177,982			(27,030		)	(15.2	)

Other income (expense):
Interest income	59,104			31,952			27,152			85.0		57,730			59,104			(1,374		)	(2.3	)
Interest expense, net of amounts capitalized	(259,721		)	(245,478		)	(14,243		)	5.8		(272,218		)	(231,169		)	(41,049		)	17.8
Gains (losses) on investments, net	187			(1,574		)	1,761			*		(8,464		)	187			(8,651		)	*
Equity in earnings (losses) of unconsolidated affiliates, net												(3,333		)	4,874			(8,207		)	*
Foreign currency transaction gains (losses), net												(9,855		)	(12,484		)	2,629			(21.1	)
Other, net	431			4,839			(4,408		)	(91.1	)	(633		)	8,041			(8,674		)	*
Total other expense, net	(199,999		)	(210,261		)	10,262			(4.9	)
Income before income taxes	143,712			39,351			104,361			*
Total other income (expense), net												(236,773		)	(171,447		)	(65,326		)	38.1
Income (loss) from continuing operations before income taxes												(85,821		)	6,535			(92,356		)	*
Income tax benefit (provision), net	(46,369		)	258,202			(304,571		)	*		(11,595		)	(18,615		)	7,020			(37.7	)
Net income	97,343			297,553			(200,210		)	(67.3	)
Less: Net income attributable to noncontrolling interests	1,842			1,583			259			16.4
Net income attributable to HSS	$	95,501		$	295,970		$	(200,469	)	(67.7	)
Net income (loss) from continuing operations												(97,416		)	(12,080		)	(85,336		)	*
Net income (loss) from discontinued operations												56,539			109,423			(52,884		)	(48.3	)
Net income (loss)												(40,877		)	97,343			(138,220		)	*
Less: Net income (loss) attributable to non-controlling interests												(11,335		)	1,842			(13,177		)	*
Net income (loss) attributable to HSS												$	(29,542	)	$	95,501		$	(125,043	)	*

Other data:
EBITDA (2)	$	893,903		$	748,092		$	145,811		19.5		$	604,799		$	603,610		$	1,189		0.2
Subscribers, end of period	1,361,000			1,208,000			153,000			12.7		1,477,000			1,361,000			116,000			8.5

* Percentage is not ~~meaningful.~~meaningful

~~(1) An explanation of our key metrics is included on pages 34 and 35 under the heading “Explanation of Key Metrics and Other Items.”~~


(1)	An explanation of our key metrics is includedin Explanation of Key Metrics and Other Items.

(2)

A reconciliation of EBITDA to ~~“Net~~Net income” (loss), the most directly comparable ~~generally accepted accounting principles (“~~U.S. ~~GAAP)~~GAAP measure in ~~the accompanying financial statements,~~our Accompanying Consolidated Financial Statements, is included ~~on page 32.~~ in Results of Operations.For further information on our use of EBITDA, see ~~“Explanation~~Explanation of Key Metrics and Other ~~Items” on page 35.~~Items.

~~Services and other revenue - DISH Network. Services and other revenue — DISH Network totaled $366 million for the year ended December 31, 2018, a decrease of $68 million, or 15.6%, compared to the same period in 2017.~~

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Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued

~~Services and other revenue — DISH Network from~~

The following discussion relates to our ~~Hughes segment~~continuing operations for the ~~year~~years ended December 31, 2019 and 2018 ~~decreased by $33 million, or 39.5%, to $50 million compared to the same period in 2017. The decrease was primarily attributable to a continued decrease in residential wholesale broadband services.~~

~~Services and other revenue — DISH Network~~ from our ESS segment for the year ended December 31, 2018 decreased by $35 million, or 10.2%, to $310 million compared to the same period in 2017. The decrease was primarily attributable to the revenue reduction of (i) $21 million resulting from the expiration of DISH Network’s agreement to lease satellite capacity from us on the EchoStar VII satellite at the end of June 2018, (ii) $7 million resulting from DISH Network’s termination of its agreement to lease satellite capacity from us on the EchoStar XII satellite at the end of September 2017,(iii) $4 million as a result of the satellite anomaly experienced by the EchoStar X satellite in December 2017 which reduced the satellite capacity leased to DISH Network and (iv) $3 million as a result of a decrease in satellite capacity leased to DISH Network on the EchoStar IX satellite.unless otherwise stated.

Services and other revenue ~~— other~~. Services and other revenue ~~— other~~ totaled ~~$1.5~~$1.6 billion for the year ended December 31, ~~2018,~~2019, an increase of ~~$323~~$62.0 million, or ~~26.8%~~4.0%, compared to ~~the same period in 2017.~~2018.

Services and other revenue — other from our Hughes segment for the year ended December 31, 2018 increased by $305 million, or 26.4%, to $1.5 billion compared to the same period in 2017. The increase was primarily attributable to increases in sales of broadband services to our consumer and enterprise customers of $271 million and $28 million, respectively.

Services and other revenue — other from our ESS segment for the year ended December 31, 2018 increased by $1 million, or 1.8%, to $48 million compared to the same period in 2017. The increase was due to a net increase in transponder services provided.


•	Services and other revenue from our Hughes segment for the year ended December 31, 2019 increased by $74.9 million, or 5.0%, to $1.6 billion compared to 2018. The increase was primarily attributable to increases in sales of broadband services to our consumer customers of $102.0 million, primarily offset by a decrease in sales of services to our enterprise customers of $30.7 million.

Services and other revenue — other from our Corporate and other segment for the year ended December 31, 2018 increased by $17 million compared to the same period in 2017. The increase was primarily due to the services and lease equipment we provide to support EchoStar Mobile Limited, a subsidiary of EchoStar that provides mobile satellite services and complementary ground component services covering the entire European Union using S-band spectrum.


•	Services and other revenue from our ESS segment for the year ended December 31, 2019 decreased by $11.0 million, or 40.3%, to $16.3 million compared to 2018. The decrease was due to a decrease of $9.2 million in transponder services provided to third parties and a decrease of $1.6 million in satellite capacity leased to DISH Network on the EchoStar IX satellite.

Equipment ~~revenue~~revenue. Equipment revenue totaled ~~$205~~$266.7 million for the year ended December 31, ~~2018, a decrease~~2019, an increase of ~~$34~~$61.3 million, or ~~14.2%~~29.8%, compared to ~~the same period in 2017.~~2018. The ~~decrease~~increase was primarily attributable to our Hughes segment due to ~~a decrease~~increases in hardware sales ~~in our Hughes segment~~ of ~~$23~~$45.9 million to our ~~domestic~~ enterprise customers $8and $15.5 million to our mobile satellite systems ~~customers and $6 million to our consumer customers. The decrease was partially offset by an increase in hardware sales in our Hughes segment of $3 million to our international enterprise~~ customers.

Cost of sales — services and other. Cost of sales — services and other totaled ~~$600~~$555.7 million for the year ended December 31, ~~2018, an increase~~2019, a decrease of ~~$41~~$4.1 million, or ~~7.2%~~0.7%, compared to ~~the same period in 2017.~~

Cost of sales — services and other from our Hughes segment for the year ended December 31, 2018 increased by $60 million, or 12.0%, to $555 million compared to the same period in 2017. The increase was primarily attributable to an increase in the costs of broadband services provided to our consumer and enterprise customers.

~~Cost of sales — services and other~~ ~~from our ESS segment for the year ended December 31, 2018 decreased by $20 million, or 31.7%, to $44 million compared to the same period in 2017.~~2018. The decrease was primarily attributable to ~~the termination~~our Hughes segment due to lower costs of services provided to our ~~agreement for satellite capacity on the AMC-15 satellite~~enterprise customers, partially offset by an increase in ~~December 2017.~~costs of services to our consumer customers.

Cost of sales — equipment. Cost of sales — equipment totaled ~~$177~~$225.1 million for the year ended December 31, ~~2018, a decrease~~2019, an increase of ~~$19~~$48.5 million, or ~~9.6%~~27.5%, compared to ~~the same period in 2017.~~2018. The ~~decrease~~increase was primarily attributable to ~~a decrease in hardware sales in~~ our Hughes segment ~~provided~~due to ~~our consumer customers, domestic enterprise customers and mobile satellite systems customers, partially offset by~~ an increase in hardware sales to our enterprise customers and our mobile satellite systems customers.

Selling, general and administrative expenses. Selling, general and administrative expenses totaled $467.9 million for the year ended December 31, 2019, an increase of $69.9 million, or 17.6%, compared to 2018. The increase was primarily attributable to increases in (i) expense of $32.5 million related to certain legal proceedings, (ii) marketing and promotional expenses of $22.5 million from our Hughes segment mainly associated with our consumer business, (iii) bad debt expense of $5.0 million and (iv) other general and administrative expenses of $9.9 million.

Depreciation and amortization. Depreciation and amortization expenses totaled $464.8 million for the year ended December 31, 2019, an increase of $37.9 million, or 8.9%, compared to 2018. The increase was due to our ~~international enterprise customers.~~Hughes segment and due to increases in depreciation expense of (i) $20.2 million relating to our customer premises equipment, (ii) $10.4 million relating to machinery and equipment, (iii) $4.8 million relating the Telesat T19V satellite that was placed into service in the fourth quarter of 2018, (iv) $3.1 million relating to the decrease in depreciable life of the SPACEWAY 3 satellite and (v) $2.0 million relating to the depreciation of the assets acquired from Yahsat in Brazil.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized totaled $272.2 million for the year ended December 31, 2019, an increase of $41.0 million, or 17.8%, compared to 2018. The increase was primarily due to an increase of $76.3 million in interest expense associated with certain legal proceedings and a net decrease of $5.1 million in capitalized interest relating to the Telesat T19V satellite that was placed into service in the fourth quarter of 2018. The increase was partially offset by a decrease of $39.1 million in interest expense and the amortization of deferred financing cost as a result of the repurchase and maturity of our 6 1/2% Senior Secured Notes due 2019.

Gains (losses) on investments, net. Gains (losses) on investments, net totaled $8.5 million in losses for the year ended December 31, 2019 compared to $0.2 million in gains in 2018. The change was due to losses on a certain investment in 2019.

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Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued

~~Selling, general and administrative expenses~~Equity in earnings (losses) of unconsolidated affiliates, net.~~. Selling, general and administrative expenses~~ Equity in earnings (losses) of unconsolidated affiliates, net totaled ~~$398~~$3.3 million in loss for the year ended December 31, ~~2018, an increase of $61 million, or 17.9%,~~2019, compared to the same period in 2017. Selling expenses increased $37 million primarily attributable to the amortization of contract acquisition and fulfillment costs from our Hughes segment and an increase in marketing and promotional costs from our Hughes segment mainly associated with our consumer business. General and administration expenses increased $24 million primarily attributable to increases in bad debt expense, costs associated with beginning operations in certain Central and South American countries and other administrative costs from our Hughes segment.

~~Depreciation and amortization.~~ Depreciation and amortization expenses totaled $551 million for the year ended December 31, 2018, an increase of $55 million, or 11.0%, compared to the same period in 2017. The increase was primarily due to an increase in depreciation expense of: (i) $28 million relating to our customer rental equipment, (ii) $17 million relating to the EchoStar XIX and EchoStar 105/SES-11 satellites that were placed into service in the first and fourth quarters of 2017, respectively and the Telesat T19V satellite that was placed into service in the fourth quarter of 2018, (iii) $9 million relating to the decrease in depreciable life of the SPACEWAY 3 satellite (iv) $12 million relating to machinery and equipment and (v) an increase of $3$4.9 million in amortization expense relating to the development of externally marketed software. The increases were partially offset by a decrease of $8 million in amortization expense from certain fully amortized other intangible assets in our Hughes segment

~~Impairment of long-lived assets. Impairment of long-lived assets totaled nil~~earnings for the year ended December 31, 2018, a decrease of $6$8.2 million, compared to ~~the same period in 2017. The decrease~~2018, which was ~~attributable~~related to an ~~impairment~~increase in loss ~~of $6 million relating to our regulatory authorizations with indefinite lives~~ from our ~~ESS segment~~equity method investments. Additionally, in ~~2017.~~the fourth quarter of 2019, we changed our accounting policy to record our share of net earnings or losses of investees on a three-month lag.

~~Interest income~~Foreign currency transaction gains (losses), net. ~~. Interest income~~ Foreign currency transaction gains (losses), nettotaled ~~$59~~$9.9 million in losses for the year ended December 31, ~~2018, an increase~~2019, a decrease in losses of ~~$27~~$2.6 million, or ~~85%~~21.1%, compared to 2018. The decrease in losses was due to the ~~same period~~net strengthening of the U.S. dollar against certain foreign currencies in ~~2017. The increase was primarily attributable to an increase in yield percentage in 2018~~2019 compared to ~~2017.~~

~~Interest expense, net of amounts capitalized~~. Interest expense, net of amounts capitalized totaled $260 million for the year ended December 31, 2018, an increase of $14 million, or 5.8%, compared to the same period in 2017. The increase was primarily due to a decrease of $17 million in capitalized interest relating to the EchoStar XIX, EchoStar XXI and EchoStar 105/SES-11 satellites that were placed into service in the first and fourth quarters of 2017, respectively. The increase was partially offset by a decrease of $3 million in interest expense relating to lower principal balances on certain capital lease obligations.

~~Gains (losses) on investments, net.~~ Gains (losses) and impairment on marketable investment securities, net totaled nil for the year ended December 31, 2018 compared to $2 million in gains for the same period in 2017. The change was primarily due to an other-than-temporary impairment loss of $3 million on one of our available-for-sale securities in 2017 and a $2 million gain on our trading securities in 2017.2018.

Other, net. Other, net totaled ~~$0.4~~$0.6 million in loss for the year ended December 31, 2019 compared to $8.0 million in income for the year ended December 31, ~~2018, a decrease of $4 million, or 91.1%, compared to the same period in 2017.~~2018. The decrease in income was ~~primarily related~~due to ~~an unfavorable foreign exchange impact of $11 million and $2 million decrease in equity in earnings of our unconsolidated affiliates. The decreases were partially offset by~~ a net gain of ~~$10~~$9.6 million due to the one-time settlement of certain amounts due to and from a third party vendor in ~~the second quarter of~~ 2018.

Income tax benefit (provision), net. Income tax ~~provision~~benefit (provision), net was ~~$46~~$11.6 million in provision for the year ended December 31, ~~2018,~~2019, an increase of ~~$305~~$7.0 million or 37.7%, compared to ~~the same period in 2017.~~2018. Our effective income tax rate was ~~32.3%~~(13.5)% for the year ended December 31, ~~2018,~~2019, compared to ~~(656.2)%~~284.7% for the same period in ~~2017.~~2018. The variations in our effective tax rate from the U.S. federal statutory rate for the year ended December 31, 2019 were primarily due to the change in net unrealized losses that are capital in nature, various permanent tax differences, the impact of state and local taxes, and increase in our valuation allowance associated with certain foreign losses. For the year ended December 31, 2018, the variations in our effective tax rate from the U.S. federal statutory rate were primarily due to various permanent tax differences, the impact of state and local taxes, increase in our valuation allowance associated with certain foreign losses, and the change in our valuation allowance associated with net unrealized losses that are capital in nature. ~~For~~

Net income (loss) attributable to HSS. Net income (loss) attributable to HSS was a net loss of $29.5 million for the year ended December 31, ~~2017, the variations in our effective tax rate from the U.S. federal statutory rate were primarily due~~2019, compared to ~~the Tax Cuts and Jobs Act~~net income of ~~2017, recognition of a one-time tax benefit~~$95.5 million for the ~~revaluation~~year ended December 31, 2018, a decrease of ~~our deferred tax assets and liabilities due~~$125.0 million, compared to ~~a change~~2018, as set forth in ~~our state effective tax rate as a result of~~ the ~~Share Exchange. The tax benefit recognized from the change in our effective tax rate was partially offset by the increase in our valuation allowance associated with certain state and foreign losses.~~following table:



	Amounts

Net income (loss) attributable to HSS for the year ended December 31, 2018	$	95,501
Decrease (increase) in net income attributable to non-controlling interests	13,177
Decrease (increase) in income tax provision, net	7,020
Decrease (increase) in foreign currency transaction losses, net	2,629
Increase (decrease) in interest income	(1,374		)
Increase (decrease) in equity in earnings of unconsolidated affiliates, net	(8,207		)
Increase (decrease) in gains on investments, net	(8,651		)
Increase (decrease) in other, net	(8,674		)
Increase (decrease) in operating income, including depreciation and amortization	(27,030		)
Decrease (increase) in interest expense, net of amounts capitalized	(41,049		)
Increase (decrease) in net income from discontinued operations	(52,884		)
Net income (loss) attributable to HSS for the year ended December 31, 2019	$	(29,542	)

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Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued

~~Net income attributable to HSS. Net income attributable to HSS was $96 million for the year ended December 31, 2018, a decrease of $200 million compared to the same period in 2017 as set forth in the following table.~~

Amounts
(In thousands)
Net income attributable to HSS for the year ended December 31, 2017 $ 295,970
Increase in tax provision (304,571 )
Increase in interest expense (14,243 )
Increase in other net (4,408 )
Increase in operating income, including depreciation and amortization 94,099
Increase in interest income 27,152
Decrease in losses on investments, net 1,761
Increase in net income attributable to noncontrolling interests (259 )
Net income attributable to HSS for the year ended December 31, 2018 $ 95,501

EBITDA. EBITDA is a non-GAAP financial measure and is described under Explanation of Key Metrics and Other Items below. The following table reconciles EBITDA to Net income (loss), the most directly comparable U.S. GAAP measure in ~~the accompanying financial statements.~~our Accompanying Consolidated Financial Statements:

For the years ended December 31, Variance
2018 2017 Amount %
(Dollars in thousands)
Net income $ 97,343
$ 297,553
$ (200,210 ) (67.3 )

Interest income and expense, net 200,617
213,526
(12,909 ) (6.0 )
Income tax (benefit) provision 46,369
(258,202 ) 304,571
*
Depreciation and amortization 551,416
496,798
54,618
11.0
Net income attributable to noncontrolling interests (1,842 ) (1,583 ) (259 ) 16.4
EBITDA $ 893,903
$ 748,092
$ 145,811
19.5



	For the years ended December 31,						Variance
	2019			2018			Amount			%

Net income (loss)	$	(40,877	)	$	97,343		$	(138,220	)	*
Interest income	(57,730		)	(59,104		)	1,374			(2.3	)
Interest expense, net of amounts capitalized	272,218			231,169			41,049			17.8
Income tax provision (benefit), net	11,595			18,615			(7,020		)	(37.7	)
Depreciation and amortization	464,797			426,852			37,945			8.9
Net (income) loss from discontinued operations	(56,539		)	(109,423		)	52,884			(48.3	)
Net (income) loss attributable to non-controlling interests	11,335			(1,842		)	13,177			*
EBITDA	$	604,799		$	603,610		$	1,189		0.2

EBITDA was ~~$894~~$604.8 million for the year ended December 31, ~~2018,~~2019, an increase of ~~$146~~$1.2 million, or ~~19.5%~~0.2%, compared to 2018, as set forth in the ~~same period in 2017. The increase was primarily due to an increase in operating income, excluding depreciation and amortization, of $149 million.~~

~~Segment Operating Results and Capital Expenditures~~following table:

Hughes ESS Corporate and Other Consolidated Total
(In thousands)
For the year ended December 31, 2018
Total revenue $ 1,716,528
$ 358,058
$ 23,077
$ 2,097,663
Capital expenditures $ 390,108
$ (76,582 ) $ 15
$ 313,541
EBITDA $ 601,319
$ 308,058
$ (15,474 ) $ 893,903

For the year ended December 31, 2017
Total revenue $ 1,477,918
$ 392,244
$ 6,707
$ 1,876,869
Capital expenditures $ 376,502
$ 20,725
$ —
$ 397,227
EBITDA $ 475,222
$ 315,285
$ (42,415 ) $ 748,092



	Amounts

EBITDA for the year ended December 31, 2018	$	603,610
Increase (decrease) in depreciation and amortization	37,945
Decrease (increase) in net income attributable to non-controlling interests	13,177
Decrease (increase) in foreign currency transaction losses, net	2,629
Increase (decrease) in equity in earnings of unconsolidated affiliates, net	(8,207		)
Increase (decrease) in gains on investments, net	(8,651		)
Increase (decrease) in other, net	(8,674		)
Increase (decrease) in operating income, including depreciation and amortization	(27,030		)
EBITDA for the year ended December 31, 2019	$	604,799

Table of Contents

Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued

Segment Operating Results and Capital Expenditures

~~Hughes Segment~~

For the years
ended December 31,
Variance
2018 2017 Amount %
(Dollars in thousands)
Total revenue $ 1,716,528
$ 1,477,918
$ 238,610
16.1
Capital expenditures $ 390,108
$ 376,502
$ 13,606
3.6
EBITDA $ 601,319
$ 475,222
$ 126,097
26.5

~~Total revenue~~The following tables present our operating results, capital expenditures and EBITDA by segment for the year ended December 31, ~~2018 increased by $239 million, or 16.1%,~~2019 compared to the ~~same period in 2017. The increase was primarily due~~year ended December 31, 2018. Capital expenditures are net of refunds and other receipts related to ~~an increase in sales of broadband services to our consumer~~property and enterprise customers of $271 million and $28 million, respectively, and an increase in hardware sales of $3 million to our international enterprise customers. The increase was partially offset by (i) a decrease of $33 million in residential wholesale broadband services and a decrease in hardware sales of (ii) $23 million to our domestic enterprise customers, (iii) $8 million to our mobile satellite systems customers and (iv) $6 million to our consumer customers.equipment.



	Hughes		ESS			Corporate and Other			Consolidated Total

For the year ended December 31, 2019
Total revenue	$	1,852,742	$	16,257		$	21,162		$	1,890,161
Capital expenditures	308,781		—			—			308,781
EBITDA	625,660		6,994			(27,855		)	604,799

For the year ended December 31, 2018
Total revenue	$	1,716,528	$	27,231		$	23,077		$	1,766,836
Capital expenditures	390,108		(76,757		)	15			313,366
EBITDA	601,319		17,764			(15,473		)	603,610

~~Capital expenditures~~Hughes Segment



	For the years ended December 31,				Variance
	2019		2018		Amount			%

Total revenue	$	1,852,742	$	1,716,528	$	136,214		7.9
Capital expenditures	308,781		390,108		(81,327		)	(20.8	)
EBITDA	625,660		601,319		24,341			4.0

Total revenue was $1.9 billion for the year ended December 31, ~~2018 increased by $14~~2019, an increase of $136.2 million, or ~~3.6%~~7.9%, compared to the same period in 2017, primarily due to increases in capital expenditures relating to our Telesat T19V satellite and our enterprise business of $31 million. The increases were partially offset by a decrease of $17 million in capital expenditures mainly associated with satellite ground facilities.

~~EBITDA for the year ended December 31, 2018 increased by $126 million, or 26.5%, compared to the same period in 2017.~~2018. The increase was primarily due to an increase of ~~$196~~$102.0 million in ~~gross margin~~sales of broadband services to our consumer customers and ~~an other-than-temporary impairment loss~~net increases in hardware sales of $3$45.9 million ~~on one of~~to our ~~available-for-sale securities in the first quarter of 2017.~~enterprise customers and $15.5 million to our mobile satellite systems customers. The increase was partially offset by ~~(i) an increase~~a decrease of ~~$66~~$30.7 million in ~~selling, general and administrative expenses due~~sales of services to ~~bad debt expense, the amortization of contract acquisition and fulfillment costs and an increase in marketing and promotional costs mainly associated with~~ our ~~consumer business and (ii) an unfavorable foreign exchange impact of $11 million in 2018 compared to the same period in 2017.~~

~~ESS Segment~~

For the years
ended December 31, Variance
2018 2017 Amount %
(Dollars in thousands)
Total revenue $ 358,058
$ 392,244
$ (34,186 ) (8.7 )
Capital expenditures $ (76,582 ) $ 20,725
$ (97,307 ) *
EBITDA $ 308,058
$ 315,285
$ (7,227 ) (2.3 )

enterprise customers. * Percentage is not meaningful.

~~Total revenue~~Capital expenditures were $308.8 million for the year ended December 31, ~~2018 decreased by $34~~2019, a decrease of $81.3 million, or ~~8.7%~~20.8%, compared to 2018, primarily due to net decreases in capital expenditures associated with the ~~same period~~construction and infrastructure of our satellites and in 2017. The decrease was primarily attributable to revenue reduction of (i) $21 million resulting from the expiration of DISH Network’s agreement to lease satellite capacity from us on the EchoStar VII satellite at the end of June 2018, (ii) $7 million resulting from DISH Network’s termination of its agreement to lease satellite capacity from us on the EchoStar XII satellite at the end of September 2017, (iii) $4 million as a result of the satellite anomaly experienced by the EchoStar X satellite in December 2017 which reduced the satellite capacity leased to DISH Networkour consumer and ~~(iv) $3 million as a result of a decrease in satellite capacity leased to DISH Network on the EchoStar IX satellite.~~enterprise businesses.

Capital expenditures for the year ended December 31, 2018 decreased by $97 million, compared to the same period in 2017, primarily reflect a reimbursement of $77 million and a decrease in satellite expenditure as a result of the EchoStar 105/SES-11 satellite that was placed into service in the fourth quarter of 2017.

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Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued

EBITDA was $625.7 million for the year ended December 31, ~~2018 decreased by $7~~2019, an increase of $24.3 million, or ~~2.3%~~4.0%, compared to 2018, as set forth in the ~~same period in 2017.~~following table:



	Amounts

EBITDA for the year ended December 31, 2018	$	601,319
Increase (decrease) in depreciation and amortization	40,050
Decrease (increase) in net income attributable to non-controlling interests	13,177
Decrease (increase) in foreign currency transaction losses, net	2,613
Increase (decrease) in other, net	(197		)
Increase (decrease) in equity in earnings of unconsolidated affiliates, net	(5,477		)
Increase (decrease) in gains on investments, net	(8,890		)
Increase (decrease) in operating income, including depreciation and amortization	(16,935		)
EBITDA for the year ended December 31, 2019	$	625,660

ESS Segment



	For the years ended December 31,					Variance
	2019		2018			Amount			%

Total revenue	$	16,257	$	27,231		$	(10,974	)	(40.3	)
Capital expenditures	—		(76,757		)	76,757			(100.0	)
EBITDA	6,994		17,764			(10,770		)	(60.6	)

Total revenue was $16.3 million for the year ended December 31, 2019, a decrease of $11.0 million, or 40.3%, compared to 2018. The decrease was attributable to a net decrease of $9.2 million in transponder services provided to third parties and a decrease of $1.6 million in satellite capacity leased to DISH Network on the EchoStar IX satellite.

There were no capital expenditures for the year ended December 31, 2019, as there were no new satellites under construction in our ESS segment during the year. The negative capital expenditure in 2018 for $76.8 million is primarily driven by a reimbursement of $77.5 million related to the EchoStar 105/SES-11 satellite received in the first quarter of 2018.

EBITDA was $7.0 million for the year ended December 31, 2019, a decrease of $10.8 million, or 60.6%, compared to 2018, primarily due to the decrease in overall ESS segment total revenue of $34 million in 2018 compared to the same period in 2017. The decrease was partially offset by a decrease in satellite services costs of $19 million mainly associated with the termination of our agreement for satellite capacity on the AMC-15 satellite in December 2017 and an impairment loss of $6 million relating to our regulatory authorizations with indefinite lives in 2017.revenue.

Corporate and Other


	For the years ended December 31,						Variance				For the years ended December 31,						Variance
	2018			2017			Amount		%		2019			2018			Amount			%
	(Dollars in thousands)
Total revenue	$	23,077		$	6,707		$	16,370	*		$	21,162		$	23,077		$	(1,915	)	(8.3	)
Capital expenditures	$	15		$	—		$	15	*		—			15			(15		)	(100.0	)
EBITDA	$	(15,474	)	$	(42,415	)	$	26,941	(63.5	)	(27,855		)	(15,473		)	(12,382		)	80.0

* Percentage is not meaningful.

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Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued

EBITDA was a loss of $27.9 million for the year ended December 31, ~~2018 was a loss of $15 million, an increase of $27 million, or 63.5%, compared to a loss of $42 million during same period in 2017. The change in EBITDA was primarily due to~~2019, an increase in ~~operating income, excluding depreciation and amortization,~~loss of ~~$21~~$12.4 million, ~~and a net gain of $10 million due~~or 80.0% compared to ~~the settlement of certain amounts due to and from a third party vendor~~2018, as set forth in the ~~second quarter of 2018.~~following table:



	Amounts

EBITDA for the year ended December 31, 2018	$	(15,473	)
Increase (decrease) in operating income, including depreciation and amortization	912
Increase (decrease) in gains on investments, net	239
Decrease (increase) in foreign currency transaction losses, net	16
Increase (decrease) in depreciation and amortization	(2,340		)
Increase (decrease) in equity in earnings of unconsolidated affiliates, net	(2,730		)
Increase (decrease) in other, net	(8,480		)
EBITDA for the year ended December 31, 2019	$	(27,856	)

EXPLANATION OF KEY METRICS AND OTHER ITEMS

Services and other revenue ~~- DISH Network~~. Services and other revenue - DISH Network primarily includes revenue associated with satellite and transponder leases and services, TT&C, professional services, facilities rental revenue and other services provided to DISH Network. “Services and other revenue — DISH Network” also includes subscriber wholesale service fees for the HughesNet satellite internet service (the “HughesNet service”) sold to DISH Network.

~~Services and other revenue - other. Services and other revenue - other~~ primarily includes the sales of ~~enterprise~~consumer and ~~consumer~~enterprise broadband services, ~~as well as~~ maintenance and other contracted ~~services. “Services and other revenue~~— ~~other” also includes~~services, revenue associated with satellite and transponder leases and services, satellite uplinking/downlinking, subscriber wholesale service fees for the HughesNet service professional services and ~~other services provided to customers other than DISH Network.~~facilities rental revenue.

Equipment revenue. Equipment revenue primarily includes broadband equipment and networks sold to customers in our consumer and enterprise ~~and consumer markets and sales of satellite broadband equipment and related equipment, related to the HughesNet service, to DISH Network.~~markets.

Cost of sales - services and other. Cost of sales - services and other primarily includes the cost of broadband services provided to our consumer and enterprise ~~and consumer~~ customers, ~~and to DISH Network, as well as the cost of providing~~ maintenance and other contracted ~~services. “Cost of sales —~~ services, ~~and other” also includes the~~ costs associated with satellite and transponder leases and services, ~~TT&C,~~ professional services and facilities ~~rental costs, and other services provided to our customers, including DISH Network.~~rental.

Cost of sales - equipment. Cost of sales - equipment consists primarily of the cost of broadband equipment and networks sold to customers in our consumer and enterprise ~~and consumer markets and to DISH Network. Cost of sales - equipment~~markets. It also includes certain other costs associated with the deployment of equipment to our customers.

Selling, general and administrative ~~expenses~~expenses. . Selling, general and administrative expenses primarily includes selling and marketing costs and employee-related costs associated with administrative services (e.g., information systems, human resources and other services), including stock-based compensation expense. It also includes professional fees (e.g. legal, information systems and accounting services) and other ~~items~~expenses associated with facilities and administrative ~~services provided by EchoStar, DISH Network and other third parties.~~services.

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~~Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued~~

Research and development expenses. Research and development expenses primarily includes costs associated with the design and development of products to support future growth and provide new technology and innovation to our customers.

Impairment of long-lived assets. Impairment of long-lived assets includes our impairment losses related to our property and equipment, goodwill, regulatory authorizations and other intangible assets.

Interest income. Interest income primarily includes interest earned on our cash, cash equivalents and marketable investment securities, and other investments including premium amortization and discount accretion on debt securities.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized primarily includes interest expense associated with our debt and ~~capital~~finance lease obligations (net of capitalized interest), ~~and~~ amortization of debt issuance ~~costs.~~costs and interest expense related to certain legal proceedings.

Gains (losses) on investments, net. Gains (losses) on investments, net primarily includes changes in fair value of our marketable equity securities and other investments for which we have elected the fair value option. It may also

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Item 7. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - Continued

include realized gains and losses on the sale or exchange of our available-for-sale debt securities, other-than-temporary impairment losses on our available-for-sale securities, realized gains and losses on the sale or exchange of ~~our investments in unconsolidated entities~~equity securities and debt securities without readily determinable fair value and adjustments to the carrying amount of investments in unconsolidated ~~entities~~affiliates and marketable equity securities resulting from impairments and observable price changes.

Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net includes earnings or losses from our investments accounted for using the equity method.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net include gains and losses resulting from the re-measurement of transactions denominated in foreign currencies.

Other, net. Other, net primarily includes ~~foreign exchange gains and losses,~~ dividends received from our marketable investment securities ~~equity in earnings of unconsolidated affiliate,~~ and other non-operating income orand expense items that are not appropriately classified elsewhere in ~~our~~the Consolidated Statements of Operations ~~and Comprehensive Income (Loss).~~in our Accompanying Consolidated Financial Statements.

Net income (loss) from discontinued operations. Net income (loss) from discontinued operations includes the financial results of the BSS Business transferred in the BSS Transaction, except for certain real estate that transferred in the transaction.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”).EBITDA is defined as Net ~~income”~~income (loss) excluding ~~“Interest~~Interest income and expense, net, Income tax benefit (provision), net, ~~and~~ Depreciation and ~~amortization.~~amortization, Net income (loss) from discontinued operations and Net income (loss) attributable to non-controlling interests. EBITDA is not a measure determined in accordance with U.S. GAAP. This non-GAAP measure is reconciled to ~~“Net income”~~Net income (loss) in our discussion of Results of Operations above. EBITDA should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with U.S. GAAP. EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes EBITDA provides meaningful supplemental information regarding the underlying operating performance of our business and is appropriate to enhance an overall understanding of our financial performance. Management also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate the performance of companies in our industry.

~~Subscribers~~Subscribers. . Subscribers include customers that subscribe to our HughesNet service, through retail, wholesale and small/medium enterprise service channels.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks Associated with Financial Instruments and Foreign Currency

Our investments and debt are exposed to market risks, discussed below.

Cash, Cash Equivalents and Current Marketable Investment Securities

As of December 31, ~~2018,~~2019, our cash, cash equivalents and current marketable investment securities had a fair value of ~~$2.5~~$1.8 billion. Of this amount, a total of ~~$2.5~~$1.8 billion was invested in: (a) cash; (b) commercial paper and corporate notes with an overall average maturity of less than one year and rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations; (c) debt instruments of the United States (“U.S.”) government and its agencies; and/or (d) instruments with similar risk, duration and credit quality characteristics to the commercial paper and corporate obligations described above. The primary purpose of these investing activities has been to preserve principal until the cash is required to, among other things, fund operations, make strategic investments and expand the business. Consequently, the size of this portfolio fluctuates significantly as cash is received and used in our business. The value of this portfolio may be negatively impacted by credit losses; however, this risk is mitigated through diversification that limits our exposure to any one issuer.

Interest Rate Risk

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A change in interest rates would not affect the fair value of our cash, or materially affect the fair value of our cash equivalents due to their maturities of less than 90 days. A change in interest rates would affect the fair value of our current marketable debt securities portfolio; however, we normally hold these investments to maturity. Based on our cash, cash equivalents and current marketable debt securities investment portfolio of ~~$2.5~~$1.8 billion as of December 31, ~~2018,~~2019, a hypothetical 10% change in average interest rates during ~~2018~~2019 would not have had a material impact on the fair value of our cash, cash equivalents and debt securities portfolio due to the limited duration of our investments.

Our cash, cash equivalents and current marketable debt securities had an average annual rate of return for the year ended December 31, ~~2018~~2019 of ~~2.4%~~2.67%. A change in interest rates would affect our future annual interest income from this portfolio, since funds would be re-invested at different rates as the instruments mature. A hypothetical 10% decrease in average interest rates during ~~2018~~2019 would have resulted in a decrease of ~~approximately $6~~$5.5 million in annual interest income.

Other Investments ~~in Unconsolidated Entities~~

As of December 31, ~~2018,~~2019, we had $7.4 million of other equity investments ~~with an aggregate carrying amount of $126 million in securities~~and other debt investments of privately held companies that we hold for strategic business purposes. The fair value of these investments is not readily determinable. We periodically review these investments and we may ~~estimate fair value and~~ adjust the carrying amount to their estimated fair value when there are indications of impairment, or observable prices changes for the investments or observable transactions of the same investments. A hypothetical adverse change equal to 10% of the carrying amount of these equity instruments during ~~2018~~2019 would have resulted in a decrease of ~~approximately $12.6~~$0.7 million in the value of these investments.

Our ability to realize value from our strategic investments in companies that are privately held depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we ~~desire to~~ sell them, we will not be able to ~~obtain fair value for them.~~recover our investment.

Foreign Currency Exchange Risk

We generally conduct our business in U.S. dollars. Our international business is conducted in a variety of foreign currencies with our largest exposures being to the Brazilian real, the Indian rupee, European euro and the British pound. This exposes us to fluctuations in foreign currency exchange rates. Transactions in foreign currencies are converted into U.S. dollars using exchange rates in effect on the dates of the transactions.

Our objective in managing our exposure to foreign currency changes is to reduce earnings and cash flow volatility associated with foreign currency exchange rate ~~fluctuations.~~fluctuations, primarily resulting from loans to foreign subsidiaries in U.S. dollars. Accordingly, we may enter into foreign currency forward contracts,

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or take other measures, to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions. As of December 31, ~~2018,~~2019, we had ~~$32 million of net foreign currency denominated receivables and payables outstanding and~~ foreign currency forward contracts with a notional value of $7$12.1 million in place to partially mitigate foreign currency exchange risk. The estimated fair values of the foreign ~~exchange~~currency contracts were not material as of December 31, ~~2018.~~2019. The impact of a hypothetical 10% adverse change in exchange rates on the carrying amount of the net assets and liabilities of our foreign subsidiaries during ~~2018~~2019 would have been an estimated loss to the cumulative translation adjustment of ~~$18~~$44.8 million as of December 31, ~~2018.~~2019.

Derivative Financial Instruments

We generally do not use derivative financial instruments for speculative purposes and we generally do not apply hedge accounting treatment to our derivative financial instruments. We evaluate our derivative financial instruments from time to time but there can be no assurance that we will not enter into additional foreign currency forward contracts, or take other measures, in the future to mitigate our foreign currency exchange risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our ~~accompanying~~Accompanying Consolidated Financial Statements are included in Item 15 of this ~~Annual Report on~~ Form ~~10-K beginning on page~~ ~~F-3~~.10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this ~~Annual Report on~~ Form ~~10-K (“Form 10-K).~~10-K. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K such that the information required to be disclosed in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In November 2019, we consummated our joint venture with Yahsat in Brazil. As a result of the transaction, we are reviewing the internal controls of the business we acquired from Yahsat in the transaction and we may make appropriate changes as deemed necessary.

Changes in Internal Control Over Financial Reporting

~~There~~Except as noted above, there has been no change in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during the three months ended December 31, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We continue to review our internal control over financial reporting, and may from time to time make changes aimed at enhancing its effectiveness and to ensure that our systems evolve with our business.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States.

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Our internal control over financial reporting includes those policies and procedures that:


(i)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;


(ii)	provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles in the United States, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and


(iii)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, ~~2018.~~2019. Management’s assessment of our internal control over financial reporting did not include the internal controls of the business we acquired from Yahsat in Brazil in November 2019. The amount of total assets and revenue acquired that is included in our Accompanying

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Consolidated Financial Statements as of and for the year ended December 31, 2019 was $108.6 million and $0.8 million, respectively.

ITEM 9B. OTHER INFORMATION

Financial Results

On February ~~21, 2019,~~20, 2020, EchoStar issued a press release (the “Press Release”) announcing its financial results for the quarter and year ended December 31, ~~2018.~~2019 and a supplemental investor information presentation (the “Presentation”) providing unaudited pro forma financial information. A copy of the Press Release isand Presentation are furnished herewith as Exhibit ~~99.1.~~

99.1 and Exhibit 99.2, respectively. The foregoing information, including the exhibit related thereto, is furnished in response to Item 2.02 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise, and shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.

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PART III

~~Item~~ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Appointment of Independent Registered Public Accounting Firm

Appointment of Independent Registered Public Accounting Firm for ~~2019~~2020. KPMG LLP served as our independent registered public accounting firm for the fiscal year ended December 31, ~~2018. EchoStar Corporation’s (“EchoStar”)~~2019. EchoStar’s board of directors, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if ~~EchoStar’s board of directors believes~~it determines that such a change would be in our best interests.

Fees Paid to KPMG LLP

The following table presents fees for professional services rendered by KPMG LLP on behalf of the Company for the years ended December 31, ~~2018~~2019 and ~~2017.~~2018:


	For the Years Ended December 31,				For the Years Ended December 31,
	2018		2017		2019		2018
	(Dollars in thousands)
Audit fees (1)	$	1,828,355	$	1,760,310	$	2,147,764	$	1,828,355
Audit-related fees (2)	112,158		27,125		62,919		112,158
Total audit and audited related fees	1,940,513		1,787,435		2,210,683		1,940,513
Tax fees (3)	78,794		29,063		—		78,794
Total fees	$	2,019,307	$	1,816,498	$	2,210,683	$	2,019,307


(1)	Consists of fees for the audit of our consolidated financial statements included in our Annual Report on Form 10-K, review of our unaudited financial statements included in our Quarterly Reports on Form 10-Q and fees in connection with statutory and other audits of our foreign subsidiaries.


(2)	Consists of fees for assurance and other services that are provided in connection with the issuance of consents, comfort letters, certifications, compliance with XBRL tagging, and professional consultations with respect to accounting issues or matters that are non-recurring in nature.


(3)	Consists of fees for tax consultation and tax compliance services.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

EchoStar’s Audit Committee is responsible for appointing, setting compensation, retaining, and overseeing the work of our independent registered public accounting firm. EchoStar’s Audit Committee has established a process regarding pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm.

Requests are submitted to EchoStar’s Audit Committee in one of the following ways:

Request for approval of services at a meeting of EchoStar’s Audit Committee; or

Request for approval of services by members of EchoStar’s Audit Committee acting by written consent.

The request may be made with respect to either specific services or a type of service for predictable or recurring services. ~~Fees~~All of the fees paid by us to KPMG LLP for services ~~rendered in~~for 2019 and 2018 ~~and 2017~~ were pre-approved by EchoStar’s Audit Committee.

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PART IV

~~Item~~ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:



	Page
(1) Consolidated Financial Statements

Index to Consolidated Financial Statements	F-1
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, ~~2018~~2019 and ~~2017~~2018	F-3
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017	F-4
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-4~~F-5
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-5~~F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-6~~F-7
Notes to Consolidated Financial Statements	~~F-7~~F-8

(2) ~~Financial Statement Schedules~~

~~Schedule II — Valuation and Qualifying Accounts~~	~~F-59~~

~~(3)~~ Exhibits



Exhibit No.		Description
2.1*		Agreement and Plan of Merger between EchoStar Corporation, EchoStar Satellite Services L.L.C., Broadband Acquisition Corporation and Hughes Communications, Inc. dated as of February 13, 2011 (incorporated by reference to Exhibit 2.1 to Hughes Communications Inc.’s Current Report on Form 8-K, filed February 15, 2011, Commission File No. 1-33040).****

2.2*		Master Transaction Agreement by and among DISH Network Corporation, BSS Merger Sub Inc., EchoStar Corporation, and EchoStar BSS Corporation, dated as of May 19, 2019 (incorporated by reference to Exhibit 2.1 to Hughes Satellite Systems Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed August 8, 2019, Commission File No. 333-179121)****

3.1(a)*		Articles of Incorporation of EH Holding Corporation (currently known as Hughes Satellite Systems Corporation), dated as of March 16, 2011 (incorporated by reference to Exhibit 3.1(a) to the Company’s Registration Statement on Form S-4, Registration No. 333-179121).

3.1(b)*		Articles of Amendment of EH Holding Corporation (currently known as Hughes Satellite Systems Corporation), dated as of October 26, 2011 (incorporated by reference to Exhibit 3.1(b) to the Company’s Registration Statement on Form S-4, Registration No. 333-179121).

3.1(c)*		Articles of Amendment of Hughes Satellite Systems Corporation, dated as of December 30, 2013 (incorporated by reference to Exhibit 3.1(c) to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013, filed February 21, 2014, Commission File No. 333-179121.

3.1(d)*		Articles of Amendment of Hughes Satellite Systems Corporation, dated as of January 21, 2014 (incorporated by reference to Exhibit 3.1(d) to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013, filed February 21, 2014, Commission File No. 333-179121).

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Exhibit No.		Description
3.1(e)*		Articles of Amendment of Hughes Satellite Systems Corporation, dated as of February 28, 2014 (incorporated by reference to Exhibit 3.1(a) to Hughes Satellite Systems Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed May 9, 2014, Commission File No. 333-179121).

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~~Exhibit No.~~		~~Description~~
3.1(f)*		Articles of Amendment to Articles of Incorporation of Hughes Satellite Systems Corporation, dated as of March 1, 2017 (incorporated by reference to Exhibit 32 to EchoStar Corporation’s Current Report on Form 8-K filed March 6, 2017, Commission File No. 001-33807).

3.2*		Bylaws of EH Holding Corporation (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-4, Registration No. 333-179121).

4.1*		Indenture relating to the EH Holding Corporation (currently known as Hughes Satellite Systems Corporation) 6 1/2% Senior Secured Notes due 2019, dated as of June 1, 2011, by and among EH Holding Corporation, the guarantors listed on the signature page thereto, and Wells Fargo Bank, National Association, as collateral agent and trustee (incorporated by reference to Exhibit 4.1 to EchoStar Corporation’s Current Report on Form 8-K filed June 2, 2011, Commission File No. 001-33807).

4.2*		~~Indenture relating to the EH Holding Corporation (currently known as Hughes Satellite Systems Corporation)~~ 7 5/8% Senior Unsecured Notes due 2021, dated as of June 1, 2011, by and among EH Holding Corporation, the guarantors listed on the signature page thereto, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to EchoStar Corporation’s Current Report on Form 8-K, filed June 2, 2011, Commission File No. 001-33807).

4.3*		Supplemental Indenture relating to the 6 1/2% Senior Secured Notes due 2019 of EH Holding Corporation (currently known as Hughes Satellite Systems Corporation), dated as of June 8, 2011, by and among EH Holding Corporation, the guarantors listed on the signature page thereto, and Wells Fargo Bank, National Association, as collateral agent and trustee (incorporated by reference to Exhibit 4.2 to EchoStar Corporation’s Current Report on Form 8-K, filed June 9, 2011, Commission File No. 001-33807).

4.44.2		Supplemental Indenture relating to the 7 5/8% Senior Unsecured Notes due 2021 of EH Holding Corporation (currently known as Hughes Satellite Systems Corporation), dated as of June 8, 2011, by and among EH Holding Corporation, the guarantors listed on the signature page thereto, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.3 to EchoStar Corporation’s Current Report on Form 8-K, filed June 9, 2011, Commission File No. 001-33807).

4.54.3		Registration Rights Agreement, dated as of June 1, 2011, among EH Holding Corporation (currently known as Hughes Satellite Systems Corporation), the guarantors listed on the signature page thereto and Deutsche Bank Securities Inc. (incorporated by reference to Exhibit 4.3 to EchoStar Corporation’s Current Report on Form 8-K, filed June 2, 2011, Commission File No. 001-33807).

4.64.4		Security Agreement, dated as of June 8, 2011, among EH Holding Corporation (currently known as Hughes Satellite Systems Corporation), the guarantors listed on the signature pages thereto, and ~~Wells Fargo~~U.S. Bank National Association, as successor collateral agent (incorporated by reference to Exhibit 4.1 to EchoStar Corporation’s Current Report on Form 8-K, filed June 9, 2011, Commission File No. 001-33807).

4.7*		Second Supplemental Indenture relating to the 6 1/2% Senior Secured Notes due 2019 of Hughes Satellite Systems Corporation, dated as of March 28, 2014, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantors listed on the signature pages thereto, and Wells Fargo Bank, National Association, as collateral agent and trustee (incorporated by reference to Exhibit 4.1 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed May 9, 2014, Commission File No. 001-33807).

~~Table of Contents~~



~~Exhibit No.~~		~~Description~~
4.84.5		Second Supplemental Indenture relating to the 7 5/8% Senior Unsecured Notes due 2021 of Hughes Satellite Systems Corporation, dated as of March 28, 2014, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantors listed on the signature pages thereto, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed May 9, 2014, Commission File No. 001-33807).

4.9*		Joinder Agreement, dated as of March 28, 2014, to the Security Agreement dated as of June 8, 2011, by and among EchoStar XI Holding L.L.C., EchoStar XIV Holding L.L.C., and Wells Fargo Bank, National Association, as collateral agent (incorporated by reference to Exhibit 4.3 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed May 9, 2014, Commission File No. 001-33807).

4.10*		~~Form of Note for 6 1/2% Senior Secured Notes due 2019 (included as part of Exhibit 4.1).~~

4.114.6		Form of Note for 7 5/8% Senior Unsecured Notes due 2021 (included as part of Exhibit 4.2).

4.124.7		Indenture, relating to the 5.250% Senior Secured Notes, dated as of July 27, 2016, among Hughes Satellite Systems Corporation, the guarantors party thereto, U.S. Bank National Association, as trustee and ~~Wells Fargo Bank, National Association, as~~successor collateral agent (incorporated by reference to Exhibit 4.1 to EchoStar Corporation’s Current Report on Form 8-K filed on July 27, 2016, Commission File No. 001-33807).

4.134.8		Indenture, relating to the 6.625% Senior Unsecured Notes, dated as of July 27, 2016, among Hughes Satellite Systems Corporation, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to EchoStar Corporation’s Current Report on Form 8-K filed on July 27, 2016, Commission File No. 001-33807).

Table of Contents



Exhibit No.		Description

4.144.9		Registration Rights Agreement, dated as of July 27, 2016, among Hughes Satellite Systems Corporation, the guarantors party thereto and Deutsche Bank Securities Inc. (incorporated by reference to Exhibit 4.3 to EchoStar Corporation’s Current Report on Form 8-K filed on July 27, 2016, Commission File No. 001-33807).

4.154.10		Additional Secured Party Joinder, dated as of July 27, 2016, among U.S. Bank National Association, as trustee ~~Wells Fargo Bank, National Association, as~~and successor collateral agent, and Hughes Satellite Systems Corporation (incorporated by reference to Exhibit 4.4 to EchoStar Corporation’s Current Report on Form 8-K filed on July 27, 2016, Commission File No. 001-33807).

4.164.11		Form of 5.250% Senior Secured Note due 2026 (included as part of Exhibit 4.12).

4.174.12		Form of 6.625% Senior Unsecured Note due 2026 (included as part of Exhibit 4.13).

4.18*		Joinder Agreement, dated as of March 23, 2017, to the Security Agreement dated as of June 8, 2011, by and between Cheyenne Data Center L.L.C. and Wells Fargo Bank, National Association, as collateral agent (incorporated by reference to Exhibit 4.18 to Hughes Satellite Systems Corporation’s Registration Statement on Form S-4, filed April 6, 2017, Commission File No. 333-179121).

4.194.13		Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 5.250% Senior Secured Notes due 2026, dated March 23, 2017, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantor listed on the signature pages thereto, U.S. Bank National Association, as trustee and ~~Wells Fargo Bank, National Association, as~~successor collateral agent (incorporated by reference to Exhibit 4.19 to Hughes Satellite Systems Corporation’s Registration Statement on Form S-4, filed April 6, 2017, Commission File No. 333-179121).

~~Table of Contents~~



~~Exhibit No.~~		~~Description~~

4.204.14		Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 6.625% Senior Notes due 2026, dated as of March 23, 2017, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantor listed on the signature pages thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.20 to Hughes Satellite Systems Corporation’s Registration Statement on Form S-4, filed April 6, 2017, Commission File No. 333-179121).

4.21*		Third Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 6½% Senior Secured Notes due 2019, dated March 23, 2017, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantor listed on the signature pages thereto and Wells Fargo Bank, National Association, as collateral agent and trustee (incorporated by reference to Exhibit 4.21 to Hughes Satellite Systems Corporation’s Registration Statement on Form S-4, filed April 6, 2017, Commission File No. 333-179121).

4.224.15		Third Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 7⅝% Senior Notes due 2021, dated March 23, 2017, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantor listed on the signature pages thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.22 to Hughes Satellite Systems Corporation’s Registration Statement on Form S-4, filed April 6, 2017, Commission File No. 333-179121).

4.234.16		Joinder Agreement, dated as of August 10, 2017, to the Security Agreement dated as of June 8, 2011, by and between HNS Americas, L.L.C., HNS Americas II, L.L.C. and ~~Wells Fargo~~U.S. Bank National Association, as successor collateral agent (incorporated by reference to Exhibit 4.23 to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, filed February 22, 2018, Commission File No. 333-179121).

4.244.17		Second Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 5.250% Senior Secured Notes due 2026, dated August 10, 2017, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantor listed on the signature pages thereto, U.S. Bank National Association, as trustee and ~~Wells Fargo Bank, National Association, as~~successor collateral agent (incorporated by reference to Exhibit 4.24 to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, filed February 22, 2018, Commission File No. 333-179121).

Table of Contents



Exhibit No.		Description
4.254.18		Second Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 6.625% Senior Notes due 2026, dated as of August 10, 2017, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantor listed on the signature pages thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.25 to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, filed February 22, 2018, Commission File No. 333-179121).

4.26*		Fourth Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 6½% Senior Secured Notes due 2019, dated August 10, 2017, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantor listed on the signature pages thereto and Wells Fargo Bank, National Association, as collateral agent and trustee (incorporated by reference to Exhibit 4.26 to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, filed February 22, 2018, Commission File No. 333-179121).

4.274.19		Fourth Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 7⅝% Senior Notes due 2021, dated August 10, 2017, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantor listed on the signature pages thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.27 to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017, filed February 22, 2018, Commission File No. 333-179121).

~~Table of Contents~~

4.20*

Joinder Agreement, dated as of June 12, 2019, to the Security Agreement dated as of June 8, 2011, by and between EchoStar BSS Corporation, EchoStar FSS L.L.C. and U.S. Bank National Association, as successor collateral agent (incorporated by reference to Exhibit 4.1 to Hughes Satellite System Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed August 8, 2019, Commission File No. 333-179121).

4.21*

Third Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 5.250% Senior Secured Notes due 2026, dated June 12, 2019, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantors listed on the signature pages thereto, U.S. Bank National Association, as trustee and successor collateral agent (incorporated by reference to Exhibit 4.2 to Hughes Satellite System Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed August 8, 2019, Commission File No. 333-179121).

4.22*

Third Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 6.625% Senior Notes due 2026, dated as of June 12, 2019, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantors listed on the signature pages thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.3 to Hughes Satellite System Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed August 8, 2019, Commission File No. 333-179121).

4.23*

Fifth Supplemental Indenture relating to Hughes Satellite Systems Corporation’s 7⅝% Senior Notes due 2021, dated June 12, 2019, by and among Hughes Satellite Systems Corporation, the guarantors and the supplemental guarantors listed on the signature pages thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.4 to Hughes Satellite Systems Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed August 8, 2019, Commission File No. 333-179121).



~~Exhibit No.~~		~~Description~~

10.1*		Form of Tax Sharing Agreement between EchoStar Corporation and DISH Network Corporation (incorporated by reference to Exhibit 10.2 to Amendment No. 1 of EchoStar Corporation’s Form 10, filed December 12, 2007, Commission File No. 001-33807).

10.2*		Form of EchoStar Corporation 2008 Class B CEO Stock Option Plan (incorporated by reference to Exhibit 10.25 to Amendment No. 1 of EchoStar Corporation’s Form 10 filed December 12, 2007, Commission File No. 001-33807).**

10.3*		QuetzSat-1 Satellite Service Agreement, dated November 24, 2008, between SES Latin America S.A. and EchoStar 77 Corporation, a direct wholly-owned subsidiary of EchoStar Corporation (incorporated by reference to Exhibit 10.24 to EchoStar Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, filed March 1, 2010, Commission File No. 001-33807).***

10.4*		QuetzSat-1 Satellite Service Agreement, dated November 24, 2008, between EchoStar 77 Corporation, a direct wholly-owned subsidiary of EchoStar Corporation, and DISH Network L.L.C. (incorporated by reference to Exhibit 10.25 to EchoStar Corporation’s Annual Report on Form 10-K of EchoStar Corporation for the year ended December 31, 2009, filed March 1, 2010, Commission File No. 001-33807).***

10.5*		Amended and Restated EchoStar Corporation 2008 Stock Incentive Plan (the “2008 Stock Incentive Plan”) (incorporated by reference to EchoStar Corporation’s Definitive Proxy Statement on Form 14, filed September 18, 2014, Commission File No. 001-33807).**

10.6*		NIMIQ 5 Whole RF Channel Service Agreement, dated September 15, 2009, between Telesat Canada and EchoStar Corporation (incorporated by reference to Exhibit 10.30 to EchoStar Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, filed March 1, 2010, Commission File No. 001-33807).***

10.7*		NIMIQ 5 Whole RF Channel Service Agreement, dated September 15, 2009, between EchoStar Corporation and DISH Network L.L.C. (incorporated by reference to Exhibit 10.31 to EchoStar Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, Commission File No. 001-33807).***

10.8*		EchoStar XVI Satellite Transponder Service Agreement between EchoStar Satellite Operating Corporation and DISH Network L.L.C., effective December 21, 2009 (incorporated by reference to Exhibit 10.36 to EchoStar Corporation’s Annual Report on Form 10-K for the year ended December 31, 2009, filed March 1, 2010, Commission File No. 001-33807).***

10.910.3		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Hughes Communications, Inc., filed June 22, 2006, (Commission File No. 000-51784)). **

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Exhibit No.		Description
10.1010.4		Employment Agreement, dated as of April 23, 2005 by and between Hughes Network Systems, LLC and Pradman Kaul (incorporated by reference to Exhibit 10.3 to Hughes Communications, Inc.’s Registration Statement on Form S-1, filed December 5, 2005 (File No. 333-130136)).**

10.1110.5		Amendment to Employment Agreement, dated as of December 23, 2010 by and between Hughes Communications, Inc. and Pradman Kaul (incorporated by reference to Exhibit 10.29 to Hughes Communications, Inc.’s Annual Report on Form 10-K, filed March 7, 2011 (File No. 001-33040)).**

~~Table of Contents~~



~~Exhibit No.~~		~~Description~~
10.1210.6		Amendment to Employment Agreement, dated as of April 1, 2016, between Hughes Communications, Inc. and Pradman Kaul (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of EchoStar Corporation, filed April 6, 2016, Commission File No. 001-33807). **

~~10.13~~*		First Amendment to EchoStar XVI Satellite Transponder Service Agreement, dated December 21, 2012 between EchoStar Satellite Operating Corporation and DISH Network L.L.C. (incorporated by reference to Exhibit 10.37 to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K, for the year ended December 31, 2012, filed February 20, 2013, File No. 333-179121).***

10.14*		Form of Satellite Transponder Service Agreement by and between EchoStar Satellite Operating Corporation and DISH Operating L.L.C (incorporated by reference to Exhibit 10.3 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed May 9, 2014, Commission File No. 001-33807).

10.1510.7		Form of Restricted Stock Unit Agreement for 2008 Stock Incentive Plan — Executive or Director (incorporated by reference to Exhibit 10.1 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed November 6, 2015, Commission File No. 001-33807).**

10.1610.8		Form of Stock Option Agreement for 2008 Stock Incentive Plan (1999) (incorporated by reference to Exhibit 10.31 to Hughes Satellite System Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015, filed February 24, 2016, Commission File No. 333-179121). **

10.1710.9		Form of Stock Option Agreement for 2008 Stock Incentive Plan — Employee (2008) (incorporated by reference to Exhibit 10.32 to Hughes Satellite System Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015, filed February 24, 2016, Commission File No. 333-179121). **

10.1810.10		Form of Stock Option Agreement for 2008 Stock Incentive Plan — Executive (2008) (incorporated by reference to Exhibit 10.33 to Hughes Satellite System Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015, filed February 24, 2016, Commission File No. 333-179121). **

10.1910.11		Form of Stock Option Agreement for 2008 Stock Incentive Plan — Employee (2014) (incorporated by reference to Exhibit 10.34 to Hughes Satellite System Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015, filed February 24, 2016, Commission File No. 333-179121). **

10.2010.12		Form of Stock Option Agreement for 2008 Stock Incentive Plan — Executive (2014) (incorporated by reference to Exhibit 10.35 to Hughes Satellite System Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015, filed February 24, 2016, Commission File No. 333-179121). **

10.2110.13		Form of Restricted Stock Unit Agreement for 2008 Stock Incentive Plan — Executive or Director (2011) (incorporated by reference to Exhibit 10.36 to Hughes Satellite System Corporation’s Annual Report on Form 10-K for the year ended December 31, 2015, filed February 24, 2016, Commission File No. 333-179121).**

10.2210.14		EchoStar Corporation Executive Officer Bonus Incentive Plan, dated as of May 4, 2016 (incorporated by reference to Exhibit 10.1 to EchoStar Corporation’s Current Report on Form 8-K, filed May 5, 2016, Commission File No. 001-33807).**

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Exhibit No.		Description
10.2310.15		EchoStar Corporation 2017 Stock Incentive Plan (incorporated by reference to EchoStar Corporation’s Definitive Proxy Statement on Form 14, filed March 23, 2017, Commission File No. 001-33807).**

10.2410.16		Amended and Restated EchoStar Corporation 2017 Employee Stock Purchase Plan (incorporated by reference to EchoStar Corporation’s Definitive Proxy Statement on Form 14, filed March 23, 2017, Commission File No. 001-33807).**

10.2510.17		EchoStar Non-Qualified Plan -- Executive Plan and Adoption Agreement, as amended (incorporated by reference to Exhibit 10.1 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed August 9, 2017, Commission File No. 001-33807).**

10.2610.18		Form of Stock Option Agreement for the EchoStar Corporation 2017 Stock Incentive Plan - Employee (2017) (incorporated by reference to Exhibit 10.2 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed August 9, 2017, Commission File No. 001-33807).**

10.2710.19		Form of Stock Option Agreement for the EchoStar Corporation 2017 Stock Incentive Plan - Executive (2017) (incorporated by reference to Exhibit 10.3 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed August 9, 2017, Commission File No. 001-33807). **

10.2810.20		Form of Restricted Stock Unit Agreement for the EchoStar Corporation 2017 Stock Incentive Plan - Executive (2017) (incorporated by reference to Exhibit 10.5 to EchoStar Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed August 9, 2017, Commission File No. 001-33807).**

10.2910.21		Letter Agreement between EchoStar Corporation and DISH Network Corporation, dated August 3, 2018, amending that certain Form of Tax Sharing Agreement between EchoStar Corporation and DISH Network (incorporated by reference to Exhibit 10.1 to Hughes Satellite System Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 2018, filed November 8, 2018, Commission File No. 333-179121).

~~10.30(H)~~10.22*		Amendment to EchoStar Non-Qualified Plan-Executive Plan and Adoption Agreement, dated November 1, 20182018 (incorporated by reference to Exhibit 10.30 to Hughes Satellite Systems Corporation’s Annual Report on Form 10-K for the Year ended December 31, 2018, filed February 21, 2019, Commission File No. 333-179121).*

10.23*		Amended and Restated EchoStar Corporation Executive Officer Bonus Incentive Plan, dated as of April 30, 2019 (incorporated by reference to Exhibit 10.1 to Hughes Satellite Systems Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed August 8, 2019, Commission File No. 333-179121).**

31.1 (H)		Section 302 Certification of Chief Executive Officer.

31.2 (H)		Section 302 Certification of Chief Financial Officer.

32.1 (H)		Section 906 Certifications of Chief Executive Officer and Chief Financial Officer.

~~99.1(I)~~99.1 (I)		Press release dated February ~~21, 2018~~20, 2020 issued by EchoStar Corporation regarding financial results for the quarter and full year ended December 31, ~~2018.~~2019.

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Exhibit No.		Description
99.2(I)		Presentation dated February 20, 2020 issued by EchoStar Corporation regarding unaudited pro forma financial information

101.INS		XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase.

101.DEF		XBRL Taxonomy Extension Definition Linkbase.

~~Table of Contents~~



~~Exhibit No.~~		~~Description~~

101.LAB		XBRL Taxonomy Extension Label Linkbase.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase.


(H)	Filed herewith.


(I)	Furnished herewith


*	Incorporated by reference.


**	Constitutes a management contract or compensatory plan or arrangement.


***	Certain portions of the exhibit have been omitted ~~and separately filed~~in accordance with the Securities and Exchange ~~Commission with a request for~~Commission’s rules and regulations regarding confidential treatment.


****	Schedules and exhibits have been omitted pursuant to Item ~~601(b)(2)~~601(a)(5) of Regulation S-K. We agree to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request, subject to our right to request confidential treatment of any requested schedule or exhibit.

~~Item~~ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	HUGHES SATELLITE SYSTEMS CORPORATION


	By:	/s/ David J. Rayner
		David J. Rayner
		Executive Vice President,
		Chief Financial Officer,
		Chief Operating Officer, and
		Treasurer

Date: February ~~21, 2019~~20, 2020

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/s/ Michael T. Dugan	Chief Executive Officer, President and Director	February ~~21, 2019~~20, 2020
Michael T. Dugan	(Principal Executive Officer)

/s/ David J. Rayner	Executive Vice President, Chief Financial Officer,	February ~~21, 2019~~20, 2020
David J. Rayner	Chief Operating Officer and Treasurer
	(Principal Financial and Accounting Officer)

/s/ Charles W. Ergen	Chairman	February ~~21, 2019~~20, 2020
Charles W. Ergen

/s/ Dean A. Manson	Executive Vice President, General Counsel	February ~~21, 2019~~20, 2020
Dean A. Manson	Secretary and Director

Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements:



	Page
Index to Consolidated Financial Statements	F-1
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, ~~2018~~2019 and ~~2017~~2018	F-3
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017	F-4
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-4~~F-5
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-5~~F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 ~~2017~~ and ~~2016~~2017	~~F-6~~F-7
Notes to Consolidated Financial Statements	~~F-7~~F-8

F-1

Table of Contents

Report of Independent Registered Public Accounting Firm

To the ~~stockholders~~Shareholders and ~~board~~Board of ~~directors~~Directors

Hughes Satellite Systems Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Hughes Satellite Systems Corporation and subsidiaries (the ~~“Company”)~~Company) as of December 31, ~~2018~~2019 and ~~2017,~~2018, the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, ~~2018,~~2019, and the related notes and financial statement schedule II listed in Item 15 (collectively, the ~~“consolidated~~consolidated financial ~~statements”)~~statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2018~~2019 and ~~2017,~~2018, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, ~~2018,~~2019, in conformity with U.S. generally accepted accounting principles.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, in 2019, the Company has changed its method of accounting for leases due to the adoption of Accounting Standards Update No. 2016-02, Leases as of January 1, 2019. In 2018, the Company has changed its method of accounting for revenue recognition ~~in 2018~~ due to the adoption of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers and changed its method of accounting for marketable investment securities and fair value measurements due to the adoption of Accounting Standards Update No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~(“PCAOB”)~~(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.



	/s/ KPMG LLP

We have served as the Company’s auditor since 2011.

Denver, Colorado

February ~~21, 2019~~20, 2020

F-2

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED BALANCE SHEETS

(~~Dollars~~Amounts in thousands, except per share amounts)

As of December 31,
2018 2017
Assets
Current assets:
Cash and cash equivalents $ 847,823
$ 1,822,561
Marketable investment securities, at fair value 1,609,196
455,602
Trade accounts receivable and contract assets, net (Note 3) 201,096
196,840
Trade accounts receivable - DISH Network 13,550
38,641
Inventory 75,379
83,595
Prepaids and deposits 48,681
38,797
Advances to affiliates, net 103,550
114,858
Other current assets 18,539
91,544
Total current assets 2,917,814
2,842,438
Noncurrent assets:
Property and equipment, net 2,582,181
2,753,098
Regulatory authorizations 465,658
465,658
Goodwill 504,173
504,173
Other intangible assets, net 43,952
58,582
Investments in unconsolidated entities 126,369
30,587
Other noncurrent assets, net 253,025
202,814
Total noncurrent assets 3,975,358
4,014,912
Total assets $ 6,893,172
$ 6,857,350
Liabilities and Shareholders’ Equity
Current liabilities:
Trade accounts payable $ 104,751
$ 102,816
Trade accounts payable - DISH Network 752
3,769
Current portion of long-term debt and capital lease obligations 959,577
40,631
Advances from affiliates, net 868
477
Contract liabilities 72,249
65,959
Accrued interest 46,703
46,834
Accrued compensation 42,796
36,924
Accrued taxes 7,609
8,198
Accrued expenses and other 68,854
77,312
Total current liabilities 1,304,159
382,920
Noncurrent liabilities:
Long-term debt and capital lease obligations, net 2,573,204
3,594,213
Deferred tax liabilities, net 488,736
439,631
Advances from affiliates 33,438
33,715
Other noncurrent liabilities 101,140
107,627
Total noncurrent liabilities 3,196,518
4,175,186
Total liabilities 4,500,677
4,558,106
Commitments and contingencies (Note 13)
Shareholders’ equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding at each of December 31, 2018 and 2017 —
—
Common stock, $0.01 par value; 1,000,000 shares authorized, 1,078 shares issued and outstanding at each of December 31, 2018 and 2017 —
—
Additional paid-in capital 1,767,037
1,754,561
Accumulated other comprehensive loss (83,774 ) (52,822 )
Accumulated earnings 693,957
582,683
Total HSS shareholders’ equity 2,377,220
2,284,422
Noncontrolling interests 15,275
14,822
Total shareholders’ equity 2,392,495
2,299,244
Total liabilities and shareholders’ equity $ 6,893,172
$ 6,857,350

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



	As of December 31,
	2019			2018

Assets
Current assets:
Cash and cash equivalents	$	1,139,435		$	847,823
Marketable investment securities	652,835			1,609,196
Trade accounts receivable and contract assets, net	196,520			201,096
Advances to affiliates	131,892			103,550
Other current assets	169,760			152,666
Current assets of discontinued operations	—			3,483
Total current assets	2,290,442			2,917,814
Non-current assets:
Property and equipment, net	1,857,581			1,921,911
Operating lease right-of-use assets	113,399			—
Goodwill	506,953			504,173
Regulatory authorizations, net	412,363			400,043
Other intangible assets, net	29,321			43,952
Other investments, net	110,040			126,369
Advances to affiliates, net	19,759			—
Other non-current assets, net	232,177			236,449
Non-current assets of discontinued operations	—			742,461
Total non-current assets	3,281,593			3,975,358
Total assets	$	5,572,035		$	6,893,172
Liabilities and Shareholders’ Equity
Current liabilities:
Trade accounts payable	$	121,552		$	104,751
Current portion of long-term debt and finance lease obligations	486			919,582
Advances from affiliates, net	11,132			868
Contract liabilities	101,060			72,249
Accrued expenses and other current liabilities	246,799			157,654
Current liabilities of discontinued operations	—			49,055
Total current liabilities	481,029			1,304,159
Non-current liabilities:
Long-term debt and finance lease obligations, net of current portion	2,389,733			2,386,202
Deferred tax liabilities, net	380,316			355,949
Operating lease liabilities	96,879			—
Advances from affiliates, net	23,980			33,438
Other non-current liabilities	65,935			71,647
Non-current liabilities of discontinued operations	—			349,282
Total non-current liabilities	2,956,843			3,196,518
Total liabilities	3,437,872			4,500,677

Commitments and contingencies

Shareholders’ equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued and outstanding at both December 31, 2019 and 2018	—			—
Common stock, $0.01 par value; 1,000,000 shares authorized, 1,078 shares issued and outstanding at both December 31, 2019 and 2018	—			—
Additional paid-in capital	1,478,636			1,767,037
Accumulated other comprehensive income (loss)	(84,636		)	(83,774		)
Accumulated earnings (losses)	664,415			693,957
Total HSS shareholders’ equity	2,058,415			2,377,220
Non-controlling interests	75,748			15,275
Total shareholders’ equity	2,134,163			2,392,495
Total liabilities and shareholders’ equity	$	5,572,035		$	6,893,172

~~F-3~~

~~Table of Contents~~

~~HUGHES SATELLITE SYSTEMS CORPORATION~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)~~

~~(Dollars in thousands)~~

For the years ended December 31,
2018 2017 2016
Revenue:
Services and other revenue - DISH Network $ 366,155
$ 433,829
$ 449,547
Services and other revenue - other 1,526,098
1,203,551
1,103,127
Equipment revenue 205,410
239,489
247,119
Total revenue 2,097,663
1,876,869
1,799,793
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization) 600,213
559,684
533,305
Cost of sales - equipment (exclusive of depreciation and amortization) 176,600
195,439
189,405
Selling, general and administrative expenses 398,153
337,591
281,048
Research and development expenses 27,570
31,745
31,170
Depreciation and amortization 551,416
496,798
414,133
Impairment of long-lived asset —
6,000
—
Total costs and expenses 1,753,952
1,627,257
1,449,061
Operating income 343,711
249,612
350,732
Other income (expense):
Interest income 59,104
31,952
12,598
Interest expense, net of amounts capitalized (259,721 ) (245,478 ) (187,198 )
Gains (losses) on investments, net 187
(1,574 ) 6,995
Equity in earnings of unconsolidated affiliate 4,874
7,027
9,444
Other, net (4,443 ) (2,188 ) 2,909
Total other expense, net (199,999 ) (210,261 ) (155,252 )
Income before income taxes 143,712
39,351
195,480
Income tax benefit (provision), net (46,369 ) 258,202
(73,759 )
Net income 97,343
297,553
121,721
Less: Net income attributable to noncontrolling interests 1,842
1,583
1,706
Net income attributable to HSS $ 95,501
$ 295,970
$ 120,015

Comprehensive Income:
Net income $ 97,343
$ 297,553
$ 121,721
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (31,938 ) 7,196
(5,377 )
Unrealized gains (losses) on available-for-sale securities and other (624 ) (2,188 ) 1,584
Amounts reclassified to net income:
Other-than-temporary impairment loss on available-for-sale securities —
3,298
—
Recognition of realized gains on available-for-sale securities in net income (212 ) —
(2,996 )
Total other comprehensive gain (loss), net of tax (32,774 ) 8,306
(6,789 )
Comprehensive income 64,569
305,859
114,932
Less: Comprehensive income attributable to noncontrolling interests 453
1,992
1,520
Comprehensive income attributable to HSS $ 64,116
$ 303,867
$ 113,412

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

~~F-4~~

~~Table of Contents~~

~~HUGHES SATELLITE SYSTEMS CORPORATION~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY~~

~~(Dollars in thousands)~~

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Loss

Accumulated
Earnings

Noncontrolling
Interests
Total
Balance, January 1, 2016 $ 1,417,748
$ (54,116 ) $ 166,698
$ 11,310
$ 1,541,640
Stock-based compensation 4,822
—
—
—
4,822
Transfer of EchoStar XXIII launch service contract from EchoStar to HNS 70,300
—
—
—
70,300
Contributions to fund EchoStar XXI launch service contract from EchoStar to HNS 23,750
—
—
—
23,750
Other comprehensive loss —
(6,539 ) —
(186 ) (6,725 )
Net income —
—
120,015
1,706
121,721
Other, net (421 ) (64 ) —
—
(485 )
Balance, December 31, 2016 1,516,199
(60,719 ) 286,713
12,830
1,755,023
Stock-based compensation 5,117
—
—
—
5,117
Transfer of launch service contracts to EchoStar (145,114 ) —
—
—
(145,114 )
Contribution of EchoStar XIX satellite, net of deferred tax 349,337
—
—
—
349,337
Contribution of net assets pursuant to Share Exchange Agreement 219,662
—
—
—
219,662
Exchange of uplinking business net assets for HSS Tracking Stock (190,221 )

(190,221 )
Other comprehensive income —
7,805

409
8,214
Net income —
—
295,970
1,583
297,553
Other (419 ) 92
—
—
(327 )
Balance, December 31, 2017 1,754,561
(52,822 ) 582,683
14,822
2,299,244
Cumulative effect of adoption of ASU 2014-09 and ASU 2016-01 as of January 1, 2018

433
15,773

16,206
Balance, January 1, 2018 1,754,561
(52,389 ) 598,456
14,822
2,315,450
Stock-based compensation 5,435
—
—
—
5,435
Capital contribution from EchoStar Corporation 7,125
—
—
—
7,125
Other comprehensive income —
(31,385 ) —
(1,389 ) (32,774 )
Net Income —
—
95,501
1,842
97,343
Other (84 ) —
—

(84 )
Balance, December 31, 2018 $ 1,767,037
$ (83,774 ) $ 693,957
$ 15,275
$ 2,392,495

The accompanying notes are an integral part of these ~~consolidated financial statements.~~Consolidated Financial Statements.

F-3

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands)



	For the years ended December 31,
	2019			2018			2017

Revenue:
Services and other revenue	$	1,623,458		$	1,561,426		$	1,275,553
Equipment revenue	266,703			205,410			239,489
Total revenue	1,890,161			1,766,836			1,515,042
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	555,701			559,838			497,111
Cost of sales - equipment (exclusive of depreciation and amortization)	225,103			176,600			195,439
Selling, general and administrative expenses	467,869			397,994			337,548
Research and development expenses	25,739			27,570			31,745
Depreciation and amortization	464,797			426,852			370,418
Impairment of long-lived assets	—			—			6,000
Total costs and expenses	1,739,209			1,588,854			1,438,261
Operating income (loss)	150,952			177,982			76,781
Other income (expense):
Interest income	57,730			59,104			31,952
Interest expense, net of amounts capitalized	(272,218		)	(231,169		)	(213,166		)
Gains (losses) on investments, net	(8,464		)	187			(1,574		)
Equity in earnings (losses) of unconsolidated affiliates, net	(3,333		)	4,874			7,027
Foreign currency transaction gains (losses), net	(9,855		)	(12,484		)	(1,158		)
Other, net	(633		)	8,041			(1,030		)
Total other income (expense), net	(236,773		)	(171,447		)	(177,949		)
Income (loss) from continuing operations before income taxes	(85,821		)	6,535			(101,168		)
Income tax benefit (provision), net	(11,595		)	(18,615		)	93,766
Net income (loss) from continuing operations	(97,416		)	(12,080		)	(7,402		)
Net income (loss) from discontinued operations	56,539			109,423			304,955
Net income (loss)	(40,877		)	97,343			297,553
Less: Net income (loss) attributable to non-controlling interests	(11,335		)	1,842			1,583
Net income (loss) attributable to HSS	$	(29,542	)	$	95,501		$	295,970

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

F-4

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)



	For the years ended December 31,
	2019			2018			2017

Net income (loss)	$	(40,877	)	$	97,343		$	297,553
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	1,182			(31,938		)	7,196
Unrealized gains (losses) on available-for-sale securities	1,817			(665		)	(2,280		)
Other	(114		)	41			92
Amounts reclassified to net income (loss):
Realized gains on available-for-sale securities	(419		)	(212		)	—
Other-than-temporary impairment loss on available-for-sale securities	—			—			3,298
Total other comprehensive income (loss), net of tax	2,466			(32,774		)	8,306
Comprehensive income (loss)	(38,411		)	64,569			305,859
Less: Comprehensive income (loss) attributable to non-controlling interests	(8,007		)	453			1,992
Comprehensive income (loss) attributable to HSS	$	(30,404	)	$	64,116		$	303,867

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

F-5

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN SHAREHOLDERS’ EQUITY

(~~Dollars~~Amounts in thousands)

For the years ended December 31,
2018 2017 2016
Cash flows from operating activities:
Net income $ 97,343
$ 297,553
$ 121,721
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization 551,416
496,798
414,133
Amortization of debt issuance costs 7,923
7,378
6,551
Losses (gains) and impairment on marketable investment securities, net (184 ) 1,574
(6,995 )
Impairment of long-lived asset —
6,000
—
Equity in earnings of unconsolidated affiliate (4,791 ) (7,027 ) (9,444 )
Stock-based compensation 5,435
5,117
4,822
Deferred tax (benefit) provision 43,698
(268,071 ) 70,901
Dividends received from unconsolidated entity 10,000
19,000
10,000
Proceeds from sale of trading securities —
8,922
7,140
Changes in current assets and current liabilities, net:
Trade accounts receivable, net (17,840 ) (12,459 ) (39,092 )
Advances to and from affiliates, net 7,276
12,176
(67,579 )
Trade accounts receivable - DISH Network 25,091
(19,318 ) 1,935
Inventory 5,650
(23,373 ) (13,221 )
Other current assets (17,312 ) (9,303 ) 298
Trade accounts payable 6,258
(4,826 ) 9,429
Accrued expenses and other 16,839
13,701
30,603
Changes in noncurrent assets and noncurrent liabilities, net (2,680 ) (30,831 ) 14,233
Other, net 8,581
4,018
10,436
Net cash flows from operating activities 742,703
497,029
565,871
Cash flows from investing activities:
Purchases of marketable investment securities (2,063,042 ) (535,476 ) (396,730 )
Sales and maturities of marketable investment securities 909,996
259,263
460,834
Expenditures for property and equipment (391,065 ) (401,538 ) (381,287 )
Refunds and other receipts related to property and equipment 77,524
4,311
—
Investment in unconsolidated entity (100,991 ) —
—
Payment for EchoStar XXI launch services (7,125 ) —
(23,750 )
Expenditures for externally marketed software (31,639 ) (31,331 ) (23,252 )
Other, net —
—
(1,636 )
Net cash flows from investing activities (1,606,342 ) (704,771 ) (365,821 )
Cash flows from financing activities:
Proceeds from issuance of long-term debt —
—
1,500,000
Payments of debt issuance costs —
(414 ) (7,097 )
Repurchase of the 2019 Senior Secured Notes (70,173 ) —
—
Repayment of debt and capital lease obligations (41,019 ) (37,063 ) (31,669 )
Advances from (to) affiliates —
(36 ) 6,982
Capital contribution from EchoStar 7,125
—
23,750
Repayment of in-orbit incentive obligations (4,796 ) (5,850 ) (5,499 )
Other, net —
1,486
1,342
Net cash flows from financing activities (108,863 ) (41,877 ) 1,487,809
Effect of exchange rates on cash and cash equivalents (2,233 ) 1,286
183
Net increase (decrease) in cash and cash equivalents, including restricted amounts (974,735 ) (248,333 ) 1,688,042
Cash and cash equivalents, including restricted amounts, beginning of period 1,823,354
2,071,687
383,645
Cash and cash equivalents, including restricted amounts, end of period $ 848,619
$ 1,823,354
$ 2,071,687

Supplemental disclosure of cash flow Information:
Cash paid for interest, net of amounts capitalized $ 250,576
$ 236,232
$ 141,827
Cash paid for income taxes $ 4,837
$ 3,574
$ 4,796



	Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Earnings (Losses)			Non-controlling Interests			Total

Balance, December 31, 2016	$	1,516,199		$	(60,719	)	$	286,713		$	12,830		$	1,755,023
Stock-based compensation	5,117			—			—			—			5,117
Transfer of launch service contracts to EchoStar	(145,114		)	—			—			—			(145,114		)
Contribution of EchoStar XIX satellite, net of deferred tax	349,337			—			—			—			349,337
Contribution of net assets pursuant to Share Exchange Agreement	219,662			—			—			—			219,662
Exchange of uplinking business net assets for HSS Tracking Stock	(190,221		)	—			—			—			(190,221		)
Other comprehensive income (loss)	—			7,805			—			409			8,214
Net income (loss)	—			—			295,970			1,583			297,553
Other, net	(419		)	92			—			—			(327		)
Balance, December 31, 2017	1,754,561			(52,822		)	582,683			14,822			2,299,244
Cumulative effect of accounting changes	—			433			15,773			—			16,206
Balance, January 1, 2018	1,754,561			(52,389		)	598,456			14,822			2,315,450
Stock-based compensation	5,435			—			—			—			5,435
Capital contribution from EchoStar Corporation	7,125			—			—			—			7,125
Other comprehensive income (loss)	—			(31,385		)	—			(1,389		)	(32,774		)
Net income (loss)	—			—			95,501			1,842			97,343
Other, net	(84		)	—			—			—			(84		)
Balance, December 31, 2018	1,767,037			(83,774		)	693,957			15,275			2,392,495
Stock-based compensation	5,436			—			—			—			5,436
Capital contribution from EchoStar Corporation	9,606			—			—			—			9,606
Purchase of non-controlling interest	(833		)	—			—			(6,480		)	(7,313		)
Net assets distributed pursuant to the BSS Transaction	(332,699		)	—			—			—			(332,699		)
Issuance of equity and contribution of assets pursuant to the Yahsat JV formation	29,576			—			—			73,199			102,775
Other comprehensive income (loss)	—			(862		)	—			3,328			2,466
Net income (loss)	—			—			(29,542		)	(11,335		)	(40,877		)
Other, net	513			—			—			1,761			2,274
Balance, December 31, 2019	$	1,478,636		$	(84,636	)	$	664,415		$	75,748		$	2,134,163

The accompanying notes are an integral part of these ~~consolidated financial statements.~~Consolidated Financial Statements.

F-6

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)



	For the years ended December 31,
	2019			2018			2017

Cash flows from operating activities:
Net income (loss)	$	(40,877	)	$	97,343		$	297,553
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization	550,723			551,416			496,798
Impairment of long-lived assets	—			—			6,000
Losses (gains) on investments, net	8,464			(184		)	1,574
Equity in losses (earnings) of unconsolidated affiliates, net	3,333			(4,791		)	(7,027		)
Foreign currency transaction losses (gains), net	9,855			12,484			1,158
Deferred tax provision (benefit), net	14,703			43,698			(268,071		)
Stock-based compensation	5,436			5,435			5,117
Amortization of debt issuance costs	5,912			7,923			7,378
Dividends received from unconsolidated affiliates	2,716			10,000			19,000
Proceeds from sale of trading securities	—			—			8,922
Changes in current assets and current liabilities, net:
Trade accounts receivable and contract assets, net	8,398			(17,840		)	(12,459		)
Advances to and from affiliates, net	(36,662		)	7,276			12,176
Other current assets	(44,752		)	13,429			(51,994		)
Trade accounts payable	13,510			6,258			(4,826		)
Contract liabilities	26,411			7,832			5,970
Accrued expenses and other current liabilities	93,117			9,007			7,731
Changes in non-current assets and non-current liabilities, net	13,557			(2,680		)	(30,831		)
Other, net	(240		)	(3,903		)	2,860
Net cash flows from operating activities	633,604			742,703			497,029
Cash flows from investing activities:
Purchases of marketable investment securities	(709,350		)	(2,063,042		)	(535,476		)
Sales and maturities of marketable investment securities	1,665,269			909,996			259,263
Investments in unconsolidated affiliates	7,851			(100,991		)	—
Dividend received from unconsolidated affiliate	2,284			—			—
Expenditures for property and equipment	(309,291		)	(391,065		)	(401,538		)
Refunds and other receipts related to property and equipment	—			77,524			4,311
Expenditures for externally marketed software	(29,310		)	(31,639		)	(31,331		)
Purchases of regulatory authorizations	(7,850		)	—			—
Payment for EchoStar XXI launch services	��			(7,125		)	—
Net cash flows from investing activities	619,603			(1,606,342		)	(704,771		)



Cash flows from financing activities:
Repurchase and maturity of the 2019 Senior Secured Notes	(920,923		)	(70,173		)	—
Repayment of other long-term debt and finance lease obligations	(29,347		)	(41,019		)	(37,063		)
Payment of in-orbit incentive obligations	(4,430		)	(4,796		)	(5,850		)
Capital contribution from EchoStar	—			7,125			—
Purchase of non-controlling interest	(7,313		)	—			—
Other, net	1,172			—			1,036
Net cash flows from financing activities	(960,841		)	(108,863		)	(41,877		)
Effect of exchange rates on cash and cash equivalents	(663		)	(2,233		)	1,286
Net increase (decrease) in cash and cash equivalents	291,703			(974,735		)	(248,333		)
Cash and cash equivalents, including restricted amounts, beginning of period	848,619			1,823,354			2,071,687
Cash and cash equivalents, including restricted amounts, end of period	$	1,140,322		$	848,619		$	1,823,354

Supplemental disclosure of cash flow information:
Cash paid for interest (including capitalized interest)	$	216,025		$	250,576		$	236,232
Cash paid for income taxes	$	3,094		$	4,837		$	3,574

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

F-7

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND BUSINESS ACTIVITIES

Principal Business

Hughes Satellite Systems Corporation (which, together with its subsidiaries, is referred to as “HSS,” the “Company,” “we,” “us” ~~and/or~~and “our”) is a holding company and a subsidiary of EchoStar Corporation (“EchoStar”). We are a global provider of broadband satellite technologies, broadband internet services for consumer customers, which include home and small ~~office customers, satellite operations~~to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and ~~various~~ communications solutions for enterprise customers, which include aeronautical ~~enterprise~~ and government ~~customers.~~

enterprises. We ~~primarily~~ operate in the following ~~two~~2 business segments:

•

Hughes — which provides broadband satellite technologies and broadband internet services to domestic and international ~~home and small office~~consumer customers and broadband network technologies, managed services, equipment, hardware, satellite services and communication solutions to ~~domestic~~service providers and ~~international consumers and aeronautical,~~ enterprise ~~and government~~ customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.

•

~~EchoStar Satellite Services (“ESS”)~~ESS — which uses certain of our owned and leased in-orbit satellites and related licenses to provide satellite ~~operations and satellite~~ services on a full-time and/or occasional-use basis ~~primarily~~ to ~~DISH Network Corporation and its subsidiaries (“DISH Network”), Dish Mexico, S. de R.L. de C.V., a joint venture that EchoStar entered into in 2008 (“Dish Mexico”),~~ United States (“U.S.”) government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers.

Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT, Finance, Accounting, Real Estate ~~Accounting~~ and Legal) and other activities that have not been assigned to our operating segments such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other in. We also divide our ~~segment reporting.~~operations by primary geographic market as follows: (i) North America (the U.S. and its territories, Mexico, and Canada); (ii) South and Central America and; (iii) All other (Asia, Africa, Australia, Europe, India, and the Middle East). Refer to Note 18. Segment Reporting for further detail.

In May 2019, EchoStar and one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), entered into a master transaction agreement (the “Master Transaction Agreement”) with DISH Network Corporation (“DISH”) and a wholly-owned subsidiary of DISH (“Merger Sub”). Pursuant to the terms of the Master Transaction Agreement, on September 10, 2019: (i) EchoStar and its subsidiaries and we and our subsidiaries transferred to BSS Corp. certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily relating to the former portion of our ESS segment that managed, marketed and provided (1) broadcast satellite services primarily to DISH and its subsidiaries (together with DISH, “DISH Network”) and EchoStar’s joint venture Dish Mexico, S. de R.L. de C.V., (“Dish Mexico”) and its subsidiaries and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of EchoStar’s and our other businesses (collectively, the “BSS Business”); (ii) EchoStar distributed to each holder of shares of EchoStar’s Class A or Class B common stock entitled to receive consideration in the transaction an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to one share of BSS Common Stock for each share of EchoStar’s Class A or Class B common stock owned by such EchoStar stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and DISH owns and operates the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).

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agreements; and (iii) amended certain existing agreements and entered into certain new agreements pursuant to which we, EchoStar and certain of our and its other subsidiaries, on the one hand, and DISH Network, on the other hand, will obtain and provide certain products, services and rights from and to each other.

During 2017, EchoStar and certain of its and our subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries. EchoStar and certain of its and our subsidiaries received all of the shares of the Hughes Retail Preferred Tracking Stock previously issued by EchoStar and us (together, the “Tracking Stock”) in exchange for 100% of the equity interests of certain of EchoStar subsidiaries that held substantially all of EchoStar’s former EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Following the consummation of the Share Exchange, EchoStar no longer ~~operate~~operates its former EchoStar Technologies businesses, the Tracking Stock was retired and is no longer outstanding, and all agreements, arrangements and policy statements with respect to the Tracking Stock terminated.

Refer to Note 5. Discontinued Operations for further detail. Additionally, all amounts in the following footnotes reference results from continuing operations unless otherwise noted.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

These Consolidated Financial Statements and the accompanying notes are prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). We consolidate all entities in which we have a controlling financial interest. We are deemed to have a controlling financial interest in variable interest entities ~~where~~in which we are the primary ~~beneficiary. We are deemed to have a controlling financial interest~~beneficiary and in other entities ~~when~~in which we own more than 50% of the outstanding voting shares and other shareholders do not have substantive rights to participate in management. For entities we control but do not wholly own, we record a ~~noncontrolling~~non-controlling interest within shareholders’ equity for the portion of the entity’s equity attributed to the ~~noncontrolling~~non-controlling ownership interests. All significant intercompany balances and transactions have been eliminated in consolidation.

~~Reclassification~~All amounts presented in these Consolidated Financial Statements and their accompanying notes are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted.

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Reclassification

Certain prior period amounts have been reclassified to conform with the current period presentation.

Use of Estimates

~~The preparation of financial statements in conformity with generally accepted accounting principles in the U.S. (“GAAP”) requires us~~We are required to make certain estimates and assumptions that affect the amounts reported ~~amounts of assets~~in these Consolidated Financial Statements. The most significant estimates and liabilities at the date of the balance sheets, the reported amounts of revenue and expense for each reporting period and certain information disclosed in the notes to our financial statements. Estimatesassumptions are used in ~~accounting for, among other things,~~determining: (i) ~~amortization periods for deferred contract acquisition costs, (ii)~~ inputs used to recognize revenue over time, ~~(iii)~~including amortization periods for deferred contract acquisition costs; (ii) allowances for doubtful ~~accounts, (iv) warranty obligations, (v) self-insurance obligations, (vi)~~accounts; (iii) deferred taxes and related valuation allowances, ~~(vii)~~including uncertain tax ~~positions, (viii)~~positions; (iv) loss ~~contingencies, (ix)~~contingencies; (v) fair value of financial ~~instruments, (x) fair value of EchoStar’s stock-based compensation awards, (xi)~~instruments; (vi) fair value of assets and liabilities acquired in business ~~combinations, (xii) lease classifications, (xiii)~~combinations; and (vii) asset impairment ~~testing and (xiv) useful lives and methods for depreciation and amortization of long-lived assets.~~testing.

We base our estimates and assumptions on historical experience, observable market inputs and on various other factors that we believe to be relevant under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results may differ from previously estimated amounts and such differences may be material to our financial statements. Additionally, changing economic conditions may increase the inherent uncertainty in the estimates

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and assumptions indicated above. We review our estimates and assumptions periodically and the effects of revisions thereto are reflected in the period they occur or prospectively if the revised estimate affects future periods.

Fair Value Measurements

We determine fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. We utilize the highest level of inputs available according to the following hierarchy in determining fair ~~value~~value:

~~Level 1 - Defined as observable inputs being quoted prices in active markets for identical assets;~~

Level 2 - Defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and


•	Level 1 - Defined as observable inputs being quoted prices in active markets for identical assets;


•	Level 2 - Defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and


•	Level 3 - Defined as unobservable inputs for which little or no market data exists, consistent with characteristics of the asset or liability that would be considered by market participants in a transaction to purchase or sell the asset or liability.

Fair values of our marketable investment securities are measured on a recurring basis based on a variety of observable market inputs. For our investments in publicly traded equity securities and U.S. government securities, fair value ordinarily is determined based on Level 1 measurements that reflect quoted prices for identical securities in active markets. Fair values of our investments in other marketable debt securities are generally based on Level 2 measurements as the markets for such debt securities are less active. We consider trades of identical debt securities on or near the measurement date as a strong indication of fair value and matrix pricing techniques that consider par value, coupon rate, credit quality, maturity and other relevant features may also be used to determine fair value of our investments in marketable debt securities. Fair values for our outstanding debt ~~(see Note 10)~~ are based on quoted market prices in less active markets and are categorized as Level 2 measurements. Additionally, we use fair value measurements from time to time in connection with other investments, asset impairment testing and the assignment of purchase consideration to assets and liabilities of acquired companies. Those fair value measurements typically include significant unobservable inputs and are categorized within Level 3 of the fair value hierarchy.

Transfers between levels in the fair value hierarchy are considered to occur at the beginning of the quarterly accounting period. There were no0 transfers between levels ~~for each of~~during the years ended December 31, ~~2018~~2019 and ~~2017.~~2018.

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As of December 31, ~~2018~~2019 and ~~2017,~~2018, the carrying amounts of our cash and cash equivalents, trade accounts receivable and ~~other receivables,~~contract assets, net, ~~of allowance for doubtful accounts,~~trade accounts payable, and accrued expenses and other current liabilities were equal to or approximated their fair value due to their short-term nature or proximity to current market rates.

Revenue Recognition

Overview

~~We account for our sales and services revenue in accordance with~~ ~~Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”)~~, which we adopted on January 1, 2018, using the modified retrospective approach to contracts not completed as of the adoption date. Topic 606 provides a five-step revenue recognition model that we apply to our customer contracts. Under this model we (i) identify the contract with the customer, (ii) identify our performance obligations in the contract, (iii) determine the transaction price for the contract, (iv) allocate the transaction price to our performance obligations and (v) recognize revenue when or as we satisfy our performance obligations.

Revenue is recognized upon transfer of control of the promised goods or our performance of the services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. We enter into contracts that may include various combinations of products and services, which are generally distinct and accounted for as separate performance obligations.

~~Additionally, a significant portion of our~~We also recognize lease revenue which is derived from leases of property and equipment ~~that~~which, for operating leases, is reported in Services and other revenue ~~- other~~ ~~and~~ ~~Services and other revenue - DISH Network~~in ~~our~~the Consolidated Statements of Operations and, ~~Comprehensive Income (Loss).~~for sales-type leases, is reported in Equipment revenue in the Consolidated Statements of Operations. Certain of our customer contracts contain embedded equipment leases, which we separate from non-lease components of the contract based on the relative standalone selling prices of the lease and non-lease components.

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Hughes Segment

Our Hughes segment ~~provides various communication and networking services to consumer and enterprise customers in both domestic and international markets. Our~~ service contracts typically obligate us to provide substantially the same services on a recurring basis in exchange for fixed recurring fees over the term of the contract. We satisfy such performance obligations over time and recognize revenue ratably as services are rendered over the service period. Certain of our contracts with service obligations provide for fees based on usage, capacity or volume. We satisfy these performance obligations and recognize the related revenue at the point in time, or over the period, when the services are rendered. Our Hughes segment also sells and leases communications equipment to its customers. Revenue from equipment sales generally is recognized based upon shipment ~~of the equipment.~~terms. Our equipment sales contracts typically include standard product warranties, but generally do not provide for returns or refunds. Revenue for extended warranties is recognized ratably over the extended warranty period. For contracts with multiple performance obligations, we typically allocate the contract’s transaction price to each performance obligation based on their relative standalone selling prices. When the standalone selling price is not observable, our primary method used to estimate standalone selling price is the expected cost plus a margin. Our contracts generally require customer payments to be made at or shortly after the time we transfer control of goods or perform the services.

In addition to equipment and service offerings, our Hughes segment also enters into long-term contracts to design, develop, construct and install complex telecommunication networks ~~to customers in its~~for mobile system operators and enterprise ~~and mobile satellite systems markets.~~customers. Revenue from such contracts is generally recognized over time atas a measure of progress that depicts the transfer of control of the goods or services to the customer. Depending on the nature of the arrangement, we measure progress toward contract completion using an appropriate input method or output method. Under the input method, we recognize the transaction price as revenue based on the ratio of costs incurred to estimated total costs at completion. Under the output method, revenue and cost of sales are recognized as products are delivered based on the expected profit for the entire agreement. Profit margins on long-term contracts generally are based on estimates of revenue and costs at completion. We review and revise our estimates periodically and recognize related adjustments in the period in which the revisions are made. Estimated losses on contracts are recorded in the period in which they are identified. We generally receive interim payments as work progresses, although for some contracts, we may be entitled to receive an advance payment.

ESS Segment

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~~ESS~~

~~Our~~Generally, our ESS segment provides satellite operations through leasing arrangements and satellite services on a full-time and/or occasional-use basis to DISH Network and Dish Mexico, as well as government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. Our ESS segment also provides telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and technical consulting services that are billed by the hour. Generally, our service contracts with customers contain a single performance obligation and, therefore, there is no need to allocate the transaction price. We transfer control and recognize revenue for satellite services at the point in time or over the period when the services are rendered.

Lease Revenue

We lease satellite capacity, communications equipment and real estate to certain of our customers. We identify and determine the classification of such leases as operating leases or sales-type leases. A lease is classified as a sales-type lease if it meets the criteria for a finance lease; otherwise it is classified as an operating lease. Some of our leases are embedded in contracts with customers that include non-lease performance obligations. For such contracts, except where we have elected otherwise, we allocate consideration in the contract between lease and non-lease components based on their relative standalone selling prices. We elected an accounting policy to not separate the lease of equipment from related services in our HughesNet satellite internet service (the “HughesNet service”) contracts with customers and account for all revenue from such contracts as non-lease service revenue. Assets subject to operating leases remain in Property and equipment, net and continue to be depreciated. Assets subject to sales-type leases are derecognized from Property and equipment, net at lease commencement and a net investment in the lease asset is recognized in Trade accounts receivable and contract assets, net and Other non-current assets, net.

Operating lease revenue is generally recognized on a straight-line basis over the lease term. Sales-type lease revenue and a corresponding receivable generally are recognized at lease commencement based on the present value of the future lease payments and related interest income on the receivable is recognized over the lease term. Payments under sales-type leases are discounted using the interest rate implicit in the lease or our incremental borrowing rate if the interest rate implicit in the lease cannot be reasonably determined. We report revenue from sales-type leases at the commencement date in Equipment revenue and periodic interest income in Services and other revenue. We report operating lease revenue in Services and other revenue.

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Other

Sales and Value Added Taxes, Universal Service Fees and other taxes that we collect concurrent with revenue producing activities are excluded from ~~revenue.~~revenue, and included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost after control over a product has transferred to the customer and are included in Cost of sales - equipment in ~~our~~the Consolidated Statements of Operations ~~and Comprehensive Income (Loss)~~ at the time of shipment.

~~Contract Balances~~

Cost of Sales - Services and Other

Cost of sales - services and other in the Consolidated Statements of Operations primarily consists of costs of satellite capacity and services, hub infrastructure, customer care, wireline and wireless capacity and direct labor costs associated with the services provided and is generally charged to expense as incurred.

~~Trade Accounts Receivable~~

Cost of Sales - Equipment

Cost of sales - equipment in the Consolidated Statements of Operations primarily consists of inventory costs, including freight and royalties, and is generally recognized at the point in time control of the equipment is passed to the customer and related revenue is recognized.

~~Trade accounts receivable includes~~Additionally, customer-related research and development costs are incurred in connection with the specific requirements of a customer’s order; in such instances, the amounts ~~billed~~for these customer funded development efforts are also included in Cost of sales - equipment in the Consolidated Statements of Operations.

Stock-based Compensation Expense

Stock-based compensation expense is recognized based on the fair value of stock awards ultimately expected to vest. Forfeitures are estimated at the time of grant and ~~currently due~~revised, if necessary, in subsequent periods if actual forfeitures differ from ~~customers and represents our unconditional rights~~those estimates. Compensation expense for awards with service conditions only is recognized on a straight-line basis over the requisite service period for the entire award. Compensation expense for awards subject to ~~consideration arising from our~~ performance under our customer contracts. Trade accounts receivable also includes amounts due from customers under our leasing arrangements. We make ongoing estimates relating to the collectibility of our trade accounts receivable and maintain an allowance for estimated losses resulting from the inability of our customers to make the required payments. In determining the amountconditions is recognized only when satisfaction of the ~~allowance, we consider historical levels of credit losses~~performance condition is probable.

Advertising Costs

Advertising costs are expensed as incurred and ~~make judgments about the creditworthiness of our customers based on ongoing credit evaluations. Past due trade accounts receivable balances~~ are ~~written off when our internal collection efforts have been unsuccessful. Bad debt expense related to our trade accounts receivable and other contract assets is~~ included in Selling, general and administrative expenses in ~~our~~the Consolidated Statements of ~~Operations and Comprehensive Income (Loss).~~Operations.

~~Contract Assets~~

Research and ~~Contract Liabilities~~Development

~~Contract assets represent revenue that we have recognized~~Research and development costs, not incurred in ~~advance of billing the~~connection with customer ~~and~~requirements, are ~~included in~~ ~~Trade accounts receivable and contract assets, net~~ or ~~Other noncurrent assets, net~~ in our Consolidated Balance Sheets based on the expected timing of customer payment. Our contract assets include amounts that we referred to as Contracts in Process in prior periods. Our contract assets typically relate to our long-term contracts where we recognize revenue using the cost-based input method and the revenue recognized exceeds the amount billed to the customer.generally expensed when incurred.

Debt Issuance Costs

~~Contract liabilities consist~~Costs of ~~advance payments~~issuing debt generally are deferred and ~~billings in excess of revenue recognized under customer contracts and are~~amortized utilizing the effective interest method, with amortization included in ~~Contract liabilities~~ or ~~Other noncurrent liabilities~~Interest expense, net of amounts capitalized in ~~our~~the Consolidated Statements of Operations. We report unamortized debt issuance costs as a reduction of the related long-term debt in the Consolidated Balance ~~Sheets based on the timing of when we expect to recognize revenue.~~ ~~Contract liabilities~~ ~~include amounts that we referred to as deferred revenue in prior periods. We recognize contract liabilities as revenue after all revenue recognition criteria have been met.~~Sheets.

Foreign Currency

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~~Contract Acquisition and Fulfillment Costs~~

~~Contract Acquisition Costs~~

Our contract acquisition costs represent incremental direct costs of obtaining a contract and consist primarily of sales incentives paid to employees and third-party representatives. When we determine that our contract acquisition costs are recoverable, we defer and amortize the costs over the contract term, or over the estimated life of the customer relationship if anticipated renewals are expected and the incentives payable upon renewal are not commensurate with the initial incentive. We amortize contract acquisition costs in proportion to the revenue to which the costs relate. We expense sales incentives as incurred if the expected amortization period is one year or less. Unamortized contract acquisition costs are included in ~~Other noncurrent assets, net~~ ~~in our Consolidated Balance Sheets and related amortization expense is included in~~ ~~Selling, general and administrative expenses~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss).~~

~~Contract Fulfillment Costs~~

We recognize costs to fulfill a contract as an asset when the costs relate directly to a specific contract, the costs generate or enhance our resources that will be used in satisfying future performance obligations and the costs are expected to be recovered. We may incur such costs on certain contracts that require initial setup activities in advance of the transfer of goods or services to the customer. We amortize these costs in proportion to the revenue to which the costs relate. Unamortized contract fulfillment costs are included in ~~Other noncurrent assets, net~~ ~~in our Consolidated Balance Sheets and related amortization expense is included in~~ ~~Cost of sales - services and other~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss).~~

~~Foreign Currency~~

The functional currency for certain of our foreign operations is determined to be the local currency. Accordingly, we translate assets and liabilities of these foreign entities from their local currencies to U.S. dollars using period-end exchange rates and translate income and expense accounts at monthly average rates. The resulting translation adjustments are reported ~~in other comprehensive income (loss)~~ as Foreign currency translation adjustments in ~~our~~the Consolidated Statements of ~~Operations and~~ Comprehensive Income (Loss). Except in certain uncommon circumstances, we have not recorded deferred income taxes related to our foreign currency translation adjustments.

Gains and losses resulting from the re-measurement of ~~monetary assets and liabilities~~transactions denominated in foreign currencies ~~into the functional currency~~ are recognized in ~~Other,~~Foreign currency transaction gains (losses), net ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss).~~

~~Cash and Cash Equivalents~~

We consider all liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash equivalents as of December 31, 2018 and 2017 primarily consisted of commercial paper, government bonds, corporate notes, and money market funds. The amortized cost of these investments approximates their fair value.

~~Inventory~~

Inventory is stated at the lower of cost, determined using the first-in, first-out (“FIFO”) method, or net realizable value. Cost of inventory consists primarily of materials, direct labor and indirect overhead incurred in the procurement and manufacturing of our products. We use standard costing methodologies in determining the cost of certain of our finished goods and work-in-process inventories. We determine net realizable value using our best estimates of future use or recovery, considering the aging and composition of inventory balances, the effects of technological and/or design changes, forecasted future product demand based on firm or near-firm customer orders, and alternative means of disposition of excess or obsolete items. We recognize losses within operating income when we determine that the cost of inventory and commitments to purchase inventory exceed net realizable value.

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~~Capitalized Software Costs~~

~~Internal-Use Software~~

Costs related to the procurement and development of software for internal-use are capitalized and amortized using the straight-line method over the estimated useful life of the software, not in excess of five years. Capitalized costs of internal-use software are included in ~~Property and equipment, net~~ ~~in our Consolidated Balance Sheets.~~

~~Externally Marketed Software~~

Costs related to the procurement and development of software for externally marketed software are capitalized and amortized using the straight-line method over the estimated useful life of the software, not in excess of five years. Capitalized costs of externally marketed software are included in ~~Other noncurrent assets, net~~ in our Consolidated Balance Sheets. Externally marketed software generally is installed in the equipment we sell or lease to customers. We conduct software program reviews for externally marketed capitalized software costs at least annually, or as events and circumstances warrant such a review, to determine if capitalized software development costs are recoverable and to ensure that costs associated with programs that are no longer generating revenue are expensed.

~~Marketable Investment Securities~~

~~Our marketable investment securities portfolio consists of investments in debt and equity instruments with readily determinable fair values.~~

~~Debt Securities~~

We classify all of our debt securities as available for sale based on our investment strategy for the securities. Generally, we recognize periodic changes in the difference between fair value and amortized cost in ~~Unrealized gains on available-for-sale securities and other~~ in our Consolidated Statements of Operations and Comprehensive Income (Loss). Realized gains and losses upon sales of debt securities are reclassified from other comprehensive income (loss) and recognized on the trade date in ~~Gains and losses on investments, net~~ in our Consolidated Statements of Operations and Comprehensive Income (Loss). We use the FIFO method to determine the cost basis on sales of debt securities. Interest income from debt securities is reported in ~~Interest income~~ in our Consolidated Statements of Operations and Comprehensive Income (Loss). We could realize proceeds from certain investments prior to their contractual maturity if we sell these securities before such maturity.

We evaluate our available-for-sale debt securities portfolio periodically to determine whether declines in the fair value of these securities are other-than-temporary. Our evaluation considers, among other things, the length of time and the extent to which the fair value of such security has been lower than amortized cost, market and company-specific factors related to the security and our intent and ability to hold the investment to maturity or when it recovers its value. We generally consider a decline to be other-than-temporary when: (i) we intend to sell the security, (ii) it is more likely than not that we will be required to sell the security before maturity or when it recovers its value, or (iii) we do not expect to recover the amortized cost of the security at maturity. Declines in the fair value of available-for-sale debt securities that are determined to be other-than-temporary are reclassified from other comprehensive income (loss) and recognized in ~~Net income, in our Consolidated Statements of Operations and Comprehensive Income (Loss), thus establishing a new cost basis for the investment.~~

Additionally, from time to time we make strategic investments in corporate debt securities. We may elect to account for these investments using the fair value option when it reduces accounting complexity. When we have made this election, we recognize periodic changes in fair value of these investments in ~~Gains (losses) on investments, net~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss). Interest income from these securities is reported in~~ ~~Interest income~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss).~~

~~Equity Securities~~

Prior to January 1, 2018, we classified our marketable equity securities as available-for-sale or trading securities, depending on our investment strategy for the securities. For available-for-sale securities, we recognized periodic

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~~changes in the difference between fair value and cost in~~ ~~Unrealized gains (losses) on available-for-sale securities and other~~ in our Consolidated Statements of Operations and Comprehensive Income (Loss). Realized gains and losses upon sale of available-for-sale securities were reclassified from other comprehensive income (loss) and recognized on the trade date in Gains (losses) on investments, net in our Consolidated Statements of Operations and Comprehensive Income (Loss). We used the FIFO method to determine the cost basis on sales of available-for-sale securities. For trading securities, we recognized periodic changes in the fair value of the securities in ~~Gains and losses on investments, net~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss).~~

~~Effective January 1, 2018, we adopted~~ ~~Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments (the “New Investment Standard”), which established new requirements for investments in equity securities in~~ ~~ASC Topic 321, Investments - Equity Securities~~. Accordingly, beginning in 2018, we recognize periodic changes in the fair value of all of our equity securities with a readily determinable fair value that are not accounted for using the equity method in ~~Gains and losses on investments, net~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss). We recognize dividend income on equity securities on the ex-dividend date and report such income in~~ ~~Other, net~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss).~~

~~Investments in Unconsolidated Entities~~

~~Our investments in unconsolidated entities consist of investments in equity securities that are not publicly traded and do not have readily determinable fair values.~~

~~Equity Method~~

We use the equity method to account for investments when we have the ability to exercise significant influence on the operating decisions of the investee. Such investments in unconsolidated entities are initially recorded at cost and subsequently adjusted for our proportionate share of the net earnings or loss of the investee, which is reported in ~~Equity in earnings of unconsolidated affiliate~~ in our Consolidated Statements of Operations and Comprehensive Income (Loss). The carrying amount of such investments may include a component of goodwill if the cost of our investment exceeds the fair value of the underlying identifiable assets and liabilities of the investee. Dividends received from equity method investees reduce the carrying amount of the investment.

We defer, to the extent of our ownership interest in the investee, recognition of intra-entity profits on sales of equipment to the investee until the investee has charged the cost of the equipment to expense in a subsequent sale to a third party or through depreciation. In these circumstances, we report the gross amounts of revenue and cost of sales in the Consolidated Statements of ~~Operations and Comprehensive Income (Loss) and include the intra-entity profit eliminations within~~ ~~Equity in earnings of unconsolidated affiliate~~.Operations.

~~Other Investments~~

Prior to January 1, 2018, we accounted for other investments without a readily determinable fair value using the cost method. In connection with our adoption of the New Investment Standard as of January 1, 2018, we have elected to measure such investments at cost, adjusted for changes resulting from impairments and observable price changes in orderly transactions for identical or similar securities of the same issuer. We consider information in periodic financial statements and other documentation provided by our investees and we may make inquiries of investee management to determine whether observable price changes have occurred.

~~Impairment Considerations~~

We evaluate all of our investments in unconsolidated entities periodically to determine whether events or changes in circumstances have occurred that may have a significant adverse effect on the fair value of the investment. As part of our evaluation, we review available information such as business plans and current financial statements of these companies for factors that may indicate an impairment of our investments. Such factors may include, but are not limited to, unprofitable operations, negative cash flow, material litigation, violations of debt covenants, bankruptcy and changes in business strategy. When we determine that an investment is impaired, we adjust the carrying amount of the investment to its estimated fair value and recognize the impairment loss in ~~Gains and losses on investments, net~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss).~~

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~~Property and Equipment~~

Property and equipment is stated at cost, less accumulated depreciation. Depreciation is recorded on a straight-line basis over lives ranging from one to 40 years. The cost of our satellites includes construction costs, including the present value of in-orbit incentives payable to the satellite manufacturer, launch costs, capitalized interest, and related insurance premiums. Repair and maintenance costs are charged to expense when incurred. Costs of renewals and betterments are capitalized.

~~Impairment of Long-lived Assets~~

We review our long-lived assets for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For assets held and used in operations, the asset is not recoverable if the carrying amount of the asset exceeds its undiscounted estimated future net cash flows. When an asset is not recoverable, we adjust the carrying amount of such asset to its estimated fair value and recognize the impairment loss in ~~Net Income~~ ~~in our Consolidated Statements of Operations. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell.~~

~~Goodwill~~

Goodwill represents the excess of the cost of acquired businesses over the estimated fair value assigned to the identifiable assets acquired and liabilities assumed. We do not amortize goodwill, but test goodwill for impairment annually, or more frequently if circumstances indicate impairment may exist. Our goodwill as of December 31, 2018 and 2017 is assigned to reporting units of our Hughes segment. We test such goodwill for impairment in the second fiscal quarter. The goodwill impairment test involves a comparison of the fair value of a reporting unit with its carrying amount, including goodwill. We typically estimate fair value of reporting units using discounted cash flow techniques, which includes significant assumptions about prospective financial information, terminal value and discount rates (Level 3 inputs). If the reporting unit’s carrying amount exceeds its estimated fair value, we recognize an impairment loss equal to such excess, not to exceed the carrying amount of goodwill. We may bypass the quantitative goodwill impairment test if we determine, based on a qualitative assessment, that it is more likely than not that the fair value of a reporting unit exceeds its carrying amount including goodwill.

~~Regulatory Authorizations and Other Intangible Assets~~

At acquisition and periodically thereafter, we evaluate our intangible assets to determine whether their useful lives are finite or indefinite. We consider our intangible assets to have indefinite lives when no significant legal, regulatory, contractual, competitive, economic, or other factors limit their useful lives.

Intangible assets that have finite lives are amortized over their estimated useful lives, ranging from approximately one to 20 years. When we expect to incur significant costs to renew or extend finite-lived intangible assets, we amortize the total initial and estimated renewal costs over the combined initial and expected renewal terms. In such instances, actual renewal costs are capitalized when they are incurred. We test intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable (see Impairment of Long-lived Assets above).

We do not amortize our indefinite-lived intangible assets, but test those assets for impairment annually or more frequently if circumstances indicate that it is more likely than not that the asset may be impaired. Costs incurred to maintain or renew indefinite-lived intangible assets are expensed as incurred.

Our indefinite-lived intangible assets include Federal Communications Commission (“FCC”) authorizations and certain other contractual or regulatory rights to use spectrum at specified orbital locations (collectively “Regulatory Authorizations”). We have determined that our FCC authorizations generally have indefinite useful lives due to the following:

~~FCC authorizations are non-depleting assets;~~

~~renewal satellite applications generally are authorized by the FCC subject to certain conditions, without substantial cost under a stable regulatory, legislative, and legal environment;~~

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~~expenditures required to maintain the authorization are not significant; and~~

~~we intend to use these authorizations indefinitely.~~

~~Debt Issuance Costs~~

~~Costs of issuing debt generally are deferred and amortized utilizing the effective interest method with amortization included in~~ ~~Interest expense, net of amounts capitalized~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss). We report unamortized debt issuance costs as a reduction of the related long-term debt in our Consolidated Balance Sheets.~~

Income Taxes

We are included in the consolidated federal income tax return of EchoStar. We recognize a provision or benefit for income taxes currently payable or receivable and for income tax amounts deferred to future periods based upon a separate return allocation method which results in income tax expense that approximates the expense that would result if we were a stand-alone entity. Deferred tax assets and liabilities ~~are recorded based on enacted~~reflect the effects of tax ~~laws for~~losses, credits, and the ~~estimated~~ future income tax effects of temporary differences ~~that exist~~ between ~~the financial reporting~~U.S. GAAP carrying ~~amount and tax basis~~amounts of existing assets and ~~liabilities.~~liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are offset by valuation allowances when we determine it is more likely than not that such deferred tax assets will not be realized in the foreseeable future. We determine deferred tax assets and liabilities separately for each taxing jurisdiction and report the net amount for each jurisdiction as a ~~noncurrent~~non-current asset or liability in ~~our~~the Consolidated Balance Sheets.

From time to time, we engage in transactions where the income tax consequences are uncertain. We recognize tax benefits when, in management’s judgment, a tax filing position is more likely than not to be sustained if challenged by the tax authorities. For tax positions that meet the more-likely-than-not threshold, we may not recognize a portion of a tax benefit depending on management’s assessment of how the tax position will ultimately be settled. Unrecognized tax benefits generally are netted against the deferred tax assets associated with our net operating loss carryforwards. We adjust our estimates periodically based on ongoing examinations by, and settlements with, various taxing authorities, as well as changes in tax laws, regulations and precedent. Estimates of our uncertain tax positions are made based upon prior experience and are updated in light of changes in facts and circumstances. However, due to the uncertain and complex application of tax regulations, it is possible that the ultimate resolution of audits may result in liabilities which could be materially different from these estimates. In such an event, we will record additional income tax provision or benefit in the period in which such resolution occurs. We classify interest and penalties, if any, associated with our unrecognized tax benefits as a component of income tax provision or benefit.

~~Cost of Sales - Services and Equipment~~

Lessee Accounting

~~Cost of sales - services and other~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss) primarily consists of costs of~~We lease real estate, satellite capacity and ~~services, hub infrastructure, customer care, wireline~~equipment in the conduct of our business operations. For contracts entered into on or after January 1, 2019, at contract inception, we assess whether the contract is, or contains, a lease. Generally, we determine that a lease exists when (i) the contract involves the use of a distinct identified asset, (ii) we obtain the right to substantially all economic benefits from use of the asset and ~~wireless capacity,~~(iii) we have the right to direct the use of the asset. A lease is classified as a finance lease when one or more of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset or (v) the asset is of a specialized nature and ~~direct labor costs associated with~~there is not expected to be an alternative use to the ~~services provided.~~lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any of these criteria. Our operating leases consist primarily of leases for office space, data centers and satellite ground facilities. Our finance leases consist primarily of leases for satellite capacity. ~~Cost of sales - services and other~~ ~~generally are charged to expense as incurred.~~ ~~Cost of sales - equipment~~ ~~in our Consolidated Statements of Operations and Comprehensive Income (Loss) primarily consists of inventory costs, including freight and royalties.~~ ~~Cost of sales - equipment~~ ~~generally is recognized as products are delivered to customers and related revenue is recognized.~~

~~Research~~At the lease commencement date, we recognize a right-of-use asset and ~~Development~~

~~Costs incurred in research~~a lease liability for all leases, except short-term leases with an original term of 12 months or less. The right-of-use asset represents the right to use the leased asset for the lease term including any renewal options we are reasonably certain to exercise. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any prepayments to the lessor and ~~development activities~~initial direct costs such as brokerage commissions, less any lease incentives received. All right-of-use assets are generally expensed as incurred. A significant portion of our research and development costs are incurred in connection with the specific requirements of a customer’s order. In such instances, the amounts for these customer funded development efforts are included in Cost of sales-equipment in our Consolidated Statements of Operations and Comprehensive Income (Loss).

~~Advertising Costs~~

~~Advertising costs are expensed as incurred and are included in~~ ~~Selling, general and administrative expenses~~ ~~in Consolidated Statements of Operations and Comprehensive Income (Loss).~~

periodically

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reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the minimum lease payments, discounted using an estimate of our incremental borrowing rate for a collateralized loan with the same term as the underlying lease. The incremental borrowing rates used for the initial measurement of lease liabilities are based on the original lease terms.

We report operating lease right-of-use assets in Operating lease right-of-use assets and operating lease liabilities in Accrued expenses and other current liabilities and Operating lease liabilities. We report finance lease right-of-use assets in Property and equipment, net and finance lease liabilities in Current portion of long-term debt and finance lease obligations and Long-term debt and finance lease obligations, net of current portion.

Minimum lease payments included in the measurement of lease liabilities consist of (i) fixed lease payments for the non-cancelable lease term, (ii) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised and (iii) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. Certain of our real estate lease agreements require payments for non-lease costs such as utilities and common area maintenance. We elected an accounting policy to not account for such payments separately from the related lease payments. Our policy election results in a higher initial measurement of lease liabilities when such non-lease payments are fixed amounts. Certain of our real estate lease agreements require variable lease payments that do not depend on an underlying index or rate, such as sales and value-added taxes and our proportionate share of actual property taxes, insurance and utilities, which are recognized in operating expenses as incurred.

Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. Lease expense for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense on the lease liability based on the discount rate at lease commencement. For both operating and finance leases, lease payments are allocated between a reduction of the lease liability and interest expense. Amortization of the right-of-use asset for operating leases reflects amortization of the lease liability, any differences between straight-line expense and related lease payments during the accounting period, and any impairments.

Business Combinations

We account for all business combinations that result in our control over another entity by using the acquisition method of accounting, which requires us to allocate the purchase price of the acquired business to the identifiable tangible and intangible assets acquired and liabilities assumed, including contingent consideration, and non-controlling interests, based upon their estimated fair values at the date of acquisition. The difference between the purchase price and the excess of the aggregate estimated fair values of assets acquired and liabilities assumed is recorded as goodwill. In determining the estimated fair values of assets acquired and liabilities assumed in a business combination, we use various recognized valuation methods including present value modeling, referenced market values, where available and cost based approaches. Valuations are performed by management or independent valuation specialists under management’s supervision, where appropriate.

Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date, including our estimates for intangible assets, contractual obligations assumed and contingent consideration, where applicable. While we believe the assumptions and estimates we have made are reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired business and are inherently uncertain and subject to refinement.

We believe that the estimated fair values assigned to the assets we have acquired and liabilities we have assumed are based on reasonable and appropriate assumptions. While we believe our estimates and assumptions are reasonable and appropriate, they are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets we have acquired and liabilities we have assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the estimated fair values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments would be recorded in the Consolidated Statements of Operations. In addition, results of operations of the acquired company are included in the our results from the date of the acquisition forward and include amortization expense arising from acquired intangible assets. We expense all costs as incurred related to or involved with an acquisition in Other, net, in the Consolidated Statements of Operations.

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Cash and Cash Equivalents

We consider all liquid investments purchased with an original maturity of less than 90 days to be cash equivalents. Cash equivalents as of December 31, 2019 and 2018 primarily consisted of commercial paper, government bonds, corporate notes and money market funds. The amortized cost of these investments approximates their fair value.

Marketable Investment Securities

Debt Securities

We account for our debt securities as available-for-sale or using the fair value option based on our investment strategy for the securities. For available-for-sale debt securities, we recognize periodic changes in the difference between fair value and amortized cost in Unrealized gains (losses) on available-for-sale securities in the Consolidated Statements of Comprehensive Income (Loss). Gains and losses realized upon sales of available-for-sale debt securities are reclassified from other comprehensive income (loss) and recognized on the trade date in Gains (losses) on investments, net in the Consolidated Statements of Operations. We use the first-in, first-out (“FIFO”) method to determine the cost basis on sales of available-for-sale debt securities. Interest income from available-for-sale debt securities is reported in Interest income in the Consolidated Statements of Operations.

We periodically evaluate our available-for-sale debt securities portfolio to determine whether any declines in the fair value of these securities are other-than-temporary. Our evaluation considers, among other things, (i) the length of time and extent to which the fair value of such security has been lower than amortized cost, (ii) market and company-specific factors related to the security and (iii) our intent and ability to hold the investment to maturity or when it recovers its value. We generally consider a decline to be other-than-temporary when (i) we intend to sell the security, (ii) it is more likely than not that we will be required to sell the security before maturity or when it recovers its value or (iii) we do not expect to recover the amortized cost of the security at maturity. Declines in the fair value of available-for-sale debt securities that are determined to be other-than-temporary are reclassified from other comprehensive income (loss) and recognized in Net income (loss) in the Consolidated Statements of Operations, thus establishing a new cost basis for the investment.

From time to time we make strategic investments in marketable corporate debt securities. Generally, we elect to account for these debt securities using the fair value option because it results in consistency in accounting for unrealized gains and losses for all securities in our portfolio of strategic investments. When we elect the fair value option for investments in debt securities, we recognize periodic changes in fair value of these securities in Gains (losses) on investments, net in the Consolidated Statements of Operations. Interest income from these securities is reported in Interest income in the Consolidated Statements of Operations.

Equity Securities

We account for our equity securities with readily determinable fair values at fair value and recognize periodic changes in the fair value in Gains (losses) on investments, net in the Consolidated Statements of Operations. We recognize dividend income on equity securities on the ex-dividend date and report such income in Other, net in the Consolidated Statements of Operations.

Restricted Marketable Investment Securities

Restricted marketable investment securities that are pledged as collateral for our letters of credit and surety bonds are included in Other non-current assets, net in the Consolidated Balance Sheets. Restricted marketable securities are accounted for in the same manner as marketable securities that are not restricted, but are presented differently in the Consolidated Balance Sheets due to the restrictions.

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Trade Accounts Receivable

Trade accounts receivable includes amounts billed and currently due from customers and represents our unconditional rights to consideration arising from our performance under our customer contracts. Trade accounts receivable also includes amounts due from customers under our leasing arrangements. We make ongoing estimates relating to the collectability of our trade accounts receivable and maintain an allowance for estimated losses resulting from the inability of our customers to make the required payments. In determining the amount of the allowance, we consider historical levels of credit losses and make judgments about the creditworthiness of our customers based on ongoing credit evaluations. Past due trade accounts receivable balances are written off when our internal collection efforts have been unsuccessful. Bad debt expense related to our trade accounts receivable and other contract assets is included in Selling, general and administrative expenses in the Consolidated Statements of Operations.

Contract Assets

Contract assets represent revenue that we have recognized in advance of billing the customer and are included in Trade accounts receivable and contract assets, net or Other non-current assets, net in the Consolidated Balance Sheets based on the expected timing of customer payment. Our contract assets typically relate to our long-term contracts where we recognize revenue using the cost-based input method and the revenue recognized exceeds the amount billed to the customer.

Contract Acquisition Costs

Our contract acquisition costs represent incremental direct costs of obtaining a contract and consist primarily of sales incentives paid to employees and third-party representatives. When we determine that our contract acquisition costs are recoverable, we defer and amortize the costs over the contract term, or over the estimated life of the customer relationship if anticipated renewals are expected and the incentives payable upon renewal are not commensurate with the initial incentive. We amortize contract acquisition costs in proportion to the revenue to which the costs relate. We expense sales incentives as incurred if the expected amortization period is one year or less. Unamortized contract acquisition costs are included in Other non-current assets, net in the Consolidated Balance Sheets and related amortization expense is included in Selling, general and administrative expenses in the Consolidated Statements of Operations.

Inventory

Inventory is stated at the lower of cost or net realizable value. Cost of inventory is determined using the FIFO method and consists primarily of materials, direct labor and indirect overhead incurred in the procurement and manufacturing of our products. We use standard costing methodologies in determining the cost of certain of our finished goods and work-in-process inventories. We determine net realizable value using our best estimates of future use or recovery, considering the aging and composition of inventory balances, the effects of technological and/or design changes, forecasted future product demand based on firm or near-firm customer orders and alternative means of disposition of excess or obsolete items. We recognize losses within Cost of sales - equipment in the Consolidated Statements of Operations when we determine that the cost of inventory and commitments to purchase inventory exceed net realizable value.

Property and Equipment

Satellites

Satellites are stated at cost, less accumulated depreciation. Depreciation is recorded on a straight-line basis over their estimated useful lives. The cost of our satellites includes construction costs, including the present value of in-orbit incentives payable to the satellite manufacturer, launch costs, capitalized interest and related insurance premiums. We depreciate our owned satellites on a straight-line basis over the estimated useful life of each satellite.

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We have satellites acquired under finance leases. The recorded costs of those satellites are the present values of all lease payments. We amortize our finance lease right-of-use satellites over their respective lease terms.

Our satellites may experience anomalies from time to time, some of which may have a significant adverse effect on their remaining useful lives, the commercial operation of the satellites or our operating results or financial position.

We evaluate our satellites for impairment and test for recoverability whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Certain anomalies may be considered a significant adverse change in the physical condition of a particular satellite. However, based on redundancies designed within each satellite, certain of these anomalies may not be considered to be significant events requiring a test of recoverability.

We generally do not carry in-orbit insurance on our satellites and payloads because we have assessed that the cost of insurance is not economical relative to the risk of failures. Therefore, we generally bear the risk of any in-orbit failures. However, we may be required to carry insurance on specific satellites and payloads per the terms of certain agreements. We will continue to assess circumstances going forward and make insurance-related decisions on a case-by-case basis.

Other Property and Equipment

Other property and equipment are stated at cost, less accumulated depreciation. Depreciation is recorded on a straight-line basis over their estimated useful lives. Other property and equipment includes: land; buildings and improvements; furniture, fixtures, equipment and internal-use software; customer premises equipment; and construction in process. Costs related to the procurement and development of software for internal-use are capitalized and amortized using the straight-line method over the estimated useful life of the software, not in excess of five years. Repair and maintenance costs are charged to expense when incurred.

Goodwill

Goodwill represents the excess of the cost of acquired businesses over the estimated fair values assigned to the identifiable assets acquired and liabilities assumed. We test goodwill for impairment annually in our second fiscal quarter, or more frequently if indicators of impairment may exist. All of our goodwill is assigned to our Hughes segment, as it was generated through EchoStar’s acquisition of Hughes Communications, Inc. (“Hughes Communications”) and its subsidiaries in 2011 (the “Hughes Acquisition”), and the agreement with Al Yah Satellite Communications Company PrJSC (“Yahsat”) pursuant to which, in November 2019, Yahsat contributed its satellite communications services business in Brazil to one of our Brazilian subsidiaries in exchange for a 20% equity ownership interest in that subsidiary (the “Yahsat Brazil JV Transaction”).

We consider qualitative factors to assess if it is more likely than not that the fair value for goodwill is below the carrying amount. We may also elect to bypass the qualitative assessment and perform a quantitative assessment. In conducting a qualitative assessment, we analyze a variety of events or factors that may influence the fair value of the reporting unit. There has been no impairment to date.

Regulatory Authorizations

Finite Lived

We have regulatory authorizations that are not related to the Federal Communications Commission (“FCC”) and have determined that they have finite lives due to uncertainties about the ability to extend or renew their terms.

Finite lived regulatory authorizations are amortized over their estimated useful lives on a straight-line basis. Renewal costs are usually capitalized when they are incurred.

Indefinite Lived

We also have indefinite lived regulatory authorizations that primarily consist of FCC authorizations and certain other contractual or regulatory rights to use spectrum at specified orbital locations. We have determined that our FCC authorizations generally have indefinite useful lives based on the following:

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•	FCC authorizations are non-depleting assets;


•	Renewal satellite applications generally are authorized by the FCC subject to certain conditions, without substantial cost under a stable regulatory, legislative and legal environment;


•	Expenditures required to maintain the authorization are not significant; and


•	We intend to use these authorizations indefinitely.

Costs incurred to maintain or renew indefinite-lived regulatory authorizations are expensed as incurred.

Other Intangible Assets

Our other intangible assets consist of customer relationships, patents, trademarks and licenses which are amortized using the straight-line method over their estimated useful lives. We evaluate the recoverability of intangible assets periodically by taking into account events or circumstances that indicate that the carrying amount of the assets may not be recoverable.

Impairment of Long-lived Assets

We review our long-lived assets for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For assets held and used in operations, the asset is not recoverable if the carrying amount of the asset exceeds its undiscounted estimated future net cash flows. When an asset is not recoverable, we adjust the carrying amount of such asset to its estimated fair value and recognize the impairment loss in Impairment of long-lived assets in the Consolidated Statements of Operations.

Other Investments

Equity Method Investments

We use the equity method to account for investments when we have the ability to exercise significant influence on the operating decisions of the affiliate. Such investments are initially recorded at cost and subsequently adjusted for our proportionate share of the net earnings or loss of the investee, which is reported in Equity in earnings (losses) of unconsolidated affiliates, net in the Consolidated Statements of Operations. During the fourth quarter of 2019, we changed our accounting policy to record our share of the net earnings or losses of these affiliates on a three-month lag. This change was immaterial to these Consolidated Financial Statements. Additionally, the carrying amount of such investments includes a component of goodwill when the cost of our investment exceeds the fair value of the underlying identifiable assets and liabilities of the affiliate. Lastly, dividends received from these affiliates reduces the carrying amount of our investment.

Other Equity Investments

We generally measure investments in non-publicly traded equity instruments without a readily determinable fair value at cost adjusted for observable price changes in orderly transactions for the identical or similar securities of the same issuer and changes resulting from impairments, if any. Other equity instruments are measured to determine their value based on observable market information.

Impairment Considerations

We periodically evaluate all of our other investments to determine whether (i) events or changes in circumstances have occurred that may have a significant adverse effect on the fair value of the investment and (ii) if there has been observable price changes in orderly transactions for identical or similar securities of the same issuer. We consider information if provided to us by our investees such as current financial statements, business plans, investment documentation, capitalization tables, liquidation waterfalls, and board materials; and we may make additional inquiries of investee management.

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Indicators of impairment may include, but are not limited to, unprofitable operations, material loss contingencies, changes in business strategy, changes in the investees’ enterprise value and changes in the investees’ investment pricing. When we determine that one of our other investments is impaired we reduce its carrying value to its estimated fair value and recognize the impairment loss in Gains (losses) on investments, net in the Consolidated Statements of Operations. Additionally, when there has been an observable price change to a cost method investment, we adjust the carrying amount of the investment to its then estimated fair value and recognize the investment gain or loss in Gains (losses) on investments, net in the Consolidated Statements of Operations.

Externally Marketed Software

Costs related to the procurement and development of externally marketed software are capitalized and amortized using the straight-line method over the estimated useful life of the software, not in excess of five years. Capitalized costs of externally marketed software are included in Other non-current assets, net in the Consolidated Balance Sheets. Externally marketed software generally is installed in the equipment we sell or lease to customers. We conduct software program reviews for externally marketed capitalized software costs at least annually, or as events and circumstances warrant such a review, to determine if capitalized software development costs are recoverable and to ensure that costs associated with programs that are no longer generating revenue are expensed.

Contract Liabilities

Contract liabilities consist of advance payments and billings in excess of revenue recognized under customer contracts and are included in Contract liabilities or Other non-current liabilities in the Consolidated Balance Sheets based on the timing of when we expect to recognize revenue. We recognize contract liabilities as revenue after all revenue recognition criteria have been met.

Recently Adopted Accounting Pronouncements

Leases

We adopted ASU No. 2016-02 - Leases (Topic 842), as amended, codified as Accounting Standard Codification (“ASC 842”), as of January 1, 2019. The primary impact of ASC 842 on these Consolidated Financial Statements is the recognition of right-of-use assets and related liabilities in the Consolidated Balance Sheet for leases where we are the lessee. We elected to apply the requirements of the new standard prospectively on January 1, 2019 and did not restate these Consolidated Financial Statements for prior periods. Consequently, certain amounts reported in the Consolidated Balance Sheet as of December 31, 2019 are not comparable to those reported as of December 31, 2018 or earlier dates. Our adoption of ASC 842 did not have a material impact on our results of operations or cash flows for the year ended December 31, 2019.

Except for the new requirement to recognize assets and liabilities on the balance sheet for operating leases where we are the lessee, under our ASC 842 transition method, we continue to apply prior accounting standards to leases that commenced prior to 2019. We fully apply ASC 842 requirements only to leases that commenced or were modified on or after January 1, 2019. We elected certain practical expedients under our transition method, including elections to not reassess (i) whether a contract is or contains a lease and (ii) the classification of existing leases. We also elected not to apply hindsight in determining whether optional renewal periods should be included in the lease term, which in some instances may impact the initial measurement of the lease liability and the calculation of straight-line expense over the lease term for operating leases. As a result of our transition elections, there was no change in our recognition of revenue and expense for leases that commenced prior to 2019. In addition, the application of ASC 842 requirements to new and modified leases did not materially affect our recognition of revenue or expenses for the year ended December 31, 2019.

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Our adoption of ASC 842 resulted in the following adjustments to the Consolidated Balance Sheet effective January 1, 2019:



	Balance December 31, 2018		Adoption of ASC 842 Increase (Decrease)			Balance January 1, 2019

Other current assets	$	152,666	$	(28	)	$	152,638
Operating lease right-of-use assets	—		117,006			117,006
Other non-current assets, net	236,449		(7,272		)	229,177
Total assets	6,893,172		109,706			7,002,878
Accrued expenses and other current liabilities	157,654		14,444			172,098
Operating lease liabilities	—		99,133			99,133
Other non-current liabilities	71,647		(3,871		)	67,776
Total liabilities	4,500,677		109,706			4,610,383
Total liabilities and shareholders’ equity	6,893,172		109,706			7,002,878

Revenue Recognition and Financial Instruments

On January 1, 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers and related amendments (collectively, the “New Revenue Standard”). The New Revenue Standard established a comprehensive new model for revenue recognition, which is codified in Topic 606 (see Revenue Recognition above), and provided guidance for certain costs associated with customer contracts. We adopted the New Revenue Standard using the modified retrospective method for contracts that were not completed as of January 1, 2018. Accordingly, comparative information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods. Upon adoption of the New Revenue Standard, we recognized the cumulative effect of its initial application as a net increase to Accumulated earnings in ~~our~~the Consolidated Balance Sheets of $16 million, net of related income taxes. The adoption of the New Revenue Standard also impacted the timing of recognition of certain fees charged to our customers in our consumer markets; however, the adoption has not had, and we do not expect it to have, a material impact on the overall timing or amount of revenue recognition.

The primary impacts of the New Revenue Standard on our operating results relate to how we account for sales incentive costs. Historically, we charged sales incentives to expense as incurred, except for incentives related to the consumer business in our Hughes segment, which were initially deferred and subsequently amortized over the related service agreement term. Under the New Revenue Standard, we continue to defer incentives for our consumer business; however, we now amortize those incentives over the estimated customer life, which includes expected contract renewal periods. In addition, we now defer certain sales incentives related to other businesses in our Hughes segment and amortize those incentives over the related service agreement term. As a result of these changes, we have recognized additional contract acquisition costs on ~~our~~the Consolidated Balance Sheets and the costs generally are recognized as expenses over a longer period of time in ~~our~~the Consolidated Statements of ~~Operations and Comprehensive Income (Loss).~~Operations. The adoption of the New Revenue Standard by an unconsolidated entity had a similar impact on our investment in the unconsolidated entity, which we account for using the equity method.

Additionally, on January 1, 2018, we prospectively adopted the applicable requirements of the New Investment Standard. The New Investment Standard substantially revises standards for the recognition, measurement and presentation of financial instruments, including requiring all equity investments, except for investments in consolidated subsidiaries and investments accounted for using the equity method, to be measured at fair value with changes in the fair value recognized through earnings. The New Investment Standard permits an entity to elect to measure an equity security without a readily determinable fair value at its cost, adjusted for changes resulting from impairments and observable price changes in orderly transactions for identical or similar securities of the same issuer. It also amends certain disclosure requirements associated with equity investments and the fair value of financial instruments. Upon adoption of the New Investment Standard on January 1, 2018, we recorded a $0.4 million charge to Accumulated earnings to include net unrealized losses on our marketable equity securities then designated as available for sale, which previously were recorded in Accumulated other comprehensive loss in ~~our~~the Consolidated Balance Sheets. For

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

our equity investments without a readily determinable fair value that were previously accounted for using the cost method, we have elected to measure such securities at cost, adjusted for impairments and observable price changes. We expect our future net income or loss to be more volatile as a result of these changes in accounting for our investments in equity securities that were previously accounted for as available-for-sale or using the cost method.

~~F-16~~

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~~HUGHES SATELLITE SYSTEMS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~The cumulative effects of changes to the impacted line items on our Consolidated Balance Sheets as of January 1, 2018 for the adoption of these standards were as follows:~~

Balance at December 31, 2017 Adjustments Due to the Balance at January 1, 2018
New Revenue Standard New Investment Standard
(In thousands)
Assets:
Trade accounts receivable and contract assets, net $ 196,840
$ (7,103 ) $ —
$ 189,737
Other current assets $ 91,544
$ 533
$ —
$ 92,077
Other noncurrent assets, net $ 202,814
$ 22,545
$ —
$ 225,359
Total assets $ 6,857,350
$ 15,975
$ —
$ 6,873,325
Liabilities:

Contract liabilities $ 65,959
$ (1,542 ) $ —
$ 64,417
Accrued expenses and other $ 77,312
$ 255
$ —
$ 77,567
Deferred tax liabilities, net $ 439,631
$ 5,124
$ —
$ 444,755
Other noncurrent liabilities $ 107,627
$ (4,068 ) $ —
$ 103,559
Total liabilities $ 4,558,106
$ (231 ) $ —
$ 4,557,875
Shareholders’ Equity:
Accumulated other comprehensive loss $ (52,822 ) $ —
$ 433
$ (52,389 )
Accumulated earnings (losses) $ 582,683
$ 16,206
$ (433 ) $ 598,456
Total shareholders’ equity $ 2,299,244
$ 16,206
$ —
$ 2,315,450
Total liabilities and shareholders’ equity $ 6,857,350
$ 15,975
$ —
$ 6,873,325

Our adoption of these standards impacted the referenced line items on ~~our Consolidated Balance Sheets,~~the Statement of Operations and Statements of Comprehensive Income (Loss) as follows:

As of December 31, 2018
As Reported Adjustments Due to the Balances If We Had Not Adopted the New Standards
Balance Sheet New Revenue Standard New Investment Standard
(In thousands)
Assets:
Trade accounts receivable and contract assets, net $ 201,096
$ 8,379
$ —
$ 209,475
Other current assets $ 18,539
$ (533 ) $ —
$ 18,006
Other noncurrent assets, net $ 253,025
$ (35,314 ) $ —
$ 217,711
Total assets $ 6,893,172
$ (27,468 ) $ —
$ 6,865,704
Liabilities:
Contract liabilities $ 72,249
$ 878
$ —
$ 73,127
Accrued expenses and other $ 68,854
$ (255 ) $ —
$ 68,599
Deferred tax liabilities, net $ 488,736
$ (7,263 ) $ —
$ 481,473
Other noncurrent liabilities $ 101,140
$ 1,635
$ —
$ 102,775
Total liabilities $ 4,500,677
$ (5,005 ) $ —
$ 4,495,672
Shareholders’ Equity:
Accumulated other comprehensive loss $ (83,774 ) $ —
$ 366
$ (83,408 )
Accumulated earnings $ 693,957
$ (22,463 ) $ (366 ) $ 671,128
Total shareholders’ equity $ 2,392,495
$ (22,463 ) $ —
$ 2,370,032
Total liabilities and shareholders’ equity $ 6,893,172
$ (27,468 ) $ —
$ 6,865,704



	For the year ended December 31, 2018
	As Reported			Adjustments Due to the						Balances If We Had Not Adopted the New Standards
				New Revenue Standard			New Investment Standard

Statement of Operations:
Revenue:
Services and other revenue	$	1,561,426		$	2,323		$	—		$	1,563,749
Total revenue	1,766,836			2,323			—			1,769,159
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	559,838			2,738			—			562,576
Selling, general and administrative expenses	397,994			8,520			—			406,514
Total costs and expenses	1,588,854			11,258			—			1,600,112
Operating income (loss)	177,982			(8,935		)	—			169,047
Other income (expense):
Interest expense, net of amounts capitalized	(231,169		)	539			—			(230,630		)
Gains (losses) on investments, net	187			—			(800		)	(613		)
Total other income (expense), net	(171,447		)	539			(800		)	(171,708		)
Income (loss) from continuing operations before income taxes	6,535			(8,396		)	(800		)	(2,661		)
Income tax benefit (provision), net	(18,615		)	2,139			—			(16,476		)
Net income (loss) from continuing operations	(12,080		)	(6,257		)	(800		)	(19,137		)
Net income (loss)	97,343			(6,257		)	(800		)	90,286
Net income (loss) attributable to HSS	95,501			(6,257		)	(800		)	88,444

Statement of Comprehensive Income (Loss):
Net income (loss)	97,343			(6,257		)	(800		)	90,286
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available-for-sale securities	(665		)	—			(28		)	(693		)
Other-than-temporary impairment loss on available-for-sale securities	—			—			828			828
Total other comprehensive income (loss), net of tax	(32,774		)	—			800			(31,974		)
Comprehensive income (loss)	64,569			(6,257		)	—			58,312
Comprehensive income (loss) attributable to HSS	64,116			(6,257		)	—			57,859

~~F-17~~

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~~HUGHES SATELLITE SYSTEMS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

For the year ended December 31, 2018
As Reported Adjustments Due to the Balances If We Had Not Adopted the New Standards
Statement of Operations and Comprehensive Income New Revenue Standard New Investment Standard
(In thousands)
Revenue:
Services and other revenue - other $ 1,526,098
$ 2,323
$ —
$ 1,528,421
Total revenue $ 2,097,663
$ 2,323
$ —
$ 2,099,986
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization) $ 600,213
$ 2,738
$ —
$ 602,951
Selling, general and administrative expenses $ 398,153
$ 8,520
$ —
$ 406,673
Total costs and expenses $ 1,753,952
$ 11,258
$ —
$ 1,765,210
Operating income $ 343,711
$ (8,935 ) $ —
$ 334,776
Other income (expense):
Interest expense, net of amounts capitalized $ (259,721 ) $ 539
$ —
$ (259,182 )
Gains (losses) on investments, net $ 187
$ —
$ (800 ) $ (613 )
Total other income (expense), net $ (199,999 ) $ 539
$ (800 ) $ (200,260 )
Income (loss) before income taxes $ 143,712
$ (8,396 ) $ (800 ) $ 134,516
Income tax benefit (provision) $ (46,369 ) $ 2,139
$ —
$ (44,230 )
Net income $ 97,343
$ (6,257 ) $ (800 ) $ 90,286
Net income attributable to HSS $ 95,501
$ (6,257 ) $ (800 ) $ 88,444
Comprehensive income
Net income (loss) $ 97,343
$ (6,257 ) $ (800 ) $ 90,286
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available-for-sale securities and other $ (624 ) $ —
$ (28 ) $ (652 )
Other-than-temporary impairment loss on available-for-sale securities $ —
$ —
$ 828
$ 828
Total other comprehensive gain (loss), net of tax $ (32,774 ) $ —
$ 800
$ (31,974 )
Comprehensive income (loss) $ 64,569
$ (6,257 ) $ —
$ 58,312
Comprehensive income (loss) attributable to HSS $ 64,116
$ (6,257 ) $ —
$ 57,859

~~Restricted Cash and Cash Equivalents~~

~~ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash~~ requires restricted cash and restricted cash equivalents to be included with cash and cash equivalents in our Statement of Cash Flows. We adopted ASU No. 2016-18 as of January 1, 2018. As a result, the beginning and ending balances of cash and cash equivalents presented in our Consolidated Statements of Cash Flows include amounts for restricted cash and cash equivalents, which historically were not included in such balances, and receipts and payments of restricted cash and cash equivalents, exclusive of transfers to and from unrestricted accounts, are reported in our Consolidated Statements of Cash Flows. The adoption of this accounting standard did not have a material impact on our Statements of Cash Flows and related disclosures.

~~F-18~~

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~~HUGHES SATELLITE SYSTEMS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~Leases~~

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard requires lessees to recognize assets and liabilities for all leases with lease terms greater than 12 months, including leases classified as operating leases. The standard also modifies the definition of a lease and the criteria for classifying leases as operating, finance or sales-type leases and requires certain additional disclosures. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The new standard, as amended in July 2018, may be applied either on a modified retrospective basis or prospectively as of the adoption date without restating prior periods, with certain practical expedients available. We adopted the new standard prospectively as of January 1, 2019 and elected certain practical expedients permitted under the new standard’s transition guidance. This allows us to carry forward the historical lease classification and to not reassess the lease term for leases in existence as of the adoption date and to carry forward our historical accounting treatment for land easements on agreements existing on the adoption date. We also made policy elections for certain classes of underlying assets to not separate lease and non-lease components in a contract as permitted under the new standard.

We currently lease real estate and equipment from third parties under operating leases and we lease certain satellites from third parties under capital leases. We also lease satellites, real estate and equipment to some of our customers. Upon adoption of the new standard, we recognized right-of-use assets and liabilities related to substantially all operating leases where we are the lessee. While our work is not finalized, we expect that the aggregate increase in our operating lease assets and liabilities will be approximately 1% of total assets as of January 1, 2019.

Our accounting for capital leases was not significantly impacted on the adoption date. Based on our transition method, practical expedients and policy elections, our leases existing as of the adoption date will continue to be reported in our Consolidated Statements of Operations and Comprehensive Income (Loss) in accordance with current accounting standards throughout their remaining terms unless the leases are modified. However, all leases entered into or modified after the adoption date will be accounted for in accordance with the new standard. The classification of those leases as operating, finance or sales type may be impacted by the new standard and affect our future operating results and the classification of our cash flows.

Recently Issued Accounting Pronouncements Not Yet Adopted

Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses instead of incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU No. 2016-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the impact of adopting this new accounting standard on ~~our~~these Consolidated Financial Statements and related disclosures.

~~F-19~~F-21

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 3. REVENUE RECOGNITION

Information About Contract Balances

The following ~~table provides information about~~is a summary for our contract ~~balances with customers, including amounts for certain embedded leases.~~balances:


	As of						As of
	December 31, 2018			January 1, 2018			December 31, 2019			December 31, 2018
	(In thousands)
Trade accounts receivable:
Trade accounts receivable and contract assets, net:
Sales and services	$	154,415		$	156,794		$	152,632		$	154,415
Leasing	7,990			10,355			4,016			7,990
Total	162,405			167,149
Total trade accounts receivable							156,648			162,405
Contract assets	55,295			34,615			63,649			55,295
Allowance for doubtful accounts	(16,604		)	(12,027		)	(23,777		)	(16,604		)
Total trade accounts receivable and contract assets, net	$	201,096		$	189,737		$	196,520		$	201,096

Trade accounts receivable - DISH Network:
Sales and services	$	12,274		$	16,118
Leasing	1,276			22,523
Total trade accounts receivable - DISH Network, net	$	13,550		$	38,641

Contract liabilities:
Current	$	72,249		$	64,417		$	101,060		$	72,249
Noncurrent	10,133			13,036
Non-current							10,572			10,133
Total contract liabilities	$	82,382		$	77,453		$	111,632		$	82,382

For the ~~year~~years ended December 31, 2019 and December 31, 2018, we recognized revenue of ~~$52~~$65.4 million and $52.0 million, respectively, that ~~was~~were previously included in the contract liability ~~balance at January 1, 2018.~~balances as of December 31, 2018 and December 31, 2017, respectively.

~~Our bad debt expense was $25 million, $10~~A summary of our allowance for doubtful accounts activity is as follows:



	Balance at Beginning of Year		Bad Debt Expense		Deductions			Balance at End of Year

For the years ended:
December 31, 2019	$	16,604	$	30,027	$	(22,854	)	$	23,777
December 31, 2018	12,027		24,984		(20,407		)	16,604
December 31, 2017	12,752		9,551		(10,276		)	12,027

Contract Acquisition Costs

Unamortized contract acquisition costs totaled $113.6 million and ~~$14~~$104.0 million as of December 31, 2019 and 2018, respectively, and related amortization expense totaled $96.1 million and $83.0 million for the years ended December 31, ~~2018, 2017~~2019 and ~~2016,~~2018, respectively.

Transaction Price Allocated to Remaining Performance Obligations

As of December 31, ~~2018,~~2019, the remaining performance obligations for our customer contracts with original expected durations of more than one year was ~~$939~~$857.7 million. We expect to recognize ~~approximately 35.7%~~47.0% of our remaining performance obligations of these contracts as revenue in the next twelve months. This amount excludes agreements with consumer customers in our Hughes segment, ~~and~~ our leasing ~~arrangements.~~

~~Disaggregation~~arrangements and agreements with certain customers under which collectibility of ~~Revenue~~

Inall amounts due through the ~~following tables, revenue~~term of contracts is ~~disaggregated by segment, primary geographic market, nature of the products and services and transactions with major customers.~~ uncertain.

~~F-20~~

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~~Geographic Information~~

The following table disaggregates revenue from customer contracts attributed to our North America (the U.S and its territories, Mexico and Canada), South and Central America and other foreign locations as well as by segment, based on the location where the goods or services are provided. All other revenue includes transactions with customers in Asia, Africa, Australia, Europe, and the Middle East.

Hughes ESS Corporate and Other Consolidated Total
(In thousands)
For the year ended December 31, 2018

North America $ 1,444,628
$ 357,357
$ 4,555
$ 1,806,540
South and Central America 101,632
—
—
101,632
All other 170,268
701
18,522
189,491
Total revenue $ 1,716,528
$ 358,058
$ 23,077
$ 2,097,663

~~Nature of Products and Services~~

~~The following table disaggregates revenue based on the nature of products and services and by segment.~~

Hughes ESS Corporate and Other Consolidated
Total
(In thousands)
For the year ended December 31, 2018
Equipment $ 119,657
$ —
$ —
$ 119,657
Services 1,313,059
24,113
1,128
1,338,300
Design, development and construction services 85,753
—
—
85,753
Revenue from sales and services 1,518,469
24,113
1,128
1,543,710
Leasing income 198,059
333,945
21,949
553,953
Total revenue $ 1,716,528
$ 358,058
$ 23,077
$ 2,097,663

~~During the fourth quarter of 2018, we reclassified our revenue among the categories above applicable for the full year.~~

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Disaggregation of Revenue

Geographic Information

The following is our revenue from customer contracts disaggregated by primary geographic market and by segment:



	Hughes		ESS		Corporate and Other		Consolidated Total

For the year ended December 31, 2019
North America	$	1,527,823	$	16,257	$	2,143	$	1,546,223
South and Central America	125,458		—		—		125,458
All other	199,461		—		19,019		218,480
Total revenue	$	1,852,742	$	16,257	$	21,162	$	1,890,161

For the year ended December 31, 2018
North America	$	1,444,628	$	27,231	$	4,555	$	1,476,414
South and Central America	101,632		—		—		101,632
All other	170,268		—		18,522		188,790
Total revenue	$	1,716,528	$	27,231	$	23,077	$	1,766,836

For the year ended December 31, 2017
North America	$	1,204,750	$	30,417	$	4,030	$	1,239,197
South and Central America	90,000		—		—		90,000
All other	183,168		—		2,677		185,845
Total revenue	$	1,477,918	$	30,417	$	6,707	$	1,515,042

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Nature of Products and Services

The following is our revenue disaggregated by the nature of products and services and by segment:



	Hughes		ESS		Corporate and Other		Consolidated Total

For the year ended December 31, 2019
Services and other revenue:
Services	$	1,535,966	$	10,464	$	878	$	1,547,308
Lease revenue	50,073		5,793		20,284		76,150
Total services and other revenue	1,586,039		16,257		21,162		1,623,458
Equipment revenue:
Equipment	115,052		—		—		115,052
Design, development and construction services	145,646		—		—		145,646
Lease revenue	6,005		—		—		6,005
Total equipment revenue	266,703		—		—		266,703
Total revenue	$	1,852,742	$	16,257	$	21,162	$	1,890,161

For the year ended December 31, 2018
Services and other revenue:
Services	$	1,313,059	$	21,044	$	1,351	$	1,335,454
Lease revenue	198,059		6,187		21,726		225,972
Total services and other revenue	1,511,118		27,231		23,077		1,561,426
Equipment revenue:
Equipment	119,657		—		—		119,657
Design, development and construction services	85,753		—		—		85,753
Total equipment revenue	205,410		—		—		205,410
Total revenue	$	1,716,528	$	27,231	$	23,077	$	1,766,836

Lease Revenue

The following is our lease revenue by type of lease:



	For the year ended December 31, 2019

Sales-type lease revenue:
Revenue at lease commencement	$	6,005
Interest income	784
Total sales-type lease revenue	6,789
Operating lease revenue	75,366
Total lease revenue	$	82,155

Substantially all of our net investment in sales-type leases consisted of lease receivables totaling $6.5 million as of December 31, 2019.

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table presents future operating lease payments to be received as of December 31, 2019:



	Amounts

Year ending December 31,
2020	$	36,560
2021	33,545
2022	31,666
2023	30,551
2024	28,444
After 2024	123,844
Total lease payments	$	284,610

Property and equipment, net and Depreciation and amortization included the following amounts for assets subject to operating leases:



	As of December 31, 2019							For the year ended December 31, 2019
	Cost		Accumulated Depreciation			Net		Depreciation Expense

Customer premises equipment	$	1,458,298	$	(1,074,968	)	$	383,330	$	197,870
Satellites	104,620		(31,360		)	73,260		7,495
Total	$	1,562,918	$	(1,106,328	)	$	456,590	$	205,365

NOTE 4. LESSEE ACCOUNTING

The Consolidated Balance Sheets include the following amounts for right-of-use assets and lease liabilities as of December 31, 2019:



	Amounts

Right-of-use assets:
Operating	$	113,399
Finance	325,826
Total right-of-use assets	$	439,225

Lease liabilities:
Current:
Operating	$	14,112
Finance	486
Total current	14,598
Non-current:
Operating	96,879
Finance	565
Total non-current	97,444
Total lease liabilities	$	112,042

As of December 31, 2019, we have prepaid our obligations regarding most of our finance right-of-use assets. Finance lease assets are reported net of accumulated amortization of $57.3 million as of December 31, 2019.

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following are the components of lease cost and weighted average lease terms and discount rates for operating and finance leases:



	For the year ended December 31, 2019

Lease cost:
Operating lease cost	$	21,226
Finance lease cost:
Amortization of right-of-use assets	26,489
Interest on lease liabilities	173
Total finance lease cost	26,662
Short-term lease cost	434
Variable lease cost	9,585
Total lease cost	$	57,907



	As of December 31, 2019

Lease term and discount rate:
Weighted average remaining lease term:
Finance leases	2.1 years
Operating leases	10.4 years

Weighted average discount rate:
Finance leases	11.9	%
Operating leases	6.1	%

The following table details cash flows from operating and finance leases:



	For the year ended December 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	19,654
Operating cash flows from finance leases	173
Financing cash flows from finance leases	654

We obtained right-of-use assets in exchange for lease liabilities of $8.5 million upon commencement of operating leases during the year ended December 31, 2019.

F-26

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table presents future minimum lease payments of our lease liabilities as of December 31, 2019:



	Operating Leases			Finance Leases			Total

Year ending December 31,
2020	$	19,907		$	629		$	20,536
2021	17,594			487			18,081
2022	15,379			96			15,475
2023	14,369			—			14,369
2024	13,286			—			13,286
After 2024	71,147			—			71,147
Total future minimum lease payments	151,682			1,212			152,894
Less: Interest	(40,691		)	(161		)	(40,852		)
Total lease liabilities	$	110,991		$	1,051		$	112,042

NOTE 4.5. DISCONTINUED OPERATIONS

BSS Business

The following table presents the financial results of our discontinued operations of the BSS Business:



	For the years ended December 31,
	2019			2018			2017

Revenue:
Services and other revenue - DISH Network	$	195,942		$	305,229		$	337,079
Services and other revenue - other	17,714			25,598			24,748
Total revenue	213,656			330,827			361,827
Costs and expenses:
Cost of services and other	28,033			40,375			62,573
Selling, general and administrative expenses	6,903			159			43
Depreciation and amortization	85,926			124,564			126,380
Total costs and expenses	120,862			165,098			188,996
Operating income (loss)	92,794			165,729			172,831
Other income (expense):
Interest expense	(17,365		)	(28,552		)	(32,312		)
Total other income (expense), net	(17,365		)	(28,552		)	(32,312		)
Income (loss) from discontinued operations before income taxes	75,429			137,177			140,519
Income tax benefit (provision), net	(18,890		)	(27,754		)	164,436
Net income (loss) from discontinued operations	$	56,539		$	109,423		$	304,955

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table presents the aggregate carrying amounts of assets and liabilities of our discontinued operations of the BSS Business as of December 31, 2018. No assets or liabilities attributable to our discontinued operations were held by us as of December 31, 2019.



	As of December 31, 2018

Assets
Prepaids and deposits	$	3,483
Current assets of discontinued operations	3,483
Property and equipment, net	660,270
Regulatory authorizations, net	65,615
Other non-current assets, net	16,576
Non-current assets of discontinued operations	742,461
Total assets of discontinued operations	$	745,944

Liabilities:
Current portion of finance lease obligations	$	39,995
Accrued interest	1,572
Accrued expenses and other current liabilities	7,488
Current liabilities of discontinued operations	49,055
Finance lease obligations	187,002
Deferred tax liabilities, net	132,787
Other non-current liabilities	29,493
Non-current liabilities of discontinued operations	349,282
Total liabilities of discontinued operations	$	398,337

Significant supplemental cash flow information and adjustments to reconcile net income to net cash flow from operating activities for discontinued operations of the BSS business are below:



	For the years ended December 31,
	2019		2018		2017

Operating activities:
Net income (loss) from discontinued operations	$	56,539	$	109,423	$	304,955
Depreciation and amortization	85,926		124,564		126,380

Investing activities:
Expenditures for property and equipment	510		175		699

Financing activities:
Payment of finance lease obligations	27,203		35,886		32,177
Payment of in-orbit incentive obligations	3,887		4,329		4,727

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Terminated or Transferred Related Party Agreements

Effective September 10, 2019, the following agreements were terminated or transferred to DISH Network as part of the BSS Transaction. We have no further obligations and have neither earned additional revenue nor incurred additional expense, as applicable, under or in connection with these agreements after the consummation of the BSS Transaction.

DBS Transponder Lease. EchoStar leased satellite capacity from us on eight DBS transponders on the QuetzSat-1 satellite through November 2021, after which EchoStar had certain options to renew the agreement on a year-to year basis through the end of life of the QuetzSat-1 satellite.

EchoStar XXIII Launch Facilitation and Operational Control Agreement. As part of applying for the launch license for the EchoStar XXIII satellite through the UK Space Agency, we and a subsidiary of EchoStar, EchoStar Operating L.L.C. (“EOC”), entered into an agreement in March 2016 to transfer to us EOC’s launch service contracts for the EchoStar XXIII satellite and to grant us certain rights to control its in-orbit operations. EOC retained ownership of the satellite and agreed to make additional payments to us for amounts that we were required to pay under the launch service contract. In 2016, we recorded additions to Other non-current assets, net and corresponding increases in Additional paid-in capital in our Consolidated Balance Sheet to reflect EOC’s cumulative payments under the launch service contract prior to the transfer date and to reflect EOC’s funding of additional cash payments to the launch service provider. The EchoStar XXIII satellite was successfully launched in March 2017. We recorded decreases in Other non-current assets, net and Additional paid-in capital of $62.0 million, representing the carrying amount of the launch service contract at the time of launch to reflect the consumption of the contract’s economic benefits by EOC.

Satellite Capacity Leased to DISH Network. We entered into certain agreements to lease satellite capacity pursuant to which we provided satellite services to DISH Network on certain satellites, as listed below, owned or leased by us. The fees for the services provided under these agreements depended, among other things, upon the orbital location of the applicable satellite, the number of transponders that provided services on the applicable satellite and the length of the service arrangements.

EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV. In March 2014, we began leasing certain satellite capacity to DISH Network on the EchoStar VII satellite, the EchoStar X satellite, the EchoStar XI satellite and the EchoStar XIV satellite.

EchoStar XII. DISH Network leased satellite capacity from us on the EchoStar XII satellite.

EchoStar XVI. In December 2009, we entered into an agreement to lease satellite capacity to DISH Network, pursuant to which DISH Network leased satellite capacity from us on the EchoStar XVI satellite beginning in January 2013.

Nimiq 5 Agreement. In September 2009, we entered into an agreement with Telesat Canada to lease satellite capacity from Telesat Canada on all 32 direct broadcast satellite (“DBS”) transponders on the Nimiq 5 satellite at the 72.7 degree west longitude orbital location (the “Telesat Transponder Agreement”). In September 2009, we entered into an agreement with DISH Network, pursuant to which DISH Network leased satellite capacity from us on all 32 of the DBS transponders covered by the Telesat Transponder Agreement (the “DISH Nimiq 5 Agreement”). Under the terms of the DISH Nimiq 5 Agreement, DISH Network made certain monthly payments to us that commenced in September 2009, when the Nimiq 5 satellite was placed into service.

QuetzSat-1 Agreement. In November 2008, we entered into an agreement to lease satellite capacity from SES Latin America, which provided, among other things, for the provision by SES Latin America to us of leased satellite capacity on 32 DBS transponders on the QuetzSat-1 satellite. Concurrently, in 2008, we entered into an agreement pursuant to which DISH Network leased from us satellite capacity on 24 of the DBS transponders on the QuetzSat-1 satellite. The QuetzSat-1 satellite was launched in September 2011 and was placed into service in November 2011 at the 67.1 degree west longitude orbital location. In January 2013, the QuetzSat-1 satellite was moved to the 77 degree west longitude orbital location. In February 2013, we and DISH Network entered into an agreement pursuant to which we leased back from DISH Network certain satellite capacity on 5 DBS transponders on the QuetzSat-1 satellite.

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

TT&C Agreement. Effective January 2012, we entered into a TT&C agreement pursuant to which we provided TT&C services to DISH Network, which we subsequently amended (the “2012 TT&C Agreement”). The fees for services provided under the 2012 TT&C Agreement were calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which varied depending on the nature of the services provided.

Real Estate Lease. Prior to the Share Exchange, a subsidiary of EchoStar leased to DISH Network certain space at 530 EchoStar Drive, Cheyenne, Wyoming. In connection with the Share Exchange, EchoStar transferred ownership of a portion of this property to DISH Network and contributed a portion to us and we and DISH Network amended this agreement to, among other things, provide for a continued lease to DISH Network of the portion of the property we retained (the “Cheyenne Data Center”). The rent on a per square foot basis for the lease was comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease, and DISH Network was responsible for its portion of the taxes, insurance, utilities and maintenance of the premises. In connection with the BSS Transaction, we transferred the Cheyenne Data Center to DISH Network. This lease does not qualify for discontinued operations treatment, and therefore the revenue from it has not been treated as discontinued operations.

NOTE6. BUSINESS COMBINATIONS

In November 2019, we consummated the Yahsat Brazil JV Transaction. The combined business provides broadband internet services and enterprise solutions in Brazil using the Telesat T19V satellite, the Eutelsat 65W satellite and Yahsat’s Al Yah 3 satellite. The results of operations related to the business we acquired in the Yahsat Brazil JV Transaction have been included in these Consolidated Financial Statements from the date of acquisition. For the year ended December 31, 2019, we incurred $1.6 million of costs associated with the closing of the Yahsat Brazil JV Transaction.

All assets and liabilities acquired from Yahsat in the Yahsat Brazil JV Transaction have been recorded at fair value. The following table summarizes the preliminary allocations of purchase price:



	Amounts

Assets:
Cash and cash equivalents	$	7,858
Other current assets	7,106
Property and equipment	88,358
Regulatory authorization	4,498
Goodwill	2,128
Other long-term assets	1,502
Total assets	$	111,450

Liabilities:
Accounts payable and accrued liabilities	$	6,516
Other current liabilities	2,159
Total liabilities	$	8,675

Total purchase price ⁽¹⁾	$	102,775

(1) Based on the value determined for the equity ownership interest issued by our Brazilian subsidiary as consideration for the business acquired by us in the Yahsat Brazil JV Transaction.

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The preliminary valuation of assets we acquired and liabilities we assumed in the Yahsat Brazil JV Transaction were derived using primarily unobservable Level 3 inputs, which require significant management judgment and estimation, and resulted in identifiable assets as follows:



	Amounts

Satellite payload	$	50,738
Regulatory authorization	4,498
Total	$	55,236

The satellite payload asset and regulatory authorization were valued using an income approach and will be being amortized over seven and 11 years, respectively.

We recognized goodwill in connection with the Yahsat Brazil JV Transaction of $2.1 million, including a currency translation adjustment of $0.7 million. The goodwill is attributable to expected synergies, the projected long-term business growth in current and new markets and an assembled workforce. This goodwill has been allocated entirely to our Hughes segment.

NOTE 7. OTHER COMPREHENSIVE INCOME (LOSS) AND RELATED TAX EFFECTS

The changes in the balances of Accumulated other comprehensive ~~loss~~income (loss) by component were as follows:

Cumulative Foreign Currency Translation Losses Unrealized Gain (Loss) On Available-For-Sale Securities Other Accumulated Other Comprehensive Loss
(In thousands)
Balance, December 31, 2016 $ (59,038 ) $ (1,666 ) $ (15 ) $ (60,719 )
Other comprehensive income (loss) before reclassifications 6,787
(2,280 ) 92
4,599
Amounts reclassified to net income —
3,298
3,298
Other comprehensive income 6,787
1,018
92
7,897
Balance, December 31, 2017 $ (52,251 ) $ (648 ) $ 77
$ (52,822 )
Cumulative effect of adoption of the New Investment Standard 433
433
Balance, January 1, 2018 (52,251 ) (215 ) 77
(52,389 )
Other comprehensive loss before reclassifications (30,549 ) (665 ) 41
(31,173 )
Amounts reclassified to net income —
(212 ) (212 )
Other comprehensive loss (30,549 ) (877 ) 41
(31,385 )
Balance, December 31, 2018 $ (82,800 ) $ (1,092 ) $ 118
$ (83,774 )



	Cumulative Foreign Currency Translation Adjustments			Unrealized Gain (Loss) On Available-For-Sale Securities			Other			Accumulated Other Comprehensive Income (Loss)

Balance, December 31, 2017	$	(52,251	)	$	(648	)	$	77		$	(52,822	)
Cumulative effect of accounting changes	—			433			—			433
Balance, January 1, 2018	(52,251		)	(215		)	77			(52,389		)
Other comprehensive income (loss) before reclassifications	(30,549		)	(665		)	41			(31,173		)
Amounts reclassified to net income (loss)	—			(212		)	—			(212		)
Other comprehensive income (loss)	(30,549		)	(877		)	41			(31,385		)
Balance, December 31, 2018	(82,800		)	(1,092		)	118			(83,774		)
Other comprehensive income (loss) before reclassifications	(2,146		)	1,817			(114		)	(443		)
Amounts reclassified to net income (loss)	—			(419		)	—			(419		)
Other comprehensive income (loss)	(2,146		)	1,398			(114		)	(862		)
Balance, December 31, 2019	$	(84,946	)	$	306		$	4		$	(84,636	)

The amounts reclassified to net income (loss) related to unrealized gain (loss) on available-for-sale securities in the table above are included in Gains ~~and losses~~(losses) on investments, netin ~~our~~the Consolidated Statements of ~~Operations and Other Comprehensive Income (Loss).~~Operations.

~~Except in unusual circumstances, we do not recognize tax effects on foreign currency translation adjustments because they are not expected to result in future taxable income or deductions.~~

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 5.8. MARKETABLE INVESTMENT SECURITIES

~~Overview~~

Our marketable investment securities portfolio consists of ~~various~~the following debt and equity ~~instruments as follows:~~

instruments:


	As of December 31,				As of December 31,
	2018		2017		2019		2018
	(In thousands)
Marketable investment securities:
Debt securities:
Corporate bonds	$	1,234,017	$	368,083	$	411,706	$	1,234,017
Other debt securities	374,106		86,417		240,888		374,106
Total debt securities	1,608,123		454,500		652,594		1,608,123
Equity securities	1,073		1,102		241		1,073
Total marketable investment securities	$	1,609,196	$	455,602	$	652,835	$	1,609,196

Debt Securities

Our corporate bond portfolio includes debt instruments issued by individual corporations, primarily in the industrial and financial services industries. Our other debt securities portfolio includes investments in various debt instruments, including U.S. government bonds and commercial paper.

~~F-22~~

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~~HUGHES SATELLITE SYSTEMS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

AThe following table is a summary of our available-for-sale debt ~~securities is presented in the table below.~~securities:


	Amortized		Unrealized					Estimated		Amortized		Unrealized					Estimated
	Cost		Gains		Losses			Fair Value		Cost		Gains		Losses			Fair Value
	(In thousands)
As of December 31, 2019
Corporate bonds										$	411,312	$	395	$	(1	)	$	411,706
Other debt securities										240,887		1		—			240,888
Total available-for-sale debt securities										$	652,199	$	396	$	(1	)	$	652,594
As of December 31, 2018
Corporate bonds	$	1,235,110	$	230	$	(1,323	)	$	1,234,017	$	1,235,110	$	230	$	(1,323	)	$	1,234,017
Other debt securities	374,106		—		—			374,106		374,106		—		—			374,106
Total available-for-sale debt securities	$	1,609,216	$	230	$	(1,323	)	$	1,608,123	$	1,609,216	$	230	$	(1,323	)	$	1,608,123
As of December 31, 2017
Corporate bonds	$	368,291	$	—	$	(208	)	$	368,083
Other debt securities	86,425		—		(8		)	86,417
Total available-for-sale debt securities	$	454,716	$	—	$	(216	)	$	454,500

As of December 31, ~~2018,~~2019, we have ~~$1.3 billion~~$652.6 million of available-for-sale debt securities with contractual maturities of one year or less and ~~$351 million~~0 with contractual maturities greater than one year.

Equity Securities

Our marketable equity securities consist primarily of shares of common stock of public companies. Prior to January 1, 2018, we classified our marketable equity securities as available-for-sale or trading securities, depending on our investment strategy for the securities. As of December 31, 2017, our marketable equity securities consisted of available-for-sale securities with a fair value of $1.1 million, reflecting an adjusted cost basis of $1.5 million and unrealized losses of $0.4 ~~million.~~million which were recognized as Unrealized gains (losses) on available-for-sale securities in the Consolidated Statements of Comprehensive Income (Loss). Substantially all unrealized losses on our available-for-sale securities related to securities that were in a continuous loss position for less than 12 months. We recognized a $3$3.3 million other-than-temporary impairment ~~for~~during the year ended December 31, 2017 on one of our available-for-sale securities which had experienced a decline in market value as a result of adverse ~~developments during the year ended December 31, 2017.~~developments.

~~Upon adoption of the New Investment Standard as of~~Effective January 1, 2018, ~~(see Note 2),~~ we ~~account~~began accounting for investments in equity securities at their fair value and ~~we recognize~~recognizing unrealized gains and losses in Gains ~~and losses~~(losses) on investments, netin ~~our~~the Consolidated ~~Statement~~Statements of ~~Operations and Comprehensive Income (Loss). For the year ended December 31, 2018,~~Operations. Gains ~~and losses on investments, net~~ ~~included de minimis loss related to equity securities that we held as of December 31, 2018.~~

~~Sales of Available-for-Sale Securities~~

Proceeds from sales of our available-for-sale securities were $50 million, $9 million and $20 million for the years ended December 31, 2018, 2017 and 2016, respectively. We recognized nil, de minimis and $3 million gains for the years ended December 31, 2018, 2017 and 2016, respectively, We recognized nil losses for the years ended December 31, 2018 and 2017 and de minimis losses for 2016.

~~F-23~~F-32

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ~~Continued~~CONTINUED

(losses) on investments, net in the Consolidated Statements of Operations related to equity securities that we held were $0.8 million of net loss and de minimis of net loss for the years ended December 31, 2019 and 2018, respectively. The fair value of our equity securities was $0.2 million and $1.1 million as of December 31, 2019 and 2018, respectively.

Sales of Available-for-Sale Securities

Proceeds from sales of our available-for-sale securities were $311.8 million, $50.0 million and $8.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. We recognized as a result of such sales $0.4 million of gains, $0.2 million of gains and 0 for the years ended December 31, 2019, 2018 and 2017, respectively.

Fair Value Measurements

Our marketable investment securities are ~~measured at fair value on a recurring basis as~~ summarized in the table below. Certain of our investments in debt and equity instruments have historically experienced volatility. As of December 31, ~~2018~~2019 and ~~2017,~~2018, we did not have any investments that were categorized within Level 3 of the fair value hierarchy.


	As of December 31,												As of December 31,
	2018						2017						2019						2018
	Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2		Total		Level 1		Level 2		Total
	(In thousands)
Debt securities:
Corporate bonds	$	—	$	1,234,017	$	1,234,017	$	—	$	368,083	$	368,083	$	—	$	411,706	$	411,706	$	—	$	1,234,017	$	1,234,017
Other debt securities	—		374,106		374,106		—		86,417		86,417		—		240,888		240,888		—		374,106		374,106
Total debt securities	—		1,608,123		1,608,123		—		454,500		454,500		—		652,594		652,594		—		1,608,123		1,608,123
Equity securities	1,073		—		1,073		1,102		$	—	1,102		241		—		241		1,073		—		1,073
Total marketable investment securities	$	1,073	$	1,608,123	$	1,609,196	$	1,102	$	454,500	$	455,602	$	241	$	652,594	$	652,835	$	1,073	$	1,608,123	$	1,609,196

NOTE 6.9. INVENTORY

~~Our inventory consisted~~Inventory consists of the following:


	As of December 31,				As of December 31,
	2018		2017		2019		2018
	(In thousands)
Raw materials	$	4,856	$	5,484	$	4,240	$	4,856
Work-in-process	13,901		7,442		6,979		13,901
Finished goods	56,622		70,669		68,255		56,622
Total inventory	$	75,379	$	83,595	$	79,474	$	75,379

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 7.10. PROPERTY AND EQUIPMENT

~~Property~~

Our property and equipment,net consisted of the following:

Depreciable Life
(In Years) As of December 31,
2018 2017
(In thousands)
Land — $ 13,401
$ 13,475
Buildings and improvements 1 to 40 117,564
128,292
Furniture, fixtures, equipment and other 1 to 12 741,429
650,385
Customer rental equipment 2 to 4 1,159,977
929,775
Satellites - owned 2 to 15 2,268,862
2,516,685
Satellites acquired under capital leases 10 to 15 1,051,110
916,820
Construction in progress — 28,087
149,570
Total property and equipment 5,380,430
5,305,002
Accumulated depreciation (2,798,249 ) (2,551,904 )
Property and equipment, net $ 2,582,181
$ 2,753,098



	As of December 31,
	2019		2018

Property and equipment, net:
Satellites, net	$	1,127,521	$	1,209,930
Other property and equipment, net	730,060		711,981
Total property and equipment, net	$	1,857,581	$	1,921,911

Satellites

As of December 31, ~~2018~~2019, our operating satellite fleet consisted of 8 satellites, 5 of which are owned and ~~2017, accumulated depreciation included amounts~~3 of which are leased. They are all in geosynchronous orbit, approximately 22,300 miles above the equator. In connection with the BSS Transaction, 6 of our previously owned satellites and the leases for 2 of our previously leased satellites were transferred to DISH Network (see Note 1. Organization and Business Activities and Note 5. Discontinued Operations).



Satellite	Segment	Launch Date	Nominal Degree Orbital Location (Longitude)	Depreciable Life (In Years)

Owned:
SPACEWAY 3 ⁽¹⁾	Hughes	August 2007	95 W	10
EchoStar XVII	Hughes	July 2012	107 W	15
EchoStar XIX	Hughes	December 2016	97.1 W	15
Al Yah 3 ⁽²⁾	Hughes	January 2018	20 W	7
EchoStar IX ⁽³⁾	ESS	August 2003	121 W	12

Finance leases:
Eutelsat 65 West A	Hughes	March 2016	65 W	15
Telesat T19V	Hughes	July 2018	63 W	15
EchoStar 105/SES-11	ESS	October 2017	105 W	15

(1) Depreciable life represents the remaining useful life as of June 8, 2011, the date EchoStar completed the Hughes Acquisition.

(2) Upon consummation of our joint venture with Yahsat in Brazil in November 2019, we acquired ~~under capital leases~~the Brazilian Ka-band payload on this satellite. Depreciable life represents the remaining useful life as of ~~$468 million~~November 2019.

(3) We own the Ka-band and ~~$394 million, respectively.~~ Ku-band payloads on this satellite.

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ~~Continued~~CONTINUED

~~Construction in progress~~Satellites, net consisted of the following:

As of December 31,
2018 2017
(In thousands)
Progress amounts for satellite construction, including prepayments under capital leases and launch services costs $ 246
$ 101,733
Satellite related equipment 13,001
28,358
Other 14,840
19,479
Construction in progress $ 28,087
$ 149,570



	Depreciable Life (In Years)	As of December 31,
	Depreciable Life (In Years)	2019			2018

Satellites, net:
Satellites - owned	7 to 15	$	1,516,006		$	1,459,955
Satellites - acquired under finance leases	10 to 15	381,162			385,592
Total satellites		1,897,168			1,845,547
Accumulated depreciation		(769,647		)	(635,617		)
Total satellites, net		$	1,127,521		$	1,209,930

We recorded capitalized interest related to our satellites, satellite payloads and related ground facilities under construction of $6 million, $23 million and $30 million for the years ended December 31, 2018, 2017 and 2016, respectively.

~~Depreciation expense associated with our property and equipment consisted of the following:~~

For the years ended December 31,
2018 2017 2016
(In thousands)
Buildings and improvements $ 10,026
$ 15,559
$ 4,777
Furniture, fixtures, equipment and other 80,301
68,184
57,952
Customer rental equipment 174,749
146,562
114,568
Satellites 248,688
224,738
191,729
Total depreciation expense $ 513,764
$ 455,043
$ 369,026

Satellites depreciation expense includes amortization of satellites under capital lease agreements of $76 million, $66 million and $56 million for the years ended December 31, 2018, 2017 and 2016, respectively.

~~Satellites~~

As of December 31, 2019 and 2018, accumulated depreciation included amounts for satellites acquired under finance leases of $56.4 million and $31.5 million, respectively.

Depreciation and amortization expense and capitalized interest associated with our ~~satellite fleet~~satellites consisted of ~~15 satellites, 10 of which are owned and five of which are leased. They are all in geosynchronous orbit, approximately 22,300 miles above~~ the equator. We depreciate our owned satellites on a straight-line basis over the estimated useful life of each satellite. We depreciate our leased satellites on a straight-line basis over their respective lease terms.

~~F-25~~

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~~HUGHES SATELLITE SYSTEMS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~Our operating satellite fleet consists of both owned and leased satellites detailed in the table below as of December 31, 2018.~~

Satellites Segment Launch Date Nominal Degree Orbital Locations (West Longitude) Depreciable Life (In Years)
Owned:
SPACEWAY 3 (1) Hughes August 2007 95 12
EchoStar XVII Hughes July 2012 107 15
EchoStar XIX (6) Hughes December 2016 97.1 15
EchoStar VII (2)(3)(4) ESS February 2002 119 3
EchoStar IX (2)(4) ESS August 2003 121 12
EchoStar X (2)(3) ESS February 2006 110 7
EchoStar XI (2)(3) ESS July 2008 110 9
EchoStar XII (2)(4)(5) ESS July 2003 86.4 2
EchoStar XIV (2)(3) ESS March 2010 119 11
EchoStar XVI (2) ESS November 2012 61.5 15

Capital Leases:
Eutelsat 65 West A Hughes March 2016 65 15
Telesat T19V Hughes July 2018 63 15
Nimiq 5 (2) ESS September 2009 72.7 15
QuetzSat-1 (2) ESS September 2011 77 10
EchoStar 105/SES-11 ESS October 2017 105 15


~~(1)~~	Depreciable life represents the remaining useful life as of June 8, 2011, the date EchoStar completed its acquisition of Hughes Communications, Inc. and its subsidiaries (the “Hughes Acquisition”).


~~(2)~~	~~See Note 16 for discussion of related party transactions with DISH Network.~~


~~(3)~~	Depreciable life represents the remaining useful life as of March 1, 2014, the effective date of our receipt of the satellites from DISH Network as part of the Satellite and Tracking Stock Transaction (See Note 16).


~~(4)~~	~~Fully depreciated assets as of December 31, 2018.~~


~~(5)~~	~~Depreciable life represents the remaining useful life as of June 30, 2013, the date the EchoStar XII satellite was impaired.~~


~~(6)~~	~~EchoStar contributed the EchoStar XIX satellite to us in February 2017.~~

~~Recent Developments~~

~~EchoStar I and EchoStar VI.~~following: The EchoStar I and EchoStar VI satellites were removed from their orbital locations and retired from commercial service in January 2018 and May 2018, respectively. The retirement of these satellites has not had, and is not expected to have, a material impact on our results of operations or financial position.



	For the years ended December 31,
	2019		2018		2017

Depreciation and amortization expense:
Satellites - owned	$	110,685	$	104,967	$	89,728
Satellites acquired under finance leases	25,755		20,269		9,962
Total depreciation and amortization expense	$	136,440	$	125,236	$	99,690

Capitalized interest	$	1,019	$	6,179	$	22,828

~~EchoStar 105/SES-11.~~The EchoStar 105/SES-11 satellite was launched in October 2017 and was placed into service in November 2017 at the 105 degree west longitude orbital location. Pursuant to agreements that we entered into in August 2014, we funded substantially all construction, launch and other costs associated with the EchoStar 105/SES-11 satellite and transferred the C-, Ku- and Ka-band payloads to two affiliates of SES Americom, Inc. (“SES”) after the launch date, while retaining the right to use the entire Ku-band payload on the satellite for an initial ten-year term, with an option for us to renew the agreement on a year-to-year basis. In October 2017, we recorded a ~~$77 million receivable from SES in~~ ~~Other current assets~~ in the Consolidated Balance Sheets, representing capitalized costs allocable to certain satellite payloads controlled by SES, and we reduced our carrying amount of the satellite by such amount. In January 2018, we received payment from SES for the receivable plus accrued interest. Our leased Ku-band payload on the EchoStar 105/SES-11 satellite has replaced the capacity we had on the AMC-15 satellite.

~~Telesat T19V.~~ ~~In September 2015, we entered into agreements pursuant to which affiliates of Telesat~~ Canada will provide to us Ka-band capacity on the Telesat T19V satellite at the 63 degree west longitude orbital location for a 15-year term. The Telesat T19V satellite was launched in July 2018 and placed into service in October 2018. This satellite augments the capacity being provided by the EUTELSAT 65 West A and EchoStar XIX satellites in Central and South America.

~~F-26~~

~~Table of Contents~~

~~HUGHES SATELLITE SYSTEMS CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

Satellite Anomalies and Impairments

~~Our~~We are not aware of any anomalies with respect to our owned or leased satellites ~~may experience anomalies from time to time, some of which may~~or payloads that have ahad any significant adverse effect on their remaining useful lives, the commercial operation of the satellites or payloads or our operating results or financial ~~position. We are not aware~~position as of any anomalies with respect to our owned or leased satellites that have had any such significant adverse effect during the year ended December 31, 2018. There can be no assurance, however, that anomalies will not have any such adverse effects in the future. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our satellites were to fail.

The EchoStar X satellite experienced anomalies in the past which affected seven solar array circuits. In December 2017, the satellite experienced anomalies which affected one additional solar array circuit reducing the number of functional solar array circuits to 16. As a result of these anomalies, we had a reduction in revenue of $4 millionand for the year ended December 31, ~~2018~~2019.

Satellite Insurance

We ~~historically have~~generally do not ~~carried~~carry in-orbit insurance on our satellites or payloads because we have assessed that the cost of insurance is not economical relative to the risk of failures. Therefore, we generally bear the risk of any in-orbit failures. Pursuant to the terms of the agreements governing certain portions of our indebtedness and our joint venture agreements with Yahsat, we are required, subject to certain limitations on coverage, to maintain ~~in-orbit insurance~~only for ~~our~~the SPACEWAY 3 satellite, the EchoStar XVII satellite and the Al Yah 3 Brazilian payload, insurance or other contractual arrangements during the commercial in-orbit service of such satellite. We were previously required to maintain similar insurance or other contractual arrangements for the EchoStar XVI ~~and EchoStar XVII satellites.~~satellite, which we transferred to DISH Network pursuant to the BSS Transaction. Our other satellites and payloads, either in orbit or under construction, are not covered by launch or in-orbit ~~insurance.~~insurance or other contractual arrangements. We will continue to assess circumstances going forward and make ~~insurance~~insurance-related decisions on a case-by-case basis.

We evaluate our satellites for impairment and test for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Certain of the anomalies previously disclosed may be considered to represent a significant adverse change in the physical condition of a particular satellite. However, based on the redundancy designed within each satellite, certain of these anomalies are not necessarily considered to be significant events that would require a test of recoverability.

~~NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS~~Fair Value of In-Orbit Incentives

~~Goodwill~~

~~The excess~~As of ~~the cost of an acquired business over~~December 31, 2019 and 2018, the fair values of ~~net tangible and identifiable intangible assets at the time~~our in-orbit incentive obligations from our continuing operations, based on measurements categorized within Level 2 of the ~~acquisition is recorded as goodwill. Goodwill is assigned to~~fair value hierarchy, approximated their carrying amounts of $57.0 million and $57.9 million, respectively.

F-35

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Other Property and Equipment, Net

Other property and equipment, net consisted of the ~~reporting units within~~following:



	Depreciable Life (In Years)	As of December 31,
	Depreciable Life (In Years)	2019			2018

Other property and equipment, net:
Land	—	$	13,328		$	13,366
Buildings and improvements	1 to 40	73,692			114,153
Furniture, fixtures, equipment and other	1 to 12	783,727			725,924
Customer premises equipment	2 to 4	1,377,914			1,159,977
Construction in progress		50,864			28,087
Total other property and equipment		2,299,525			2,041,507
Accumulated depreciation		(1,569,465		)	(1,329,526		)
Other property and equipment, net		$	730,060		$	711,981

Depreciation expense associated with our ~~operating segments~~other property and equipment consisted of the following:



	For the years ended December 31,
	2019		2018		2017

Other property and equipment depreciation expense:
Buildings and improvements	$	4,409	$	9,715	$	15,249
Furniture, fixtures, equipment and other	89,868		79,500		67,162
Customer premises equipment	194,906		174,749		146,562
Total depreciation expense	$	289,183	$	263,964	$	228,973

F-36

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 11. REGULATORY AUTHORIZATIONS

Our regulatory authorizations consisted of the following:



	Finite lived
	Cost			Accumulated Amortization			Total			Indefinite lived			Total

As of December 31, 2016	$	—		$	—		$	—		$	406,043		$	406,043
Impairment	—			—			—			(6,000		)	(6,000		)
As of December 31, 2017	—			—			—			400,043			400,043
As of December 31, 2018	—			—			—			400,043			400,043
Additions	12,833			—			12,833			(43		)	12,790
Amortization expense	—			(161		)	(161		)	—			(161		)
Currency translation adjustment	(309		)	—			(309		)	—			(309		)
As of December 31, 2019	$	12,524		$	(161	)	$	12,363		$	400,000		$	412,363

Weighted average useful life				14 years

Finite Lived Assets

In November 2019, we were granted an S-band spectrum license for terrestrial rights in Mexico for $7.9 million. The acquired asset is subject to ~~impairment testing annually, or more frequently when events or changes~~amortization over a period of 15 years.

Upon consummation of our joint venture with Yahsat in ~~circumstances indicate the fair value~~Brazil in November 2019, we acquired Ka-band spectrum rights for $4.5 million, which are subject to amortization over a period of ~~a reporting unit is more likely than not less than its carrying amount.~~11 years.

Future Amortization

As of December 31, 2019, our estimated future amortization of our regulatory authorizations with finite lives was as follows:



	Amount

For the years ending December 31,
2020	$	942
2021	942
2022	942
2023	942
2024	942
Thereafter	7,653
Total	$	12,363

Indefinite Lived Assets

As of December 31, 2016, our regulatory authorizations with indefinite lives included $6.0 million for contractual rights to utilize certain frequencies, in addition to those specified in the Brazilian license, at the 45 degree west longitude orbital location acquired in 2012. In 2017, we determined that certain actions required to utilize the frequencies had become impractical with the passage of time and, as a result of these circumstances, we determined that the fair value of those contractual rights was de minimis and we recognized a $6.0 million impairment loss.

F-37

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 12. OTHER INTANGIBLE ASSETS

Our other intangible assets consisted of the following:



	Customer Relationships			Patents			Trademarks and Licenses			Total

Cost:
As of December 31, 2016	$	270,300		$	51,417		$	29,700		$	351,417
As of December 31, 2017	270,300			51,417			29,700			351,417
Write-off	—			(17		)	—			(17		)
As of December 31, 2018	270,300			51,400			29,700			351,400
As of December 31, 2019	$	270,300		$	51,400		$	29,700		$	351,400
Accumulated amortization:
As of December 31, 2016	$	(214,544	)	$	(47,848	)	$	(8,291	)	$	(270,683	)
Amortization expense	(17,098		)	(3,569		)	(1,485		)	$	(22,152	)
As of December 31, 2017	(231,642		)	(51,417		)	(9,776		)	(292,835		)
Amortization expense	(13,145		)	—			(1,485		)	(14,630		)
Write-off	—			17			—			17
As of December 31, 2018	(244,787		)	(51,400		)	(11,261		)	(307,448		)
Amortization expense	(13,146		)	—			(1,485		)	(14,631		)
As of December 31, 2019	$	(257,933	)	$	(51,400	)	$	(12,746	)	$	(322,079	)
Carrying amount:
As of December 31, 2016	$	55,756		$	3,569		$	21,409		$	80,734
As of December 31, 2017	$	38,658		$	—		$	19,924		$	58,582
As of December 31, 2018	$	25,513		$	—		$	18,439		$	43,952
As of December 31, 2019	$	12,367		$	—		$	16,954		$	29,321

Weighted average useful life	8 years			6 years			20 years

Future Amortization

As of December 31, 2019, our estimated future amortization of other intangible assets was as follows:



	Amount
For the years ending December 31,
2020	$	10,981
2021	4,356
2022	1,485
2023	1,485
2024	1,485
Thereafter	9,529
Total	$	29,321

F-38

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 13. OTHER INVESTMENTS

Our Other investments, net consisted of the following:



	As of December 31,
	2019		2018

Other investments, net:
Equity method investments	$	102,689	$	110,931
Other equity investments	7,351		15,438
Total other investments, net	$	110,040	$	126,369

Equity Method Investments

Deluxe/EchoStar LLC

We own 50% of Deluxe, a joint venture that we entered into in 2010 to build an advanced digital cinema satellite distribution network targeting delivery to digitally equipped theaters in the U.S. and Canada. We recognized revenue from Deluxe for transponder services and the sale of broadband equipment of $4.4 million, $4.4 million and $4.9 million for the years ended December 31, 2019, 2018 and 2017, ~~all~~respectively. As of December 31, 2019 and 2018, we had trade accounts receivable from Deluxe of $0.6 million and $0.8 million, respectively.

Broadband Connectivity Solutions

In August 2018, we entered into an agreement with Yahsat to establish a new entity, BCS, to provide commercial Ka-band satellite broadband services across Africa, the Middle East and southwest Asia operating over Yahsat's Al Yah 2 and Al Yah 3 Ka-band satellites. The transaction was consummated in December 2018 when we invested $100.0 million in cash in exchange for a 20% interest in BCS. Under the terms of the agreement, we may also acquire, for further cash investments, additional ownership interests in BCS in the future provided certain conditions are met. We supply network operations and management services and equipment to BCS. We recognized revenue from BCS for such services and equipment of $9.0 million and $0.7 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019 and 2018, we had $5.2 million and $3.4 million, respectively, of trade accounts receivable from BCS.

During the fourth quarter ended December 31, 2019, we began recognizing equity in earnings of certain of our equity method investments on a three-month lag so for the year ended December 31, 2019, we have nine months of activity recorded in these Consolidated Financial Statements. The impact of the change was immaterial to these Consolidated Financial Statements.

As of December 31, 2019, our aggregate investment in our equity method investees exceeded our proportionate share of the net assets of the investees by $19.0 million. This difference is attributable to goodwill recorded at acquisition.

We recorded cash distributions from our investments of $2.7 million, $10.0 million and $19.0 million, respectively, for the years ended December 31, 2019, 2018 and 2017. These cash distributions were determined to be a return on investment and reported in Net cash flows from operating activities in the Consolidated Statements of Cash Flows. Additionally, we recorded an additional dividend from our investments of $2.3 million for the year ended December 31, 2019 that was ~~assigned~~considered a return of investment and reported in Net cash flows from investing activities in the Consolidated Statements of Cash Flows. There were no returns of investment during the years ended December 31, 2018 and 2017.

Other Equity Investments

During the year ended December 31, 2019, we recorded a $8.1 million reduction to ~~reporting units~~the carrying amount of one of our ~~Hughes segment. We test this goodwill~~investments based on circumstances that indicated the fair value of the investment was less than its carrying amount. There were 0 similar reductions for ~~impairment annually in~~ the ~~second quarter. Based on our impairment testing in the second quarter of~~years ended December 31, 2018 ~~our goodwill is considered to be not impaired.~~

or 2017.

~~F-27~~F-39

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ~~Continued~~CONTINUED

~~Other Intangible Assets~~

~~Our other intangible assets, which are subject to amortization, consisted of the following:~~

Weighted Average Useful Life
(in Years)
As of December 31,
2018 2017
Cost
Accumulated
Amortization

Carrying
Amount
Cost
Accumulated
Amortization

Carrying
Amount
(In thousands)
Customer relationships 8 $ 270,300
$ (244,787 ) $ 25,513
$ 270,300
$ (231,642 ) $ 38,658
Technology-based 6 51,400
(51,400 ) —
51,417
(51,417 ) —
Trademark portfolio 20 29,700
(11,261 ) 18,439
29,700
(9,776 ) 19,924
Total other intangible assets $ 351,400
$ (307,448 ) $ 43,952
$ 351,417
$ (292,835 ) $ 58,582

Customer relationships are amortized predominantly in relation to the expected contribution of cash flow to the business over the life of the intangible asset. Other intangible assets are amortized on a straight-line basis over the periods the assets are expected to contribute to our cash flows. Intangible asset amortization expense, including amortization of externally marketed capitalized software, was $38 million, $42 million and $45 million for the years ended December 31, 2018, 2017 and 2016, respectively.

~~Future Amortization~~

~~As of December 31, 2018, our estimated future amortization of intangible assets was as follows:~~

Amount
(In thousands)
For the years ending December 31,
2019 $ 14,631
2020 10,981
2021 4,356
2022 1,485
2023 1,485
Thereafter 11,014
Total $ 43,952

~~F-28~~

~~Table of Contents~~

~~NOTE 9. INVESTMENTS IN UNCONSOLIDATED ENTITIES~~

We have strategic investments in certain non-publicly traded equity securities that do not have a readily determinable fair value. We account for most of these investments using the equity method. We accounted for other investments in such equity securities using the cost method of accounting prior to January 1, 2018. In connection with our adoption of the New Investment Standard effective January 1, 2018 (see Note 2), we elected to measure our equity securities without a readily determinable fair value, other than those accounted for using the equity method, at cost adjusted for changes resulting from impairments, if any, and observable price changes in orderly transactions for the identical or similar securities of the same issuer. For the year ended December 31, 2018, we did not identify any observable price changes requiring an adjustment to our investments.

~~Our investments in unconsolidated entities consisted of the following:~~

As of December 31,
2018 2017
(In thousands)
Investments in unconsolidated entities:

Equity method $ 110,931
$ 15,149
Other equity investments without a readily determinable fair value 15,438
15,438
Total investments in unconsolidated entities $ 126,369
$ 30,587

We recorded cash distributions from our investments accounted for using the equity method of $10 million, $19 million and $10 million for the years ended December 31, 2018, 2017 and 2016, respectively. These cash distributions were determined to be a return on investment and reported in cash flows from operating activities in our consolidated statements of cash flows.

NOTE ~~10.~~14. LONG-TERM DEBT AND ~~CAPITAL~~FINANCE LEASE OBLIGATIONS

As of December 31, 2018, our debt primarily consisted of the 2019 Senior Secured Notes, the 2021 Senior Unsecured Notes, the 2026 Senior Secured Notes and the 2026 Senior Unsecured Notes, each as defined below, and our capital lease obligations.

The following table summarizes the carrying amounts and fair values of our long-term debt and ~~capital~~finance lease obligations:


	Effective Interest Rate		As of December 31,															Effective Interest Rate		As of December 31,
		2018								2017									2019								2018
		Carrying Amount				Fair Value				Carrying Amount				Fair Value					Carrying Amount				Fair Value				Carrying Amount				Fair Value
			(In thousands)
Senior Secured Notes:
6 1/2% Senior Secured Notes due 2019		6.959%		$	920,836			$	932,696			$	990,000			$	1,042,609		6.959%		$	—			$	—			$	920,836			$	932,696
5 1/4% Senior Secured Notes due 2026		5.320%		750,000				695,865				750,000				769,305			5.320%		750,000				825,308				750,000				695,865
Senior Unsecured Notes:
7 5/8% Senior Unsecured Notes due 2021	8.062%		900,000				934,902				900,000				992,745			8.062%		900,000				963,783				900,000				934,902
6 5/8% Senior Unsecured Notes due 2026	6.688%		750,000				696,353				750,000				791,865			6.688%		750,000				833,903				750,000				696,353
Less: Unamortized debt issuance costs			(16,757		)		—				(24,857		)		—					(10,832		)		—				(16,757		)		—
Subtotal			3,304,079				$	3,259,816			3,365,143				$	3,596,524				2,389,168				$	2,622,994			3,304,079				$	3,259,816
Capital lease obligations			228,702								269,701
Total debt and capital lease obligations			3,532,781								3,634,844
Finance lease obligations																				1,051								1,705
Total debt and finance lease obligations																				2,390,219								3,305,784
Less: Current portion			(959,577		)						(40,631		)							(486		)						(919,582		)
Long-term debt and capital lease obligations, net			$	2,573,204							$	3,594,213
Long-term debt and finance lease obligations, net of current portion																				$	2,389,733							$	2,386,202



	Amounts
	(In thousands)
Net income attributable to HSS for the year ended December 31, 2017	$	295,970
Increase in tax provision	(304,571		)
Increase in interest expense	(14,243		)
Increase in other net	(4,408		)
Increase in operating income, including depreciation and amortization	94,099
Increase in interest income	27,152
Decrease in losses on investments, net	1,761
Increase in net income attributable to noncontrolling interests	(259		)
Net income attributable to HSS for the year ended December 31, 2018	$	95,501



	Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Earnings		Noncontrolling Interests			Total
Balance, January 1, 2016	$	1,417,748		$	(54,116	)	$	166,698	$	11,310		$	1,541,640
Stock-based compensation	4,822			—			—		—			4,822
Transfer of EchoStar XXIII launch service contract from EchoStar to HNS	70,300			—			—		—			70,300
Contributions to fund EchoStar XXI launch service contract from EchoStar to HNS	23,750			—			—		—			23,750
Other comprehensive loss	—			(6,539		)	—		(186		)	(6,725		)
Net income	—			—			120,015		1,706			121,721
Other, net	(421		)	(64		)	—		—			(485		)
Balance, December 31, 2016	1,516,199			(60,719		)	286,713		12,830			1,755,023
Stock-based compensation	5,117			—			—		—			5,117
Transfer of launch service contracts to EchoStar	(145,114		)	—			—		—			(145,114		)
Contribution of EchoStar XIX satellite, net of deferred tax	349,337			—			—		—			349,337
Contribution of net assets pursuant to Share Exchange Agreement	219,662			—			—		—			219,662
Exchange of uplinking business net assets for HSS Tracking Stock	(190,221		)									(190,221		)
Other comprehensive income	—			7,805					409			8,214
Net income	—			—			295,970		1,583			297,553
Other	(419		)	92			—		—			(327		)
Balance, December 31, 2017	1,754,561			(52,822		)	582,683		14,822			2,299,244
Cumulative effect of adoption of ASU 2014-09 and ASU 2016-01 as of January 1, 2018				433			15,773					16,206
Balance, January 1, 2018	1,754,561			(52,389		)	598,456		14,822			2,315,450
Stock-based compensation	5,435			—			—		—			5,435
Capital contribution from EchoStar Corporation	7,125			—			—		—			7,125
Other comprehensive income	—			(31,385		)	—		(1,389		)	(32,774		)
Net Income	—			—			95,501		1,842			97,343
Other	(84		)	—			—					(84		)
Balance, December 31, 2018	$	1,767,037		$	(83,774	)	$	693,957	$	15,275		$	2,392,495



	Balance at December 31, 2017			Adjustments Due to the						Balance at January 1, 2018
	Balance at December 31, 2017			New Revenue Standard			New Investment Standard			Balance at January 1, 2018
	(In thousands)
Assets:
Trade accounts receivable and contract assets, net	$	196,840		$	(7,103	)	$	—		$	189,737
Other current assets	$	91,544		$	533		$	—		$	92,077
Other noncurrent assets, net	$	202,814		$	22,545		$	—		$	225,359
Total assets	$	6,857,350		$	15,975		$	—		$	6,873,325
Liabilities:
Contract liabilities	$	65,959		$	(1,542	)	$	—		$	64,417
Accrued expenses and other	$	77,312		$	255		$	—		$	77,567
Deferred tax liabilities, net	$	439,631		$	5,124		$	—		$	444,755
Other noncurrent liabilities	$	107,627		$	(4,068	)	$	—		$	103,559
Total liabilities	$	4,558,106		$	(231	)	$	—		$	4,557,875
Shareholders’ Equity:
Accumulated other comprehensive loss	$	(52,822	)	$	—		$	433		$	(52,389	)
Accumulated earnings (losses)	$	582,683		$	16,206		$	(433	)	$	598,456
Total shareholders’ equity	$	2,299,244		$	16,206		$	—		$	2,315,450
Total liabilities and shareholders’ equity	$	6,857,350		$	15,975		$	—		$	6,873,325



	Weighted Average Useful Life (in Years)	As of December 31,
		2018							2017
		Cost		Accumulated Amortization			Carrying Amount		Cost		Accumulated Amortization			Carrying Amount
		(In thousands)
Customer relationships	8	$	270,300	$	(244,787	)	$	25,513	$	270,300	$	(231,642	)	$	38,658
Technology-based	6	51,400		(51,400		)	—		51,417		(51,417		)	—
Trademark portfolio	20	29,700		(11,261		)	18,439		29,700		(9,776		)	19,924
Total other intangible assets		$	351,400	$	(307,448	)	$	43,952	$	351,417	$	(292,835	)	$	58,582


•	secured by security interests in substantially all of our and certain of our subsidiaries’ existing and future tangible and intangible assets of on a first priority basis, subject to certain exceptions;


•	~~ranked equally and ratably as between the 2019 Senior Secured Notes and the 2026 Senior Secured Notes;~~


•	~~structurally junior to any existing and future obligations of any of our subsidiaries that do not guarantee the respective~~ structurally junior to any existing and future obligations of any of our subsidiaries that do not guarantee the 2026 Senior Secured Notes; and


•	ranked equally with all existing and future unsubordinated indebtedness (including as between the 2021 Senior Unsecured Notes and the 2026 Senior Unsecured Notes) and effectively junior to any secured indebtedness up to the value of the assets securing such indebtedness;


•	senior in right of payment to all our existing and future obligations that are expressly subordinated to the respective Unsecured Notes;


•	structurally junior to any existing and future obligations of any of our subsidiaries that do not guarantee the respective Unsecured Notes; and


•	unconditionally guaranteed, jointly and severally, on a general senior secured basis by certain of our subsidiaries, which guarantees rank equally with all of the guarantors’ existing and future unsubordinated indebtedness, and effectively junior to any secured indebtedness of the guarantors up to the value of the assets securing such indebtedness.


	For the Years Ended December 31,							For the years ended December 31,
Unrecognized tax benefit	2018			2017		2016
	(In thousands)							2019		2018			2017
Balance as of beginning of period	$	7,950		$	7,057	$	3,508

Unrecognized tax benefit balance as of beginning of period:								$	7,866	$	7,950		$	7,057
Additions based on tax positions related to the current year	572			656		388		—		572			656
Additions based on tax positions related to prior years	—			237		3,161		—		—			237
Reductions based on tax positions related to prior years	(656		)	—		—		—		(656		)	—
Balance as of end of period	$	7,866		$	7,950	$	7,057	$	7,866	$	7,866		$	7,950


	Payments Due in the Year Ending December 31,														Payments Due in the Year Ending December 31,
	Total		2019		2020		2021		2022		2023		Thereafter		Total		2020		2021		2022		2023		2024		Thereafter
	(In thousands)
Long-term debt	$	3,320,836	$	920,836	$	—	$	900,000	$	—	$	—	$	1,500,000	$	2,400,000	$	—	$	900,000	$	—	$	—	$	—	$	1,500,000
Capital lease obligations	228,702		40,662		45,031		46,353		31,857		35,476		29,323
Interest on long-term debt and capital lease obligations	983,824		209,989		175,808		136,662		98,265		94,529		268,571
Finance lease obligations															1,212		629		487		96		—		—		—
Interest on long-term debt															726,377		157,688		123,375		89,063		89,063		89,063		178,125
Satellite-related obligations	482,010		115,514		118,688		52,515		39,451		39,771		116,071		256,869		124,334		24,078		11,365		11,241		11,969		73,882
Operating lease obligations	87,987		17,587		16,957		13,400		9,730		8,427		21,886		151,682		19,907		17,594		15,379		14,369		13,286		71,147
Total	$	5,103,359	$	1,304,588	$	356,484	$	1,148,930	$	179,303	$	178,203	$	1,935,851	$	3,536,140	$	302,558	$	1,065,534	$	115,903	$	114,673	$	114,318	$	1,823,154


	Hughes		ESS			Corporate and Other			Consolidated Total		Hughes		ESS			Corporate and Other			Consolidated Total

For the year ended December 31, 2019
External revenue											$	1,852,742	$	15,131		$	22,288		$	1,890,161
Intersegment revenue											—		1,126			(1,126		)	—
Total revenue											$	1,852,742	$	16,257		$	21,162		$	1,890,161
EBITDA											$	625,660	$	6,994		$	(27,855	)	$	604,799
Capital expenditures											$	308,781	$	—		$	—		$	308,781
	(In thousands)
For the year ended December 31, 2018
External revenue	$	1,716,169	$	355,734		$	25,760		$	2,097,663	$	1,716,169	$	27,009		$	23,658		$	1,766,836
Intersegment revenue	$	359	$	2,324		$	(2,683	)	$	—	359		222			(581		)	—
Total revenue	$	1,716,528	$	358,058		$	23,077		$	2,097,663	$	1,716,528	$	27,231		$	23,077		$	1,766,836
EBITDA	$	601,319	$	308,058		$	(15,474	)	$	893,903	$	601,319	$	17,764		$	(15,473	)	$	603,610
Capital expenditures	$	390,108	$	(76,582	)	$	15		$	313,541	$	390,108	$	(76,757	)	$	15		$	313,366

For the year ended December 31, 2017
External revenue	$	1,476,131	$	390,831		$	9,907		$	1,876,869	$	1,476,131	$	30,405		$	8,506		$	1,515,042
Intersegment revenue	$	1,787	$	1,413		$	(3,200	)	$	—	1,787		12			(1,799		)	—
Total revenue	$	1,477,918	$	392,244		$	6,707		$	1,876,869	$	1,477,918	$	30,417		$	6,707		$	1,515,042
EBITDA	$	475,222	$	315,285		$	(42,415	)	$	748,092	$	475,222	$	16,074		$	(42,415	)	$	448,881
Capital expenditures	$	376,502	$	20,725		$	—		$	397,227	$	376,502	$	20,026		$	—		$	396,528
For the year ended December 31, 2016
External revenue	$	1,389,152	$	406,970		$	3,671		$	1,799,793
Intersegment revenue	$	3,209	$	690		$	(3,899	)	$	—
Total revenue	$	1,392,361	$	407,660		$	(228	)	$	1,799,793
EBITDA	$	477,165	$	341,516		$	(36,174	)	$	782,507
Capital expenditures	$	322,362	$	58,925		$	—		$	381,287



	As of December 31,
Long-lived assets:	2018		2017
	(In thousands)

North America	$	3,311,208	$	3,482,462
Central and South America	192,860		28,360
All other	91,798		270,689
Total long-lived assets	$	3,595,866	$	3,781,511


~~(1)~~	Net income for the three months ended December 31, 2017 include a discrete income tax benefit of $283 million related to the enactment of federal tax legislation in December 2017 and an impairment loss of $6 million relating to our regulatory authorizations with indefinite lives. See Note 11 for additional information relating to the income tax benefit.


	HSS		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total		HSS		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Total
Assets
Cash and cash equivalents	$	771,718	$	46,353	$	29,752	$	—		$	847,823	$	1,057,903	$	32,338	$	49,194	$	—		$	1,139,435
Marketable investment securities, at fair value	1,608,123		1,073		—		—			1,609,196
Marketable investment securities												652,594		241		—		—			652,835
Trade accounts receivable and contract assets, net	—		128,831		72,265		—			201,096		—		129,722		66,798		—			196,520
Trade accounts receivable - DISH Network, net	—		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
Advances to affiliates												93,493		523,116		17,501		(502,218		)	131,892
Other current assets	72		26,331		41,378		(561		)	67,220		43		79,221		90,458		38			169,760
Total current assets	2,489,346		811,035		187,651		(570,218		)	2,917,814		1,804,033		764,638		223,951		(502,180		)	2,290,442
Property and equipment, net	—		2,280,804		301,377		—			2,582,181		—		1,459,151		398,430		—			1,857,581
Regulatory authorizations	—		465,658		—		—			465,658
Operating lease right-of-use assets												—		89,106		24,293		—			113,399
Goodwill	—		504,173		—		—			504,173		—		504,173		2,780		—			506,953
Regulatory authorizations, net												—		400,000		12,363		—			412,363
Other intangible assets, net	—		43,952		—		—			43,952		—		29,321		—		—			29,321
Investments in unconsolidated entities	—		126,369		—		—			126,369
Other investments, net												—		110,040		—		—			110,040
Investment in subsidiaries	3,362,589		192,370		—		(3,554,959		)	—		2,876,572		282,163		—		(3,158,735		)	—
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
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	$	5,906,636	$	4,747,316	$	505,378	$	(4,266,158	)	$	6,893,172	$	4,691,277	$	4,410,785	$	704,374	$	(4,234,401	)	$	5,572,035
Liabilities and Shareholders’ Equity
Trade accounts payable	$	—	$	88,342	$	16,409	$	—		$	104,751	$	—	$	102,744	$	18,808	$	—		$	121,552
Trade accounts payable - DISH Network	—		752		—		—			752
Current portion of long-term debt and capital lease obligations	918,916		39,995		666		—			959,577
Current portion of long-term debt and finance lease obligations												—		—		486		—			486
Advances from affiliates, net	181,926		282,268		106,331		(569,657		)	868		202,994		240,887		69,469		(502,218		)	11,132
Accrued expenses and other	43,410		147,055		48,307		(561		)	238,211
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	1,144,252		558,412		171,713		(570,218		)	1,304,159		243,694		513,812		225,703		(502,180		)	481,029
Long-term debt and capital lease obligations, net	2,385,164		187,002		1,038		—			2,573,204
Long-term debt and finance lease obligations, net of current portion												2,389,168		—		565		—			2,389,733
Deferred tax liabilities, net	—		541,903		834		(54,001		)	488,736		—		390,288		—		(9,972		)	380,316
Advances from affiliates	—		—		120,418		(86,980		)	33,438
Other noncurrent liabilities	—		98,661		2,479		—			101,140
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	2,377,220		3,361,338		193,621		(3,554,959		)	2,377,220		2,058,415		2,875,801		282,934		(3,158,735		)	2,058,415
Noncontrolling interests	—		—		15,275		—			15,275
Non-controlling interests												—		—		75,748		—			75,748
Total liabilities and shareholders’ equity	$	5,906,636	$	4,747,316	$	505,378	$	(4,266,158	)	$	6,893,172	$	4,691,277	$	4,410,785	$	704,374	$	(4,234,401	)	$	5,572,035



Allowance for doubtful accounts	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions			Balance at End of Year
	(In thousands)
For the years ended:
December 31, 2018	$	12,027	$	22,184	$	(17,607	)	$	16,604
December 31, 2017	$	12,752	$	9,551	$	(10,276	)	$	12,027
December 31, 2016	$	11,447	$	14,384	$	(13,079	)	$	12,752

For the three months ended

December 31, 2018

September 30, 2018

Net additions