Item 16. FORM 10-K SUMMARY

None.

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.

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

Date: February 27, 2019

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 27, 2019
Michael T. Dugan		(Principal Executive Officer)
/s/ David J. Rayner		Executive Vice President, Chief Financial Officer,
David J. Rayner		Chief Operating Officer and Treasurer		February 27, 2019
		(Principal Financial and Accounting Officer)
*		Chairman		February 27, 2019
Charles W. Ergen
*		Director		February 27, 2019
R. Stanton Dodge
*		Director		February 27, 2019
Anthony M. Federico
*		Director		February 27, 2019
Pradman P. Kaul
*		Director		February 27, 2019
Tom A. Ortolf
*		Director		February 27, 2019
C. Michael Schroeder
*		Director		February 27, 2019
William David Wade

* By:	/s/ Dean A. Manson
	Dean A. Manson
	Attorney-in-Fact

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 and 2017	F-4
Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016	F-5
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, 2017 and 2016	F-6
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018, 2017 and 2016	F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016	F-8
Notes to Consolidated Financial Statements	F-9

F-1

Report of Independent Registered Public Accounting Firm

To the stockholders and board of directors

EchoStar Corporation:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of EchoStar Corporation and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes and financial statement schedule II listed in Item 15, collectively, the “consolidated financial statements.” We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, in 2018 the Company has changed its method of accounting for revenue recognition 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. In 2017, the Company has changed its method of accounting for excess tax benefits and deficiencies related to share-based payment awards due to the adoption of Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

F-2

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the 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 the policies or procedures may deteriorate.

	/s/ KPMG LLP

We have served as the Company’s auditor since 2007.

Denver, Colorado
February 21, 2019

F-3

ECHOSTAR CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

		As of December 31,
		2018				2017
Assets
Current assets:
Cash and cash equivalents		$	928,306			$	2,431,456
Marketable investment securities, at fair value		2,282,152				814,161
Trade accounts receivable and contract assets, net (Note 3)		201,096				196,840
Trade accounts receivable - DISH Network		14,200				43,295
Inventory		75,379				83,595
Prepaids and deposits		61,177				54,533
Other current assets		18,539				91,671
Total current assets		3,580,849				3,715,551
Noncurrent assets:
Property and equipment, net		3,414,908				3,465,471
Regulatory authorizations, net		495,654				536,936
Goodwill		504,173				504,173
Other intangible assets, net		44,231				58,955
Investments in unconsolidated entities		262,473				161,427
Other receivables - DISH Network		95,114				92,687
Other noncurrent assets, net		263,892				214,814
Total noncurrent assets		5,080,445				5,034,463
Total assets		$	8,661,294			$	8,750,014
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable		$	121,437			$	108,406
Trade accounts payable - DISH Network		1,698				4,753
Current portion of long-term debt and capital lease obligations		959,577				40,631
Contract liabilities		72,284				65,959
Accrued interest		47,416				47,616
Accrued compensation		54,242				47,756
Accrued taxes		16,013				16,122
Accrued expenses and other		72,470				82,647
Total current liabilities		1,345,137				413,890
Noncurrent liabilities:
Long-term debt and capital lease obligations, net		2,573,204				3,594,213
Deferred tax liabilities, net		465,933				436,023
Other noncurrent liabilities		121,546				128,503
Total noncurrent liabilities		3,160,683				4,158,739
Total liabilities		4,505,820				4,572,629
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at each of December 31, 2018 and 2017		—				—
Common stock, $0.001 par value, 4,000,000,000 shares authorized:
Class A common stock, $0.001 par value, 1,600,000,000 shares authorized, 54,142,566 shares issued and 47,657,645 shares outstanding at December 31, 2018 and 53,663,859 shares issued and 48,131,541 shares outstanding at December 31, 2017		54				54
Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at each of December 31, 2018 and 2017		48				48
Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of December 31, 2018 and 2017		—				—
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of December 31, 2018 and 2017		—				—
Additional paid-in capital		3,702,522				3,669,461
Accumulated other comprehensive loss		(125,100		)		(130,154		)
Accumulated earnings		694,129				721,316
Treasury stock, at cost		(131,454		)		(98,162		)
Total EchoStar Corporation stockholders’ equity		4,140,199				4,162,563
Other noncontrolling interests		15,275				14,822
Total stockholders’ equity		4,155,474				4,177,385
Total liabilities and stockholders’ equity		$	8,661,294			$	8,750,014

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

F-4

ECHOSTAR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

		For the years ended December 31,
		2018				2017				2016
Revenue:
Services and other revenue - DISH Network		$	378,694			$	445,698			$	463,442
Services and other revenue - other		1,507,259				1,200,321				1,100,828
Equipment revenue		205,410				239,489				246,196
Total revenue		2,091,363				1,885,508				1,810,466
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)		604,305				563,346				536,568
Cost of sales - equipment (exclusive of depreciation and amortization)		176,600				195,151				188,617
Selling, general and administrative expenses		436,247				366,007				325,044
Research and development expenses		27,570				31,745				31,170
Depreciation and amortization		598,178				522,190				432,904
Impairment of long-lived assets		65,220				10,762				—
Total costs and expenses		1,908,120				1,689,201				1,514,303
Operating income		183,243				196,307				296,163
Other income (expense):
Interest income		80,275				44,619				21,244
Interest expense, net of amounts capitalized		(248,568		)		(217,240		)		(123,481		)
Gains (losses) on investments, net		(12,207		)		53,453				9,767
Equity in earnings (losses) of unconsolidated affiliates, net		(5,954		)		16,973				10,802
Other, net		(4,749		)		6,582				2,131
Total other income (expense), net		(191,203		)		(95,613		)		(79,537		)
Income (loss) from continuing operations before income taxes		(7,960		)		100,694				216,626
Income tax benefit (provision), net		(30,673		)		284,286				(80,254		)
Net income (loss) from continuing operations		(38,633		)		384,980				136,372
Net income from discontinued operations		—				8,509				44,320
Net income (loss)		(38,633		)		393,489				180,692
Less: Net income attributable to noncontrolling interests		1,842				928				762
Net income (loss) attributable to EchoStar Corporation		(40,475		)		392,561				179,930
Less: Net loss attributable to Hughes Retail Preferred Tracking Stock (Note 1)		—				(1,209		)		(1,743		)
Net income (loss) attributable to EchoStar Corporation common stock		$	(40,475	)		$	393,770			$	181,673
Earnings per share - Class A and B common stock:
Basic earnings (loss) from continuing operations per share		$	(0.42	)		$	4.04			$	1.46
Total basic earnings (loss) per share		$	(0.42	)		$	4.13			$	1.94
Diluted earnings (loss) from continuing operations per share		$	(0.42	)		$	3.98			$	1.45
Total diluted earnings (loss) per share		$	(0.42	)		$	4.07			$	1.92

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

F-5

ECHOSTAR CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

		For the years ended December 31,
		2018				2017				2016
Comprehensive income (loss):
Net income (loss)		$	(38,633	)		$	393,489			$	180,692
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(34,399		)		16,413				(11,315		)
Unrealized gains (losses) on available-for-sale securities and other		(2,872		)		(21,895		)		9,149
Amounts reclassified to net income:
Foreign currency translation realized to due impairment of long lived assets		32,136				—				—
Realized gains on available-for-sale securities		—				(2,758		)		(5,590		)
Other-than-temporary impairment loss on available-for-sale securities		(278		)		3,298				—
Total other comprehensive income (loss), net of tax		(5,413		)		(4,942		)		(7,756		)
Comprehensive income (loss)		(44,046		)		388,547				172,936
Less: Comprehensive income attributable to noncontrolling interests		453				1,337				576
Comprehensive income (loss) attributable to EchoStar Corporation		$	(44,499	)		$	387,210			$	172,360

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

F-6

ECHOSTAR CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands)

		Class A and B Common Stock				Hughes Retail Preferred Tracking Stock				Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)				Accumulated Earnings (Deficit)				Treasury Stock				Noncontrolling Interest in HSS Tracking Stock				Other Noncontrolling Interests				Total
Balance, January 1, 2016		$	99			$	6			$	3,776,451			$	(117,233	)		$	134,317			$	(98,162	)		$	74,854			$	11,310			$	3,781,642
Issuances of Class A common stock:
Exercise of stock options		1				—				13,065				—				—				—				—				—				13,066
Employee benefits		—				—				11,126				—				—				—				—				—				11,126
Employee Stock Purchase Plan		—				—				14,367				—				—				—				—				—				14,367
Stock-based compensation		—				—				15,234				—				—				—				—				—				15,234
Excess tax benefit from stock option exercises		—				—				848				—				—				—				—				—				848
R&D tax credits utilized by DISH Network		—				—				(1,600		)		—				—				—				—				—				(1,600		)
Other comprehensive loss		—				—				—				(7,506		)		—				—				—				(186		)		(7,692		)
Net income (loss)		—				—				—				—				179,930				—				(944		)		1,706				180,692
Other, net		—				—				(814		)		(64		)		—				—				—				—				(878		)
Balance, December 31, 2016		100				6				3,828,677				(124,803		)		314,247				(98,162		)		73,910				12,830				4,006,805
Cumulative effect of adoption of ASU No. 2016-09 as of January 1, 2017 (Note 2)		—				—				—				—				14,508				—				—				—				14,508
Balance, January 1, 2017		100				6				3,828,677				(124,803		)		328,755				(98,162		)		73,910				12,830				4,021,313
Issuances of Class A common stock:
Exercise of stock options		2				—				36,503				—				—				—				—				—				36,505
Employee benefits		—				—				11,200				—				—				—				—				—				11,200
Employee Stock Purchase Plan		—				—				8,758				—				—				—				—				—				8,758
Stock-based compensation		—				—				10,103				—				—				—				—				—				10,103
Reacquisition and retirement of Tracking Stock pursuant to the Share Exchange (Note 1)		—				(6		)		(227,278		)		—				—				—				(73,255		)		—				(300,539		)
R&D tax credits utilized by DISH Network		—				—				1,624				—				—				—				—				—				1,624
Other comprehensive loss		—				—				—				(5,443		)		—				—				—				409				(5,034		)
Net income (loss)		—				—				—				—				392,561				—				(655		)		1,583				393,489
Other, net		—				—				(126		)		92				—				—				—				—				(34		)
Balance, December 31, 2017		102				—				3,669,461				(130,154		)		721,316				(98,162		)		—				14,822				4,177,385
Cumulative effect of adoption of ASU No. 2014-09 and ASU No. 2016-01 as of January 1, 2018 (Note 2)		—				—				—				10,467				12,656				—				—				—				23,123
Balance, January 1, 2018		102				—				3,669,461				(119,687		)		733,972				(98,162		)		—				14,822				4,200,508
Issuances of Class A common stock:
Exercise of stock options		—				—				4,404				—				—				—				—				—				4,404
Employee benefits		—				—				7,605				—				—				—				—				—				7,605
Employee Stock Purchase Plan		—				—				9,368				—				—				—				—				—				9,368
Stock-based compensation		—				—				9,990				—				—				—				—				—				9,990
R&D tax credits utilized by DISH Network		—				—				1,822				—				—				—				—				—				1,822
Other comprehensive income (loss)		—				—				—				(3,462		)		—				—				—				(1,389		)		(4,851		)
Net income (loss)		—				—				—				—				(40,475		)		—				—				1,842				(38,633		)
Treasury share repurchase		—				—				—				—				—				(33,292		)		—				—				(33,292		)
Other, net		—				—				(128		)		(1,951		)		632				—				—				—				(1,447		)
Balance, December 31, 2018		$	102			$	—			$	3,702,522			$	(125,100	)		$	694,129			$	(131,454	)		$	—			$	15,275			$	4,155,474

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

F-7

ECHOSTAR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

		For the years ended December 31,
		2018				2017				2016
Cash flows from operating activities:
Net income (loss)		$	(38,633	)		$	393,489			$	180,692
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization		598,178				533,849				495,068
Impairment of long-lived assets		65,220				10,762				—
Equity in earnings of unconsolidated affiliates, net		6,037				(15,814		)		(13,310		)
Amortization of debt issuance costs		7,923				7,378				6,551
Gains and losses on investments, net		12,109				(53,453		)		(9,767		)
Stock-based compensation		9,990				10,103				15,234
Deferred tax provision (benefit)		26,327				(288,577		)		98,148
Dividends received from unconsolidated entities		10,000				19,000				15,000
Proceeds from sale of trading securities		—				8,922				7,140
Changes in current assets and current liabilities, net:
Trade accounts receivable, net		(17,842		)		421				(26,942		)
Trade accounts receivable - DISH Network		29,188				235,227				(1,456		)
Inventory		5,650				(19,291		)		(4,814		)
Other current assets		(16,261		)		(15,352		)		2,263
Trade accounts payable		9,562				(78,419		)		(24,571		)
Trade accounts payable - DISH Network		(3,055		)		731				(19,650		)
Accrued expenses and other		23,105				11,993				55,998
Changes in noncurrent assets and noncurrent liabilities, net		(5,070		)		(36,975		)		9,459
Other, net		12,094				2,898				18,300
Net cash flows from operating activities		734,522				726,892				803,343
Cash flows from investing activities:
Purchases of marketable investment securities		(2,973,254		)		(855,717		)		(921,247		)
Sales and maturities of marketable investment securities		1,498,463				580,235				1,009,310
Expenditures for property and equipment		(555,141		)		(583,211		)		(722,341		)
Refunds and other receipts related to property and equipment		77,524				4,311				24,087
Sale of investment in unconsolidated entity		1,558				17,781				—
Expenditures for externally marketed software		(31,639		)		(31,331		)		(23,252		)
Investments in unconsolidated entities		(115,991		)		—				(1,636		)
Other, net		—				—				2,880
Net cash flows from investing activities		(2,098,480		)		(867,932		)		(632,199		)
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 (Note 12)		(70,173		)		—				—
Purchase of treasury shares (Note 14)		(33,292		)		—				—
Repayment of debt and capital lease obligations		(41,019		)		(37,670		)		(40,364		)
Net proceeds from Class A common stock options exercised		4,424				35,536				13,065
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan		9,368				8,758				14,367
Repayment of in-orbit incentive obligations		(5,350		)		(5,487		)		(5,499		)
Cash exchanged for Tracking Stock (Note 1)		—				(651		)		—
Other, net		(521		)		—				1,217
Net cash flows from financing activities		(136,563		)		72				1,475,689
Effect of exchange rates on cash and cash equivalents		(2,233		)		1,351				138
Net increase (decrease) in cash and cash equivalents		(1,502,754		)		(139,617		)		1,646,971
Cash and cash equivalents, including restricted amounts, beginning of period		2,432,249				2,571,866				924,895
Cash and cash equivalents, including restricted amounts, end of period		$	929,495			$	2,432,249			$	2,571,866
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized		$	240,596			$	207,617			$	78,312
Cash paid for income taxes		$	5,209			$	11,033			$	11,700

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

F-8

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND BUSINESS ACTIVITIES

Principal Business

EchoStar Corporation (which, together with its subsidiaries, is referred to as “EchoStar,” the “Company,” “we,” “us” and/or “our”) is a holding company that was organized in October 2007 as a corporation under the laws of the State of Nevada and has operated as a separately traded public company from Dish Network Corporation (“DISH”) since 2008. Our Class A common stock is publicly traded on the Nasdaq Global Select Market under the symbol “SATS.”

We are a global provider of broadband satellite technologies, broadband internet services for home and small office customers, satellite operations and satellite services. We also deliver innovative network technologies, managed services and various communications solutions for aeronautical, enterprise and government customers. We primarily operate in the following two business segments:

•

Hughes — which provides broadband satellite technologies and broadband internet services to domestic and international home and small office customers and broadband network technologies, managed services, equipment, hardware, satellite services and communication solutions to domestic 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”) — 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 we 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, 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 our segment reporting.

During 2017, we and certain of our subsidiaries entered into a share exchange agreement with DISH and certain of its subsidiaries. We, and certain of our subsidiaries, received all of the shares of the Hughes Retail Preferred Tracking Stock previously issued by us and one of our subsidiaries (together, the “Tracking Stock”) in exchange for 100% of the equity interests of certain of our subsidiaries that held substantially all of our former EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Following the consummation of the Share Exchange, we no longer operate our 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. As a result of the Share Exchange, the operating results of the EchoStar Technologies businesses have been presented as discontinued operations and as such, have been excluded from continuing operations and segment results for all periods presented in our accompanying Consolidated Financial Statements. See Note 4 for further discussion of our discontinued operations.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

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 we are the primary beneficiary. We are deemed to have a controlling financial interest in other entities when 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 interest within stockholders’ equity for the portion of the entity’s equity attributed to the noncontrolling ownership interests. Prior to the consummation of the Share Exchange, noncontrolling interests consisted primarily

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of the Hughes Retail Preferred Tracking Stock issued by our subsidiary, Hughes Network Systems Corporation (“HSS”), (the “HSS Tracking Stock”) owned by DISH Network as described in Notes 1 and 4. All significant intercompany balances and transactions have been eliminated in consolidation.

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 to make certain estimates and assumptions that affect the reported amounts of assets 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. Estimates are used in accounting for, among other things, (i) amortization periods for deferred contract acquisition costs, (ii) inputs used to recognize revenue over time, (iii) allowances for doubtful accounts, (iv) warranty obligations, (v) self-insurance obligations, (vi) deferred taxes and related valuation allowances, (vii) uncertain tax positions, (viii) loss contingencies, (ix) fair value of financial instruments, (x) fair value of stock-based compensation awards, (xi) fair value of assets and liabilities acquired in business combinations, (xii) lease classifications, (xiii) asset impairment testing and (xiv) useful lives and methods for depreciation and amortization of long-lived assets.

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 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:

•	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 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 12) 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 asset impairment testing and the assignment of purchase consideration to assets and liabilities of

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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 no transfers between levels for each of the years ended December 31, 2018 and 2017.

As of December 31, 2018 and 2017, the carrying amounts of our cash and cash equivalents, trade and other receivables, net of allowance for doubtful accounts, accounts payable and accrued 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 revenue is derived from leases of property and equipment that is reported in Services and other revenue - other and Services and other revenue - DISH Network in our 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.

Hughes

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 upon shipment of the equipment. 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 enterprise and mobile satellite systems markets. Revenue from such contracts is generally recognized over time at 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

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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

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.

Other

Sales and Value Added Taxes, Universal Service Fees and other taxes that we collect concurrent with revenue producing activities are excluded from revenue.

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 Consolidated Statements of Operations at the time of shipment.

Contract Balances

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 our Consolidated Statements of Operations.

Contract Assets and Contract Liabilities

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 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.

Contract liabilities consist of advance payments and billings in excess of revenue recognized under customer contracts and are included in Contract liabilities or Other noncurrent liabilities in our 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.

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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.

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.

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 Consolidated Statements of 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 re-measurement of monetary assets and liabilities denominated in foreign currencies into the functional currency are recognized in Other, net in our Consolidated Statements of Operations.

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 (losses) on available-for-sale securities and other in our Consolidated Statements of 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 (losses) on investments, net in our Consolidated Statements of Operations. 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. 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 (loss) in our Consolidated Statements of Operations, thus establishing a new cost basis for the investment.

From time to time we make strategic investments in 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 our Consolidated Statements of Operations. Interest income from these securities is reported in Interest income in our Consolidated Statements of Operations.

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 changes in the difference between fair value and cost in Unrealized gains (losses) on available-for-sale securities and

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other in our Consolidated Statements of 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. 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 (losses) on investments, net in our Consolidated Statements of Operations.

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 (losses) on investments, net in our Consolidated Statements of Operations. 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.

Restricted Marketable Investment Securities

Restricted marketable investment securities that are pledged as collateral for our letters of credit or surety bonds are included in Other noncurrent assets, net in our Consolidated Balance Sheets. Restricted marketable securities are accounted for in the same manner as marketable securities that are not restricted, however, the restricted marketable securities are presented differently in the consolidated financial statements.

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 (losses) of unconsolidated affiliates, net in our Consolidated Statements of Operations. 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 include the intra-entity profit eliminations within Equity in earnings (losses) of unconsolidated affiliates, net in our Consolidated Statements of 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

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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 (losses) on investments, net in our Consolidated Statements of Operations.

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 30 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.

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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;

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

•	we intend to use these authorizations indefinitely.

Our non-FCC Regulatory Authorizations consist primarily of authorizations in Europe and Brazil that we acquired in 2013 and 2012, respectively. We have determined that those Regulatory Authorizations have finite lives due to uncertainties about the ability to extend or renew their terms.

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. We report unamortized debt issuance costs as a reduction of the related long-term debt in our Consolidated Balance Sheets.

Income Taxes

We recognize a provision or benefit for income taxes currently payable or receivable and for income tax amounts deferred to future periods. Deferred tax assets and liabilities are recorded based on enacted tax laws for the estimated future tax effects of differences that exist between the financial reporting carrying amount and tax basis of assets and liabilities. 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 asset or liability in our 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. 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

Cost of sales - services and other in our 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. Cost of sales - services and other generally are charged to expense as incurred. Cost of sales - equipment in our Consolidated Statements of Operations 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.

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Research and Development

Costs incurred in research and development activities 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.

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 revised, if necessary, in subsequent periods if actual forfeitures differ from 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 performance conditions is recognized only when satisfaction of the performance condition is probable. We adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, prospectively as of January 1, 2017. This update requires all excess tax benefits and deficiencies to be recognized as income tax expense or benefit and permits an entity to make an entity-wide policy election to either estimate forfeitures or recognize forfeitures as they occur. Upon adoption of this standard as of January 1, 2017, we recorded a $14 million deferred tax asset and a corresponding credit to Accumulated earnings in our Consolidated Balance Sheets for excess tax benefits that had not previously been recognized because the related tax deductions had not reduced taxes payable. We did not change our accounting policy to estimate forfeitures in determining compensation cost.

Advertising Costs

Advertising costs are expensed as incurred and are included in Selling, general and administrative expenses in Consolidated Statements of Operations.

Recently Adopted Accounting Pronouncements

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 Consolidated Balance Sheets of $23 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 Consolidated Balance Sheets and the costs generally are recognized as expenses over a longer period of time in our Consolidated Statements of 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.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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 $10 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 Consolidated Balance Sheets. For 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.

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		$	91,671			$	533			$	—			$	92,204
Investments in unconsolidated entities		$	161,427			$	6,917			$	—			$	168,344
Other noncurrent assets, net		$	214,814			$	22,545			$	—			$	237,359
Total assets		$	8,750,014			$	22,892			$	—			$	8,772,906
Liabilities:
Contract liabilities		$	65,959			$	(1,542	)		$	—			$	64,417
Accrued expenses and other		$	82,647			$	255			$	—			$	82,902
Deferred tax liabilities, net		$	436,023			$	5,124			$	—			$	441,147
Other noncurrent liabilities		$	128,503			$	(4,068	)		$	—			$	124,435
Total liabilities		$	4,572,629			$	(231	)		$	—			$	4,572,398
Stockholders’ Equity:
Accumulated other comprehensive income (loss)		$	(130,154	)		$	—			$	10,467			$	(119,687	)
Accumulated earnings (losses)		$	721,316			$	23,123			$	(10,467	)		$	733,972
Total stockholders’ equity		$	4,177,385			$	23,123			$	—			$	4,200,508
Total liabilities and stockholders’ equity		$	8,750,014			$	22,892			$	—			$	8,772,906

F-19

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Our adoption of these standards impacted the referenced line items on our Consolidated Balance Sheets, 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
Investments in unconsolidated entities		$	262,473			$	(5,639	)		$	—			$	256,834
Other noncurrent assets, net		$	263,892			$	(35,314	)		$	—			$	228,578
Total assets		$	8,661,294			$	(33,107	)		$	—			$	8,628,187
Liabilities:
Contract liabilities		$	72,284			$	878			$	—			$	73,162
Accrued expenses and other		$	72,470			$	(255	)		$	—			$	72,215
Deferred tax liabilities, net		$	465,933			$	(6,976	)		$	—			$	458,957
Other noncurrent liabilities		$	121,546			$	1,635			$	—			$	123,181
Total liabilities		$	4,505,820			$	(4,718	)		$	—			$	4,501,102
Stockholders’ Equity:
Accumulated other comprehensive income (loss)		$	(125,100	)		$	—			$	20,064			$	(105,036	)
Accumulated earnings (losses)		$	694,129			$	(28,389	)		$	(20,064	)		$	645,676
Total stockholders’ equity		$	4,155,474			$	(28,389	)		$	—			$	4,127,085
Total liabilities and stockholders’ equity		$	8,661,294			$	(33,107	)		$	—			$	8,628,187

F-20

ECHOSTAR 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			New Revenue Standard				New Investment Standard
		(In thousands, except per share amounts)
Revenue:
Services and other revenue - other		$	1,507,259			$	2,323			$	—			$	1,509,582
Total revenue		$	2,091,363			$	2,323			$	—			$	2,093,686
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)		$	604,305			$	2,738			$	—			$	607,043
Selling, general and administrative expenses		$	436,247			$	8,520			$	—			$	444,767
Total costs and expenses		$	1,908,120			$	11,258			$	—			$	1,919,378
Operating income (loss)		$	183,243			$	(8,935	)		$	—			$	174,308
Other income (expense):
Interest expense, net of amounts capitalized		$	(248,568	)		$	539			$	—			$	(248,029	)
Gains and losses on investments, net		$	(12,207	)		$	—			$	(30,531	)		$	(42,738	)
Equity in earnings (losses) of unconsolidated affiliates, net		$	(5,954	)		$	1,278			$	—			$	(4,676	)
Total other income (expense), net		$	(191,203	)		$	1,817			$	(30,531	)		$	(219,917	)
Income (loss) from continuing operations before income taxes		$	(7,960	)		$	(7,118	)		$	(30,531	)		$	(45,609	)
Income tax benefit (provision)		$	(30,673	)		$	1,852			$	—			$	(28,821	)
Net income (loss)		$	(38,633	)		$	(5,266	)		$	(30,531	)		$	(74,430	)
Net income (loss) attributable to EchoStar Corporation common stock		$	(40,475	)		$	(5,266	)		$	(30,531	)		$	(76,272	)
Earnings (losses) per share:
Basic		$	(0.42	)		$	(0.05	)		$	(0.32	)		$	(0.79	)
Diluted		$	(0.42	)		$	(0.05	)		$	(0.32	)		$	(0.79	)

		For the year ended December 31, 2018
		As Reported				Adjustments Due to the								Balances If We Had Not Adopted the New Standards
Statement of Comprehensive Income (Loss)			New Revenue Standard				New Investment Standard
		(In thousands)
Net income (loss)		$	(38,633	)		$	(5,266	)		$	(30,531	)		$	(74,430	)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on available-for-sale securities and other		$	(2,872	)		$	—			$	(6,485	)		$	(9,357	)
Other-than-temporary impairment loss on available-for-sale securities in net income		$	—			$	—			$	37,016			$	37,016
Total other comprehensive income (loss), net of tax		$	(5,413	)		$	—			$	30,531			$	25,118
Comprehensive income (loss)		$	(44,046	)		$	(5,266	)		$	—			$	(49,312	)
Comprehensive income (loss) attributable to EchoStar Corporation		$	(44,499	)		$	(5,266	)		$	—			$	(49,765	)

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-21

ECHOSTAR 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 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 Consolidated Financial Statements and related disclosures.

F-22

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 3. REVENUE RECOGNITION

Information About Contract Balances

The following table provides information about our contract balances with customers, including amounts for certain embedded leases.

		As of
		December 31, 2018				January 1, 2018
		(In thousands)
Trade accounts receivable:
Sales and services		$	154,415			$	156,794
Leasing		7,990				10,355
Total		162,405				167,149
Contract assets		55,295				34,615
Allowance for doubtful accounts		(16,604		)		(12,027		)
Total trade accounts receivable and contract assets, net		$	201,096			$	189,737
Trade accounts receivable - DISH Network:
Sales and services		$	12,274			$	16,118
Leasing		1,926				27,177
Total trade accounts receivable - DISH Network, net		$	14,200			$	43,295
Contract liabilities:
Current		$	72,284			$	64,417
Noncurrent		10,133				13,036
Total contract liabilities		$	82,417			$	77,453

For the year ended December 31, 2018, we recognized revenue of $52 million that was previously included in the contract liability balance at January 1, 2018.

Our bad debt expense was $25 million, $10 million and $14 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Transaction Price Allocated to Remaining Performance Obligations

As of December 31, 2018, the remaining performance obligations for our customer contracts with original expected durations of more than one year was $939 million. We expect to recognize approximately 35.7% 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.

F-23

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Disaggregation of Revenue

In the following tables, revenue is disaggregated by segment, primary geographic market, nature of the products and services and transactions with major customers.

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			$	17,478			$	1,819,463
South and Central America		101,632				—				—				101,632
All other		170,268				701				(701		)		170,268
Total revenue		$	1,716,528			$	358,058			$	16,777			$	2,091,363

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				18,908				1,356,080
Design, development and construction services		85,753				—				—				85,753
Revenue from sales and services		1,518,469				24,113				18,908				1,561,490
Leasing income		198,059				333,945				(2,131		)		529,873
Total revenue		$	1,716,528			$	358,058			$	16,777			$	2,091,363

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

F-24

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 4. DISCONTINUED OPERATIONS

On February 28, 2017, EchoStar Corporation and certain of our subsidiaries consummated the Share Exchange, pursuant to which, among other things, we received all of the shares of the Tracking Stock in exchange for 100% of the equity interests of certain of our subsidiaries that held substantially all of our former EchoStar Technologies businesses and certain other assets. Following the consummation of the Share Exchange, we no longer operate our 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.

As a result of the Share Exchange, the historical financial results of our EchoStar Technologies segment prior to the closing of the Share Exchange are reflected in our accompanying Consolidated Financial Statements as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. The noncontrolling interest in HSS Tracking Stock, as reflected in our stockholders’ equity, was extinguished as of February 28, 2017 as a result of the Share Exchange.

We have had de minimis activity from our discontinued operations for the year ended December 31, 2018. The following table presents the operating results of our discontinued operations for the years ended December 31, 2017 and 2016:

		For the years ended December 31,
		2017				2016
		(In thousands)
Revenue:
Equipment, services and other revenue - DISH Network		$	143,118			$	1,127,610
Equipment, services and other revenue - other		10,344				118,654
Total revenue		153,462				1,246,264
Costs and expenses:
Cost of equipment, services and other		121,967				1,010,421
Selling, general and administrative expenses		5,439				60,590
Research and development expenses		4,635				44,854
Depreciation and amortization		11,659				62,164
Total costs and expenses		143,700				1,178,029
Operating income		9,762				68,235
Other income (expense):
Interest expense		(15		)		(144		)
Equity in earnings (losses) of unconsolidated affiliates, net		(1,159		)		2,508
Other, net		(57		)		(381		)
Total income (expense), net		(1,231		)		1,983
Income from discontinued operations before income taxes		8,531				70,218
Income tax provision		(22		)		(25,898		)
Net income from discontinued operations		$	8,509			$	44,320

Expenditures for property and equipment from our discontinued operations totaled $12 million and $70 million for the years ended December 31, 2017 and 2016, respectively.

Total assets and total liabilities of the discontinued operations were $0.1 million and $1 million, respectively, as of December 31, 2017.

F-25

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 5. EARNINGS PER SHARE

We present basic earnings or losses per share (“EPS”) and diluted EPS for our Class A and Class B common stock. Basic EPS for our Class A and Class B common stock excludes potential dilution and is computed by dividing Net income (loss) attributable to EchoStar Corporation common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if shares of common stock were issued pursuant to our stock-based compensation awards. The potential dilution from common stock awards was computed using the treasury stock method based on the average market value of our Class A common stock during the period. The calculation of our diluted weighted-average common shares outstanding excluded options to purchase shares of our Class A common stock, whose effect would be anti-dilutive, of 1 million and 4 million shares for the years ended December 31, 2017 and 2016, respectively.

The following table presents basic and diluted EPS amounts for all periods and the corresponding weighted-average shares outstanding used in the calculations.

		For the years ended December 31,
		2018				2017				2016
		(In thousands, except per share amounts)
Amounts attributable to EchoStar Corporation common stock:
Net income from continuing operations		$	(40,475	)		$	385,261			$	137,353
Net income from discontinued operations		—				8,509				44,320
Net income (loss) attributable to EchoStar Corporation common stock		$	(40,475	)		$	393,770			$	181,673
Weighted-average common shares outstanding:
Basic		96,250				95,425				93,795
Dilutive impact of stock awards outstanding		—				1,316				615
Diluted		96,250				96,741				94,410
Earnings per share:
Basic:
Continuing operations		$	(0.42	)		$	4.04			$	1.46
Discontinued operations		—				0.09				0.48
Total basic earnings (loss) per share		$	(0.42	)		$	4.13			$	1.94
Diluted:
Continuing operations		$	(0.42	)		$	3.98			$	1.45
Discontinued operations		—				0.09				0.47
Total diluted earnings (loss) per share		$	(0.42	)		$	4.07			$	1.92

F-26

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 6. OTHER COMPREHENSIVE INCOME (LOSS) AND RELATED TAX EFFECTS

The changes in the balances of Accumulated other comprehensive 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		$	(135,434	)		$	10,646			$	(15	)		$	(124,803	)
Other comprehensive income before reclassifications		16,004				(21,987		)		92				(5,891		)
Amounts reclassified to net income		—				540				—				540
Other comprehensive income (loss)		16,004				(21,447		)		92				(5,351		)
Balance, December 31, 2017		(119,430		)		(10,801		)		77				(130,154		)
Cumulative effect of adoption of the New Investment Standard		—				10,467				—				10,467
Balance, January 1, 2018		(119,430		)		(334		)		77				(119,687		)
Other comprehensive loss before reclassifications		(34,399		)		(962		)		(1,910		)		(37,271		)
Amounts reclassified to net income		32,136				(278		)		—				31,858
Other comprehensive loss		(2,263		)		(1,240		)		(1,910		)		(5,413		)
Balance, December 31, 2018		$	(121,693	)		$	(1,574	)		$	(1,833	)		$	(125,100	)

The amounts reclassified to net income related to unrealized gain or loss on available-for-sale securities in the table above are included in Gains (losses) on investments, net in our Consolidated Statements of 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.

Other comprehensive income includes deferred tax benefits for foreign currency translation losses related to assets that were transferred from a foreign subsidiary to a domestic subsidiary of $7 million for year ended December 31, 2017. There were no similar transactions in 2018 or 2016.

F-27

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 7. MARKETABLE INVESTMENT SECURITIES

Overview

Our marketable investment securities portfolio consists of various debt and equity instruments summarized in the table below. Certain of our investments in debt and equity instruments have historically experienced and are likely to continue experiencing volatility.

		As of December 31,
		2018				2017
		(In thousands)
Marketable investment securities:
Debt securities:
Corporate bonds		$	1,735,653			$	542,573
Other debt securities		464,997				142,036
Total debt securities		2,200,650				684,609
Equity securities		90,976				139,571
Total marketable investment securities		2,291,626				824,180
Less: Restricted marketable investment securities		9,474				10,019
Total marketable investment securities - current		$	2,282,152			$	814,161

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, commercial paper and mutual funds.

A summary of our available-for-sale debt securities, exclusive of securities where we have elected the fair value option, is presented in the table below.

		Amortized				Unrealized								Estimated
		Cost				Gains				Losses				Fair Value
		(In thousands)
As of December 31, 2018
Corporate bonds		$	1,689,093			$	318			$	(1,896	)		$	1,687,515
Other debt securities		464,993				7				(3		)		464,997
Total available-for-sale debt securities		$	2,154,086			$	325			$	(1,899	)		$	2,152,512
As of December 31, 2017
Corporate bonds		$	542,861			$	—			$	(288	)		$	542,573
Other debt securities		142,082				—				(46		)		142,036
Total available-for-sale debt securities		$	684,943			$	—			$	(334	)		$	684,609

As of December 31, 2018, corporate bonds where we have elected the fair value option have a fair value of $48 million. We recognized gains of $4 million on these securities for the year ended December 31, 2018. We had no debt securities that were accounted for using the fair value option during the year ended December 31, 2017.

As of December 31, 2018, we have $1.6 billion of available-for-sale debt securities with contractual maturities of one year or less and $512 million with contractual maturities greater than one year.

F-28

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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 $87 million and trading securities with a fair value of $53 million. Our available-for-sale securities as of December 31, 2017 reflected an adjusted cost basis of $97 million and unrealized gains and losses of $8 million and $18 million, respectively. 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 million other-than-temporary impairment for 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.

For the years ended December 31, 2017 and 2016, Gains (losses) on investments, net in our Consolidated Statements of Operations included gains of $43 million and $1 million, respectively, related to trading securities that we held as of December 31, 2017 and 2016, respectively. The fair values of our trading securities were $47 million and $7 million as of December 31, 2017 and 2016, respectively.

Upon adoption of the New Investment Standard as of January 1, 2018 (see Note 2), we account for investments in equity securities at their fair value and we recognize unrealized gains and losses in Gains (losses) on investments, net in our Consolidated Statements of Operations. For the year ended December 31, 2018, Gains (losses) on investments, net in our Consolidated Statements of Operations included net losses of $17 million related to equity securities that we held as of December 31, 2018. The fair value of our equity securities was $91 million as of December 31, 2018.

Sales of Available-for-Sale Securities

Proceeds from sales of our available-for-sale securities, including securities accounted for using the fair value option, were $151 million, $31 million and $80 million for the years ended December 31, 2018, 2017 and 2016, respectively. We recognized gains as a result of such sales of nil, $3 million and $6 million for the years ended December 31, 2018, 2017 and 2016, respectively. Sales of securities accounted for using the fair value option do not result in gains or losses because we recognize unrealized gains and losses on such securities prior to the time of sale.

Fair Value Measurements

Our marketable investment securities are measured at fair value on a recurring basis as summarized in the table below. As of December 31, 2018 and 2017, we did not have investments that were categorized within Level 3 of the fair value hierarchy.

		As of December 31,
		2018												2017
		Level 1				Level 2				Total				Level 1				Level 2				Total
		(In thousands)
Debt securities:
Corporate bonds		$	—			$	1,735,653			$	1,735,653			$	—			$	542,573			$	542,573
Other debt securities		9,474				455,523				464,997				13,311				128,725				142,036
Total debt securities		9,474				2,191,176				2,200,650				13,311				671,298				684,609
Equity securities		85,298				5,678				90,976				133,736				5,835				139,571
Total marketable investment securities		$	94,772			$	2,196,854			$	2,291,626			$	147,047			$	677,133			$	824,180

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 8. INVENTORY

Our inventory consisted of the following:

		As of December 31,
		2018				2017
		(In thousands)
Raw materials		$	4,856			$	5,484
Work-in-process		13,901				7,442
Finished goods		56,622				70,669
Total inventory		$	75,379			$	83,595

NOTE 9. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

		Depreciable Life In Years		As of December 31,
			2018				2017
				(In thousands)
Land		—		$	33,606			$	33,713
Buildings and improvements		1 to 40		174,227				185,148
Furniture, fixtures, equipment and other		1 to 12		812,566				736,533
Customer rental equipment		2 to 4		1,159,977				929,775
Satellites - owned		2 to 15		2,816,628				3,064,391
Satellites - acquired under capital leases		10 to 15		1,051,110				916,820
Construction in progress		—		307,026				260,220
Total property and equipment				6,355,140				6,126,600
Accumulated depreciation				(2,940,232		)		(2,661,129		)
Property and equipment, net				$	3,414,908			$	3,465,471

As of December 31, 2018 and 2017, accumulated depreciation included amounts for satellites acquired under capital leases of $468 million and $394 million, respectively.

Construction in progress 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		$	277,583			$	211,765
Satellite related equipment		13,001				28,358
Other		16,442				20,097
Construction in progress		$	307,026			$	260,220

Construction in progress as of December 31, 2018 included our EchoStar XXIV satellite, which is expected to launch in 2021. In August 2017, we entered into a contract for the design and construction of the EchoStar XXIV, 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 HughesNet service in North, Central and South America as well as aeronautical and enterprise broadband services. The Federal Communications Commission (“FCC”) granted authorization to construct, deploy and operate the EchoStar XXIV satellite. In the second half of 2018, Maxar

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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 delivery of the EchoStar XXIV satellite. However, if SSL or any potential successor fails to meet 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.

We recorded capitalized interest related to our satellites, satellite payloads and related ground facilities under construction of $18 million, $52 million and $94 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		$	11,596			$	17,285			$	7,505
Furniture, fixtures, equipment and other		83,746				72,387				64,767
Customer rental equipment		174,749				146,562				114,568
Satellites		285,206				239,072				191,729
Total depreciation expense		$	555,297			$	475,306			$	378,569

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, 2018, our satellite fleet consisted of 18 satellites, 13 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.

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ECHOSTAR 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 Location (Longitude)		Depreciable Life In Years
Owned:
SPACEWAY 3 (1)		Hughes		August 2007		95 W		12
EchoStar XVII		Hughes		July 2012		107 W		15
EchoStar XIX		Hughes		December 2016		97.1 W		15
EchoStar VII (2)(3)(4)		ESS		February 2002		119 W		3
EchoStar IX (2)(4)		ESS		August 2003		121 W		12
EchoStar X (2)(3)		ESS		February 2006		110 W		7
EchoStar XI (2)(3)		ESS		July 2008		110 W		9
EchoStar XII (2)(4)(5)		ESS		July 2003		86.4 W		2
EchoStar XIV (2)(3)		ESS		March 2010		119 W		11
EchoStar XVI (2)		ESS		November 2012		61.5 W		15
EchoStar XXI		Corporate and Other		June 2017		10.25 E		15
EchoStar XXIII		Corporate and Other		March 2017		45 W		15
EUTELSAT 10A (“W2A”) (6)		Corporate and Other		April 2009		10 E		—
Capital Leases:
Eutelsat 65 West A		Hughes		March 2016		65 W		15
Telesat T19V		Hughes		July 2018		63 W		15
Nimiq 5 (2)		ESS		September 2009		72.7 W		15
QuetzSat-1 (2)		ESS		September 2011		77 W		10
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 its acquisition of Hughes Communications, Inc. and its subsidiaries (the “Hughes Acquisition”).

(2)	See Note 20 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 20).

(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)	The Company acquired the S-band payload on this satellite, which prior to the acquisition in December 2013, experienced an anomaly at the time of the launch. As a result, the S-band payload is not fully operational.

Recent Developments

EchoStar I and EchoStar VI. 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.

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

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

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.

Satellite Anomalies and Impairments

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 are not aware 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 million for the year ended December 31, 2018.

We historically have not carried in-orbit insurance on our satellites 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, we are required, subject to certain limitations on coverage, to maintain in-orbit insurance for our SPACEWAY 3, EchoStar XVI and EchoStar XVII satellites. Our other satellites, either in orbit or under construction, are not covered by launch or in-orbit insurance. We will continue to assess circumstances going forward and make insurance 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 10. GOODWILL, REGULATORY AUTHORIZATIONS AND OTHER INTANGIBLE ASSETS

Goodwill

The excess of the cost of an acquired business over the fair values of net tangible and identifiable intangible assets at the time of the acquisition is recorded as goodwill. Goodwill is assigned to the reporting units within our operating segments and is subject to impairment testing annually, or more frequently when events or changes in circumstances indicate the fair value of a reporting unit is more likely than not less than its carrying amount.

As of December 31, 2018 and 2017, all of our goodwill was assigned to reporting units of our Hughes segment. We test this goodwill for impairment annually in the second quarter. Based on our impairment testing in the second quarter of 2018, our goodwill is considered to be not impaired.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Regulatory Authorizations

Regulatory Authorizations included amounts with both finite and indefinite useful lives, as follows:

		As of December 31, 2017				Additions				Impairment				Currency Translation Adjustment				As of December 31, 2018
		(In thousands)
Finite useful lives:
Cost		$	92,621			$	—			$	(37,476	)		$	(8,358	)		$	46,787
Accumulated amortization		(21,342		)		(5,190		)		7,848				1,894				(16,790		)
Net		71,279				(5,190		)		(29,628		)		(6,464		)		29,997
Indefinite lives		465,657				—				—				—				465,657
Total regulatory authorizations, net		$	536,936			$	(5,190	)		$	(29,628	)		$	(6,464	)		$	495,654

Amortization expense for the Regulatory Authorizations with finite lives was $5 million for each of the years ended December 31, 2018, 2017 and 2016, respectively.

Prior to the fourth quarter of 2017, our Regulatory Authorizations with indefinite lives included $6 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. We acquired such contractual rights in 2012 and have evaluated potential opportunities to utilize the frequencies in conjunction with our Brazilian license. We determined in the fourth quarter of 2017 that certain actions required to utilize the frequencies had become impractical with the passage of time. As a result of these circumstances, we determined that the fair value of such contractual rights was de minimis and we recognized a $6 million impairment loss in our ESS segment in the fourth quarter of 2017.

In January 2019, we determined that we are not able to develop a business using our 45 degree west longitude regulatory authorization. We determined that the fair value of this authorization and certain related ground infrastructure have a fair value that is de minimus and we have recognized a loss on those assets of $33 million. In addition we have included a loss related to foreign currency of $32 million as a result of the in-substance liquidation of our business related to the 45 degree west longitude regulatory authorization.

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		61,283				(61,004		)		279				61,300				(60,927		)		373
Trademark portfolio		20		29,700				(11,261		)		18,439				29,700				(9,776		)		19,924
Total other intangible assets				$	361,283			$	(317,052	)		$	44,231			$	361,300			$	(302,345	)		$	58,955

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 regulatory authorizations with finite lives and externally marketed capitalized software, was $43 million, $47 million and $54 million for the years ended December 31, 2018, 2017 and 2016, respectively.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Future Amortization

As of December 31, 2018, our estimated future amortization of intangible assets, including regulatory authorizations with finite lives, was as follows:

	Amount
	(In thousands)
For the years ending December 31,
2019	$	18,304
2020	14,663
2021	8,029
2022	5,065
2023	5,065
Thereafter	23,102
Total	$	74,228

NOTE 11. 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		$	182,035			$	91,702
Other equity investments without a readily determinable fair value		80,438				69,725
Total investments in unconsolidated entities		$	262,473			$	161,427

As of December 31, 2018, our aggregate investment in our equity method investees exceeded our proportionate share of the net assets of the investees by $24 million. This difference is attributable to goodwill recorded at acquisition and certain adjustments related to intra-entity transactions subsequent to acquisition.

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.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

A summary of financial information for Dish Mexico and our equity method investees in the aggregate is as follows:

		As of December 31,
		2018								2017
		Dish Mexico				Aggregate				Dish Mexico				Aggregate
		(In thousands)
Balance sheet data:
Current assets		$	147,140			$	162,593			$	146,851			$	172,234
Noncurrent assets		187,130				188,077				185,345				187,067
Total assets		$	334,270			$	350,670			$	332,196			$	359,301
Current liabilities		$	128,708			$	129,837			$	129,087			$	130,443
Noncurrent liabilities		109,643				110,460				109,428				110,472
Total liabilities		$	238,351			$	240,297			$	238,515			$	240,915

		As of December 31,
		2018								2017								2016
		Dish Mexico				Aggregate				Dish Mexico				Aggregate				Dish Mexico				Aggregate
		(In thousands)
Income statement data:
Revenue		$	444,264			$	475,559			$	497,096			$	535,153			$	498,069			$	541,066
Operating income (loss)		$	(55,062	)		$	(43,553	)		$	15,094			$	31,919			$	32,280			$	52,656
Income (loss) before income taxes		$	(33,449	)		$	(23,701	)		$	18,267			$	32,739			$	10,195			$	29,083
Net income (loss)		$	(20,126	)		$	(10,378	)		$	15,658			$	30,130			$	6,374			$	25,262
Net income (loss) attributable to EchoStar		$	(10,828	)		$	(5,954	)		$	9,946			$	16,973			$	1,358			$	10,802

In January 2017, we sold our investment in Invidi Technologies Corporation (“Invidi”) to an entity owned in part by DISH Network for $19 million. Our investment was accounted for using the cost method and had a carrying amount of $11 million on the date of sale and as a result we recognized a gain of $9 million in connection with this transaction for the year ended December 31, 2017. See Note 20 for additional information about this transaction.

In connection with the Share Exchange (see Notes 4 and 20) our equity interests in NagraStar L.L.C. (“NagraStar”) and SmarDTV SA (“SmarDTV”), which we accounted for using the equity method, and our equity interest in Sling TV Holding L.L.C. (“Sling TV Holding”), which we accounted for using the cost method, were transferred to DISH Network as of February 28, 2017.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 12. LONG-TERM DEBT AND CAPITAL 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 lease obligations.

		Effective Interest Rate		As of December 31,
			2018								2017
			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
5 1/4% Senior Secured Notes due 2026		5.320%		750,000				695,865				750,000				769,305
Senior Unsecured Notes:
7 5/8% Senior Unsecured Notes due 2021		8.062%		900,000				934,902				900,000				992,745
6 5/8% Senior Unsecured Notes due 2026		6.688%		750,000				696,353				750,000				791,865
Less: Unamortized debt issuance costs				(16,757		)		—				(24,857		)		—
Subtotal				3,304,079				$	3,259,816			3,365,143				$	3,596,524
Capital lease obligations				228,702								269,701
Total debt and capital lease obligations				3,532,781								3,634,844
Less: Current portion				(959,577		)						(40,631		)
Long-term debt and capital lease obligations, net				$	2,573,204							$	3,594,213

2019 Senior Secured Notes and 2021 Senior Unsecured Notes

On June 1, 2011, HSS issued $1.1 billion aggregate principal amount of 6 1/2% Senior Secured Notes due 2019 (the “2019 Senior Secured Notes”) at an issue price of 100.0%, pursuant to a Secured Indenture dated June 1, 2011, (as amended the “2011 Secured Indenture”). The 2019 Senior Secured Notes mature on June 15, 2019. Interest accrues at an annual rate of 6 1/2% and is payable semi-annually in cash, in arrears on June 15 and December 15 of each year. As of December 31, 2018 and 2017, the outstanding principal balance on the 2019 Senior Secured Notes was $921 million and $990 million, respectively. The decrease in the principal outstanding was due to our repurchase of $69 million in the open market during 2018. We recorded a loss on the repurchase of $1 million.

On June 1, 2011, HSS also issued $900 million aggregate principal amount of 7 5/8% Senior Unsecured Notes due 2021 (the “2021 Senior Unsecured Notes,”) at an issue price of 100.0%, pursuant to an Unsecured Indenture dated June 1, 2011 (together with the “2011 Secured Indenture”, the “2011 Indentures”). The 2021 Senior Unsecured Notes mature on June 15, 2021. Interest accrues at an annual rate of 7 5/8% and is payable semi-annually in cash, in arrears on June 15 and December 15 of each year. As of December 31, 2018 and 2017, the outstanding principal balance on the 2021 Senior Unsecured Notes was $900 million.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

2026 Senior Secured Notes and 2026 Senior Unsecured Notes

On July 27, 2016, HSS issued $750 million aggregate principal amount of 5 1/4% Senior Secured Notes due 2026 (the “2026 Senior Secured Notes” and, together with the 2019 Senior Secured Notes, the “Secured Notes”) at an issue price of 100.0%, pursuant to an indenture dated July 27, 2016 (the “2016 Secured Indenture”) and $750 million aggregate principal amount of 6 5/8% Senior Unsecured Notes due 2026 (the “2026 Senior Unsecured Notes” and, together with the 2021 Senior Unsecured Notes, the “Unsecured Notes”) at an issue price of 100.0%, pursuant to an indenture dated July 27, 2016 (together with the 2011 Indentures and the 2016 Secured Indenture, the “Indentures”). The 2019 Senior Secured Notes, the 2021 Senior Unsecured Notes, the 2026 Senior Secured Notes and the 2026 Senior Unsecured Notes are referred to collectively as the “Notes” and individually as a series of the Notes. The 2026 Senior Secured Notes and the 2026 Senior Unsecured Notes (collectively, the “2026 Notes”) mature on August 1, 2026. Interest on the 2026 Senior Secured Notes accrues at an annual rate of 5 1/4% and interest on the 2026 Senior Unsecured Notes accrues at an annual rate of 6 5/8%. Interest on the 2026 Notes is payable semi-annually in cash, in arrears on February 1 and August 1 of each year commencing February 1, 2017. At each of December 31, 2018 and 2017, the outstanding principal balance on each of the 2026 Senior Secured Notes and the 2026 Senior Unsecured Notes was $750 million, respectively.

Additional Information Relating to the Notes

Each series of the Notes is redeemable, in whole or in part, at any time at a redemption price equal to 100.0% of the principal amount thereof plus a “make-whole” premium, as defined in the applicable Indenture, together with accrued and unpaid interest, if any, to the date of redemption. HSS may also redeem up to 10% of the outstanding 2026 Senior Secured Notes per year prior to August 1, 2020 at a redemption price equal to 103% of the principal amount thereof plus accrued and unpaid interest to the date of redemption. In addition, HSS may, at any time prior to August 1, 2019, with the net cash proceeds from certain equity offerings or capital contributions, redeem up to 35% of the 2026 Senior Secured Notes, at 105.250% of the principal amount, and up to 35% of the 2026 Senior Unsecured Notes, at a redemption price equal to 106.625% of the principal amount plus, in each case, accrued and unpaid interest on the 2026 Notes being redeemed to the date of redemption.

The Secured Notes are:

•	secured obligations of HSS;

•	secured by security interests in substantially all existing and future tangible and intangible assets of HSS and certain of its subsidiaries 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;

•	effectively junior to HSS’ obligations that are secured by assets that are not part of the collateral that secures the respective Secured Notes, in each case, to the extent of the value of the collateral securing such obligations;

•	effectively senior to HSS’ existing and future unsecured obligations to the extent of the value of the collateral securing the respective Secured Notes, after giving effect to permitted liens as provided in the Indenture governing the respective Secured Notes;

•	senior in right of payment to all existing and future obligations of HSS that are expressly subordinated to the respective Secured Notes;

•	structurally junior to any existing and future obligations of any of HSS’ subsidiaries that do not guarantee the respective Secured Notes; and

•	unconditionally guaranteed, jointly and severally, on a general senior secured basis by certain of our HSS’ subsidiaries, which guarantees rank equally with all of the guarantors’ existing and future unsubordinated indebtedness and effectively senior to such guarantors’ existing and future obligations to the extent of the value of the assets securing the respective Secured Notes.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The Unsecured Notes are:

•	unsecured senior obligations of HSS;

•	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;

•	effectively junior to HSS’ obligations that are secured to the extent of the value of the collateral securing such obligations;

•	senior in right of payment to all existing and future obligations of HSS that are expressly subordinated to the respective Unsecured Notes;

•	structurally junior to any existing and future obligations of any of HSS’ subsidiaries that do not guarantee the respective Unsecured Notes; and

•	unconditionally guaranteed, jointly and severally, on a general senior secured basis by certain of HSS’ 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.

Subject to certain exceptions, the Indentures contain restrictive covenants that, among other things, impose limitations on HSS’ ability and, in certain instances, the ability of certain of HSS’ subsidiaries to:

•	incur additional debt;

•	pay dividends or make distributions on HSS’ capital stock or repurchase HSS’ capital stock;

•	make certain investments;

•	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 the ability of certain of HSS’ subsidiaries to pay dividends, make distributions, make other payments, or transfer assets to HSS or its subsidiaries.

In the event of a Change of Control, as defined in the respective Indentures, HSS would be required to make an offer to repurchase all or any part of a holder’s Notes at a purchase price equal to 101.0% of the aggregate principal amount thereof, together with accrued and unpaid interest to the date of repurchase.

The Indentures provide for customary events of default for each series of the Notes, including, among other things, nonpayment, breach of the covenants in the applicable Indentures, payment defaults or acceleration of other indebtedness, a failure to pay certain judgments and certain events of bankruptcy, insolvency and reorganization. If any event of default occurs and is continuing with respect to any series of the Notes, the trustee or the holders of at least 25% in principal amount of the then outstanding Notes of such series may declare all the Notes of such series to be due and payable immediately, together with any accrued and unpaid interest.

Pursuant to the terms of a registration rights agreement, HSS registered notes having substantially identical terms as the 2026 Notes with the Securities and Exchange Commission as part of an offer to exchange registered notes for the 2026 Notes. This exchange offer expired May 11, 2017 with 99.98% of the 2026 Notes being tendered for exchange.

Debt Issuance Costs

In connection with the issuance of the 2026 Notes, we incurred $8 million of debt issuance costs. For the years ended December 31, 2018, 2017 and 2016, we amortized $8 million, $7 million and $7 million of debt issuance costs incurred for all debt issuances, respectively, which are included in Interest expense, net of amounts capitalized in our Consolidated Statements of Operations.

F-39

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Capital Lease Obligations

Our capital lease obligations reflect the present value of future minimum lease payments under noncancelable lease agreements, primarily for certain of our satellites (see Note 9). These agreements require monthly recurring payments, which generally include principal, interest, an amount for use of the orbital location and estimated executory costs, such as insurance and maintenance. The monthly recurring payments generally are subject to reduction in the event of failures that reduce the satellite transponder capacity. Certain of these agreements provide for extension of the initial lease term at our option. The effective interest rates for our satellite capital lease obligations range from 9.1% to 11.2%, with a weighted average of 10.7% as of December 31, 2018.

Our capital lease obligations consist primarily of our payment obligations under agreements for the Nimiq 5 and QuetzSat-1 satellites, which have remaining noncancelable terms ending in September 2024 and November 2021, respectively. As discussed in Note 20, we have subleased transponders on these satellites to DISH Network.

Future minimum lease payments under our capital lease obligations, together with the present value of the net minimum lease payments as of December 31, 2018, are as follows:

	Amount
	(In thousands)
For the Years Ending December 31,
2019	$	88,615
2020	88,395
2021	84,248
2022	63,484
2023	63,360
Thereafter	47,520
Total minimum lease payments	435,622
Less: Amount representing use of the orbital location and estimated executory costs including profit thereon, included in total minimum lease payments	(136,799		)
Net minimum lease payments	298,823
Less: Amount representing interest	(70,121		)
Present value of net minimum lease payments	228,702
Less: Current portion	(40,662		)
Long-term portion of capital lease obligations	$	188,040

We received rental income from the sublease of our capital lease satellites of approximately $132 million for each of the years ended December 31, 2018, 2017 and 2016. As of December 31, 2018, our future minimum sublease rental income was $216 million relating to such satellites. The subleases have a remaining weighted average term of two years.

F-40

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 13. INCOME TAXES

The components of Income (loss) from continuing operations before income taxes in our Consolidated Statements of Operations are as follows:

		For the years ended December 31,
		2018				2017				2016
		(In thousands)
Domestic		$	151,002			$	146,383			$	236,200
Foreign		(158,962		)		(45,689		)		(19,574		)
Income from continuing operations before income taxes		$	(7,960	)		$	100,694			$	216,626

The components of Income tax benefit (provision), net, in our Consolidated Statements of Operations are as follows:

		For the years ended December 31,
		2018				2017				2016
		(In thousands)
Current benefit (provision):
Federal		$	(1,472	)		$	(8,652	)		$	(19,385	)
State		(184		)		(1,237		)		267
Foreign		(2,690		)		(2,335		)		(2,481		)
Total current benefit (provision)		(4,346		)		(12,224		)		(21,599		)
Deferred benefit (provision):
Federal		(19,189		)		299,693				(58,250		)
State		(7,365		)		2,356				(6,232		)
Foreign		227				(5,539		)		5,827
Total deferred benefit (provision)		(26,327		)		296,510				(58,655		)
Total income tax benefit (provision), net		$	(30,673	)		$	284,286			$	(80,254	)

The actual tax provisions for the years ended December 31, 2018, 2017 and 2016 reconcile to the amounts computed by applying the statutory federal tax rate to Income (loss) from continuing operations before income taxes in our Consolidated Statements of Operations as shown below:

		For the years ended December 31,
		2018			2017			2016
Statutory rate		21.0	%		35.0	%		35.0	%
State income taxes, net of Federal benefit		(94.4	)%		(12.2	)%		5.0	%
Permanent differences		(16.9	)%		(0.3	)%		1.4	%
Tax credits		68.6	%		(8.1	)%		(4.2	)%
Valuation allowance		(491.9	)%		4.6	%		(0.3	)%
Enactment of Tax Cuts and Job Act of 2017		—	%		(301.4	)%		—	%
Rates different than statutory		116.6	%		—	%		—	%
Other		11.6	%		0.1	%		0.1	%
Total effective tax rate		(385.4	)%		(282.3	)%		37.0	%

F-41

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The components of our deferred tax assets and liabilities are as follows:

		As of December 31,
		2018				2017
		(In thousands)
Deferred tax assets:
Net operating losses, credit and other carryforwards		$	284,300			$	278,540
Unrealized losses on investments, net		41,852				22,260
Accrued expenses		22,148				23,583
Stock-based compensation		10,210				9,148
Other assets		22,366				11,890
Total deferred tax assets		380,876				345,421
Valuation allowance		(109,762		)		(66,886		)
Deferred tax assets after valuation allowance		271,114				278,535
Deferred tax liabilities:
Depreciation and amortization		(731,447		)		(708,599		)
Other liabilities		(1,290		)		(1,509		)
Total deferred tax liabilities		(732,737		)		(710,108		)
Total net deferred tax liabilities		$	(461,623	)		$	(431,573	)

Deferred tax assets and liabilities reflect the effects of tax losses, credits, and the future income tax effects of temporary differences between the accompanying Consolidated Financial Statement carrying amounts of existing assets and 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.

We evaluate our deferred tax assets for realization and record a valuation allowance when we determine that it is more likely than not that the amounts will not be realized. Overall, our net deferred tax assets were offset by a valuation allowance of $110 million and $67 million as of December 31, 2018 and 2017, respectively. The change in the valuation allowance primarily relates to an increase in the net operating loss carryforwards of certain foreign subsidiaries and a decrease associated with unrealized gains that are capital in nature.

Tax benefits of net operating loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. As of December 31, 2018, we had net operating loss carryforwards of $797 million, including $237 million of foreign net operating loss carryforwards. A substantial portion of these net operating loss carryforwards will begin to expire in 2029. As of December 31, 2018, we have tax credit carryforwards of $133 million and $98 million for federal and state income tax purposes, respectively. If not utilized, the federal tax credit carryforwards will begin to expire in 2026 and the state tax credit carryforwards will begin to expire in 2018.

As of December 31, 2018, we had undistributed earnings attributable to foreign subsidiaries for which no provision for U.S. income taxes or foreign withholding taxes has been made because it is expected that such earnings will be reinvested outside the U.S. indefinitely. It is not practicable to determine the amount of the unrecognized deferred tax liability at this time. However, due to the one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiary earnings, the majority of previously unremitted earnings have now been subjected to U.S. federal income tax.

Accounting for the U.S. Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”) was enacted in December 2017 and has significantly impacted our effective tax rate and the tax benefit calculated for the year ended December 31, 2017. For the year ended December 31, 2017, we recorded a benefit of $304 million to reflect the change in the value of our deferred tax assets

F-42

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

and liabilities resulting from the change in the federal corporate tax rate from 35% to 21%. For the year ended December 31, 2018, we recorded an additional tax benefit of $1 million upon the completion of our analysis. This amount included an estimate of zero related to valuation allowances on foreign tax credit carryforwards. We account for the effects, if any, of the global intangible low-taxed income provisions (“GILTI”) of the 2017 Tax Act as incurred. We also recorded a tax provision of nil related to the tax on deemed mandatory repatriation of our unrepatriated foreign earnings.

Accounting for Uncertainty in Income Taxes

In addition to filing U.S. federal income tax returns, we file income tax returns in all states that impose an income tax. As of December 31, 2018, we are not currently under a U.S. federal income tax examination, however, the IRS can perform tax examination as early as tax year 2008. We are also subject to frequent state income tax audits and have open state examinations in years as early as 2008. We also file income tax returns in the United Kingdom, Brazil, India and a number of other foreign jurisdictions. We generally are open to income tax examination in these foreign jurisdictions for taxable years beginning in 2003. As of December 31, 2018, we are currently being audited by the Indian tax authorities for fiscal years 2003 through 2012. We have no other on-going significant income tax examinations in process in our foreign jurisdictions.

A reconciliation of the beginning and ending amount of unrecognized income tax benefits is as follows:

		For the years ended December 31,
Unrecognized tax benefit		2018				2017				2016
		(In thousands)
Balance as of beginning of period		$	63,296			$	63,502			$	62,366
Additions based on tax positions related to the current year		4,361				1,116				2,132
Additions based on tax positions related to prior years		2,539				258				3
Reductions based on tax positions related to prior years		(656		)		(852		)		(734		)
Reductions based on tax settlements		—				—				(265		)
Reductions based on expirations of statute of limitations		—				(728		)		—
Balance as of end of period		$	69,540			$	63,296			$	63,502

As of December 31, 2018, we had $70 million of unrecognized income tax benefits, all of which, if recognized, would affect our effective tax rate. As of December 31, 2017, we had $63 million of unrecognized income tax benefits, all of which, if recognized, would affect our effective tax rate. We do not believe that the total amount of unrecognized income tax benefits will significantly increase or decrease within the next twelve months due to the lapse of statute of limitations or settlement with tax authorities.

For the years ended December 31, 2018, 2017 and 2016, our income tax provision included an insignificant amount of interest and penalties.

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.

F-43

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 14. STOCKHOLDERS’ EQUITY

Preferred Stock

Our board of directors is authorized to divide the preferred stock into series and, with respect to each series, to determine the preferences and rights and the qualifications, limitations or restrictions of the series, including the dividend rights, conversion rights, voting rights, redemption rights and terms, liquidation preferences, sinking fund provisions, the number of shares constituting the series, and the designation of such series. Our board of directors may, without stockholder approval, issue additional preferred stock of existing or new series with voting and other rights that could adversely affect the voting power of the holders of common stock and could have certain anti-takeover effects.

In February 2014, our board of directors authorized 13,000,000 shares of Tracking Stock with a par value of $0.001 per share, of which 6,290,499 shares were issued to DISH Network on March 1, 2014. Following the consummation of the Share Exchange, we no longer operate our 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. See Note 20 for additional information about the Share Exchange.

Common Stock

Our Class A, Class B, and Class C common stock are equivalent except for voting rights. Holders of Class A and Class C common stock are entitled to one vote per share and holders of Class B common stock are entitled to 10 votes per share. Upon a change in control of the Company, each holder of outstanding shares of Class C common stock is entitled to 10 votes for each share of Class C common stock held. Each share of Class B and Class C common stock is convertible, at the option of the holder, into one share of Class A common stock. Our principal stockholder and certain entities established by him for the benefit of his family own all outstanding Class B common stock. There are no shares of Class C common stock outstanding.

Any holder of Class D common stock is not entitled to a vote on any matter or to convert the shares of Class D common stock into any other class of common stock. There are no shares of Class D common stock outstanding.

Each share of common stock is entitled to receive its pro rata share, based upon the number of shares of common stock held, of dividends and distributions upon liquidation.

Common Stock Repurchase Program

Pursuant to a stock repurchase program approved by our board of directors on October 30, 2018, we are authorized to repurchase up to $500 million of our outstanding shares of Class A common stock through and including December 31, 2019. For the year ended December 31, 2018, we repurchased 952,603 shares of our common stock at an average price per share of $34.95 for a total purchase price of $33 million. For the year ended December 31, 2017, we did not repurchase any common stock under this program.

NOTE 15. EMPLOYEE BENEFIT PLANS

Employee Stock Purchase Plan

We have an employee stock purchase plan (the “ESPP”), under which we are authorized to issue 5.0 million shares of Class A common stock. As of December 31, 2018, we had approximately 2.5 million shares of Class A common stock which remain available for issuance under the ESPP. Generally, all full-time employees who have been employed by EchoStar for at least one calendar quarter are eligible to participate in the ESPP. Employee stock purchases are made through payroll deductions. Under the terms of the ESPP, each employee’s deductions are limited so that the maximum they may purchase under the ESPP is $25,000 in fair value of Class A common stock per year. Stock purchases are made on the last business day of each calendar quarter at 85.0% of the closing price of the Class A common stock on that date. For the years ended December 31, 2018, 2017 and 2016, employee purchases of Class A common stock through the ESPP totaled approximately 245,000 shares, 176,000 shares and 227,000 shares, respectively.

F-44

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

401(k) Employee Savings Plans

Under the EchoStar 401(k) Plan (“the Plan”), eligible employees are entitled to contribute up to 75.0% of their eligible compensation subject to the maximum contribution limit provided by the Internal Revenue Code of 1986, as amended (the “Code”). Eligible employees have the option to contribute up to 75% of their eligible compensation on a pre-tax and/or after-tax basis subject to the Code limits. All employee contributions to the Plan are immediately vested. We match 50 cents on the dollar for the first 6.0% of each employee’s salary contributions to the Plan for a total of 3.0% match on a pre-tax basis up to a maximum of $7,500 annually. Our match is calculated each pay period there is an employee contribution. In addition, we may make an annual discretionary contribution to the Plan to be made in cash or our stock. Our contributions under the Plan vest at 20.0% per year and are 100.0% vested after an eligible employee has completed five years of employment. Forfeitures of unvested participant balances may be used to fund matching and discretionary contributions.

During the years ended December 31, 2018, 2017 and 2016, we recognized matching contributions, net of forfeitures, of $5 million, $5 million and $6 million, respectively, and made discretionary contributions of shares of our Class A common stock, net of forfeitures, with a fair value of $8 million, $7 million and $8 million, respectively (approximately 127,000, 130,000 and 210,500 shares, respectively), to the Plan.

NOTE 16. STOCK-BASED COMPENSATION

Stock Incentive Plans

We maintain stock incentive plans to attract and retain officers, directors and employees. Stock awards under these plans may include both performance-based and non-performance based stock incentives. As of December 31, 2018, we had outstanding under these plans stock options to acquire approximately 5.0 million shares of our Class A common stock. Stock options granted prior to December 31, 2018 were granted with exercise prices equal to or greater than the market value of our Class A common stock at the date of grant or the last trading day prior to the date of grant (if the grant date is not a trading day) and generally with a maximum term of ten years for our officers and employees and five years for our non-employee directors. While generally we issue stock awards subject to vesting, typically over five years, some stock awards have been granted with immediate or longer vesting and other stock awards vest also or only upon the achievement of certain performance objectives. Under these plans, we grant to certain of our employees awards of fully vested shares of Class A common stock under our Employee Innovator Recognition Program, which is available to all of our eligible employees. As of December 31, 2018, we had approximately 8 million shares of our Class A common stock available for future grant under our stock incentive plans.

Exercise prices for stock options outstanding and exercisable as of December 31, 2018 are as follows:

		Options Outstanding									Options Exercisable
Price Range		Number Outstanding as of December 31, 2018			Weighted- Average Remaining Contractual Term (In Years)		Weighted- Average Exercise Price				Number Exercisable as of December 31, 2018			Weighted- Average Remaining Contractual Term (In Years)		Weighted- Average Exercise Price
$0.00 - $20.00		51,359			2		$	18.74			51,359			2		$	18.74
$20.01 - $25.00		429,306			1		$	20.18			429,306			1		$	20.18
$25.01 - $30.00		3,300			3		$	26.42			3,300			3		$	26.42
$30.01 - $35.00		352,500			4		$	34.22			352,500			4		$	34.22
$35.01 - $40.00		1,985,200			4		$	38.19			1,832,500			3		$	38.09
$40.01 - $45.00		277,000			7		$	43.98			111,400			7		$	44.04
$45.01 - $50.00		766,973			6		$	47.58			577,473			5		$	47.64
$50.01 - $55.00		487,400			7		$	52.24			197,300			6		$	51.99
$55.01 - $60.00		600,000			8		$	56.97			127,000			8		$	56.95
$60.01 and over		60,000			7		$	60.70			28,000			5		$	60.70
		5,013,038			5		$	41.80			3,710,138			4		$	38.59

F-45

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Stock Award Activity

Our stock option activity was as follows:

		For the years ended December 31,
		2018							2017							2016
		Options			Weighted- Average Exercise Price				Options			Weighted- Average Exercise Price				Options			Weighted- Average Exercise Price
Total options outstanding, beginning of period		4,951,256			$	41.42			5,968,763			$	39.30			5,893,241			$	38.38
Granted		215,500			$	51.71			1,262,500			$	57.12			732,000			$	41.86
Exercised		(108,318	)		$	40.67			(1,018,507	)		$	35.84			(453,182	)		$	28.83
Forfeited and canceled		(45,400	)		$	50.21			(1,261,500	)		$	51.63			(203,296	)		$	45.15
Total options outstanding, end of period		5,013,038			$	41.80			4,951,256			$	41.42			5,968,763			$	39.30
Exercisable at end of period		3,710,138			$	38.59			3,143,656			$	36.98			3,551,063			$	35.40

On April 1, 2017, we granted to Mr. Ergen, our Chairman, an option to purchase 1,100,000 shares of Class A common stock. On April 24, 2017, Mr. Ergen voluntarily forfeited a portion of the option covering 600,000 shares and we canceled such forfeited portion of the option.

We realized total tax benefits from stock options exercised of $0.4 million, $3 million and $2 million for the years ended December 31, 2018, 2017 and 2016, respectively. The aggregate intrinsic value of our stock options exercised was $2 million, $20 million and $8 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Our restricted stock unit activity was as follows:

		For the years ended December 31,
		2018							2017							2016
		Restricted Stock Units			Weighted- Average Grant Date Fair Value				Restricted Stock Units			Weighted- Average Grant Date Fair Value				Restricted Stock Units			Weighted- Average Grant Date Fair Value
Total restricted stock units outstanding, beginning of period		—			$	—			6,667			$	34.22			57,328			$	42.31
Vested		—			$	—			(6,667	)		$	34.22			(50,661	)		$	43.38
Total restricted stock units outstanding, end of period		—			$	—			—			$	—			6,667			$	34.22

The total fair value of restricted stock units vested was nil, $0.2 million and $2 million for the years ended December 31, 2018, 2017 and 2016, respectively.

F-46

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Stock-Based Compensation

Total noncash, stock-based compensation expense for all of our employees is shown in the following table for the years ended December 31, 2018, 2017 and 2016, respectively, and was assigned to the same expense categories as the base compensation for such employees:

		For the years ended December 31,
		2018				2017				2016
		(In thousands)
Research and development expenses		$	634			$	1,010			$	1,046
Selling, general and administrative expenses		9,356				10,630				9,865
Total stock-based compensation		$	9,990			$	11,640			$	10,911

The income tax benefits related to stock-based compensation expense was $2 million, $4 million and $4 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, total unrecognized stock-based compensation cost, net of estimated forfeitures, related to our unvested stock awards was $14 million. This amount is based on an estimated future forfeiture rate of approximately 2.0% per year and will be recognized over a weighted-average period of approximately two years.

Valuation of Stock Options

The fair value of each stock option granted for the years ended December 31, 2018, 2017 and 2016 was estimated at the date of the grant using a Black-Scholes option valuation model. The estimated grant-date fair values and related assumptions were as follows:

		For the years ended December 31,
Assumptions:		2018		2017		2016
Risk-free interest rate		2.25% - 2.99%		1.98% - 2.05%		1.10% - 1.87%
Volatility factor		22.77% - 23.28%		24.20% - 26.69%		27.22% - 27.37%
Expected term of options in years		5.7 - 5.8		5.7 - 5.8		5.7 - 5.8
Weighted-average grant-date fair value		$12.38 - $16.23		$15.25 - $16.49		$11.15 - $12.49

We do not currently intend to pay dividends on our common stock and accordingly, the dividend yield used in the Black-Scholes option valuation model was assumed to be zero for all periods. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded stock options which have no vesting restrictions and are fully transferable. Consequently, our estimate of fair value may differ from that determined using other valuation models. Further, the Black-Scholes option valuation model requires the input of subjective assumptions. Changes in the subjective input assumptions can materially affect the fair value estimate.

Based on the closing market price of our Class A common stock on December 31, 2018, the aggregate intrinsic value of our stock options was $9 million for options outstanding and $9 million for options exercisable as of December 31, 2018.

F-47

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 17. COMMITMENTS AND CONTINGENCIES

Commitments

The following table summarizes our contractual obligations at December 31, 2018:

		Payments Due in the Year Ending December 31,
		Total				2019				2020				2021				2022				2023				Thereafter
		(In thousands)
Long-term debt		$	3,320,836			$	920,836			$	—			$	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
Satellite-related obligations		731,684				207,403				166,601				60,852				47,996				47,907				200,925
Operating lease obligations		93,918				21,146				18,081				13,873				10,118				8,814				21,886
Service commitments		866				176				181				186				192				131				—
Total		$	5,359,830			$	1,400,212			$	405,702			$	1,157,926			$	188,428			$	186,857			$	2,020,705

Our satellite-related obligations primarily include payments pursuant to agreements for the construction of the EchoStar XXIV satellite; payments pursuant to Regulatory Authorizations; executory costs for our capital lease satellites; and in-orbit incentives relating to certain satellites; as well as commitments for satellite service arrangements. We incurred satellite-related expenses of $101 million, $140 million and $144 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Our operating lease obligations consist of minimum rental payments under noncancelable leases. Certain of our lease agreements require us to pay additional amounts for utilities, common area maintenance, property taxes, and other executory costs.

The table above does not include amounts related to deferred tax liabilities, unrecognized tax positions and certain other amounts recorded in our noncurrent liabilities as the timing of any payments is uncertain. The table also excludes long-term deferred revenue and other long-term liabilities that do not require future cash payments.

In certain circumstances, the dates on which we are obligated to pay our contractual obligations could change.

Rent Expense

For the years ended December 31, 2018, 2017 and 2016, we recorded $27 million, $30 million and $21 million, respectively, of operating lease expense relating to the leases of office space, equipment, and other facilities.

Contingencies

Patents and Intellectual Property

Many entities, including some of our competitors, have or may have in the future patents and other intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer. We may not be aware of all patents and other intellectual property rights that our products and services may potentially infringe. Damages in patent infringement cases can be substantial, and in certain circumstances can be tripled. Further, 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. Various parties have asserted patent and other intellectual property rights with respect to our products and services. We cannot be certain that these parties 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. Further, we cannot be certain that we would be able to obtain licenses from these parties 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.

F-48

ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Separation Agreement and Share Exchange

In connection with our spin-off from DISH in 2008 (the “Spin-off”), we entered into a separation agreement with DISH Network that provides, among other things, for the division of certain liabilities, including liabilities resulting from litigation. Under the terms of the separation agreement, we assumed certain liabilities that relate to our business, including certain designated liabilities for acts or omissions that occurred prior to the Spin-off. Certain specific provisions govern intellectual property related claims under which, we will generally only be liable for our acts or omissions following the Spin-off and DISH Network will indemnify us for any liabilities or damages resulting from intellectual property claims relating to the period prior to the Spin-off, as well as DISH Network’s acts or omissions following the Spin-off. Additionally, in connection with the Share Exchange, we entered into a share exchange agreement and other agreements which provide, among other things, for the division of certain liabilities, including liabilities relating to taxes, intellectual property and employees and liabilities resulting from litigation and the assumption of certain liabilities that relate to the transferred businesses and assets. These agreements also contain additional indemnification provisions between us and DISH Network for certain pre-existing liabilities and legal proceedings.

Litigation

We are involved in a number of legal proceedings concerning matters arising in connection with the conduct of our business activities. Many of these proceedings are at preliminary stages and/or seek an indeterminate amount of damages. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable and to determine if accruals are appropriate. We record an accrual for litigation and other loss contingencies when we determine that a loss is probable and the amount of the loss can be reasonably estimated. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. There can be no assurance that legal proceedings against us will be resolved in amounts that will not differ from the amounts of our recorded accruals. Legal fees and other costs of defending litigation are charged to expense as incurred.

For certain cases, management is unable to predict with any degree of certainty the outcome or provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons, (i) the proceedings are in various stages; (ii) damages have not been sought or specified; (iii) damages are unsupported, indeterminate and/or exaggerated in management’s opinion; (iv) there is uncertainty as to the outcome of pending trials, appeals or motions; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties are involved (as with many patent-related cases). Except as described below, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material effect on our financial condition, operating results or cash flows, though there is no assurance that the resolution and outcomes of these proceedings, individually or in the aggregate, will not be material to our financial condition, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period.

We intend to vigorously defend the proceedings against us. In the event that a court or jury ultimately rules against us, we may be subject to adverse consequences, including, without limitation, substantial damages, which may include treble damages, fines, penalties, compensatory damages and/or other equitable or injunctive relief that could require us to materially modify our business operations or certain products or services that we offer to our consumers.

Elbit

On January 23, 2015, Elbit Systems Land and C4I LTD and Elbit Systems of America Ltd. (together referred to as “Elbit”) filed a complaint against our subsidiary Hughes Network Systems, L.L.C. (“HNS”), as well as against Black Elk Energy Offshore Operations, LLC, Bluetide Communications, Inc. and Helm Hotels Group, in the U.S. District Court for the Eastern District of Texas, alleging infringement of U.S. Patent Nos. 6,240,073 (the “073 patent”) and 7,245,874 (“874 patent”). The 073 patent is entitled “Reverse Link for a Satellite Communication Network” and the 874 patent is entitled “Infrastructure for Telephony Network.” Elbit alleges that the 073 patent is infringed by broadband satellite systems that practice the Internet Protocol Over Satellite standard. Elbit alleges that the 874 patent is infringed by the manufacture and sale of broadband satellite systems that provide cellular backhaul service via connections to E1 or T1 interfaces at cellular backhaul base stations. On April 2, 2015, Elbit filed an amended complaint removing Helm

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Hotels Group as a defendant, but making similar allegations against a new defendant, Country Home Investments, Inc. On November 3 and 4, 2015 and January 22, 2016, the defendants filed petitions before the United States Patent and Trademark Office (“USPTO”) challenging the validity of the patents in suit, which the USPTO subsequently declined to institute. On April 13, 2016, the defendants answered Elbit’s complaint. At Elbit’s request, on June 26, 2017, the court dismissed Elbit’s claims of infringement against all parties other than HNS. Trial commenced on July 31, 2017. On August 7, 2017, the jury returned a verdict that the 073 patent was valid and infringed, and awarded Elbit approximately $21 million. The jury also found that such infringement of the 073 patent was not willful and that the 874 patent was not infringed. On March 30, 2018, the court ruled on post-trial motions, upholding the jury’s findings and awarding Elbit attorneys’ fees in an amount that has not yet been specified. As a result of pre-judgment interest, costs and unit sales through the 073 patent’s expiration in November 2017, the jury verdict would result in a payment of approximately $29 million plus post-judgment interest if not overturned or modified on appeal. Elbit has requested an award of approximately $14 million of attorneys’ fees. HNS is contesting Elbit’s claims as inappropriate and unreasonable in light of the court’s decision and prevailing law. On April 27, 2018, HNS filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit. The parties have briefed the appeal and are awaiting a date for oral arguments. We cannot predict with certainty the outcome of the appeal. As of December 31, 2018 and 2017, we have recorded an accrual of approximately $3 million and $3 million, respectively, with respect to this liability. Any eventual payments made with respect to the ultimate outcome of this matter may be different from our accruals and such differences could be significant.

Realtime Data LLC

On May 8, 2015, Realtime Data LLC (“Realtime”) filed suit against EchoStar Corporation and our subsidiary HNS in the U.S. District Court for the Eastern District of Texas alleging infringement of U.S. Patent Nos. 7,378,992 (the “992 patent”), entitled “Content Independent Data Compression Method and System;” 7,415,530 (the “530 patent”), entitled “System and Methods for Accelerated Data Storage and Retrieval,” and 8,643,513 (the “513 patent”), entitled “Data Compression System and Methods.” On September 14, 2015, Realtime amended its complaint, additionally alleging infringement of U.S. Patent No. 9,116,908 (the “908 patent”), entitled “System and Methods for Accelerated Data Storage and Retrieval.” On February 14, 2017, Realtime filed a second suit against EchoStar Corporation and our subsidiary HNS in the same District Court, alleging infringement of four additional U.S. Patents, Nos. 7,358,867 (the “867 patent”), entitled “Content Independent Data Compression Method and System;” 8,502,707 (the “707 patent”), entitled “Data Compression Systems and Methods;” 8,717,204 (the “204 patent”), entitled “Methods for Encoding and Decoding Data;” and 9,054,728 (the “728 patent”), entitled “Data Compression System and Methods.” On February 13, 2018, we filed petitions before the USPTO challenging the validity of all claims asserted against us from the 707 patent, as well as one of the asserted claims of the 728 patent. On September 5, 2018, the USPTO declined to institute proceedings for the petition that we had filed against the 728 patent. On September 12, 2018, the USPTO instituted proceedings to review the validity of the asserted claims of the 707 patent. In a stipulation filed on October 24, 2018, Realtime voluntarily elected not to pursue any previously asserted claims from the 992, 530, 513, 908, 867 and 204 patents. Realtime is an entity that seeks to license an acquired patent portfolio without itself practicing any of the claims recited therein. In February 2019, we entered into a settlement agreement with Realtime and the case was dismissed with prejudice.

Other

In addition to the above actions, we are subject to various other legal proceedings and claims, which arise in the ordinary course of business. As part of our ongoing operations, we are subject to various inspections, audits, inquiries, investigations and similar actions by third parties, as well as by governmental/regulatory authorities responsible for enforcing the laws and regulations to which we may be subject. Further, under the federal False Claims Act, private parties have the right to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the federal government. Some states have adopted similar state whistleblower and false claims provisions. In addition, we from time to time receive inquiries from federal, state and foreign agencies regarding compliance with various laws and regulations.

In our opinion, the amount of ultimate liability with respect to any of these other actions is unlikely to materially affect our financial position, results of operations or cash flows, though the resolutions and outcomes, individually or in the aggregate, could be material to our financial position, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period.

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We also indemnify our directors, officers and employees for certain liabilities that might arise from the performance of their responsibilities for us. Additionally, in the normal course of its business, we enter into contracts pursuant to which we may make a variety of representations and warranties and indemnify the counterparty for certain losses. Our possible exposure under these arrangements cannot be reasonably estimated as this involves the resolution of claims made, or future claims that may be made, against us or our officers, directors or employees, the outcomes of which are unknown and not currently predictable or estimable.

NOTE 18. SEGMENT REPORTING

Operating segments are business components of an enterprise for which separate financial information is available and regularly evaluated by our chief operating decision maker (“CODM”), who is our Chief Executive Officer. We primarily operate in two business segments, Hughes and ESS, as described in Note 1.

The primary measure of segment profitability that is reported regularly to our CODM is earnings before interest, taxes, depreciation and amortization, or EBITDA. 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 certain of our investments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other in the tables below or in the reconciliation of EBITDA below.

Total assets by segment have not been reported herein because the information is not provided to our CODM on a regular basis.

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The following table presents revenue, EBITDA and capital expenditures for each of our operating segments. Capital expenditures are net of refunds and other receipts related to property and equipment and exclude capital expenditures from discontinued operations of $12 million and $70 million for the years ended December 31, 2017 and 2016, respectively.

		Hughes				ESS				Corporate and Other				Consolidated Total
		(In thousands)
For the year ended December 31, 2018
External revenue		$	1,716,169			$	355,734			$	19,460			$	2,091,363
Intersegment revenue		$	359			$	2,324			$	(2,683	)		$	—
Total revenue		$	1,716,528			$	358,058			$	16,777			$	2,091,363
EBITDA		$	601,319			$	308,058			$	(152,708	)		$	756,669
Capital expenditures		$	390,108			$	(76,582	)		$	164,091			$	477,617
For the year ended December 31, 2017
External revenue		$	1,476,131			$	390,831			$	18,546			$	1,885,508
Intersegment revenue		$	1,787			$	1,413			$	(3,200	)		$	—
Total revenue		$	1,477,918			$	392,244			$	15,346			$	1,885,508
EBITDA		$	475,222			$	315,285			$	4,070			$	794,577
Capital expenditures		$	376,502			$	20,725			$	169,157			$	566,384
For the year ended December 31, 2016
External revenue		$	1,389,152			$	406,970			$	14,344			$	1,810,466
Intersegment revenue		$	3,209			$	690			$	(3,899	)		$	—
Total revenue		$	1,392,361			$	407,660			$	10,445			$	1,810,466
EBITDA		$	477,165			$	341,516			$	(67,676	)		$	751,005
Capital expenditures		$	322,362			$	58,925			$	247,223			$	628,510

The following table reconciles total consolidated EBITDA to reported Income (loss) from continuing operations before income taxes in our Consolidated Statements of Operations:

		For the Years Ended December 31,
		2018				2017				2016
		(In thousands)
EBITDA		$	756,669			$	794,577			$	751,005
Interest income and expense, net		(168,293		)		(172,621		)		(102,237		)
Depreciation and amortization		(598,178		)		(522,190		)		(432,904		)
Net income attributable to noncontrolling interests		1,842				928				762
Income (loss) from continuing operations before income taxes		$	(7,960	)		$	100,694			$	216,626

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Geographic Information and Transactions with Major Customers

Geographic Information. Revenue is attributed to geographic regions based upon the location where the goods and services are provided. North America revenue includes transactions with customers in the U.S. and its territories, Mexico and Canada. Central and South America revenue includes transactions with customers in Brazil, Colombia, Peru, Ecuador and other countries in this region. All other revenue includes transactions with customers in Asia, Africa, Australia, Europe, and the Middle East. The following table summarizes total long-lived assets and revenue attributed to the North America, South and Central America and other foreign locations.

		As of December 31,
Long-lived assets:		2018				2017
		(In thousands)
North America		$	4,114,087			$	4,221,793
Central and South America		226,232				213,890
All other		118,647				129,852
Total long-lived assets		$	4,458,966			$	4,565,535

		For the Years Ended December 31,
Revenue:		2018				2017				2016
		(In thousands)
North America		$	1,819,463			$	1,612,349			$	1,566,576
Central and South America		101,632				90,000				50,952
All other		170,268				183,159				192,938
Total revenue		$	2,091,363			$	1,885,508			$	1,810,466

Transactions with Major Customers

For the years ended December 31, 2018, 2017 and 2016, our revenue included sales to one major customer. The following table summarizes sales to this customer and its percentage of total revenue.

		For the Years Ended December 31,
		2018				2017				2016
		(In thousands)
Total revenue:
DISH Network:
Hughes segment		$	50,275			$	82,625			$	107,300
EchoStar Satellite Services segment		309,815				344,841				349,549
Corporate and Other		19,075				18,522				15,433
Total DISH Network		379,165				445,988				472,282
All other		1,712,198				1,439,520				1,338,184
Total revenue		$	2,091,363			$	1,885,508			$	1,810,466
Percentage of total revenue:
DISH Network		18.1		%		23.7		%		26.1		%
All other		81.9		%		76.3		%		73.9		%

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NOTE 19. QUARTERLY FINANCIAL DATA (UNAUDITED)

Our quarterly results of operations are summarized as follows:

		For the Three Months Ended
		March 31				June 30				September 30				December 31 (2)
		(In thousands, except per share amounts)
Year Ended December 31, 2018
Total revenue		$	501,792			$	525,957			$	532,953			$	530,661
Operating income		$	58,010			$	74,765			$	70,035			$	(19,567	)
Net income (loss)		$	(21,171	)		$	77,684			$	16,502			$	(111,648	)
Net income (loss) attributable to EchoStar common stock		$	(21,551	)		$	77,222			$	16,052			$	(112,198	)
Basic earnings (loss) per share		$	(0.22	)		$	0.80			$	0.17			$	(1.17	)
Diluted earnings (loss) per share		$	(0.22	)		$	0.80			$	0.17			$	(1.17	)
Year Ended December 31, 2017
Total revenue (1)		$	433,151			$	465,076			$	481,233			$	506,048
Operating income (1)		$	51,651			$	45,890			$	56,414			$	42,352
Net income		$	37,352			$	7,122			$	35,201			$	313,814
Net income attributable to EchoStar common stock		$	38,924			$	6,940			$	34,669			$	313,237
Basic earnings per share		$	0.41			$	0.07			$	0.36			$	3.29
Diluted earnings per share		$	0.41			$	0.07			$	0.36			$	3.23

(1)

As a result of the Share Exchange, the consolidated financial statements of the EchoStar Technologies businesses have been presented as discontinued operations and, as such, have been excluded from the quarterly financial data presented above for all periods presented. See Note 4 in the notes to our accompanying Consolidated Financial Statements for further discussion of our discontinued operations.

(2)

Net income and related per share amounts for the three months ended December 31, 2018 include an impairment charge of $65 million related to certain long-lived assets in Brazil. See Note 10 for additional information related to the impairment charge. Net income and related per share amounts for the three months ended December 31, 2017 include a discrete income tax benefit of $304 million related to the enactment of federal tax legislation in December 2017, a gain of $23 on our trading securities, and an impairment loss of $11 million relating to our regulatory authorizations with indefinite lives and certain projects in construction in progress. See Note 13 for additional information relating to the income tax benefit.

NOTE 20. RELATED PARTY TRANSACTIONS

DISH Network

EchoStar Corporation and DISH have operated as separate publicly-traded companies since 2008. In addition, prior to the consummation of the Share Exchange in February 2017, DISH Network owned the Tracking Stock, which represented an aggregate 80.0% economic interest in the residential retail satellite broadband business of our Hughes segment. Following the consummation of the Share Exchange, the Tracking Stock was retired. A substantial majority of the voting power of the shares of each of EchoStar Corporation and DISH is owned beneficially by Charles W. Ergen, our Chairman, and by certain entities established by Mr. Ergen for the benefit of his family.

In connection with and following both the Spin-off and the Share Exchange, we and DISH Network entered into certain agreements pursuant to which we obtain certain products, services and rights from DISH Network; DISH Network obtains certain products, services and rights from us; and we and DISH Network indemnify each other against certain liabilities arising from our respective businesses. We also may enter into additional agreements with DISH Network in the future. Generally, the amounts we or DISH Network pay for products and services provided under the agreements are based on cost plus a fixed margin (unless noted differently below), which varies depending on the nature of the products and services provided.

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The following is a summary of the terms of our principal agreements with DISH Network that may have an impact on our financial condition and results of operations.

Services and Other Revenue — DISH Network

Satellite Capacity Leased to DISH Network. We have entered into certain agreements to lease satellite capacity pursuant to which we provide satellite services to DISH Network on certain satellites owned or leased by us. The fees for the services provided under these agreements depend, among other things, upon the orbital location of the applicable satellite, the number of transponders that are providing services on the applicable satellite and the length of the service arrangements. The terms of each service arrangement is set forth below:

EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV. In March 2014, as part of the Satellite and Tracking Stock Transaction, described below in Other Agreements - DISH Network, we began leasing certain satellite capacity to DISH Network on the EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV satellites. These agreements to lease satellite capacity generally terminate upon the earlier of: (i) the end of life of the satellite; (ii) the date the satellite fails; or (iii) a certain date, which depends upon, among other things, the estimated useful life of the satellite. DISH Network generally has the option to renew each agreement to lease satellite capacity on a year-to-year basis through the end of the respective satellite’s life. There can be no assurance that any options to renew such agreements will be exercised. The agreement to lease satellite capacity on the EchoStar VII satellite expired at the end of June 2018.

EchoStar IX. Effective January 2008, DISH Network began leasing satellite capacity from us on the EchoStar IX satellite. Subject to availability, DISH Network generally has the right to continue leasing satellite capacity from us on the EchoStar IX satellite on a month-to-month basis.

EchoStar XII. DISH Network leased satellite capacity from us on the EchoStar XII satellite. The agreement to lease satellite capacity expired at the end of September 2017.

EchoStar XVI. In December 2009, we entered into an initial ten-year agreement to lease satellite capacity to DISH Network, pursuant to which DISH Network has leased satellite capacity from us on the EchoStar XVI satellite since January 2013. Effective December 2012, we and DISH Network amended the agreement to, among other things, change the initial term to generally expire upon the earlier of: (i) the end-of-life or replacement of the satellite; (ii) the date the satellite fails; (iii) the date the transponder(s) on which service is being provided under the agreement fails; or (iv) four years following the actual service commencement date. In July 2016, we and DISH Network further amended the agreement to, among other things, extend the initial term by one additional year through January 2018 and to reduce the term of the first renewal option by one year. In May 2017, DISH Network renewed the agreement through January 2023. DISH Network has the option to renew for an additional five-year period prior to expiration of the current term. There can be no assurance that such option to renew this agreement will be exercised. In the event that DISH Network does not exercise its five-year renewal option, DISH Network has the option to purchase the EchoStar XVI satellite for a certain price. If DISH Network does not elect to purchase the EchoStar XVI satellite at that time, we may sell the EchoStar XVI satellite to a third party and DISH Network is required to pay us a certain amount in the event we are not able to sell the EchoStar XVI satellite for more than a certain amount. We and DISH Network have amended the agreement to allow DISH Network to place and use certain satellites at the 61.5 degree west longitude orbital location.

Nimiq 5 Agreement. In September 2009, we entered into a fifteen-year 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 also entered into an agreement with DISH Network, pursuant to which DISH Network leases 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 makes certain monthly payments to us that commenced in September 2009, when the Nimiq 5 satellite was placed into service, and continue through the service term. Unless earlier terminated under the terms and conditions of the DISH Nimiq 5 Agreement, the service term will expire in October 2019. Upon expiration of the initial term, DISH Network has the option to renew the

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DISH Nimiq 5 Agreement on a year-to-year basis through the end of life of the Nimiq 5 satellite. Upon in-orbit failure or end of life of the Nimiq 5 satellite, and in certain other circumstances, DISH Network has certain rights to lease satellite capacity from us on a replacement satellite. There can be no assurance that any options to renew the DISH Nimiq 5 Agreement will be exercised or that DISH Network will exercise its option to lease satellite capacity on a replacement satellite.

QuetzSat-1 Agreement. In November 2008, we entered into a ten-year agreement to lease satellite capacity from SES Latin America, which provides, 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 leases 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 lease back from DISH Network certain satellite capacity on five DBS transponders on the QuetzSat-1 satellite through November 2021, unless extended or earlier terminated under the terms and conditions of our agreement.

Under the terms of our contractual arrangements with DISH Network, we began leasing satellite capacity to DISH Network on the QuetzSat-1 satellite in February 2013 and will continue leasing such capacity through November 2021, unless extended or earlier terminated under the terms and conditions of our agreement with DISH Network for the QuetzSat-1 satellite. Upon expiration of the initial service term, DISH Network has the option to renew the agreement for the QuetzSat-1 satellite on a year-to-year basis through the end of life of the QuetzSat-1 satellite. Upon an in-orbit failure or end of life of the QuetzSat-1 satellite, and in certain other circumstances, DISH Network has certain rights to lease satellite capacity from us on a replacement satellite. There can be no assurance that any options to renew this agreement will be exercised or that DISH Network will exercise its option to lease satellite capacity on a replacement satellite.

103 Degree Orbital Location/SES-3. In May 2012, we entered into a spectrum development agreement (the “103 Spectrum Development Agreement”) with Ciel Satellite Holdings Inc. (“Ciel”) to develop certain spectrum rights at the 103 degree west longitude orbital location (the “103 Spectrum Rights”). In June 2013, we and DISH Network entered into a spectrum development agreement (the “DISH 103 Spectrum Development Agreement”) pursuant to which DISH Network may use and develop the 103 Spectrum Rights. Effective in March 2018, DISH Network exercised its right to terminate the DISH 103 Spectrum Development Agreement and we exercised our right to terminate the 103 Spectrum Development Agreement.

In connection with the 103 Spectrum Development Agreement, in May 2012, we also entered into a ten-year agreement with Ciel pursuant to which we leased certain satellite capacity from Ciel on the SES-3 satellite at the 103 degree west longitude orbital location (the “Ciel 103 Agreement”). In June 2013, we and DISH Network entered into an agreement pursuant to which DISH Network leased certain satellite capacity from us on the SES-3 satellite (the “DISH 103 Agreement”). Under the terms of the DISH 103 Agreement, DISH Network made certain monthly payments to us through the service term. Effective in March 2018, DISH Network exercised its right to terminate the DISH 103 Agreement and we exercised our right to terminate the Ciel 103 Agreement.

TT&C Agreement. Effective January 2012, we entered into a TT&C agreement pursuant to which we provided TT&C services to DISH Network for a period ending in December 2016 (the “TT&C Agreement”). We and DISH Network have amended the TT&C Agreement over time to, among other things, extend the term through February 2023. The fees for services provided under the TT&C Agreement are calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which will vary depending on the nature of the services provided. DISH Network is able to terminate the TT&C Agreement for any reason upon 12 months’ notice.

Effective March 2014, we provide TT&C services for the D-1 and EchoStar XV satellites; however, for the period that we received satellite services on the EchoStar XV satellite from DISH Network, we waived the fees for the TT&C services on the EchoStar XV satellite. Effective August 2016, we provide TT&C services to DISH Network for the EchoStar XVIII satellite.

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Real Estate Leases to DISH Network. We have entered into lease agreements pursuant to which DISH Network leases certain real estate from us. The rent on a per square foot basis for each of the leases is 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 is responsible for its portion of the taxes, insurance, utilities and maintenance of the premises. The term of each of the leases is set forth below:

100 Inverness Agreement. Effective March 2017, DISH Network is licensed to use certain of our space at 100 Inverness Terrace East, Englewood, Colorado for a period ending in December 2020. This agreement may be terminated by either party upon 180 days’ prior notice. This agreement may be extended by mutual consent, in which case this agreement will be converted to a month-to-month lease agreement. Upon extension, either party has the right to terminate this agreement upon 30 days’ notice.

90 Inverness Lease Agreement. The lease for certain space at 90 Inverness Circle East, Englewood, Colorado was for a period ending in December 2016. In February 2016, DISH Network terminated this lease effective in August 2016.

Meridian Lease Agreement. The lease for all of 9601 S. Meridian Blvd., Englewood, Colorado was for a period ending in December 2016. We and DISH Network have amended this lease over time to, among other things, extend the term through December 2019. After December 2019, this agreement may be converted by mutual consent to a month-to-month lease agreement with either party having the right to terminate upon 30 days’ notice.

Santa Fe Lease Agreement. The lease for all of 5701 S. Santa Fe Dr., Littleton, Colorado was for a period ending in December 2016. We and DISH Network have amended this lease over time to, among other things, extend the term through December 2019. After December 2019, this agreement may be converted by mutual consent to a month-to-month lease agreement with either party having the right to terminate upon 30 days’ notice.

Atlanta Sublease Agreement. The sublease for certain space at 211 Perimeter Center, Atlanta, Georgia terminated in October 2016.

Cheyenne Lease Agreement. Prior to the Share Exchange, we leased to DISH Network certain space at 530 EchoStar Drive, Cheyenne, Wyoming. In connection with the Share Exchange, we transferred ownership of a portion of this property to DISH Network and we and DISH Network amended this agreement to (i) terminate the lease for the transferred space and (ii) provide for a continued lease to DISH Network of the portion of the property we retained for a period ending in December 2031. After December 2031, this agreement may be converted by mutual consent to a month-to-month lease agreement with either party having the right to terminate upon 30 days’ notice.

TerreStar Agreement. In March 2012, DISH Network completed its acquisition of substantially all the assets of TerreStar Networks Inc. (“TerreStar”). Prior to DISH Network’s acquisition of substantially all the assets of TerreStar and our completion of the Hughes Acquisition, TerreStar and HNS entered into various agreements pursuant to which we provide, among other things, warranty, operations and maintenance and hosting services for TerreStar’s ground-based communications equipment. In December 2017, we and DISH Network amended these agreements, effective as of January 1, 2018, to reduce certain pricing terms through December 31, 2023 and to modify certain termination provisions. DISH Network generally has the right to continue to receive warranty services from us for our products on a month-to-month basis unless terminated by DISH Network upon at least 21 days’ written notice to us. DISH Network generally has the right to continue to receive operations and maintenance services from us on a quarter-to-quarter basis unless operations and maintenance services are terminated by DISH Network upon at least 90 days’ written notice to us. The provision of hosting services will continue until May 2022. In addition, DISH Network generally may terminate any and all services for convenience subject to providing us with prior notice and/or payment of termination charges.

Hughes Broadband Distribution Agreement. Effective October 2012, we and DISH Network, entered into a distribution agreement (the “Distribution Agreement”) pursuant to which DISH Network has the right, but not the obligation, to market, sell and distribute our HughesNet satellite internet service (the “HughesNet service”). DISH Network pays us a monthly per subscriber wholesale service fee for the HughesNet service based upon a subscriber’s service level and based upon certain volume subscription thresholds. The Distribution Agreement also provides that

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DISH Network has the right, but not the obligation, to purchase certain broadband equipment from us to support the sale of the HughesNet service. The Distribution Agreement had an initial term of five years with automatic renewal for successive one year terms unless terminated by either party with a written notice at least 180 days before the expiration of the then-current term. In February 2014, we and DISH Network entered into an amendment to the Distribution Agreement which, among other things, extended the initial term of the Distribution Agreement until March 2024. Upon expiration or termination of the Distribution Agreement, we and DISH Network will continue to provide our HughesNet service to the then-current DISH Network subscribers pursuant to the terms and conditions of the Distribution Agreement.

DBSD North America Agreement. In March 2012, DISH Network completed its acquisition of 100% of the equity of reorganized DBSD North America, Inc. (“DBSD North America”). Prior to DISH Network’s acquisition of DBSD North America and our completion of the Hughes Acquisition, DBSD North America and HNS entered into various agreements pursuant to which we provide, among other things, warranty, operations and maintenance and hosting services of DBSD North America’s gateway and ground-based communications equipment. In December 2017, we and DBSD North America amended these agreements, effective as of January 1, 2018, to reduce certain pricing terms through December 31, 2023 and to modify certain termination provisions. DBSD North America has the right to continue to receive operations and maintenance services from us on a quarter-to-quarter basis, unless terminated by DBSD North America upon at least 120 days’ written notice to us. In February 2019, we further amended these agreements to provide DBSD North America with the right to continue to receive warranty services from us on a month-to-month basis until December 2023, unless terminated by DBSD North America upon at least 21 days’ written notice to us. The provision of hosting services will continue until February 2022 and will automatically renew for an additional five-year period until February 2027 unless terminated by DBSD North America upon at least 180 days’ written notice to us. In addition, DBSD North America generally may terminate any and all such services for convenience, subject to providing us with prior notice and/or payment of termination charges.

RUS Implementation Agreement. In September 2010, DISH Network was selected by the Rural Utilities Service (“RUS”) of the U.S. Department of Agriculture to receive up to approximately $14 million in broadband stimulus grant funds. Effective November 2011, we and DISH Network entered into a RUS Implementation Agreement (the “RUS Agreement”) pursuant to which we provided certain portions of the equipment and broadband service used to implement DISH Network’s RUS program. While the RUS Agreement expired in June 2013 when the broadband stimulus grant funds were exhausted, we are required to continue providing services to DISH Network’s customers activated prior to the expiration of the RUS Agreement in accordance with the terms and conditions of the RUS Agreement.

Hughes Equipment and Services Agreement. In February 2019, we and DISH Network entered into an agreement pursuant to which we will sell to DISH Network our HughesNet Service and HughesNet equipment that has been modified to meet DISH Network’s internet-of-things specifications for the transfer of data to DISH Network’s network operations centers. This agreement has an initial term of five years expiring February 2024 with automatic renewal for successive one-year terms unless terminated by DISH Network with at least 180 days’ written notice to us or by us with at least 365 days’ written notice to DISH Network.

General and Administrative Expenses — DISH Network

Amended and Restated Professional Services Agreement. In connection with the Spin-off, we entered into various agreements with DISH Network including a transition services agreement, satellite procurement agreement and services agreement, which all expired in January 2010 and were replaced by a professional services agreement (the “Professional Services Agreement”). In January 2010, we and DISH Network agreed that we continue to have the right, but not the obligation, to receive the following services from DISH Network, among others, certain of which were previously provided under a transition services agreement: information technology, travel and event coordination, internal audit, legal, accounting and tax, benefits administration, program acquisition services and other support services. Mr. Vivek Khemka, who was then employed as DISH Network’s Executive Vice President and Chief Technology Officer, provided services to us during portions of 2016 and through February 2017 pursuant to the Professional Services Agreement as President -- EchoStar Technologies L.L.C. Additionally, we and DISH Network agreed that DISH Network would continue to have the right, but not the obligation, to engage us to manage the process of procuring new satellite capacity for DISH Network (previously provided under a satellite procurement agreement), receive logistics, procurement and quality assurance services from us (previously provided under a services agreement) and provide other support services. In connection with the consummation of the Share Exchange, we and DISH

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amended and restated the Professional Services Agreement (the “Amended and Restated Professional Services Agreement”) to provide that we and DISH Network shall have the right to receive additional services that either we or DISH Network may require as a result of the Share Exchange, including access to antennas owned by DISH Network for our use in performing TT&C services and maintenance and support services for our antennas. The term of the Amended and Restated Professional Services Agreement is through January 2020 and renews automatically for successive one-year periods thereafter, unless the agreement is terminated earlier by either party upon at least 60 days’ notice. We or DISH Network may generally terminate the Amended and Restated Professional Services Agreement in part with respect to any particular service it receives for any reason upon at least 30 days’ notice, unless the statement of work for particular services states otherwise. Certain services being provided for under the Amended and Restated Professional Services Agreement may survive the termination of the agreement.

Real Estate Leases from DISH Network. We have entered into lease agreements pursuant to which we lease certain real estate from DISH Network. The rent on a per square foot basis is comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the leases, and for certain properties, we are responsible for our portion of the taxes, insurance, utilities and maintenance of the premises.

Cheyenne Lease Agreement. Effective March 2017 we lease from DISH Network certain space at 530 EchoStar Drive in Cheyenne, Wyoming for a period ending in February 2019. In August 2018, we exercised our option to renew this lease for a one year period ending in February 2020. We have the option to renew this lease for twelve one-year periods.

Gilbert Lease Agreement. Effective March 2017 we lease from DISH Network certain space at 801 N. DISH Dr. in Gilbert, Arizona for a period ending in February 2019. In August 2018, we exercised our option to renew this lease for a one year period ending in February 2020. We have the option to renew this lease for twelve one-year periods.

American Fork Occupancy License Agreement. In connection with the Share Exchange, effective March 2017, we subleased from DISH Network certain space at 796 East Utah Valley Drive in American Fork, Utah for a period ending in August 2017. We exercised our option to renew this sublease for a five-year period ending in August 2022.

Employee Matters Agreement. Effective March 2017 in connection with the Share Exchange, we and DISH Network entered into an employee matters agreement that addressed the transfer of employees from EchoStar to DISH Network, including certain benefit and compensation matters and the allocation of responsibility for employee related liabilities relating to current and past employees of the transferred businesses. DISH Network assumed employee-related liabilities relating to the transferred businesses as part of the Share Exchange, except that we are responsible for certain existing employee related litigation as well as certain pre-Share Exchange compensation and benefits for employees transferring to DISH Network in connection with the Share Exchange.

Collocation and Antenna Space Agreements. We and DISH Network have entered into an agreement pursuant to which DISH Network provides us with collocation space in El Paso, Texas. This agreement was for an initial period ending in August 2015, and provides us with renewal options for four consecutive years. Effective August 2015, we exercised our first renewal option for a period ending in August 2018, and in April 2018 we exercised our second renewal option for a period ending in August 2021. In connection with the Share Exchange, effective March 2017, we also entered into certain agreements pursuant to which DISH Network provides collocation and antenna space to EchoStar through February 2022 at the following locations: Cheyenne, Wyoming; Gilbert, Arizona; New Braunfels, Texas; Monee, Illinois; Spokane, Washington; and Englewood, Colorado. In August 2017, we and DISH Network also entered into certain other agreements pursuant to which DISH Network provides additional collocation and antenna space to EchoStar in Monee, Illinois and Spokane, Washington through August 2022. We generally may renew our collocation and antenna space agreements for three-year periods by providing DISH Network with prior written notice no more than 120 days but no less than 90 days prior to the end of the then-current term. We may terminate certain of these agreements with 180 days’ prior written notice. The fees for the services provided under these agreements depend on the number of racks leased at the location.

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Other Agreements — DISH Network

Satellite and Tracking Stock Transaction. In February 2014, we entered into agreements with DISH Network to implement a transaction pursuant to which, among other things: (i) in March 2014, EchoStar and HSS issued the Tracking Stock to DISH Network in exchange for five satellites owned by DISH Network (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV) (including assumption of related in-orbit incentive obligations) and approximately $11 million in cash; and (ii) in March 2014, DISH Network began receiving certain satellite services from us as discussed above on these five satellites (collectively, the “Satellite and Tracking Stock Transaction.”) The Tracking Stock was retired in March 2017 and is no longer outstanding and all agreements, arrangements and policy statements with respect to such Tracking Stock terminated and are of no further effect.

Share Exchange Agreement. On January 31, 2017, EchoStar Corporation and certain of our subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries pursuant to which, on February 28, 2017, we received all of the shares of the Tracking Stock in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of our EchoStar Technologies businesses and certain other assets. Following consummation of the Share Exchange on February 28, 2017, we no longer operate the transferred EchoStar Technologies businesses and the Tracking Stock was retired and is no longer outstanding and all agreements, arrangements and policy statements with respect to such Tracking Stock terminated and are of no further effect. Pursuant to the Share Exchange Agreement, we transferred certain assets, investments in joint ventures, spectrum licenses and real estate properties and DISH Network assumed certain liabilities relating to the transferred assets and businesses. The Share Exchange Agreement contained customary representations and warranties by the parties, including representations by us related to the transferred assets, assumed liabilities and the financial condition of the transferred businesses. We and DISH Network also agreed to customary indemnification provisions whereby each party indemnifies the other against certain losses with respect to breaches of representations, warranties or covenants and certain liabilities and if certain actions undertaken by us or DISH causes the transaction to be taxable to the other party after closing. See Notes 1 and 4 for further information.

Hughes Broadband Master Services Agreement. In March 2017, we and DISH Network entered into a master service agreement (the “Hughes Broadband MSA”) pursuant to which DISH Network, among other things: (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 telecommunication services and (ii) installs HughesNet service equipment with respect to activations generated by DISH Network. Under the Hughes Broadband MSA, we and DISH Network make certain payments to each other relating to sales, upgrades, purchases and installation services. The Hughes Broadband MSA has an initial term of five years until March 2022 with automatic renewal for successive one-year terms. Upon expiration or termination of the Hughes Broadband MSA, we will continue to provide our HughesNet service to subscribers and make certain payments to DISH Network pursuant to the terms and conditions of the Hughes Broadband MSA. We incurred sales incentives and other costs under the Hughes Broadband MSA totaling $33 million and $29 million for the year ended December 31, 2018 and 2017, respectively.

Intellectual Property and Technology License Agreement. Effective March 2017 in connection with the Share Exchange, we and DISH Network entered into an Intellectual Property and Technology License Agreement (“IPTLA”) pursuant to which we and DISH Network license to each other certain intellectual property and technology. The IPTLA will continue in perpetuity, unless mutually terminated by the parties. Pursuant to the IPTLA, we granted to DISH Network a license to our intellectual property and technology for use by DISH Network, among other things, in connection with its continued operation of the businesses acquired pursuant to the Share Exchange, including a limited license to use the “ECHOSTAR” trademark during a transition period. EchoStar retains full ownership of the “ECHOSTAR” trademark. In addition, DISH Network granted a license back to us, among other things, for the continued use of all intellectual property and technology that is used in our retained businesses but the ownership of which was transferred to DISH Network pursuant to the Share Exchange.

Tax Matters Agreement. Effective March 2017, in connection with the Share Exchange, we and DISH entered into a tax matters agreement. This agreement governs certain of our rights, responsibilities and obligations with respect to taxes of the transferred businesses pursuant to the Share Exchange. Generally, we are responsible for all tax returns and tax liabilities for the transferred businesses and assets for periods prior to the Share Exchange and DISH Network is responsible for all tax returns and tax liabilities for the transferred businesses and assets from and after the Share Exchange. Both we and DISH Network made certain tax-related representations and are subject to various tax-related

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covenants after the consummation of the Share Exchange. Both we and DISH Network have agreed to indemnify each other if there is a breach of any such tax representation or violation of any such tax covenant and that breach or violation results in the Share Exchange not qualifying for tax free treatment for the other party. In addition, DISH Network has agreed to indemnify us if the transferred businesses are acquired, either directly or indirectly (e.g., via an acquisition of DISH Network), by one or more persons and such acquisition results in the Share Exchange not qualifying for tax free treatment. The tax matters agreement supplements the Tax Sharing Agreement outlined below, which continues in full force and effect.

Tax Sharing Agreement. Effective December 2007, we and DISH Network entered into a tax sharing agreement (the “Tax Sharing Agreement”) in connection with the Spin-off. This agreement governs our and DISH Network’s respective rights, responsibilities and obligations after the Spin-off with respect to taxes for the periods ending on or before the Spin-off. Generally, all pre-Spin-off taxes, including any taxes that are incurred as a result of restructuring activities undertaken to implement the Spin-off, are borne by DISH Network, and DISH Network indemnifies us for such taxes. However, DISH Network is not liable for and does not indemnify us for any taxes that are incurred as a result of the Spin-off or certain related transactions failing to qualify as tax-free distributions pursuant to any provision of Section 355 or Section 361 of the Code, because of: (i) a direct or indirect acquisition of any of our stock, stock options or assets; (ii) any action that we take or fail to take; or (iii) any action that we take that is inconsistent with the information and representations furnished to the IRS in connection with the request for the private letter ruling, or to counsel in connection with any opinion being delivered by counsel with respect to the Spin-off or certain related transactions. In such case, we will be solely liable for, and will indemnify DISH Network for, any resulting taxes, as well as any losses, claims and expenses. The Tax Sharing Agreement will terminate after the later of the full period of all applicable statutes of limitations, including extensions, or once all rights and obligations are fully effectuated or performed.

In light of the Tax Sharing Agreement, among other things, and in connection with our consolidated federal income tax returns for certain tax years prior to and for the year of the Spin-off, in September 2013, we and DISH Network agreed upon a supplemental allocation of the tax benefits arising from certain tax items resolved in the course of the IRS’s examination of our consolidated tax returns. Prior to the agreement with DISH Network in 2013, the federal tax benefits were reflected as a deferred tax asset for depreciation and amortization, which was netted in our noncurrent deferred tax liabilities. The agreement with DISH Network in 2013 requires DISH Network to pay us the federal tax benefit it receives at such time as we would have otherwise been able to realize such tax benefit. We recorded a noncurrent receivable from DISH Network in Other receivables - DISH Network and a corresponding increase in our Deferred tax liabilities, net to reflect the effects of this agreement in September 2013. In addition, in September 2013, we and DISH Network agreed upon a tax sharing arrangement for filing certain combined state income tax returns and a method of allocating the respective tax liabilities between us and DISH Network for such combined returns, through the taxable period ending on December 31, 2017 (the “State Tax Arrangement”).

In August 2018, we and DISH Network amended the Tax Sharing Agreement and the 2013 agreements (the “Tax Sharing Amendment”). Under the Tax Sharing Amendment, to the extent permitted by applicable tax law, DISH Network is entitled to apply the benefit of our 2009 net operating losses (the “SATS 2009 NOLs”) to DISH Network’s federal tax return for the year ended December 31, 2008, in exchange for DISH Network paying us over time the value of the net annual federal income taxes paid by us that would have been otherwise offset by the SATS 2009 NOLs. The Tax Sharing Amendment also requires us and DISH Network to pay the other for the benefits of certain past and future federal research and development tax credits that we or DISH Network receive or received as a result of being part of a controlled group under the Code, and requires DISH Network to compensate us for certain past tax losses utilized by DISH Network and for certain past and future excess California research and development tax credits generated by us and used by DISH Network. In addition, the Tax Sharing Amendment extends the term of the State Tax Arrangement to the earlier to occur of termination of the Tax Sharing Agreement, a change in control of either us or DISH Network or, for any particular state, if we and DISH Network no longer file a combined tax return for such state.

We and DISH Network file combined income tax returns in certain states. We have earned and recognized tax benefits for certain state income tax credits that we would be unable to utilize currently if we had filed separately from DISH Network. We have charged Additional paid-in capital in prior periods when DISH Network has utilized such tax benefits. We expect to increase Additional paid-in capital upon receipt of any consideration that DISH Network pays to us in exchange for these tax credits.

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gTLD Bidding Agreement. In April 2015, we and DISH Network entered into a generic top level domain (“gTLD”) Bidding Agreement whereby, among other things: (i) DISH Network obtained rights from us to participate in a gTLD auction, assuming all rights and obligations from us related to our application with the Internet Corporation for Assigned Names and Numbers for a particular gTLD; (ii) DISH Network agreed to reimburse us for our Internet Corporation for Assigned Names and Numbers application fee and certain out-of-pocket expenses related to the application and the auction; and (iii) we and DISH Network agreed to split equally the net proceeds obtained by DISH Network as the losing bidder in the auction, less such fee reimbursement and out-of-pocket expenses.

Patent Cross-License Agreements. In December 2011, we and DISH Network entered into separate patent cross-license agreements with the same third party whereby: (i) we and such third party licensed our respective patents to each other subject to certain conditions; and (ii) DISH Network and such third party licensed their respective patents to each other subject to certain conditions (each, a “Cross-License Agreement”). Each Cross-License Agreement covers patents acquired by the respective party prior to January 2017 and aggregate payments under both Cross-License Agreements were less than $10 million. Each Cross-License Agreement contained an option to extend each Cross-License Agreement to include patents acquired by the respective party prior to January 2022. In December 2016, both we and DISH Network exercised our respective renewal options, resulting in aggregate additional payments to such third party totaling less than $3 million. Since the aggregate payments under both Cross-License Agreements were based on the combined annual revenue of us and DISH Network, we and DISH Network agreed to allocate our respective payments to such third party based on our respective percentage of combined total revenue.

Caltech. On October 1, 2013, Caltech Institute of Technology (“Caltech”) filed complaints against us and DISH Network, in the U.S. District Court for the Central District of California alleging infringement of U.S. Patent Nos. 7,116,710; 7,421,032; 7,916,781; and 8,284,833, each of which is entitled “Serial Concatenation of Interleaved Convolutional Codes forming Turbo-Like Codes.” Caltech asserted that encoding data as specified by the DVB-S2 standard infringed each of the asserted patents. Caltech claimed that certain of our satellite broadband products and services, infringed the asserted patents by implementing the DVB-S2 standard. Pursuant to a settlement agreement among us, DISH Network and Caltech, Caltech dismissed with prejudice all of its claims in these actions in May 2016.

Orange, NJ. In October 2016, we and DISH Network sold two parcels of real estate owned separately by us and DISH Network in Orange, NJ to a third party pursuant to a purchase and sale agreement. Pursuant to the agreement, we and DISH Network separately received our respective payments from the buyer.

Invidi. In November 2010 and April 2011, we made investments in Invidi in exchange for shares of Invidi’s Series D Preferred Stock. In November 2016, DIRECTV, LLC, a wholly owned indirect subsidiary of AT&T Inc., DISH Network and Cavendish Square Holding B.V., an affiliate of WPP plc, entered into a series of agreements to acquire Invidi. As a result of the transaction, we sold our ownership interest in Invidi on the same terms offered to the other shareholders of Invidi. The transaction closed in January 2017.

Other Agreements

Hughes Systique Corporation (“Hughes Systique”)

We contract with Hughes Systique for software development services. In addition to our approximately 43.4% ownership in Hughes Systique, Mr. Pradman Kaul, the President of Hughes Communications, Inc. and a member of our board of directors, and his brother, who is the Chief Executive Officer and President of Hughes Systique, in the aggregate, own approximately 25.5%, on an undiluted basis, of Hughes Systique’s outstanding shares as of December 31, 2018. Furthermore, Mr. Pradman Kaul serves on the board of directors of Hughes Systique. Hughes Systique is a variable interest entity and we are considered the primary beneficiary of Hughes Systique due to, among other factors, our ability to direct the activities that most significantly impact the economic performance of Hughes Systique. As a result, we consolidate Hughes Systique’s financial statements in our accompanying Consolidated Financial Statements.

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Dish Mexico

We own 49.0% of Dish Mexico, an entity that provides direct-to-home satellite services in Mexico. We provide certain satellite services to Dish Mexico. We recognized revenue from sales of services we provided to Dish Mexico of approximately $23 million for each of the years ended December 31, 2018, 2017 and 2016. As of December 31, 2018 and 2017, we had trade accounts receivable from Dish Mexico of approximately $6 million and $8 million, respectively.

Deluxe/EchoStar LLC

We own 50.0% of Deluxe/EchoStar LLC (“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 account for our investment in Deluxe using the equity method. We recognized revenue from Deluxe for transponder services and the sale of broadband equipment of approximately $4 million, $5 million and $3 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018 and 2017, we had trade accounts receivable from Deluxe of approximately $1 million and $1 million, respectively.

AsiaSat

We contract with AsiaSat Telecommunications Inc. (“AsiaSat”) for the use of transponder capacity on one of AsiaSat's satellites. Mr. William David Wade, who joined our board of directors in February 2017, served as the Chief Executive Officer of AsiaSat in 2016 and as a senior advisor to the Chief Executive Officer of AsiaSat through March 2017. We incurred expenses payable to AsiaSat under this agreement of approximately $0.1 million for the year ended December 31, 2017.

Global IP

In May 2017, we entered into an agreement with Global-IP Cayman (“Global IP”) providing for the sale of certain equipment and services to Global IP. Mr. William David Wade, a member of our board of directors, serves as a member of the board of directors of Global IP and as an executive advisor to the Chief Executive Officer of Global IP. In August 2018, we and Global IP amended the agreement to (i) change certain of the equipment and services to be provided to Global IP; (ii) modify certain payment terms; (iii) provide Global IP an option to use one of our test lab facilities; and (iv) effectuate the assignment of the agreement from Global IP to one of its wholly-owned subsidiaries. In February 2019, we terminated the agreement as a result of Global IP’s defaults resulting from its failure to make payments to us as required under the terms of the agreement and we reserved our rights and remedies against Global IP under the agreement. We recognized revenue under this agreement of approximately $9 million and $0.3 million for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018 and 2017, we had trade accounts receivable from Global IP of approximately $7.5 million and nil, respectively.

TerreStar Solutions

DISH Network owns more than 15% of TerreStar Solutions, Inc. (“TSI”). In May 2018, we and TSI entered into an equipment and services agreement pursuant to which we design, manufacture and install upgraded ground communications network equipment for TSI’s network and provides, among other things, warranty and support services. We recognized revenue of approximately $6 million for the year ended December 31, 2018. As of December 31, 2018, we had $2 million trade accounts receivable from TSI.

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Broadband Connectivity Solutions

In August 2018, we entered into an agreement with Al Yah Satellite Communications Company PrJSC (“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 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 approximately $0.7 million for the year ended December 31, 2018. As of December 31, 2018, we had $3 million trade accounts receivable from BCS.

Discontinued Operations

The following agreements or investments were terminated or transferred to DISH Network as part of the Share Exchange. We have no further obligations, have earned no additional revenue and incurred no additional expense, as applicable, under such agreements and investments after February 2017. Historical transactions under such agreements and investments are reported in Net income from discontinued operations in our Consolidated Statements of Operations (see Notes 1 and 4).

Set-Top Box Application Development Agreement. In November 2012, one of our former subsidiaries and DISH Network entered into a set-top box application development agreement (the “Application Development Agreement”) pursuant to which we provided DISH Network with certain services relating to the development of web-based applications for set-top boxes. The fees for services provided under the Application Development Agreement were calculated at our cost of providing the relevant service plus a fixed margin, which depended on the nature of the services provided.

Receiver Agreement. Effective January 2012, one of our former subsidiaries and DISH Network entered into a receiver agreement (the “2012 Receiver Agreement”), pursuant to which DISH Network had the right, but not the obligation, to purchase digital set-top boxes, related accessories, and other equipment from us. The 2012 Receiver Agreement replaced the receiver agreement one of our former subsidiaries entered into with DISH Network in connection with the Spin-off. The 2012 Receiver Agreement allowed DISH Network to purchase digital set-top boxes, related accessories, and other equipment from us either: (i) at cost (decreasing as we reduced costs and increasing as costs increased) plus a dollar mark-up which depended upon the cost of the product subject to a collar on our mark-up; or (ii) at cost plus a fixed margin, which depended on the nature of the equipment purchased. Under the 2012 Receiver Agreement, our margins would have increased if we were able to reduce the costs of our digital set-top boxes and our margins would have reduced if these costs increased. One of our former subsidiaries provided DISH Network with standard manufacturer warranties for the goods sold under the 2012 Receiver Agreement. Additionally, the 2012 Receiver Agreement included an indemnification provision, whereby the parties agreed to indemnify each other for certain intellectual property matters.

Broadcast Agreement. Effective January 2012, one of our former subsidiaries and DISH Network entered into a broadcast agreement (the “2012 Broadcast Agreement”), pursuant to which we provided certain broadcast services to DISH Network, including teleport services such as transmission and downlinking, channel origination services, and channel management services. The fees for the services provided under the 2012 Broadcast Agreement were calculated at either: (a) our cost of providing the relevant service plus a fixed dollar fee, which was subject to certain adjustments; or (b) our cost of providing the relevant service plus a fixed margin, depending on the nature of the services provided.

Broadcast Agreement for Certain Sports Related Programming. In May 2010, one of our former subsidiaries and DISH Network entered into a broadcast agreement pursuant to which we provided certain broadcast services to DISH Network in connection with its carriage of certain sports related programming. The fees for the broadcast services provided under this agreement depended, among other things, upon the cost to develop and provide such services.

Gilbert Lease Agreement. DISH Network leased certain space from us at 801 N. DISH Drive, Gilbert, Arizona. The rent on a per square foot basis for this lease was comparable to per square foot rental rates of similar commercial

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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.

Product Support Agreement. In connection with the Spin-off, one of our former subsidiaries entered into a product support agreement pursuant to which DISH Network had the right, but not the obligation, to receive product support from us (including certain engineering and technical support services) for all set-top boxes and related accessories that we had previously sold to DISH Network. The fees for the services provided under the product support agreement were calculated at cost plus a fixed margin, which varied depending on the nature of the services provided. The term of the product support agreement was the economic life of such set-top boxes and related accessories, unless terminated earlier.

DISHOnline.com Services Agreement. Effective January 2010, DISH Network entered into a two-year agreement with one of our former subsidiaries pursuant to which DISH Network received certain services associated with an online video portal. The fees for the services provided under this services agreement depended, among other things, upon the cost to develop and operate such services.

DISH Remote Access Services Agreement. Effective February 2010, one of our former subsidiaries entered into an agreement with DISH Network pursuant to which DISH Network received, among other things, certain remote digital video recorder (“DVR”) management services. The fees for the services provided under this services agreement depended, among other things, upon the cost to develop and operate such services.

SlingService Services Agreement. Effective February 2010, one of our former subsidiaries entered into an agreement with DISH Network pursuant to which DISH Network received certain services related to placeshifting. The fees for the services provided under this services agreement depended, among other things, upon the cost to develop and operate such services.

XiP Encryption Agreement. In July 2012, we entered into an encryption agreement with DISH Network for our whole-home high definition (“HD”) DVR line of set-top boxes (the “XiP Encryption Agreement”) pursuant to which we provided certain security measures on our whole-home HD DVR line of set-top boxes to encrypt the content delivered to the set-top box via a smart card and secure the content between set-top boxes. The XiP Encryption Agreement’s term ended on the same day as the 2012 Receiver Agreement. The fees for the services provided under the XiP Encryption Agreement were calculated on a monthly basis based on the number of receivers utilizing such security measures each month.

Sling TV Holding. Effective July 2012, we and DISH Network formed Sling TV Holding, which was owned two-thirds by DISH Network and one-third by us. Sling TV Holding was formed to develop and commercialize certain advanced technologies. At that time, we, DISH Network and Sling TV Holding entered into the following agreements with respect to Sling TV Holding: (i) a contribution agreement pursuant to which we and DISH Network contributed certain assets in exchange for our respective ownership interests in Sling TV Holding; (ii) a limited liability company operating agreement (“Operating Agreement”), which provided for the governance of Sling TV Holding; and (iii) a commercial agreement (“Commercial Agreement”) pursuant to which, among other things, Sling TV Holding had: (a) certain rights and corresponding obligations with respect to its business; and (b) the right, but not the obligation, to receive certain services from us and DISH Network, respectively. Additionally, the spouse of Mr. Vivek Khemka, who was the President - EchoStar Technologies L.L.C. during portions of 2016 and through February 2017, was employed during 2016 as Vice President of Business Development and Operations of Sling TV Holding.

Effective August 2014, we and Sling TV Holding entered into an exchange agreement (“Exchange Agreement”) pursuant to which, among other things, Sling TV Holding distributed certain assets to us and we reduced our interest in Sling TV Holding to a 10.0% non-voting interest. As a result, DISH Network had a 90.0% equity interest and a 100% voting interest in Sling TV Holding. In addition, we, DISH Network and Sling TV Holding amended and restated the Operating Agreement, primarily to reflect the changes implemented by the Exchange Agreement. Finally, we, DISH Network and Sling TV Holding amended and restated the Commercial Agreement, pursuant to which, among other things, Sling TV Holding: (1) had certain rights and corresponding obligations with respect to its business; (2) had the right, but not the obligation, to receive certain services from us and DISH Network; and (3) had a license from us to use certain of the assets distributed to us as part of the Exchange Agreement.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Remanufactured Receiver and Services Agreement. In connection with the Spin-off, one of our former subsidiaries entered into a remanufactured receiver and services agreement with DISH Network pursuant to which we had the right, but not the obligation, to purchase remanufactured receivers and related components from DISH Network at cost plus a fixed margin, which varied depending on the nature of the equipment purchased.

Intellectual Property Matters Agreement. We entered into an intellectual property matters agreement (the “Intellectual Property Matters Agreement”) with DISH Network in connection with the Spin-off. The Intellectual Property Matters Agreement governed our relationship with DISH Network with respect to patents, trademarks and other intellectual property. Pursuant to the Intellectual Property Matters Agreement, DISH Network irrevocably assigned to us all right, title and interest in certain patents, trademarks and other intellectual property necessary for the operation of our set-top box business. In addition, the agreement permitted us to use, in the operation of our set-top box business, certain other intellectual property currently owned or licensed by DISH Network. In addition, DISH Network was prohibited from using the “EchoStar” name as a trademark, except in certain limited circumstances. Similarly, the Intellectual Property Matters Agreement provided that we would not make any use of the name or trademark “DISH Network” or any other trademark owned by DISH Network, except in certain circumstances.

TiVo. In April 2011, we and DISH Network entered into a settlement agreement with TiVo, Inc. (“TiVo”). The settlement resolved all pending litigation between us and DISH Network, on the one hand, and TiVo, on the other hand, including litigation relating to alleged patent infringement involving certain DISH Network DVRs. Under the settlement agreement, all pending litigation was dismissed with prejudice and all injunctions that permanently restrain, enjoin or compel any action by us or DISH Network were dissolved. We and DISH Network were jointly responsible for making payments to TiVo in the aggregate amount of $500 million, including an initial payment of $300 million and the remaining $200 million in six equal annual installments between 2012 and 2017. Pursuant to the terms and conditions of the agreements entered into in connection with the Spin-off, DISH Network made the initial payment to TiVo in May 2011, except for the contribution from us totaling approximately $10 million, representing an allocation of liability relating to our sales of DVR-enabled receivers to an international customer. Subsequent payments were allocated between us and DISH Network based on historical sales of certain licensed products, with EchoStar being responsible for 5% of each annual payment.

Sling Trademark License Agreement. In December 2014, Sling TV Holding entered into an agreement with Sling Media, Inc., our former subsidiary, pursuant to which Sling TV Holding had the right, for a fixed fee, to use certain trademarks, domain names and other intellectual property related to the “Sling” trademark.

NagraStar L.L.C. Prior to March 2017, we owned 50.0% of NagraStar, a joint venture that was the primary provider of encryption and related security technology used in the set-top boxes produced by our former EchoStar Technologies segment. We accounted for our investment in NagraStar using the equity method.

SmarDTV. Prior to March 2017, we owned a 22.5% interest in SmarDTV, which we accounted for using the equity method. Pursuant to our agreements with SmarDTV and its subsidiaries, our former EchoStar Technologies segment purchased engineering services from and paid royalties to SmarDTV and its subsidiaries.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

NOTE 21. SUPPLEMENTAL FINANCIAL INFORMATION

Noncash Investing and Financing Activities

		For the years ended December 31,
		2018				2017				2016
		(In thousands)
Employee benefits paid in Class A common stock		$	7,605			$	11,200			$	11,126
Property and equipment financed under capital lease obligations		$	364			$	8,484			$	7,652
Increase (decrease) in capital expenditures included in accounts payable, net		$	7,318			$	(3,831	)		$	3,054
Capitalized in-orbit incentive obligations		$	—			$	43,890			$	—
Noncash net assets exchanged for Tracking Stock (Note 1)		$	—			$	299,888			$	—

Restricted Cash and Cash Equivalents

The beginning and ending balances of cash and cash equivalents presented in our Consolidated Statements of Cash Flows included restricted cash and cash equivalents of $1 million and $1 million, respectively, for the year ended December 31, 2018, and $1 million and $1 million, respectively, for the year ended December 31, 2017. These amounts are included in Other noncurrent assets, net in our Consolidated Balance Sheets.

Foreign Currency

We recognized net foreign currency transaction losses of $16 million, gains of $1 million and losses of $0.5 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Fair Value of In-Orbit Incentives

As of December 31, 2018 and 2017, the fair values of our in-orbit incentive obligations, based on measurements categorized within Level 2 of the fair value hierarchy, approximated their carrying amounts of $107 million and $112 million, respectively.

Contract Acquisition and Fulfillment Costs

Unamortized contract acquisition costs totaled $104 million as of December 31, 2018 and related amortization expense totaled $83 million for the year ended December 31, 2018, respectively.

Unamortized contract fulfillment costs totaled $3 million as of December 31, 2018 and related amortization expense was de minimis for the year ended December 31, 2018.

Research and Development

The table below summarizes the research and development costs incurred in connection with customers’ orders included in cost of sales and other expenses we incurred for research and development.

		For the years ended December 31,
		2018				2017				2016
		(In thousands)
Cost of sales		$	23,422			$	27,899			$	23,663
Research and development		$	27,570			$	31,745			$	31,170

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Capitalized Software Costs

As of December 31, 2018 and 2017, the net carrying amount of externally marketed software was $97 million and $88 million, respectively, of which $29 million and $20 million, respectively, is under development and not yet placed in service. We capitalized costs related to the development of externally marketed software of $32 million, $31 million and $23 million for the years ended December 31, 2018, 2017 and 2016, respectively. We recorded amortization expense relating to the development of externally marketed software of $23 million, $20 million and $10 million for the years ended December 31, 2018, 2017 and 2016, respectively. The weighted average useful life of our externally marketed software was approximately three years as of December 31, 2018.

Advertising Costs

We incurred advertising expense of $76 million, $64 million and $44 million for the years ended December 31, 2018, 2017 and 2016, respectively.

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SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Our valuation and qualifying accounts as of December 31, 2018, 2017 and 2016 were as follows:

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		$	12,955			$	9,551			$	(10,479	)		$	12,027
December 31, 2016		$	11,687			$	14,393			$	(13,125	)		$	12,955

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