Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

**RESULTS OF OPERATIONS **

**Basis of Presentation **

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

**Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013 **

		For the Years Ended December 31,						Variance
Statements of Operations Data(1)		2014			2013			Amount			%
		(Dollars in thousands)
Revenue:
Equipment revenue—DISH Network		$	1,145,979		$	1,311,446		$	(165,467	)		(12.6	)
Equipment revenue—other			374,049			347,910			26,139			7.5
Services and other revenue—DISH Network			828,612			620,189			208,423			33.6
Services and other revenue—other			1,096,938			1,002,907			94,031			9.4
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total revenue			3,445,578			3,282,452			163,126			5.0
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Costs and Expenses:
Cost of sales—equipment			1,288,998			1,430,777			(141,779	)		(9.9	)
% of Total equipment revenue			84.8	%		86.2	%
Cost of sales—services and other			838,918			776,121			62,797			8.1
% of Total services and other revenue			43.6	%		47.8	%
Selling, general and administrative expenses			372,010			358,499			13,511			3.8
% of Total revenue			10.8	%		10.9	%
Research and development expenses			60,886			67,942			(7,056	)		(10.4	)
% of Total revenue			1.8	%		2.1	%
Depreciation and amortization			556,676			507,111			49,565			9.8
Impairment of long-lived asset			—			38,415			(38,415	)		(100.0	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total costs and expenses			3,117,488			3,178,865			(61,377	)		(1.9	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income			328,090			103,587			224,503			*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other Income (Expense):
Interest income			9,102			14,656			(5,554	)		(37.9	)
Interest expense, net of amounts capitalized			(171,349	)		(192,554	)		21,205			(11.0	)
Realized gains on marketable investment securities and other investments, net			41			38,341			(38,300	)		(99.9	)
Equity in earnings (losses) of unconsolidated affiliates, net			8,198			(5,024	)		13,222			*
Other, net			4,251			6,958			(2,707	)		(38.9	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total other expense, net			(149,757	)		(137,623	)		(12,134	)		8.8
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income (loss) before income taxes			178,333			(34,036	)		212,369			*
Income tax benefit (provision), net			(30,784	)		37,437			(68,221	)		*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income			147,549			3,401			144,148			*
Less: Net loss attributable to noncontrolling interest in
HSS Tracking Stock			(6,714	)		—			(6,714	)		*
Less: Net income attributable to other noncontrolling interests			1,389			876			513			58.6
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income attributable to EchoStar		$	152,874		$	2,525		$	150,349			*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other Data:
EBITDA		$	902,581		$	650,097		$	252,484			38.8
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Subscribers, end of period			977,000			860,000			117,000			13.6
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

Percentage is not meaningful.

(1)

An explanation of our key metrics is included on pages 74 and 75.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

Equipment revenue—DISH Network. "Equipment revenue—DISH Network" totaled $1.15 billion for the year ended December 31, 2014, a decrease of $165.5 million, or 12.6%, compared to the same period in 2013.

Equipment revenue—DISH Network from our EchoStar Technologies segment for the year ended December 31, 2014 decreased by $128.3 million, or 10.3%, to $1.11 billion compared to the same period in 2013. Our EchoStar Technologies segment offers multiple set-top boxes with different price points depending on their capabilities and functionalities. The revenue and associated margins we earn on sales are determined largely through our Receiver Agreement with DISH Network which could result in prices reflecting, among other things, the set-top boxes and other equipment that meet DISH Network's current sales and marketing priorities, the product and service alternatives available from other equipment suppliers, our ability to respond to DISH Network's requirements, and our ability to differentiate ourselves from other equipment suppliers on bases other than pricing. In addition, products containing new technologies and features typically have higher initial prices, which reduce over time as a result of manufacturing efficiencies, demand decreases or as DISH Network's demand changes for new or refurbished units. The decrease in revenue for the year ended December 31, 2014 was primarily due to both the sale of set-top boxes and related accessories. In set-top boxes, the decrease was due to a 15.0% decrease in the weighted average price offset by a 4.3% increase in the unit sales. In related accessories, the decrease was due to a 13.5% decrease in unit sales partially offset by a 5.4% increase in the weighted average price.

Equipment revenue—DISH Network from our Hughes segment for the year ended December 31, 2014 decreased $37.2 million, or 53.8%, to $31.9 million compared to the same period in 2013. The decrease was primarily due to the decrease in the unit sales of broadband equipment to dishNET.

Equipment revenue—other. "Equipment revenue—other" totaled $374.0 million for the year ended December 31, 2014, an increase of $26.1 million or 7.5%, compared to the same period in 2013.

Equipment revenue—other from our EchoStar Technologies segment for the year ended December 31, 2014 increased $10.0 million, or 6.5%, to $163.1 million compared to the same period in 2013. The increase was attributable to an increase of 64.1% in unit sales of set-top boxes and an increase of 74.3% in sales of related accessories to our international customers. The increase was partially offset by a 41.9% decrease in the weighted average price of set-top boxes and a 20.1% decrease in the weighted average price of related accessories. The decrease in the average price per unit was due to the high volume of remanufactured products and the mix of product models purchased by our international customers and the renewal of certain customer contracts at lower contract prices with volume commitments.

Equipment revenue—other from our Hughes segment for the year ended December 31, 2014 increased by $16.1 million, or 8.3%, to $210.8 million compared to the same period in 2013. The increase was mainly due to a $27.2 million increase in sales of telecom systems equipment and a $4.8 million increase in sales to international enterprise customers, partially offset by a decrease in sales of broadband equipment of $15.5 million primarily due to lower sales to our consumer and domestic enterprise markets.

Services and other revenue—DISH Network. "Services and other revenue—DISH Network" totaled $828.6 million for the year ended December 31, 2014, an increase of $208.4 million or 33.6%, compared to the same period in 2013.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

Services and other revenue—DISH Network from our EchoStar Technologies segment for the year ended December 31, 2014 increased by $8.1 million, or 2.7%, to $311.8 million compared to the same period in 2013. The increase was primarily due to an increase of $9.9 million related to application development for set-top boxes sold to DISH Network.

Services and other revenue—DISH Network from our Hughes segment for the year ended December 31, 2014 increased by $36.0 million, or 80.4%, to $80.8 million compared to the same period in 2013. The increase was primarily attributable to an increase in wholesale subscribers receiving services pursuant to our Distribution Agreement with dishNET.

Services and other revenue—DISH Network from our EchoStar Satellite Services segment for the year ended December 31, 2014 increased by $160.1 million, or 64.8%, to $407.2 million compared to the same period in 2013. The increase was mainly due to an increase of $147.9 million in revenue recognized from certain satellite services provided to DISH Network from the five satellites transferred to us from DISH Network as part of the Satellite and Tracking Stock Transaction and an increase of $15.7 million from the renewal of our satellite services agreement related to services provided by the EchoStar VIII satellite to DISH Network that expired in the first quarter of 2013 and was renewed in the second quarter of 2013. The increases were offset partially by a decrease of $3.5 million attributable to the amended telemetry, tracking and control ("TT&C") agreement where we no longer provide TT&C services to DISH Network on the five satellites transferred to us from DISH Network as part of the Satellite and Tracking Stock Transaction.

Services and other revenue—other. "Services and other revenue—other" totaled $1.10 billion for the year ended December 31, 2014, an increase of $94.0 million or 9.4%, compared to the same period in 2013.

Services and other revenue—other from our EchoStar Technologies segment for the year ended December 31, 2014 increased by $4.0 million, or 23.7%, to $20.8 million compared to the same period in 2013. The increase was primarily attributable to an increase of $5.4 million for system integration solutions, offset partially by a decrease of $1.8 million attributable to nonrecurring engineering projects and licenses.

Services and other revenue—other from our Hughes segment for the year ended December 31, 2014 increased by $94.6 million, or 10.4%, to $1.00 billion compared to the same period in 2013. The increase was primarily attributable to an increase in sales of broadband services to our consumer and international customers.

Services and other revenue—other from our EchoStar Satellite Services segment for the year ended December 31, 2014, decreased by $5.8 million, or 7.0%, to $77.1 million compared to the same period in 2013. The decrease was mainly due to a decrease of $5.4 million in sales of uplink services in 2014 compared to the same period in 2013.

Cost of sales—equipment. "Cost of sales—equipment" totaled $1.29 billion for the year ended December 31, 2014, a decrease of $141.8 million, or 9.9%, compared to the same period in 2013.

Cost of sales—equipment from our EchoStar Technologies segment for the year ended December 31, 2014 decreased by $113.8 million, or 9.5%, to $1.08 billion compared to the same period in 2013. The decrease was primarily attributable to a decrease in equipment costs of $120.5 million related to the decrease in sales of set-top boxes and related accessories to

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

DISH Network, offset partially by an increase of $7.8 million in cost of sales related to the increase in sales of set-top boxes and related accessories to our international customers.

Cost of sales—equipment from our Hughes segment for the year ended December 31, 2014 decreased by $28.1 million, or 11.8%, to $209.0 million compared to the same period in 2013. The decrease was primarily attributable to reductions in (i) equipment costs of $28.6 million resulting from lower sales of broadband equipment to dishNET and (ii) equipment development costs of $6.0 million for DISH Network as compared to the same period in 2013. These decreases were partially offset by higher equipment costs associated with the increase in sales of broadband equipment to our international enterprise customers and telecom systems equipment.

Cost of sales—services and other. "Cost of sales—services and other" totaled $838.9 million for the year ended December 31, 2014, an increase of $62.8 million, or 8.1%, compared to the same period in 2013.

Cost of sales—services and other from our EchoStar Technologies segment for the year ended December 31, 2014 increased by $11.8 million, or 5.4%, to $231.5 million compared to the same period in 2013. The increase was primarily due to an increase in support costs of $17.4 million related to engineering and uplink services provided in 2014 compared to the same period in 2013, offset partially by a decrease in system integration solutions costs of $5.3 million.

Cost of sales—services and other from our Hughes segment for the year ended December 31, 2014 increased by $33.2 million, or 7.4%, to $483.4 million compared to the same period in 2013. The increase was primarily attributable to an increase in sales of broadband services to our consumer and international customers.

Cost of sales—services and other related to our other operations and satellite development activities for the year ended December 31, 2014 increased by $18.0 million, or 36.6%, to $67.3 million compared to the same period in 2013. The increase was primarily due to our acquisition of satellite services on the EchoStar XV satellite from DISH Network in May 2013.

Selling, general and administrative expenses. "Selling, general and administrative expenses" totaled $372.0 million for the year ended December 31, 2014, an increase of $13.5 million, or 3.8%, compared to the same period in 2013. The increase was mainly due to a $16.4 million increase in marketing expenses primarily in our Hughes segment and an increase of $1.8 million in professional fees, offset partially by a $4.0 million decrease in personnel and other employee-related expenses.

Research and development. "Research and development" expenses totaled $60.9 million for the year ended December 31, 2014, a decrease of $7.1 million or 10.4%, compared to the same period in 2013. The decrease was primarily due to reductions of research and development related activities in our EchoStar Technologies and Hughes segments of $5.4 million and $1.7 million, respectively. The Company's research and development activities vary based on the activity level and scope of other engineering and customer related development contracts. Research and development expenses within our EchoStar Technologies segment decreased primarily due to an increased amount of customer funded projects, which is included in cost of sales. Additionally, the decrease in research and development expenses in our Hughes segment was primarily due to a $6.1 million increase in the development of software projects for products and features to be marketed or sold to customers that were eligible to be capitalized.

Depreciation and amortization. "Depreciation and amortization" expense totaled $556.7 million for the year ended December 31, 2014, an increase of $49.6 million or 9.8%, compared to the same period in 2013. The increase was primarily related to an increase in depreciation of $39.7 million from our

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

EchoStar Satellite Services segment, primarily due to the depreciation of the five satellites we received from DISH Network as part of the Satellite and Tracking Stock Transaction, an increase in depreciation of $18.6 million associated with customer rental equipment from our Hughes segment, and an increase of $4.5 million in amortization expense for the regulatory authorizations with finite useful lives. The increase in depreciation and amortization was partially offset by a decrease in depreciation of $5.7 million due to the impairment of the EchoStar XII satellite's carrying amount that occurred in the second quarter of 2013, a decrease in depreciation of $3.7 million attributable to EchoStar VIII satellite as it was fully depreciated as of September 2014 and a decrease in depreciation of $3.3 million relating to the retirement of certain machinery and equipment.

Impairment of long-lived assets. "Impairment of long-lived assets" totaled zero for the year ended December 31, 2014, a decrease of $38.4 million, compared to the same period in 2013, due to the impairment of our EchoStar XII satellite of $34.7 million in June 2013 and a $3.8 million impairment of goodwill of our EchoStar Technologies segment in December 2013. See Note 10 in the notes to consolidated financial statements for further discussion of the impairment in the second quarter of 2013.

Interest expense, net of amounts capitalized. "Interest expense, net of amounts capitalized" totaled $171.3 million for the year ended December 31, 2014, a decrease of $21.2 million, or 11.0%, compared to the same period in 2013. The decrease was due to higher capitalized interest of $19.8 million associated with the construction of our EchoStar XIX, EchoStar XXI, EchoStar XXIII, and EUTELSAT 65 West A satellites in the year ended December 31, 2014 compared to the same period in 2013.

Realized gains on marketable investment securities and other investments, net. "Realized gains on marketable investment securities and other investments, net" totaled $41.3 thousand for the year ended December 31, 2014, a decrease of $38.3 million, compared to the same period in 2013. The decrease was primarily related to a gain of $35.9 million recognized from the sale of a strategic investment in a public company in 2013 and a gain of $2.6 million that resulted from the conversion of one of our investments into a marketable investment security in 2013.

Equity in earnings (losses) of unconsolidated affiliates, net. "Equity in earnings (losses) of unconsolidated affiliates, net" totaled $8.2 million for the year ended December 31, 2014, an increase of $13.2 million, compared to the same period in 2013. The increase was primarily related to a $10.3 million non-recurring adjustment to increase our equity in earnings of Dish Mexico to reflect an increase from 24.0% to 49.0% in our interest in Dish Mexico's inception-to-date net income, offset partially by a $5.6 million increase in equity in losses in Dish Mexico when compared to the same period in 2013. In addition, the increase was also attributable to the decrease in equity in losses of $6.4 million from our investment in Sling TV, formerly DISH Digital Holding L.L.C, due to our exchange of our one-third voting interest in Sling TV which we accounted for using the equity method, for a 10.0% non-voting interest in Sling TV, which we account for using the cost method beginning in August 2014. See Note 6 in the notes to consolidated financial statements for more information regarding our investment in Dish Mexico and Sling TV.

Other, net. "Other, net" totaled $4.3 million for the year ended December 31, 2014, a decrease of $2.7 million, or 38.9%, compared to the same period in 2013. The decrease was primarily attributable to a non-recurring gain of $6.7 million in 2013 resulting from a reduction of the capital lease obligation for the AMC-16 satellite and a gain of $2.6 million in connection with the settlement of certain accounts receivables in 2013. This decrease was partially offset by a gain of $5.8 million in 2014 related

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

to our investment in TerreStar. See Note 6 in the notes to consolidated financial statements for further discussion of our investment in TerreStar.

Earnings before interest, taxes, depreciation and amortization. EBITDA was $902.6 million for the year ended December 31, 2014, an increase of $252.5 million, or 38.8%, compared to the same period in 2013. The increase was primarily due to an increase in operating income, excluding depreciation and amortization and the net loss attributable to noncontrolling interests, of $280.3 million, an increase of $13.2 million in equity from earnings of unconsolidated affiliates, net and a gain of $5.8 million related to our investment in TerreStar for the year ended December 31, 2014. The increase was partially offset by a gain of $35.9 million recognized from the sale of a strategic investment in a public company in 2013, a non-recurring gain of $6.7 million recognized in 2013 resulting from a reduction of the capital lease obligation for the AMC-16 satellite, a gain of $2.6 million that resulted from the conversion of one of our investments into a marketable investment security in 2013 and a gain of $2.6 million in connection with the settlement of certain accounts receivables in 2013. EBITDA is a non-GAAP financial measure and is described under Explanation of Key Metrics and Other Items below. The following table reconciles EBITDA to Income (loss) before income taxes, the most directly comparable GAAP measure in the accompanying financial statements.

		For the Years Ended December 31,						Variance
		2014			2013			Amount			%
		(Dollars in thousands)
EBITDA		$	902,581		$	650,097		$	252,484			38.8
Interest income and expense, net			(162,247	)		(177,898	)		15,651			(8.8	)
Depreciation and amortization			(556,676	)		(507,111	)		(49,565	)		9.8
Net loss attributable to noncontrolling interest in HSS Tracking Stock			(6,714	)		—			(6,714	)		*
Net income attributable to other noncontrolling interests			1,389			876			513			58.6
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income (loss) before income taxes		$	178,333		$	(34,036	)	$	212,369			*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

Percentage is not meaningful.

Income tax benefit (provision), net. Income tax expense was $30.8 million for the year ended December 31, 2014, compared to an income tax benefit of $37.4 million for the same period in 2013. Our effective income tax rate was 17.3% for the year ended December 31, 2014 compared to 110.0% for the same period in 2013. The variation in our current year effective tax rate from a U.S. federal statutory rate for the current period was primarily due to changes of our valuation allowance associated with realized and unrealized losses that are capital in nature, research and experimentation tax credits, and a lower state effective tax rate. For the same period in 2013, the variation in our effective tax rate from a U.S. federal statutory rate was primarily due to the decrease of our valuation allowance associated with realized and unrealized losses that are capital in nature, current year research and experimentation tax credits, and reinstatement of the research and experimentation tax credit for 2012, as provided by the American Taxpayer Relief Act enacted on January 2, 2013.

Net income (loss) attributable to EchoStar. Net income attributable to EchoStar was $152.9 million for the year ended December 31, 2014, an increase of $150.3 million, compared to the same period in 2013. The increase was primarily due to higher operating income, including depreciation and amortization, of $224.5 million, an increase in capitalized interest of $19.8 million associated with the

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

construction of the EchoStar XIX, EchoStar XXI, EchoStar XXIII, and EUTELSAT 65 West A satellites, an increase of $13.2 million in equity in earnings of unconsolidated affiliates, net, and an increase of $6.7 million in the net loss attributable to noncontrolling interest in HSS Tracking Stock. The increase in "Net income attributable to EchoStar" was partially offset by a decrease of $68.2 million in income tax benefit, a gain of $35.9 million recognized from the sale of a strategic investment in a public company in 2013, a non-recurring gain of $6.7 million resulting from a reduction of the capital lease obligation for the AMC-16 satellite in 2013, and a decrease of $5.6 million in interest income due to lower market interest rates.

**Segment Operating Results and Capital Expenditures **

**Year Ended December 31, 2014 Compared to the Year Ended December 31, 2013 **

For the Years Ended December 31, 2014		EchoStar Technologies			Hughes			EchoStar Satellite Services			All Other and Eliminations			Consolidated Total
		(In thousands)
Total revenue		$	1,609,820		$	1,327,718		$	484,455		$	23,585		$	3,445,578
Capital expenditures		$	48,616		$	218,607		$	28,734		$	384,069		$	680,026
EBITDA		$	152,439		$	356,871		$	419,442		$	(26,171	)	$	902,581
For the Years Ended December 31, 2013
Total revenue		$	1,715,991		$	1,218,126		$	330,177		$	18,158		$	3,282,452
Capital expenditures		$	56,935		$	186,561		$	12,700		$	135,677		$	391,873
EBITDA		$	136,057		$	281,513		$	235,993		$	(3,466	)	$	650,097

**EchoStar Technologies Segment **

		For the Years Ended December 31,						Variance
		2014			2013			Amount			%
		(Dollars in thousands)
Total revenue		$	1,609,820		$	1,715,991		$	(106,171	)		(6.2	)
Capital expenditures		$	48,616		$	56,935		$	(8,319	)		(14.6	)
EBITDA		$	152,439		$	136,057		$	16,382			12.0

Revenue

EchoStar Technologies segment total revenue for the year ended December 31, 2014 decreased by $106.2 million, or 6.2%, compared to the same period in 2013, primarily resulting from a decrease of $128.3 million in equipment revenue earned from DISH Network, offset partially by an increase of $10.0 million in other equipment revenue, a $8.1 million increase in service revenue from DISH Network and a $4.0 million increase in other service revenue.

Capital Expenditures

EchoStar Technologies segment capital expenditures for the year ended December 31, 2014 decreased by $8.3 million, or 14.6%, compared to the same period in 2013, primarily due to a decrease of $7.5 million in expenditures related to our digital broadcast center.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

EBITDA

EchoStar Technologies segment EBITDA for the year ended December 31, 2014 was $152.4 million, an increase of $16.4 million or 12.0%, compared to the same period in 2013. The increase in EBITDA for our EchoStar Technologies segment was primarily driven by a decrease of $14.5 million in selling, general and administrative expenses, a decrease of $5.4 million in research and development, and a decrease of $3.8 million in impairment of goodwill, partially offset by a $4.2 million decrease in gross margin and an increase of $2.6 million in foreign exchange losses.

**Hughes Segment **

		For the Years Ended December 31,						Variance
		2014			2013			Amount			%
		(Dollars in thousands)
Total revenue		$	1,327,718		$	1,218,126		$	109,592			9.0
Capital expenditures		$	218,607		$	186,561		$	32,046			17.2
EBITDA		$	356,871		$	281,513		$	75,358			26.8

Revenue

Hughes segment total revenue for the year ended December 31, 2014 increased by $109.6 million, or 9.0%, compared to the same period in 2013, primarily due to an increase in service revenue of $94.6 million mainly attributable to an increase in sales of broadband services to our consumer and international customers, an increase of $36.0 million in service revenue from DISH Network as a result of the increase in wholesale subscribers on dishNET and an increase in other equipment revenue of $16.1 million. The increase in revenue was partially offset by a decrease in equipment revenue from DISH Network of $37.2 million.

Capital Expenditures

Hughes segment capital expenditures for the year ended December 31, 2014 increased by $32.0 million, or 17.2%, compared to the same period in 2013, primarily due to an increase in expenditures related to EUTELSAT 65 West A and the EchoStar XIX ground infrastructure. Capital expenditures for the construction and launch of EchoStar XIX are reported in "All Other and Eliminations" in our segment reporting.

EBITDA

Hughes segment EBITDA for the year ended December 31, 2014 was $356.9 million, an increase of $75.4 million or 26.8%, compared to the same period in 2013. The increase was primarily attributable to a $104.6 million increase in gross margin, partially offset by a $26.0 million increase in selling, general and administrative expenses and a gain of $2.6 million in connection with the settlement of certain accounts receivables in 2013.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

**EchoStar Satellite Services Segment **

		For the Years Ended December 31,						Variance
		2014			2013			Amount			%
		(Dollars in thousands)
Total revenue		$	484,455		$	330,177		$	154,278			46.7
Capital expenditures		$	28,734		$	12,700		$	16,034			*
EBITDA		$	419,442		$	235,993		$	183,449			77.7

Revenue

EchoStar Satellite Services segment total revenue for the year ended December 31, 2014 increased by $154.3 million, or 46.7%, compared to the same period in 2013, due to a $154.3 million increase in service revenue, primarily related to satellite services provided to DISH Network on the satellites received as part of the Satellite and Tracking Stock Transaction.

Capital Expenditures

EchoStar Satellite Services segment capital expenditures for the year ended December 31, 2014 increased by $16.0 million, compared to the same period in 2013, primarily due to an increase in the satellite expenditures related to the EchoStar 105/SES-11 satellite of $28.5 million in 2014, partially offset by a decrease in satellite expenditures related to the EchoStar XVI satellite of $12.3 million in 2013. Capital expenditures for our EchoStar XXI and EchoStar XXIII satellite programs are reported in our corporate and other activities.

EBITDA

EchoStar Satellite Services segment EBITDA for the year ended December 31, 2014 was $419.4 million, an increase of $183.4 million or 77.7%, compared to the same period in 2013. The increase in EBITDA for our EchoStar Satellite Services segment was primarily attributable to an increase of $154.4 million in gross margin and a $34.7 million decrease in loss on impairments due to the impairment of our EchoStar XII satellite in June 2013. The increase was partially offset by a non-recurring gain of $6.7 million in 2013 resulting from a reduction of the capital lease obligation for the AMC-16 satellite.

**All Other and Eliminations **

Capital Expenditures

For the year ended December 31, 2014, All Other and Eliminations capital expenditures increased by $248.4 million compared to the same period in 2013, primarily related to the increase in satellite expenditures on the EchoStar XXI satellite of $103.4 million, the EchoStar XIX satellite of $102.7 million, and the EchoStar XXIII satellite of $48.1 million. The increases in satellite expenditures were partially offset by a $4.8 million expenditure related to a launch contract in 2013. The EchoStar XIX satellite is expected to be used in the operations of our Hughes segment and the EchoStar XXI satellite is intended to be used by Solaris Mobile in providing mobile satellite services in the European Union. EchoStar XXIII is expected to launch in the second half of 2016 and will be initially deployed at 45 degree west longitude orbital location.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

EBITDA

For the year ended December 31, 2014, All Other and Eliminations EBITDA was a loss of $26.2 million, compared to a loss of $3.5 million for the same period in 2013. The $22.7 million decrease in EBITDA was primarily due to a gain of $35.9 million recognized from the sale of a strategic investment in a public company in 2013, an increase of $15.7 million in cost of sales relating to our acquisition of satellite services on the EchoStar XV satellite from DISH Network in May 2013, which has not been assigned to any of our segments, offset partially by an increase of $13.2 million in equity in earnings of unconsolidated affiliates, net, an increase of $6.7 million in the net loss attributable to noncontrolling interest in HSS Tracking Stock and a gain of $5.8 million related to our investment in TerreStar.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

**Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012 **

		For the Years Ended December 31,						Variance
Statements of Operations Data(1)		2013			2012			Amount			%
		(Dollars in thousands)
Revenue:
Equipment revenue—DISH Network		$	1,311,446		$	1,028,588		$	282,858			27.5
Equipment revenue—other			347,910			621,495			(273,585	)		(44.0	)
Services and other revenue—DISH Network			620,189			515,176			105,013			20.4
Services and other revenue—other			1,002,907			956,445			46,462			4.9
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total revenue			3,282,452			3,121,704			160,748			5.1
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Costs and Expenses:
Cost of sales—equipment			1,430,777			1,397,512			33,265			2.4
% of Total equipment revenue			86.2	%		84.7	%
Cost of sales—services and other			776,121			691,922			84,199			12.2
% of Total services and other revenue			47.8	%		47.0	%
Selling, general and administrative expenses			358,499			372,644			(14,145	)		(3.8	)
% of Total revenue			10.9	%		11.9	%
Research and development expenses			67,942			69,649			(1,707	)		(2.5	)
% of Total revenue			2.1	%		2.2	%
Depreciation and amortization			507,111			457,326			49,785			10.9
Impairment of long-lived assets			38,415			32,765			5,650			17.2
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total costs and expenses			3,178,865			3,021,818			157,047			5.2
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating income			103,587			99,886			3,701			3.7
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other Income (Expense):
Interest income			14,656			11,176			3,480			31.1
Interest expense, net of amounts capitalized			(192,554	)		(153,029	)		(39,525	)		25.8
Realized gains on marketable investment securities and other investments, net			38,341			177,558			(139,217	)		(78.4	)
Equity in losses of unconsolidated affiliates, net			(5,024	)		(438	)		(4,586	)		*
Other, net			6,958			59,531			(52,573	)		(88.3	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total other income (expense), net			(137,623	)		94,798			(232,421	)		*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income (loss) before income taxes			(34,036	)		194,684			(228,720	)		*
Income tax benefit, net			37,437			16,329			21,108			*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income			3,401			211,013			(207,612	)		(98.4	)
Less: Net income (loss) attributable to other noncontrolling interests			876			(35	)		911			*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net income attributable to EchoStar		$	2,525		$	211,048		$	(208,523	)		(98.8	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other Data:
EBITDA		$	650,097		$	793,898		$	(143,801	)		(18.1	)
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Subscribers, end of period			860,000			636,000			224,000			35.2
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

Percentage is not meaningful.

(1)

An explanation of our key metrics is included on pages 74 and 75.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

Equipment revenue—DISH Network. "Equipment revenue—DISH Network" totaled $1.31 billion for the year ended December 31, 2013, an increase of $282.9 million or 27.5%, compared to the same period in 2012.

Equipment revenue—DISH Network from our EchoStar Technologies segment for the year ended December 31, 2013 increased by $237.5 million, or 23.6%, to $1.24 billion compared to the same period in 2012. The increase in revenue for the year ended December 31, 2013 was primarily due to an increase of 44.7% in unit sales of set-top boxes, offset partially by a 9.2% decrease in the weighted average price of set-top boxes. Additionally, unit sales of related accessories and the weighted average price of related accessories increased 5.8% and 4.5%, respectively. Our EchoStar Technologies segment offers multiple set-top boxes with different price points depending on their capabilities and functionalities. The revenue and associated margins we earn on sales are determined largely through periodic negotiations that could result in prices reflecting, among other things, the set-top boxes and other equipment that meet our customers' current sales and marketing priorities, the product and service alternatives available from other equipment suppliers, our ability to respond to customer requirements, and to differentiate ourselves from other equipment suppliers on bases other than pricing. In addition, products containing new technologies and features typically have higher initial prices, which decline over time as a result of manufacturing efficiencies.

Equipment revenue—DISH Network from our Hughes segment for the year ended December 31, 2013 increased by $45.4 million to $69.1 million compared to the same period in 2012. The increase was primarily due to the commencement of broadband equipment sales to DISH Network pursuant to the Distribution Agreement we entered into with dishNET in October 2012 such that a full year of revenue has been included in the 2013 period.

Equipment revenue—other. "Equipment revenue—other" totaled $347.9 million for the year ended December 31, 2013, a decrease of $273.6 million or 44.0%, compared to the same period in 2012.

Equipment revenue—other from our EchoStar Technologies segment for the year ended December 31, 2013 decreased by $212.8 million, or 58.2%, to $153.1 million compared to the same period in 2012. The decrease was primarily attributable to a 54.7% decrease in unit sales and a 20.6% decrease in the weighted average price of set-top boxes sold to Bell TV and our other international customers. Additionally, unit sales and the weighted average price of related accessories sold to Bell TV and our other international customers decreased 16.1% and 38.8%, respectively, for the year ended December 31, 2013 compared to the same period in 2012. The sales to Bell TV and other international customers may remain at the current levels in the near term, due to customer utilization of refurbished set-top boxes and lower overall demand in the respective markets that we sell these products.

Equipment revenue—other from our Hughes segment for the year ended December 31, 2013 decreased by $61.5 million, or 24.0%, to $194.7 million compared to the same period in 2012. The decrease was mainly due to a decrease in sales of mobile satellite systems equipment of $30.4 million and international broadband equipment of $29.5 million.

Services and other revenue—DISH Network. "Services and other revenue—DISH Network" totaled $620.2 million for the year ended December 31, 2013, an increase of $105.0 million or 20.4%, compared to the same period in 2012.

Services and other revenue—DISH Network from our EchoStar Technologies segment for the year ended December 31, 2013 increased by $31.5 million, or 11.6%, to $303.7 million compared to the

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

same period in 2012. The increase was primarily due to an increase of $15.3 million in revenue earned from the sales of satellite uplink/downlink services and $16.9 million related to product support and development of applications for set-top boxes.

Services and other revenue—DISH Network from our Hughes segment for the year ended December 31, 2013 increased by $34.5 million to $44.8 million compared to the same period in 2012. The increase was primarily attributable to revenue earned pursuant to the Distribution Agreement we entered into with dishNET in October 2012.

Services and other revenue—DISH Network from our EchoStar Satellite Services segment for the year ended December 31, 2013 increased by $45.9 million, or 22.8%, to $247.2 million compared to the same period in 2012. The increase was mainly due to a $99.2 million increase in revenue related to the lease of capacity on the EchoStar XVI satellite which began in January 2013 and services provided on the lease of transponders of the Quetzsat-1 satellite to DISH Network beginning in February 2013. This increase was partially offset by a $43.7 million decrease relating to the expiration of our satellite capacity lease agreement for the EchoStar VI satellite, a $5.1 million decrease relating to the renewal of our satellite capacity agreement for the EchoStar VIII satellite, and a $5.3 million decrease in revenue related to DISH Network's use of our right to the 61.5 degree west longitude orbital location.

Services and other revenue—other. "Services and other revenue—other" totaled $1.00 billion for the year ended December 31, 2013, an increase of $46.5 million or 4.9%, compared to the same period in 2012.

Services and other revenue—other from our Hughes segment for the year ended December 31, 2013 increased by $41.1 million, or 4.7%, to $909.6 million compared to the same period in 2012. The increase was primarily due to an increase in sales of broadband services in our enterprise and consumer markets.

Services and other revenue—other from our EchoStar Satellite Services segment for the year ended December 31, 2013 increased by $6.4 million, or 8.3%, to $82.9 million compared to the same period in 2012. The increase was mainly due to an increase of $6.4 million in sales of transponder services.

Cost of sales—equipment. "Cost of sales—equipment" totaled $1.43 billion for the year ended December 31, 2013, an increase of $33.3 million, or 2.4%, compared to the same period in 2012.

Cost of sales—equipment from our EchoStar Technologies segment for the year ended December 31, 2013 increased by $28.8 million, or 2.5%, to $1.19 billion compared to the same period in 2012. The increase was attributable to an increase in equipment costs of $199.3 million, related directly to the increase in sales of set-top boxes and related accessories to DISH Network. The increase was partially offset by a decrease in cost of sales of $168.9 million, primarily related to a decrease in sales of set-top boxes and related accessories to our international customers.

Cost of sales—equipment from our Hughes segment for the year ended December 31, 2013 increased by $4.4 million, or 1.9%, to $237.1 million compared to the same period in 2012. The increase was primarily attributable to an increase in the cost of broadband equipment sold to our wholesale customers of $35.7 million. The increase was primarily offset by a decrease in cost of sales of $17.2 million, due to the decrease in cost of sales of mobile satellite systems equipment and a decrease of $14.3 million in cost of sales related to international broadband equipment.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

Cost of sales—services and other. "Cost of sales—services and other" totaled $776.1 million for the year ended December 31, 2013, an increase of $84.2 million, or 12.2%, compared to the same period in 2012.

Cost of sales—services and other from our EchoStar Technologies segment for the year ended December 31, 2013 increased by $31.0 million, or 16.4%, to $219.7 million compared to the same period in 2012. The increase was primarily attributable to a $22.8 million increase in engineering services costs provided in 2013 compared to 2012 and a $4.2 million increase in uplink/downlink costs.

Cost of sales—services and other from our Hughes segment for the year ended December 31, 2013 increased by $28.4 million, or 6.7%, to $450.3 million compared to the same period in 2012. The increase includes a $23.9 million increase in cost of sales related to an increase in sales of broadband services in our consumer and enterprise markets and a $4.4 million increase in cost of sales primarily related to the Distribution Agreement we entered into with dishNET in October 2012.

Cost of sales—services and other from our EchoStar Satellite Services segment for the year ended December 31, 2013 decreased by $4.0 million, or 6.5%, to $56.9 million compared to the same period in 2012. The decrease was primarily attributable to an $8.4 million decrease in lease expense due to the termination of our satellite lease agreement with DISH Network for EchoStar I in July 2012, partially offset by a $4.4 million increase in cost of sales related to the increase in transponder revenue in 2013.

Cost of sales—services and other related to our other operations and business development activities for the year ended December 31, 2013 increased $28.8 million compared to the same period in 2012. The increase was primarily due to the commencement of our operating lease of the EchoStar XV satellite capacity from DISH Network in May 2013.

Selling, general and administrative expenses. "Selling, general and administrative expenses" totaled $358.5 million for the year ended December 31, 2013, a decrease of $14.1 million or 3.8%, compared to the same period in 2012. The decrease was mainly due to a $21.6 million decrease in general and administrative expenses as a result of an increase in services billed to DISH Network, a $11.5 million decrease in other general and administrative expenses, a $3.9 million decrease in professional services, and a $3.8 million decrease in professional services provided to us by DISH Network pursuant to our related party agreements. These decreases in general and administrative expenses were partially offset by higher marketing and advertising expenses of $21.8 million incurred primarily by our Hughes segment and an increase of $4.8 million in personnel and other employee-related expenses.

Depreciation and amortization. "Depreciation and amortization" expense totaled $507.1 million for the year ended December 31, 2013, an increase of $49.8 million or 10.9%, compared to the same period in 2012. The increase was primarily related to an increase in depreciation of $25.3 million from our Hughes segment related to depreciation from EchoStar XVII, which was placed into service in October 2012, an increase of $24.4 million in depreciation from our EchoStar Satellite Services segment, primarily due to the depreciation of EchoStar XVI, which was placed into service in January 2013, and a $17.4 million increase in depreciation associated with customer rental equipment. These increases in depreciation were partially offset by a decrease in depreciation of $13.5 million on EchoStar VI, which was fully depreciated in August 2012, and a decrease in depreciation of $5.7 million on EchoStar XII due to the impairment of the satellite's carrying amount in the second quarter of 2013.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

Impairment of long-lived assets. "Impairment of long-lived assets" totaled $38.4 million for the year ended December 31, 2013, an increase of $5.7 million or 17.2%, compared to the same period in 2012. Impairment losses in 2013 consisted of a $34.7 million impairment of our EchoStar XII satellite and a $3.8 million impairment of goodwill of our EchoStar Technologies segment. Impairment losses in 2012 consisted of a $22.0 million impairment of certain contract rights of our Hughes segment, a $6.6 million impairment of goodwill of our EchoStar Technologies segment, and a $4.2 million impairment of certain regulatory authorizations.

Interest expense, net of amounts capitalized. "Interest expense, net of amounts capitalized" totaled $192.6 million for the year ended December 31, 2013, an increase of $39.5 million or 25.8%, compared to the same period in 2012. The increase was mainly due to a $45.1 million decrease in capitalized interest associated with the EchoStar XVII and EchoStar XVI satellites which were placed into service in October 2012 and January 2013, respectively, partially offset by the capitalization of interest expense of $4.0 million primarily related to the construction of the EchoStar XIX and the EchoStar XXI satellites in 2013.

Equity in losses of unconsolidated affiliates, net. "Equity in losses of unconsolidated affiliates, net" was $5.0 million for the year ended December 31, 2013, a $4.6 million increase compared to the same period in 2012. The increase was primarily attributable to a $6.3 million increase in our one-third share of losses incurred by DISH Digital Holding, L.L.C., which commenced operations in July 2012.

Realized gains on marketable investment securities and other investments, net. "Realized gains on marketable investment securities and other investments, net" totaled $38.3 million for the year ended December 31, 2013, a decrease of $139.2 million or 78.4%, compared to the same period in 2012. The decrease was mainly related to a decrease in gains of $136.4 million recognized on the sale of certain strategic investments in public companies in 2012.

Other, net. "Other, net" totaled $7.0 million for the year ended December 31, 2013, a decrease of $52.6 million, or 88.3%, compared to the same period in 2012. The decrease was primarily related to a non-recurring dividend of $46.0 million received from a strategic investment in 2012 and a $5.9 million decrease in gains arising from reductions of the capital lease obligation for the AMC-16 satellite as a result of a partial loss of satellite capacity.

Earnings before interest, taxes, depreciation and amortization. EBITDA was $650.1 million for the year ended December 31, 2013, a decrease of $143.8 million, or 18.1%, compared to the same period in 2012. The decrease was primarily due to a decrease in gains of $139.2 million recognized from the sale of certain strategic investments in several public companies in 2012, a non-recurring dividend of $46.0 million received from a strategic investment in 2012, a decrease in gains of $5.9 million arising from reductions of the capital lease obligation for the AMC-16 satellite when compared to the same period in 2012, and a decrease of $4.6 million in equity in earnings of unconsolidated affiliates. These

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

decreases were partially offset by a $53.5 million increase in operating income, exclusive of depreciation and amortization. The following table reconciles EBITDA to the accompanying financial statements.

		For the Years Ended December 31,						Variance
		2013			2012			Amount			%
		(Dollars in thousands)
EBITDA		$	650,097		$	793,898		$	(143,801	)		(18.1	)
Interest income and expense, net			(177,898	)		(141,853	)		(36,045	)		25.4
Depreciation and amortization			(507,111	)		(457,326	)		(49,785	)		10.9
Net income attributable to other noncontrolling interests			876			(35	)		911			*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income (loss) before income taxes		$	(34,036	)	$	194,684		$	(228,720	)		*
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​

Percentage is not meaningful.

Income tax benefit, net. Income tax benefit totaled $37.4 million for the year ended December 31, 2013, an increase of $21.1 million, compared to the same period in 2012. Our effective income tax rate was 110.0% for the year ended December 31, 2013 compared to (8.4%) for the same period in 2012. The variation in our current year effective tax rate from a U.S. federal statutory rate for the current period was primarily due to the release of the valuation allowance associated with capital loss carryforwards in conjunction with the sale of certain of our capital investments, current year research and experimentation credits, and the reinstatement of the research and experimentation tax credit for 2012, as provided by the American Taxpayer Relief Act enacted on January 2, 2013. For the same period in 2012, the variation from a U.S. federal statutory rate was primarily attributable to the release of the valuation allowance associated with the sale of certain capital investments. In addition, significant fluctuation in the effective tax rate from a U.S. federal statutory rate resulted from our pre-tax losses in the current year.

Net income attributable to EchoStar. Net income attributable to EchoStar was $2.5 million for the year ended December 31, 2013, a decrease of $208.5 million, or 98.8%, compared to the same period in 2012. The change was primarily due to a decrease in gains of $139.2 million recognized from the sale of marketable investment securities and other investments in 2012, a gain recognized in 2012 associated with a non-recurring dividend of $46.0 million received from a strategic investment that was not received in 2013, a decrease in capitalized interest of $45.1 million associated with EchoStar XVII and EchoStar XVI, which were placed into service in October 2012 and January 2013, respectively, and a decrease in other income of $5.9 million as a result of a reduction of the capital lease obligation for the AMC-16 satellite when compared to the same period in 2012. These reductions were offset partially by an increase of $21.1 million in income tax benefit, the capitalization of interest expense of $4.0 million primarily related to the construction of the EchoStar XIX and the EchoStar XXI satellites in 2013, and an increase in operating income of $3.7 million.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

**Segment Operating Results and Capital Expenditures **

**Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012 **

For the Years Ended December 31, 2013		EchoStar Technologies			Hughes			EchoStar Satellite Services			All Other and Eliminations			Consolidated Total
		(In thousands)
Total revenue		$	1,715,991		$	1,218,126		$	330,177		$	18,158		$	3,282,452
Capital expenditures		$	56,935		$	186,561		$	12,700		$	135,677		$	391,873
EBITDA		$	136,057		$	281,513		$	235,993		$	(3,466	)	$	650,097
For the Years Ended December 31, 2012
Total revenue		$	1,660,029		$	1,158,714		$	277,985		$	24,976		$	3,121,704
Capital expenditures		$	69,809		$	292,222		$	118,998		$	31,976		$	513,005
EBITDA		$	110,933		$	265,756		$	212,549		$	204,660		$	793,898

**EchoStar Technologies Segment **

		For the Years Ended December 31,						Variance
		2013			2012			Amount			%
		(Dollars in thousands)
Total revenue		$	1,715,991		$	1,660,029		$	55,962			3.4
Capital expenditures		$	56,935		$	69,809		$	(12,874	)		(18.4	)
EBITDA		$	136,057		$	110,933		$	25,124			22.6

Revenue

EchoStar Technologies segment total revenue for the year ended December 31, 2013 increased by $56.0 million, or 3.4%, compared to the same period in 2012, primarily as a result of a $269.0 million increase in both equipment and service revenue provided to DISH Network, offset partially by a $213.1 million decrease in other equipment and service revenue primarily due to a decrease in sales of set-top boxes and related accessories to Bell TV and our other international customers.

Capital Expenditures

EchoStar Technologies segment capital expenditures for the year ended December 31, 2013 decreased by $12.9 million, or 18.4%, compared to the same period in 2012, primarily due to lower capital requirements related to our digital broadcast center and network operations.

EBITDA

EchoStar Technologies segment EBITDA for the year ended December 31, 2013 was $136.1 million, an increase of $25.1 million, or 22.6%, compared to the same period in 2012. The increase in EBITDA for our EchoStar Technologies segment was primarily driven by a $27.3 million increase in operating income offset partially by a decrease of $1.7 million in gains on the sale of investments compared to the same period in 2012.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

**Hughes Segment **

		For the Years Ended December 31,						Variance
		2013			2012			Amount			%
		(Dollars in thousands)
Total revenue		$	1,218,126		$	1,158,714		$	59,412			5.1
Capital expenditures		$	186,561		$	292,222		$	(105,661	)		(36.2	)
EBITDA		$	281,513		$	265,756		$	15,757			5.9

Revenue

Hughes segment total revenue for the year ended December 31, 2013 increased by $59.4 million, or 5.1%, compared to the same period in 2012. This increase was primarily due to an increase in both service and hardware revenue from DISH Network of $34.5 million and $45.4 million, respectively. This increase in revenue from DISH Network was primarily a result of an increase in sales of broadband equipment and services pursuant to the Distribution Agreement we entered into with dishNET in October 2012. Also contributing to the increase in our Hughes segment revenue was an increase of $41.1 million of other service revenue related to an increase in sales of broadband services. These increases were offset partially by a decrease of $61.5 million in equipment revenue as a result of a decrease in sales of mobile satellite systems equipment and international broadband equipment.

Capital Expenditures

Hughes segment capital expenditures for the year ended December 31, 2013 decreased by $105.7 million, or 36.2%, compared to the same period in 2012, primarily due to a decrease in satellite expenditures related to EchoStar XVII, which was launched in July 2012.

EBITDA

EBITDA for our Hughes segment for the year ended December 31, 2013 was $281.5 million, an increase of $15.8 million, or 5.9%, compared to the same period in 2012. The increase was due primarily to a $22.0 million impairment loss in 2012 on certain contract rights associated with the Hughes Acquisition that did not occur in 2013 and a gain of $2.6 million in connection with the settlement of certain accounts receivables in 2013. These increases were offset partially by a decrease in gains on marketable investment securities of $10.5 million compared to the same period in 2012.

**EchoStar Satellite Services Segment **

		For the Years Ended December 31,						Variance
		2013			2012			Amount			%
		(Dollars in thousands)
Total revenue		$	330,177		$	277,985		$	52,192			18.8
Capital expenditures		$	12,700		$	118,998		$	(106,298	)		(89.3	)
EBITDA		$	235,993		$	212,549		$	23,444			11.0

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

Revenue

EchoStar Satellite Services segment total revenue for the year ended December 31, 2013 increased by $52.2 million, or 18.8%, compared to the same period in 2012, primarily due to an increase in sales of transponder services to DISH Network.

Capital Expenditures

EchoStar Satellite Services segment capital expenditures for the year ended December 31, 2013 decreased by $106.3 million, or 89.3%, compared to the same period in 2012, primarily related to a decrease in satellite expenditures due to the launch of EchoStar XVI in November 2012.

EBITDA

EchoStar Satellite Services segment EBITDA for the year ended December 31, 2013 was $236.0 million, an increase of $23.4 million, or 11.0%, compared to the same period in 2012. The increase in EBITDA for our EchoStar Satellite Services segment was primarily due to a $64.1 million increase in operating income excluding depreciation and amortization and impairment losses primarily related to an increase in the sales of transponder services provided in 2013 compared to 2012 and a decrease in cost of sales related to the termination of our satellite lease contract with DISH Network on EchoStar I, which was effective in July 2012. The increase in operating income was partially offset by the impairment loss of our EchoStar XII satellite of $34.7 million in June 2013 and a decrease in gains of $5.9 million as a result of a reduction of the capital lease obligation for the AMC-16 satellite when compared to the same period in 2012.

**All Other and Eliminations **

Capital Expenditures

For the year ended December 31, 2013 capital expenditures increased by $103.7 million compared to the same period in 2012, primarily related to the increase in satellite expenditures on the EchoStar XIX satellite of $100.8 million and the EchoStar XXI satellite of $13.9 million. The EchoStar XIX satellite is expected to be used in the operations of our Hughes segment and the EchoStar XXI satellite is intended to be used by Solaris Mobile in providing mobile satellite services in the EU.

EBITDA

All Other and Eliminations EBITDA for the year ended December 31, 2013 was a loss of $3.5 million, compared to income of $204.7 million for the same period in 2012. The $208.1 million decrease in EBITDA was primarily due to a decrease in gains of $126.1 million recognized from the sale of marketable investment securities and other investments in 2012 and non-recurring dividends of $46.0 million received from a strategic investment in 2012.

**LIQUIDITY AND CAPITAL RESOURCES **

**Cash, Cash Equivalents and Current Marketable Investment Securities **

We consider all liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. See Item 7A.—Quantitative and Qualitative Disclosures about Market Risk in this Annual Report on Form 10-K for further discussion regarding our marketable investment securities. As of

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

December 31, 2014, our cash, cash equivalents and current marketable investment securities totaled $1.69 billion compared to $1.62 billion as of December 31, 2013, an increase of $67.5 million.

We have investments in various debt and equity instruments including corporate bonds, corporate equity securities, government bonds, and variable rate demand notes ("VRDNs"). VRDNs are long term floating rate bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest. All of the put options are secured by a pledged liquidity source. Our VRDN portfolio is comprised of investments in municipalities and corporations, which are backed by financial institutions or other highly rated companies that serve as the pledged liquidity source. While they are classified as marketable investment securities, the put option allows VRDNs to be liquidated generally on the same day or on a five business day settlement basis. As of December 31, 2014 and 2013, we held VRDNs, within our current marketable investment securities portfolio, with fair values of $4.3 million and $34.7 million, respectively. Our other current marketable investment securities portfolio consists primarily of corporate and government bonds. As of December 31, 2014 and 2013, we held $1.09 billion and $918.2 million, respectively, of corporate and government bonds and other investment securities.

The following discussion highlights our cash flow activities for the years ended December 31, 2014, 2013 and 2012.

Cash flows from operating activities. We typically reinvest the cash flow from operating activities in our business. For the years ended December 31, 2014, 2013 and 2012, we reported net cash inflows from operating activities of $840.1 million, $450.5 million and $505.1 million, respectively.

Net cash flows from operating activities for the year ended December 31, 2014 increased by $389.6 million compared to the same period in 2013. The increase was primarily attributable to higher net income of $252.9 million adjusted to exclude: (i) "Depreciation and amortization;" (ii) "Equity in losses of unconsolidated affiliates, net;" (iii) "Realized gains on marketable investment securities and other investments, net;" (iv) "Impairment of long-lived asset," (v) "Stock-based compensation;" (vi) "Deferred tax benefit (provision);" and (vii) "Other, net." In addition, net cash inflows were increased by $136.7 million resulting from changes in operating assets and liabilities related to timing differences between the incurrence of expense and cash payments.

Net cash flows from operating activities for the year ended December 31, 2013 decreased by $54.6 million compared to the same period in 2012. The decrease was primarily attributable to lower net income of $33.8 million adjusted to exclude: (i) "Depreciation and amortization;" (ii) "Realized gains on marketable investment securities and other investments, net;" (iii) "Equity in losses (earnings) of unconsolidated affiliates, net;" (iv) "Impairment of long-lived assets", (v) "Stock-based compensation;" (vi) "Deferred tax benefit;" and (vii) "Other, net." In addition, net cash inflows decreased by $20.8 million resulting from changes in operating assets and liabilities related to timing differences between the incurrence of expense and cash payments.

Cash flows from investing activities. Our investing activities generally include purchases and sales of marketable investment securities, capital expenditures, acquisitions, and strategic investments. For the years ended December 31, 2014, 2013 and 2012, we reported net cash outflows from investing activities of $887.6 million, $570.3 million and $346.8 million, respectively.

Net cash outflows from investing activities for the year ended December 31, 2014 increased by $317.3 million compared to the same period in 2013. The increase in cash outflows primarily related to a $288.2 million increase in capital expenditures in 2014 when compared to the same period in 2013, a

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

decrease of $15.7 million in restricted cash and marketable investment securities, and an increase of $11.6 million in capital contributions to certain investees.

Net cash outflows from investing activities for the year ended December 31, 2013 increased by $223.5 million compared to the same period in 2012. The increase in cash outflows primarily related to an increase of $446.0 million in net purchases of marketable investment securities. This increase was partially offset by a $121.1 million reduction in capital expenditures, decrease of $56.7 million in acquisitions of regulatory authorizations, and proceeds of $40.4 million in 2013 from the transfer of a regulatory authorization and satellite launch services contract to DISH Network.

Cash flows from financing activities. Our financing activities generally include proceeds related to the issuance of long-term debt and cash used for the repurchase, redemption or payment of long-term debt and capital lease obligations, and the proceeds from Class A common stock options exercised and stock issued under our Employee Stock Purchase Plan. For the years ended December 31, 2014, 2013 and 2012, we reported net cash outflows from financing activities of $35.1 million, net cash inflows from financing activities of $18.3 million and net cash outflows from financing activities of $44.0 million, respectively.

Net cash outflows from financing activities increased by $53.4 million for the year ended December 31, 2014 compared to the same period in 2013. The increase in cash outflows was primarily due to lower proceeds of $42.4 million received from Class A common stock option exercises and stock issued under our Employee Stock Purchase Plan, a decrease of $19.9 million in excess tax benefits from stock option exercises, and an increase of $5.7 million for in-orbit incentive obligation payments, which was partially offset by proceeds of $11.4 million, net of offering costs of $3.9 million from the issuance of Hughes Retail preferred tracking stock and a decrease of $5.5 million in capital lease obligation payments.

Net cash inflows from financing activities increased to $18.3 million for the year ended December 31, 2013 compared to net cash outflows of $44.0 million for the same period in 2012. The increase was primarily due to higher proceeds of $55.8 million received from Class A common stock options exercised and stock issued under our Employee Stock Purchase Plan and an increase in excess tax benefit from stock option exercises, which was partially offset by an increase in repayments of long-term debt of $8.2 million.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

**Obligations and Future Capital Requirements **

Contractual Obligations and Off-Balance Sheet Arrangements

The following table summarizes our contractual obligations at December 31, 2014:

		Payments Due in the Year Ending December 31,
		Total			2015			2016			2017			2018			2019			Thereafter
		(In thousands)
Long-term debt		$	2,001,240		$	1,234		$	6		$	—		$	—		$	1,100,000		$	900,000
Capital lease obligations			366,447			40,678			29,724			32,697			36,232			40,114			187,002
Interest on long-term debt and capital lease obligations			962,957			176,044			173,085			169,924			166,410			126,962			150,532
Satellite-related obligations			1,265,685			569,895			251,177			74,479			59,802			54,727			255,605
Operating lease obligations			66,117			21,731			16,757			11,614			5,126			3,776			7,113
Purchase and other obligations			189,452			186,118			1,667			1,667			—			—			—
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total		$	4,851,898		$	995,700		$	472,416		$	290,381		$	267,570		$	1,325,579		$	1,500,252
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​

"Satellite-related obligations" primarily include payments pursuant to agreements for the construction of the EchoStar XIX, EchoStar XXI, EchoStar XXIII, EUTELSAT 65 West A and EchoStar 105/SES-11 satellites, payments pursuant to launch services contracts and regulatory authorizations, executory costs for our capital lease satellites, costs under transponder agreements and in-orbit incentives relating to certain satellites, as well as commitments for long term satellite operating leases and transponder capacity arrangements.

Our "Purchase and other obligations" primarily consists of binding purchase orders for digital set-top boxes and related components. Our purchase obligations can fluctuate significantly from period to period due to, among other things, management's control of inventory levels, and can materially impact our future operating asset and liability balances, and our future working capital requirements.

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.

Off-Balance Sheet Arrangements

Other than the transactions below, we generally do not engage in off-balance sheet financing activities or use derivative financial instruments for hedge accounting or speculative purposes.

As of December 31, 2014, we had $45.6 million of letters of credit and insurance bonds. Of this amount, $16.9 million was secured by restricted cash; $14.6 million related to insurance bonds; and $14.1 million was issued under credit arrangements available to our foreign subsidiaries. Certain letters of credit are secured by assets of our foreign subsidiaries.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

As of December 31, 2014, we had foreign currency forward contracts with a notional value of $5.0 million in place to partially mitigate foreign currency exchange risk. From time to time, we may enter into foreign currency forward contracts, or take other measures, to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions.

Satellite Insurance

We generally do not carry insurance for any of the in-orbit satellites that we use because we believe that the premium costs are uneconomical relative to the risk of satellite failure. However, pursuant to the terms of the agreements governing certain portions of our indebtedness, we are required, subject to certain limitations on coverage, to maintain launch and in-orbit insurance for SPACEWAY 3, EchoStar XVI, and EchoStar XVII. Although we are not required to maintain in-orbit insurance pursuant to our service agreement with DISH Network for EchoStar XV, we are liable for any damage caused by our use of the satellite and therefore we carry third-party insurance on EchoStar XV. The loss of a satellite or other satellite malfunctions or anomalies could have a material adverse effect on our financial performance, which we may not be able to mitigate by using available capacity on other satellites. There can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail. In addition, the loss of a satellite or other satellite malfunctions or anomalies could affect our ability to comply with FCC and other regulatory obligations and our ability to fund the construction or acquisition of replacement satellites for our in-orbit fleet in a timely fashion, or at all.

Future Capital Requirements

We primarily rely on our existing cash and marketable investment securities balances, as well as cash flow generated through our operations to fund our investment needs. Since we currently depend on DISH Network for a substantial portion of our revenue, our cash flow from operations depends heavily on DISH Network's needs for equipment and services. To the extent that DISH Network's gross subscriber additions decrease or DISH Network experiences a net loss of subscribers, sales of our digital set-top boxes and related components as well as broadband services provided to DISH Network may decline, which in turn could have a material adverse effect on our financial position and results of operations. There can be no assurance that we will have positive cash flows from operations. Furthermore, if we experience negative cash flows, our existing cash and marketable investment securities balances may be reduced.

We have a significant amount of outstanding indebtedness. As of December 31, 2014, our total indebtedness was $2.37 billion, of which $366.4 million related to capital lease obligations. Our liquidity requirements will be significant, primarily due to our debt service requirements. In addition, our future capital expenditures are likely to increase if we make additional investments in infrastructure necessary to support and expand our business, or if we decide to purchase one or more additional satellites. Other aspects of our business operations may also require additional capital. We periodically evaluate various strategic initiatives, the pursuit of which could also require us to raise significant additional capital.

**Satellites **

As our satellite fleet ages, we will be required to evaluate replacement alternatives such as acquiring, leasing, or constructing additional satellites, with or without customer commitments for capacity. We

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

may also construct or lease additional satellites in the future to provide satellite services at additional orbital locations or to improve the quality of our satellite services.

**Stock Repurchases **

Pursuant to a stock repurchase plan approved by our Board of Directors, we are authorized to repurchase up to $500.0 million of our outstanding shares of Class A common stock through December 31, 2015. For the years ended December 31, 2014, 2013 and 2012, we did not repurchase any common stock under this plan.

**Critical Accounting Policies and Estimates **

The preparation of consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, the reported amounts of revenue and expenses for each reporting period, and certain information disclosed in the notes to consolidated financial statements in Item 15 of this report. We base our estimates, judgments, and assumptions on historical experience and on various other factors that we believe to be relevant under the circumstances. Actual results may differ from previously estimated amounts, and such differences may be material to our consolidated financial statements. We review our estimates and assumptions periodically, and the effects of revisions are reflected in the period they occur or prospectively if the revised estimate affects future periods. The following represent what we believe are the critical accounting policies that may involve a high degree of estimation, judgment and complexity. For a summary of our significant accounting policies, including those discussed below, see Note 3 in the notes to consolidated financial statements in Item 15 of this report.

Marketable Securities and Other Investments

We hold investments in debt and equity securities of various companies, including marketable investments in publicly traded securities and non-marketable investments in securities of privately held companies. Our marketable investment securities ordinarily are accounted for as available-for-sale; accordingly, we report those securities at fair value on a recurring basis and generally recognize unrealized gains and losses in other comprehensive income (loss). Except in unusual circumstances, the estimated fair values of our marketable investment securities are determined by reference to quoted prices for identical securities or based primarily on other observable market inputs. Our investments in non-marketable securities typically are strategic investments in privately held companies and may be highly speculative. We account for such investments using the equity method when we exert significant influence over the investee; otherwise, we account for such investments using the cost method.

All of our investments are subject to quarterly evaluations to determine whether an other-than-temporary impairment has occurred, in which case we record an impairment loss in determining net income. For our marketable investment securities, our impairment evaluation considers factors such the length of time the security has been in a continuous unrealized loss position, the magnitude of the unrealized loss, current market conditions, company-specific information, and whether we have the intent and ability to hold the investment in the foreseeable future. Generally, it is not practicable to estimate fair value of our cost method and equity method investments on a recurring basis. Our impairment evaluation for such investments considers whether events or changes in circumstances have occurred that may have a significant adverse effect on the fair value of the investment. As part of our evaluation, we review available information such as recent company financial

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

statements, business plans and current economic conditions for factors that may indicate an impairment of our investments. When we determine that an investment is impaired and the impairment is other-than-temporary, we adjust the carrying amount of the investments to its estimated fair value and recognize an impairment loss in earnings. In these circumstances, our fair value estimates may reflect significant unobservable inputs.

Our periodic investment impairment evaluations require us to make significant estimates, judgments and assumptions about uncertain future events. In some cases, there may be limited or no observable market data to support significant assumptions in our estimates. As a result of weakening economic conditions, or other future events and changes in circumstances affecting our investments, we may subsequently determine that an investment is impaired or that an existing impairment is other-than-temporary. Such events and changes in circumstances could result in our recognition of material investment impairment losses in the future.

Impairment of Long-lived Assets

We evaluate our long-lived assets other than goodwill or intangible assets with indefinite lives, for impairment whenever events and changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of a long-lived asset or asset group is considered to not be recoverable when the estimated future undiscounted cash flows from such asset or asset group is less than its carrying amount. In that event, an impairment loss is recorded in the determination of operating income based on the amount by which the carrying amount exceeds the estimated fair value of the long-lived asset or asset group. Fair value is determined primarily using discounted cash flow techniques reflecting the estimated cash flows and discount rate that would be assumed by a market participant for the asset or asset group under review. Our discounted cash flow estimates typically include assumptions based on unobservable inputs and may reflect probability-weighting of alternative scenarios. Estimated losses on long-lived assets to be disposed of by sale may be determined in a similar manner, except that fair value estimates are reduced for estimated selling costs. Changes in estimates of future cash flows, discounts rates and other assumptions could result in recognition of additional impairment losses in future periods.

Impairment of Goodwill and Indefinite-lived Intangible Assets

We test our goodwill for impairment annually and more frequently when events or changes in circumstances indicate that an impairment may have occurred. There are two steps to the goodwill impairment test. Step one compares the fair value of a reporting unit with its carrying amount, including goodwill. If the reporting unit's carrying amount exceeds its estimated fair value, it is necessary to perform the second step of the impairment test, which compares the implied fair value of reporting unit goodwill with the carrying amount of such goodwill to determine the amount of impairment loss. We may bypass the two-step quantitative impairment test when 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.

As of December 31, 2014, our goodwill consisted primarily of goodwill assigned to reporting units of the Hughes segment. We test such goodwill annually in our second fiscal quarter. Based on our qualitative assessment of impairment of the goodwill assigned to the Hughes segment in the second quarter of 2014 and 2013, we determined that no further testing of goodwill for impairment was necessary as it was more likely than not that the fair values of the Hughes segment reporting units exceeded their corresponding carrying amounts. Our qualitative assessments considered the results of

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

our quantitative annual impairment test in 2012 and generally favorable trends in the operations of the reporting units and in other significant inputs that would be used to determine fair value. Depending on our assessment of future events and changes in circumstances, we may be required to perform the two-step quantitative impairment test in the future. We may determine that some or all of our goodwill is impaired in connection with future impairment tests.

Our indefinite-lived intangible assets consist primarily of regulatory authorizations for the use of spectrum in specified orbital locations. We test these intangible assets annually in our fourth fiscal quarter, or more frequently if events or changes in circumstances indicate that an impairment may have occurred. We recognize an impairment loss in the determination of operating income when we determine that the carrying amount of an intangible asset exceeds its estimated fair value. Fair value is determined primarily using discounted cash flow techniques reflecting the estimated cash flows and discount rate that we believe would be assumed by market participants. Our cash flow projections typically include significant assumptions based on unobservable inputs. Changes in economic conditions, laws and regulations, technology, competition and other factors could affect the assumptions reflected in our fair value estimates and may result in future intangible asset impairments.

Revenue Recognition

Our Hughes segment enters into contracts to design, develop, and deliver telecommunication networks to customers in our enterprise and mobile satellite systems markets. Those contracts require significant effort to develop and construct the network over an extended time period. Revenue from such contracts is recognized using the percentage-of-completion method. Depending on the nature of the arrangement, we measure progress toward completion using the cost-to-cost method or the units-of-delivery method. Under the cost-to-cost method, revenue reflects the ratio of costs incurred to estimated total costs at completion. Under the units-of-delivery method, revenue and related costs are recognized as products are delivered based on the expected profit for the entire agreement. Profit margins on long-term contracts are based on estimates of total 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. Changes in our periodic estimates for these contracts could result in significant adjustments to our revenue or costs, which could be material to our consolidated results of operations.

Income Taxes

We record deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as for operating loss and tax credit carryforwards. Determining necessary valuation allowances for deferred tax assets requires us to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning opportunities. We periodically evaluate the need for valuation allowances based on both historical evidence, including trends, and future expectations. Our future operating results and other events and circumstances could have a significant effect on the realization of tax benefits. Those future events and circumstances could require significant adjustments to our valuation allowances in future periods, which could be material to our consolidated results of operations.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

Management evaluates the recognition and measurement of uncertain tax positions based on applicable tax law, regulations, case law, administrative rulings and pronouncements, and the facts and circumstances surrounding the tax position. Changes in our estimates related to the recognition and measurement of the amount recorded for uncertain tax positions could result in significant adjustments to our income tax provision or benefit in future periods, which could be material to our consolidated results of operations.

Contingent Liabilities

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. Legal fees and other costs of defending litigation are charged to expense as incurred. A significant amount of management judgment is required in determining whether an accrual should be recorded for a loss contingency and the amount of such accrual. Estimates generally are developed in consultation with legal counsel and are based on an analysis of potential outcomes. Due to the inherent uncertainty in determining the likelihood of potential outcomes and the potential financial statement impact of such outcomes, it is possible that upon further development or resolution of a contingent matter, charges related to existing loss contingencies could be recorded in future periods, which could be material to our consolidated results of operations and financial position.

**New Accounting Pronouncements **

For a discussion of new accounting pronouncements, see Note 3 in the notes to consolidated financial statements in Item 15 of this report. We are assessing the impact of adopting the recently issued accounting pronouncements on our consolidated financial statements and related disclosures.

**Seasonality **

For our EchoStar Technologies segment, we are affected by seasonality to the extent it impacts our customers as a result of their sales and promotion activities, which can vary from year to year. Although the seasonal impacts have not been significant, historically, the first half of the year generally produces fewer new subscribers for the pay-TV industry than the second half of the year. However, we cannot provide assurance that this trend will continue in the future.

For our Hughes segment, service revenue is generally not impacted by seasonal fluctuations other than those associated with fluctuations related to sales and promotional activities. However, like many communications infrastructure equipment vendors, a higher amount of our hardware revenue occurs in the second half of the year due to our customers' annual procurement and budget cycles. Large enterprises and operators often allocate their capital expenditure budgets at the beginning of their fiscal year (which often coincides with the calendar year). The typical sales cycle for large complex system procurements is six to 12 months, which often results in the customer expenditure occurring towards the end of the year. Customers often seek to expend the budgeted funds prior to the end of the year and the next budget cycle. In the Hughes consumer business, we see a similar seasonality for consumer acquisitions, and therefore hardware revenue, as is seen in the consumer and retail sectors where the first and fourth calendar quarters tend to be higher than the second and third quarters.

Our EchoStar Satellite Services segment is not generally affected by seasonal impacts.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

**Inflation **

Inflation has not materially affected our operations during the past three years. We believe that our ability to increase the prices charged for our products and services in future periods will depend primarily on competitive pressures or contractual terms.

**EXPLANATION OF KEY METRICS AND OTHER ITEMS **

Equipment revenue—DISH Network. "Equipment revenue—DISH Network" primarily includes sales of digital set-top boxes and related components, including Slingbox products and related hardware products, and sales of satellite broadband equipment and related equipment, primarily related to the Hughes service, to DISH Network.

Equipment revenue—other. "Equipment revenue—other" primarily includes sales of digital set-top boxes and related components to Bell TV, Dish Mexico and other domestic and international customers, including sales of Slingbox products and related hardware products, and sales of broadband equipment and networks to customers in our enterprise and consumer markets.

Services and other revenue—DISH Network. "Services and other revenue—DISH Network" primarily includes revenue associated with satellite and transponder services, satellite uplinking/downlinking, signal processing, conditional access management, telemetry, tracking and control, development of web-based applications for set-top boxes, professional services, facilities rental revenue and other services provided to DISH Network. Beginning in October 2012, "Services and other revenue—DISH Network" also includes subscriber wholesale service fees for the Hughes service sold to dishNET.

Services and other revenue—other. "Services and other revenue—other" primarily includes the sales of enterprise and consumer broadband services, as well as maintenance and other contracted services. "Services and other revenue—other" also includes revenue associated with satellite and transponder services, satellite uplinking/downlinking and other services provided to customers other than DISH Network.

Cost of sales—equipment. "Cost of sales—equipment" principally includes costs associated with digital set-top boxes and related components sold to DISH Network, Bell TV, Dish Mexico and other domestic and international customers, including costs associated with Slingbox products and related hardware products. "Cost of sales—equipment" also includes the cost of broadband equipment and networks sold to customers in our enterprise and consumer markets, and to DISH Network.

Cost of sales—services and other. "Cost of sales—services and other" primarily includes the cost of broadband services provided to our enterprise and consumer customers, and to DISH Network, as well as the cost of providing maintenance and other contracted services. "Cost of sales—services and other" also includes the costs associated with satellite and transponder services, satellite uplinking/downlinking, signal processing, conditional access management, telemetry, tracking and control, product support and development of applications for set-top boxes, professional services, facilities rental costs, and other services provided to our customers, including DISH Network.

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

Selling, general and administrative expenses. "Selling, general and administrative expenses" primarily includes selling and marketing costs and employee-related costs associated with administrative services

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Continued

(e.g., information systems, human resources and other services), including stock-based compensation expense. It also includes professional fees (e.g. legal, information systems and accounting services) and other items associated with facilities and administrative services provided by DISH Network and other third parties.

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

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

Interest expense, net of amounts capitalized. "Interest expense, net of amounts capitalized" primarily includes interest expense associated with our long-term debt and capital lease obligations (net of capitalized interest), and amortization of debt issuance costs.

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

Realized gains on marketable investment securities and other investments, net. "Realized gains on marketable investment securities and other investments, net" primarily includes gains, net of any losses, on the sale or exchange of investments.

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

Earnings before interest, taxes, depreciation and amortization ("EBITDA"). EBITDA is defined as "Net income (loss) attributable to EchoStar" excluding "Interest expense, net of amounts capitalized," "Interest income," "Income tax benefit (provision), net" and "Depreciation and amortization." EBITDA is not a measure determined in accordance with GAAP. This non-GAAP measure is reconciled to "Income (loss) before income taxes" in our discussion of "Results of Operations" above. EBITDA should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with GAAP. Conceptually, EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures. EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes EBITDA provides meaningful supplemental information regarding liquidity and the underlying operating performance of our business. Management also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties to evaluate the performance of companies in our industry.

Subscribers. Subscribers include customers that subscribe to our Hughes segment's HughesNet broadband services, through retail, wholesale and small/medium enterprise service channels.