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EX-32.2 - EX-32.2 - DISH DBS CORPddbs-20170630ex322135fd0.htm
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EX-31.2 - EX-31.2 - DISH DBS CORPddbs-20170630ex3124c1ca2.htm
EX-31.1 - EX-31.1 - DISH DBS CORPddbs-20170630ex31143f1c5.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 


 

Form 10-Q

 

(Mark One)

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017.

 

OR

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO ________________.

 

Commission File Number: 333-31929

 

DISH DBS Corporation

(Exact name of registrant as specified in its charter)

 

 

 

Colorado

84-1328967

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

9601 South Meridian Boulevard

 

Englewood, Colorado

80112

(Address of principal executive offices)

(Zip code)

 

(303) 723-1000

(Registrant’s telephone number, including area code)

 

Not Applicable

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer ☒

 

Smaller reporting company

 

(Do not check if a smaller reporting company)

 

 

 

 

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

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

 

As of August 9, 2017, the registrant’s outstanding common stock consisted of 1,015 shares of common stock, $0.01 par value.

 

The registrant meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

 

 

PART I — FINANCIAL INFORMATION 

 

 

 

 

 

Disclosure Regarding Forward-Looking Statements

 

i

 

 

 

 

Item 1. 

Financial Statements

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets — June 30, 2017 and December 31, 2016 (Unaudited)

 

1

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the Three and Six Months Ended June 30, 2017 and 2016 (Unaudited)

 

2

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2017 and 2016 (Unaudited)

 

3

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

4

 

 

 

 

Item 2. 

Management’s Narrative Analysis of Results of Operations

 

38

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

*

 

 

 

 

Item 4. 

Controls and Procedures

 

57

 

 

 

 

PART II — OTHER INFORMATION 

 

 

 

 

Item 1. 

Legal Proceedings

 

57

 

 

 

 

Item 1A. 

Risk Factors

 

57

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

*

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

*

 

 

 

 

Item 4.

Mine Safety Disclosures

 

None

 

 

 

 

Item 5.

Other Information

 

None

 

 

 

 

Item 6. 

Exhibits

 

59

 

 

 

 

 

Signatures

 

60

 

 

*This item has been omitted pursuant to the reduced disclosure format as set forth in General Instruction (H)(2) of Form 10-Q.

 

 


 

 

PART I — FINANCIAL INFORMATION

 

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

Unless otherwise required by the context, in this report, the words “DISH DBS,” the “Company,” “we,” “our” and “us” refer to DISH DBS Corporation and its subsidiaries, “DISH Network” refers to DISH Network Corporation, our parent company, and its subsidiaries, including us, and “EchoStar” refers to EchoStar Corporation and its subsidiaries.

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular, statements about our plans, objectives and strategies, growth opportunities in our industries and businesses, our expectations regarding future results, financial condition, liquidity and capital requirements, our estimates regarding the impact of regulatory developments and legal proceedings, and other trends and projections.  Forward-looking statements are not historical facts and may be identified by words such as “future,” “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” “will,” “would,” “could,” “can,” “may,” and similar terms.  These forward-looking statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and represent management’s current views and assumptions.  Forward-looking statements are not guarantees of future performance, events or results and involve known and unknown risks, uncertainties and other factors, which may be beyond our control.  Accordingly, actual performance, events or results could differ materially from those expressed or implied in the forward-looking statements due to a number of factors, including, but not limited to, the following:

 

Competition and Economic Risks

 

·

As the pay-TV industry has matured and bundled offers combining video, broadband and/or wireless services have become more prevalent and competitive, we face intense and increasing competition from providers of video, broadband and/or wireless services, which may require us to further increase subscriber acquisition and retention spending or accept lower subscriber activations and higher subscriber churn.

 

·

Changing consumer behavior and competition from digital media companies that provide or facilitate the delivery of video content via the Internet may reduce our gross new subscriber activations and may cause our subscribers to purchase fewer services from us or to cancel our services altogether, resulting in less revenue to us.

 

·

Economic weakness and uncertainty may adversely affect our ability to grow or maintain our business.

 

·

Our competitors may be able to leverage their relationships with programmers to reduce their programming costs and/or offer exclusive content that will place them at a competitive advantage to us.

 

·

Our over-the-top (“OTT”) Sling TV Internet-based services face certain risks, including, among others, significant competition.

 

·

We face increasing competition from other distributors of unique programming services such as foreign language, sports programming, and original content that may limit our ability to maintain subscribers that desire these unique programming services.

 

Operational and Service Delivery Risks

 

·

If our operational performance and customer satisfaction were to deteriorate, our gross new subscriber activations and our subscriber churn may be negatively impacted, which could in turn adversely affect our revenue.

 

·

If our gross new subscriber activations continue to decrease, or if our subscriber churn, subscriber acquisition costs or retention costs increase, our financial performance will be adversely affected.

 

i


 

·

Programming expenses are increasing and could adversely affect our future financial condition and results of operations.

 

·

We depend on others to provide the programming that we offer to our subscribers and, if we fail to obtain or lose access to this programming, our gross new subscriber activations and our subscriber churn may be negatively impacted.

 

·

We may not be able to obtain necessary retransmission consent agreements at acceptable rates, or at all, from local network stations.

 

·

We may be required to make substantial additional investments to maintain competitive programming offerings.

 

·

Any failure or inadequacy of our information technology infrastructure and communications systems, including without limitation those caused by cyber-attacks or other malicious activities, could disrupt or harm our business.

 

·

We currently depend on EchoStar to provide the vast majority of our satellite transponder capacity and other related services to us.  Our business would be adversely affected if EchoStar ceases to provide these services to us and we are unable to obtain suitable replacement services from third parties.

 

·

Technology in the pay-TV industry changes rapidly, and our success may depend in part on our timely introduction and implementation of, and effective investment in, new competitive products and services and more advanced equipment, and our failure to do so could cause our products and services to become obsolete and could negatively impact our business.

 

·

We rely on a single vendor or a limited number of vendors to provide certain key products or services to us such as information technology support, billing systems, and security access devices, and the inability of these key vendors to meet our needs could have a material adverse effect on our business.

 

·

We rely on a few suppliers and in some cases a single supplier, for many components of our new set-top boxes, and any reduction or interruption in supplies or significant increase in the price of supplies could have a negative impact on our business.

 

·

Our programming signals are subject to theft, and we are vulnerable to other forms of fraud that could require us to make significant expenditures to remedy.

 

·

We depend on independent third parties to solicit orders for our services that represent a significant percentage of our total gross new subscriber activations.

 

·

We have limited satellite capacity and failures or reduced capacity could adversely affect our DISH branded pay-TV service.

 

·

Our owned and leased satellites are subject to construction, launch, operational and environmental risks that could limit our ability to utilize these satellites.

 

·

We generally do not carry commercial launch or in-orbit insurance on any of the satellites that we use, other than certain satellites leased from third parties, and could face significant impairment charges if any of our owned satellites fail.

 

·

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

 

·

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

ii


 

Acquisition and Capital Structure Risks

 

·

Our parent, DISH Network, has made substantial investments to acquire certain wireless spectrum licenses and other related assets.  In addition, DISH Network has made substantial non-controlling investments in the Northstar Entities and the SNR Entities related to AWS-3 wireless spectrum licenses.

 

·

Our parent, DISH Network, faces certain risks related to its non-controlling investments in the Northstar Entities and the SNR Entities.

 

·

To the extent that our parent, DISH Network, commercializes its wireless spectrum licenses, it will face certain risks entering and competing in the wireless services industry and operating a wireless services business.

 

·

We may pursue acquisitions and other strategic transactions to complement or expand our business that may not be successful and we may lose up to the entire value of our investment in these acquisitions and transactions.

 

·

We may need additional capital, which may not be available on acceptable terms or at all, to continue investing in our business and to finance acquisitions and other strategic transactions.

 

·

We have substantial debt outstanding and may incur additional debt.

 

·

Our parent, DISH Network, is controlled by one principal stockholder who is also our Chairman and Chief Executive Officer.

 

Legal and Regulatory Risks

 

·

The rulings in the Do Not Call litigation requiring us to pay up to an aggregate amount of $341 million and imposing certain injunctive relief against us, if upheld, would have a material adverse effect on our cash, cash equivalents and marketable investment securities balances and our business operations.

 

·

Our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others.

 

·

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

 

·

Our ability to distribute video content via the Internet, including our Sling TV services, involves regulatory risk.

 

·

Changes in the Cable Act of 1992 (“Cable Act”), and/or the rules of the Federal Communications Commission (“FCC”) that implement the Cable Act, may limit our ability to access programming from cable-affiliated programmers at nondiscriminatory rates.

 

·

The injunction against our retransmission of distant networks, which is currently waived, may be reinstated.

 

·

We are subject to significant regulatory oversight, and changes in applicable regulatory requirements, including any adoption or modification of laws or regulations relating to the Internet, could adversely affect our business.

 

·

Our business depends on FCC licenses that can expire or be revoked or modified and applications for FCC licenses that may not be granted.

 

iii


 

·

We are subject to digital high-definition (“HD”) “carry-one, carry-all” requirements that cause capacity constraints.

 

·

Our business, investor confidence in our financial results, and DISH Network’s stock price may be adversely affected if our internal controls are not effective.

 

·

We may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange Commission (“SEC”).

 

Other factors that could cause or contribute to such differences include, but are not limited to, those discussed under the caption “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K (the “10-K”) filed with the SEC, those discussed in “Management’s Narrative Analysis of Results of Operations” herein and in the 10-K and those discussed in other documents we file with the SEC.  All cautionary statements made or referred to herein should be read as being applicable to all forward-looking statements wherever they appear.  Investors should consider the risks and uncertainties described or referred to herein and should not place undue reliance on any forward-looking statements.  The forward-looking statements speak only as of the date made, and we expressly disclaim any obligation to update these forward-looking statements.

 

 

iv


 

Item 1. FINANCIAL STATEMENTS

 

DISH DBS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

    

June 30,

    

December 31,

    

 

 

2017

 

2016

 

Assets

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,174,555

 

$

777,578

 

Marketable investment securities

 

 

3,521

 

 

3,833

 

Trade accounts receivable, net of allowance for doubtful accounts of $19,571 and $17,440, respectively

 

 

704,892

 

 

740,856

 

Inventory

 

 

373,659

 

 

422,323

 

Other current assets

 

 

109,862

 

 

112,745

 

Total current assets

 

 

2,366,489

 

 

2,057,335

 

 

 

 

 

 

 

 

 

Noncurrent Assets:

 

 

 

 

 

 

 

Restricted cash, cash equivalents and marketable investment securities

 

 

81,433

 

 

82,360

 

Property and equipment, net

 

 

1,724,857

 

 

1,890,368

 

FCC authorizations

 

 

635,794

 

 

635,794

 

Other investment securities

 

 

119,750

 

 

33,248

 

Other noncurrent assets, net

 

 

232,138

 

 

243,112

 

Total noncurrent assets

 

 

2,793,972

 

 

2,884,882

 

Total assets

 

$

5,160,461

 

$

4,942,217

 

 

 

 

 

 

 

 

 

Liabilities and Stockholder's Equity (Deficit)

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Trade accounts payable

 

$

294,890

 

$

504,562

 

Deferred revenue and other

 

 

723,780

 

 

751,397

 

Accrued programming

 

 

1,583,346

 

 

1,542,036

 

Accrued interest

 

 

257,850

 

 

265,224

 

Other accrued expenses (Note 8)

 

 

766,607

 

 

459,239

 

Current portion of long-term debt and capital lease obligations

 

 

2,137,909

 

 

938,832

 

Total current liabilities

 

 

5,764,382

 

 

4,461,290

 

 

 

 

 

 

 

 

 

Long-Term Obligations, Net of Current Portion:

 

 

 

 

 

 

 

Long-term debt and capital lease obligations, net of current portion

 

 

12,061,139

 

 

13,274,536

 

Deferred tax liabilities

 

 

755,482

 

 

776,903

 

Long-term deferred revenue and other long-term liabilities

 

 

218,494

 

 

221,638

 

Total long-term obligations, net of current portion

 

 

13,035,115

 

 

14,273,077

 

Total liabilities

 

 

18,799,497

 

 

18,734,367

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholder’s Equity (Deficit):

 

 

 

 

 

 

 

Common stock, $.01 par value, 1,000,000 shares authorized, 1,015 shares issued and outstanding

 

 

 —

 

 

 —

 

Additional paid-in capital

 

 

1,102,098

 

 

1,097,607

 

Accumulated other comprehensive income (loss)

 

 

731

 

 

(117)

 

Accumulated earnings (deficit)

 

 

(14,745,514)

 

 

(14,891,573)

 

Total DISH DBS stockholder's equity (deficit)

 

 

(13,642,685)

 

 

(13,794,083)

 

Noncontrolling interests

 

 

3,649

 

 

1,933

 

Total stockholder’s equity (deficit)

 

 

(13,639,036)

 

 

(13,792,150)

 

Total liabilities and stockholder’s equity (deficit)

 

$

5,160,461

 

$

4,942,217

 

 

 

 

 

 

 

 

 

 

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

1


 

DISH DBS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

    

2017

    

2016

    

2017

    

2016

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber-related revenue

 

$

3,512,900

 

$

3,709,799

 

$

7,049,362

 

$

7,370,465

 

Equipment sales and other revenue

 

 

30,912

 

 

37,497

 

 

65,409

 

 

89,463

 

Total revenue

 

 

3,543,812

 

 

3,747,296

 

 

7,114,771

 

 

7,459,928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses (exclusive of depreciation shown separately below - Note 6):

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber-related expenses

 

 

2,183,057

 

 

2,178,685

 

 

4,360,987

 

 

4,339,041

 

Satellite and transmission expenses

 

 

179,059

 

 

173,751

 

 

369,721

 

 

340,147

 

Cost of sales - equipment and other

 

 

24,050

 

 

29,666

 

 

50,109

 

 

69,931

 

Subscriber acquisition costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

   Cost of sales - subscriber promotion subsidies

 

 

22,211

 

 

35,120

 

 

42,484

 

 

86,934

 

   Other subscriber acquisition costs

 

 

131,501

 

 

169,845

 

 

265,558

 

 

347,937

 

   Subscriber acquisition advertising

 

 

117,907

 

 

125,880

 

 

243,754

 

 

248,555

 

Total subscriber acquisition costs

 

 

271,619

 

 

330,845

 

 

551,796

 

 

683,426

 

General and administrative expenses

 

 

179,298

 

 

176,277

 

 

304,608

 

 

368,176

 

Litigation expense (Note 8)

 

 

295,695

 

 

 —

 

 

295,695

 

 

 —

 

Depreciation and amortization (Note 6)

 

 

191,314

 

 

218,929

 

 

373,342

 

 

425,122

 

Total costs and expenses

 

 

3,324,092

 

 

3,108,153

 

 

6,306,258

 

 

6,225,843

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

219,720

 

 

639,143

 

 

808,513

 

 

1,234,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

3,409

 

 

4,036

 

 

5,696

 

 

4,383

 

Interest expense, net of amounts capitalized

 

 

(221,943)

 

 

(191,789)

 

 

(443,234)

 

 

(383,165)

 

Other, net

 

 

2,477

 

 

(570)

 

 

3,425

 

 

31,675

 

Total other income (expense)

 

 

(216,057)

 

 

(188,323)

 

 

(434,113)

 

 

(347,107)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

3,663

 

 

450,820

 

 

374,400

 

 

886,978

 

Income tax (provision) benefit, net

 

 

(97,120)

 

 

(172,106)

 

 

(226,899)

 

 

(335,776)

 

Net income (loss)

 

 

(93,457)

 

 

278,714

 

 

147,501

 

 

551,202

 

   Less: Net income (loss) attributable to noncontrolling interests, net of tax

 

 

2,199

 

 

1,682

 

 

1,442

 

 

1,335

 

Net income (loss) attributable to DISH DBS

 

$

(95,656)

 

$

277,032

 

$

146,059

 

$

549,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(93,457)

 

$

278,714

 

$

147,501

 

$

551,202

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

   Foreign currency translation adjustments

 

 

639

 

 

 —

 

 

846

 

 

 —

 

   Unrealized holding gains (losses) on available-for-sale securities

 

 

(22)

 

 

111

 

 

(65)

 

 

(19,606)

 

   Deferred income tax (expense) benefit, net

 

 

51

 

 

253

 

 

67

 

 

7,690

 

Total other comprehensive income (loss), net of tax

 

 

668

 

 

364

 

 

848

 

 

(11,916)

 

Comprehensive income (loss)

 

 

(92,789)

 

 

279,078

 

 

148,349

 

 

539,286

 

   Less: Comprehensive income (loss) attributable to noncontrolling interests, net of tax

 

 

2,199

 

 

1,682

 

 

1,442

 

 

1,335

 

Comprehensive income (loss) attributable to DISH DBS

 

$

(94,988)

 

$

277,396

 

$

146,907

 

$

537,951

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

2


 

DISH DBS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

 

June 30,

 

 

 

2017

    

2016

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

Net income (loss)

 

$

147,501

 

$

551,202

 

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

373,342

 

 

425,122

 

Realized and unrealized losses (gains) on investments

 

 

(1,803)

 

 

(32,322)

 

Non-cash, stock-based compensation

 

 

11,863

 

 

3,745

 

Deferred tax expense (benefit)

 

 

(22,854)

 

 

(48,496)

 

Other, net

 

 

12,797

 

 

49,790

 

Changes in current assets and current liabilities, net

 

 

194,876

 

 

32,336

 

Net cash flows from operating activities

 

 

715,722

 

 

981,377

 

 

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

(Purchases) Sales and maturities of marketable investment securities, net

 

 

247

 

 

135,367

 

Purchases of property and equipment

 

 

(210,030)

 

 

(264,777)

 

Purchases of strategic investments

 

 

(90,381)

 

 

 —

 

Other, net

 

 

7,569

 

 

7,858

 

Net cash flows from investing activities

 

 

(292,595)

 

 

(121,552)

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

Proceeds from issuance of senior notes

 

 

 —

 

 

2,000,000

 

Dividend to DISH Orbital Corporation

 

 

 —

 

 

(1,500,000)

 

Redemption and repurchases of senior notes

 

 

 —

 

 

(1,500,000)

 

Payments made to parent of transferred businesses

 

 

(7,098)

 

 

(48,342)

 

Repayment of long-term debt and capital lease obligations

 

 

(19,052)

 

 

(19,823)

 

Other, net

 

 

 —

 

 

(7,548)

 

Net cash flows from financing activities

 

 

(26,150)

 

 

(1,075,713)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

396,977

 

 

(215,888)

 

Cash and cash equivalents, beginning of period

 

 

777,578

 

 

420,752

 

Cash and cash equivalents, end of period

 

$

1,174,555

 

$

204,864

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

3


 

 

DISH DBS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.Organization and Business Activities

 

Principal Business

 

DISH DBS Corporation (which together with its subsidiaries is referred to as “DISH DBS,” the “Company,” “we,” “us” and/or “our” unless otherwise required by the context) is a holding company and an indirect, wholly-owned subsidiary of DISH Network Corporation (“DISH Network”).  DISH DBS was formed under Colorado law in January 1996 and its common stock is held by DISH Orbital Corporation (“DOC”), a direct subsidiary of DISH Network.

Our subsidiaries operate one primary business segment.

 

Pay-TV

 

We offer pay-TV services under the DISH® brand and the Sling® brand (collectively “Pay-TV” services).  The DISH branded pay-TV service consists of, among other things, Federal Communications Commission (“FCC”) licenses authorizing us to use direct broadcast satellite (“DBS”) and Fixed Satellite Service (“FSS”) spectrum, our owned and leased satellites, receiver systems, broadcast operations, customer service facilities, a leased fiber optic network, in-home service and call center operations, and certain other assets utilized in our operations.  The Sling branded pay-TV services consist of, among other things, live, linear streaming over-the-top (“OTT”) Internet-based domestic, international and Latino video programming services (“Sling TV”).  Our Sling domestic service has a single-stream service branded Sling Orange and a multi-stream service branded Sling Blue, which includes, among other things, the ability to stream on up to three devices simultaneously.  All Sling branded pay-TV subscribers are included in our Pay-TV subscriber count.        As of June 30, 2017, we had 13.332 million Pay-TV subscribers in the United States.

 

As a result of the completion of the Share Exchange with EchoStar, described below, we also design, develop and distribute receiver systems and provide digital broadcast operations, including satellite uplinking/downlinking, transmission and other services to third-party pay-TV providers.  See Note 2 and Note 11 for further information.

 

2.Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information.  Accordingly, these statements do not include all of the information and notes required for complete financial statements prepared under GAAP.  In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  Our results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.  For further information, refer to the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016.  Certain prior period amounts have been reclassified to conform to the current period presentation.

 

Principles of Consolidation

 

We consolidate all majority owned subsidiaries, investments in entities in which we have controlling influence and variable interest entities where we have been determined to be the primary beneficiary.  Minority interests are recorded as noncontrolling interests or redeemable noncontrolling interests.  See below for further information.  Non-consolidated investments are accounted for using the equity method when we have the ability to significantly influence the operating decisions of the investee.  When we do not have the ability to significantly influence the operating decisions of an investee, the cost method is used.  All significant intercompany accounts and transactions have been eliminated in consolidation.

 

4


 

Table of Contents

DISH DBS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

 

On February 28, 2017, DISH Network and EchoStar and certain of their respective subsidiaries completed the transactions contemplated by the Share Exchange Agreement (the “Share Exchange Agreement”) that was previously entered into on January 31, 2017 (the “Share Exchange”).  Pursuant to the Share Exchange Agreement, among other things, EchoStar transferred to us certain assets and liabilities of the EchoStar technologies and EchoStar broadcasting businesses, consisting primarily of the businesses that design, develop and distribute digital set-top boxes, provide satellite uplinking services and develop and support streaming video technology, as well as certain investments in joint ventures, spectrum licenses, real estate properties and EchoStar’s ten percent non-voting interest in Sling TV Holding L.L.C. (the “Transferred Businesses”), and in exchange, we transferred to EchoStar the 6,290,499 shares of preferred tracking stock issued by EchoStar (the “EchoStar Tracking Stock”) and 81.128 shares of preferred tracking stock issued by Hughes Satellite Systems Corporation, a subsidiary of EchoStar (the “HSSC Tracking Stock,” and together with the EchoStar Tracking Stock, collectively, the “Tracking Stock”), that tracked the residential retail satellite broadband business of Hughes Network Systems, LLC (“HNS”).  In connection with the Share Exchange, DISH Network and EchoStar and certain of their respective subsidiaries entered into certain agreements covering, among other things, tax matters, employee matters, intellectual property matters and the provision of transitional services.  See Note 11 for further information.

 

As the Share Exchange was a transaction between entities that are under common control, accounting rules require that our Condensed Consolidated Financial Statements include the results of the Transferred Businesses for all periods presented, including periods prior to the completion of the Share Exchange.  We initially recorded the Transferred Businesses at EchoStar’s historical cost basis.  The difference between the historical cost basis of the Transferred Businesses and the net carrying value of the Tracking Stock is recorded in “Additional paid-in capital” on our Condensed Consolidated Balance Sheets.  The results of the Transferred Businesses were prepared from separate records maintained by EchoStar for the periods prior to March 1, 2017, and may not necessarily be indicative of the conditions that would have existed, or the results of operations, if the Transferred Businesses had been operated on a combined basis with our subsidiaries.  The primary impacts to our financial statement presentation are as follows:

 

·

Our investments in the EchoStar Tracking Stock and HSSC Tracking Stock are no longer included in our Condensed Consolidated Balance Sheets.

·

The assets and liabilities of the Transferred Businesses are recorded in our Condensed Consolidated Balance Sheets, and the results of operations of the Transferred Businesses, including sales of set-top boxes to third parties, are recorded in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

·

Sling TV Holding L.L.C., in which EchoStar held a 10% non-voting interest prior to the Share Exchange, is accounted for as though it was an indirect wholly-owned subsidiary of us.

·

Intercompany transactions between the Transferred Businesses and us, including, among others, the sale of set-top boxes and broadcast services from EchoStar to us, have been eliminated to the extent possible, including the margin EchoStar received on those sales.

 

Our subsequent annual and quarterly financial statements will include the results of the Transferred Businesses as described above for all periods presented in those financial statements, including periods prior to the completion of the Share Exchange.  The table below includes unaudited supplemental pro forma information for revenue and net income (loss) attributable to DISH DBS on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as if the results of the Transferred Businesses were included for the three and six months ended June 30, 2016 and for the year ended December 31, 2016, respectively:

5


 

Table of Contents

DISH DBS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DISH DBS (as previously reported)

    

 

Adjustments Relating to the Transferred Businesses

 

 

DISH DBS (as currently reported)

 

 

 

 

 

(In thousands)

 

 

 

For the Three Months Ended June 30, 2016:

 

 

 

 

 

 

 

 

Total revenue

$

3,719,415

 

$

27,881

 

$

3,747,296

Net income (loss) attributable to DISH DBS

$

263,394

 

$

13,638

 

$

277,032

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2016:

 

 

 

 

 

 

 

 

Total revenue

$

7,391,569

 

$

68,359

 

$

7,459,928

Net income (loss) attributable to DISH DBS

$

525,628

 

$

24,239

 

$

549,867

 

 

 

 

 

 

 

 

 

For the Year Ended December 31, 2016:

 

 

 

 

 

 

 

 

Total revenue

$

14,637,043

 

$

118,896

 

$

14,755,939

Net income (loss) attributable to DISH DBS

$

916,528

 

$

48,086

 

$

964,614

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period.  Estimates are used in accounting for, among other things, allowances for doubtful accounts, self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair value of financial instruments, fair value of options granted under our stock-based compensation plans, fair value of assets and liabilities acquired in business combinations, fair value of multi-element arrangements, capital leases, asset impairments, estimates of future cash flows used to evaluate impairments, useful lives of property, equipment and intangible assets, independent third-party retailer incentives, programming expenses and subscriber lives.  Economic conditions may increase the inherent uncertainty in the estimates and assumptions indicated above.  Actual results may differ from previously estimated amounts, and such differences may be material to our condensed consolidated financial statements.  Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected prospectively in the period they occur.

 

Property and Equipment

 

Property and equipment are stated at amortized cost less impairment losses, if any.  The costs of satellites under construction, including interest and certain amounts prepaid under our satellite service agreements, are capitalized during the construction phase, assuming the eventual successful launch and in-orbit operation of the satellite.  If a satellite were to fail during launch or while in-orbit, the resultant loss would be charged to expense in the period such loss was incurred.  The amount of any such loss would be reduced to the extent of insurance proceeds estimated to be received, if any.  Depreciation is recorded on a straight-line basis over useful lives ranging from one to 40 years.  Repair and maintenance costs are charged to expense when incurred.  Renewals and improvements that add value or extend the asset’s useful life are capitalized.  Costs related to the procurement and development of software for internal-use are capitalized and amortized using the straight-line method over the estimated useful life of the software.

 

Cost of Sales – Equipment and Other

 

Costs include the cost of non-subsidized sales of DBS accessories and the cost of sales of digital receivers and related components to third-party pay-TV providers, both of which include freight and royalties.  Costs are generally recognized as products are delivered to customers and the related revenue is recognized.

 

Fair Value Measurements

 

We determine fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  Market or observable inputs are the preferred source of values, followed by unobservable inputs or

6


 

Table of Contents

DISH DBS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

 

assumptions based on hypothetical transactions in the absence of market inputs.  We apply the following hierarchy in determining fair value:

 

·

Level 1, defined as observable inputs being quoted prices in active markets for identical assets;

·

Level 2, defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets; and quoted prices for identical or similar instruments in markets that are not active; and

·

Level 3, defined as unobservable inputs for which little or no market data exists, consistent with reasonably available assumptions made by other participants therefore requiring assumptions based on the best information available.

 

As of June 30, 2017 and December 31, 2016, the carrying amount for cash and cash equivalents, trade accounts receivable (net of allowance for doubtful accounts) and current liabilities (excluding the “Current portion of long-term debt and capital lease obligations”) is equal to or approximates fair value due to their short-term nature or proximity to current market rates.  See Note 4 for the fair value of our marketable investment securities.

 

Fair values for our publicly traded debt securities are based on quoted market prices, when available.  The fair values of private debt are based on, among other things, available trade information, and/or an analysis in which we evaluate market conditions, related securities, various public and private offerings, and other publicly available information.  In performing this analysis, we make various assumptions regarding, among other things, credit spreads, and the impact of these factors on the value of the debt securities.  See Note 7 for the fair value of our long-term debt.

 

Revenue Recognition

 

We recognize revenue when an arrangement exists, prices are determinable, collectability is reasonably assured and the goods or services have been delivered.

 

Revenue from our Pay-TV services is recognized when programming is broadcast to subscribers.  Payments received from Pay-TV subscribers in advance of the broadcast or service period are recorded as “Deferred revenue and other” in our Condensed Consolidated Balance Sheets until earned.  Revenue from equipment sales generally is recognized upon shipment to customers. 

 

For certain of our promotions, subscribers are charged an upfront fee.  A portion of these fees may be deferred and recognized over the estimated subscriber life for new subscribers or the estimated remaining life for existing subscribers ranging from four to five years.  Revenue from advertising sales is recognized when the related services are performed.

 

Subscriber fees for DISH branded pay-TV equipment rental fees and other hardware related fees, including fees for DVRs, additional outlet fees, advertising services and fees earned from our in-home service operations are recognized as revenue as earned.  Generally, revenue from equipment sales, equipment upgrades and sales of streaming-capable devices for our Sling branded pay-TV services are recognized upon shipment to customers. 

 

Certain of our existing and new subscriber promotions include programming discounts.  Programming revenues are recorded as earned at the discounted monthly rate charged to the subscriber.

 

We offer our customers the opportunity to download movies for a specific viewing period or permanently purchase a movie from our website.  We recognize revenue when the movie is successfully downloaded by the customer, which, based on our current technology, occurs at the time the customer plays the movie for the first time.

Research and Development

 

Research and development costs are expensed as incurred.  Research and development costs totaled $9 million and $12 million for the three months ended June 30, 2017 and 2016, respectively.  Research and development costs totaled $16 million and $24 million for the six months ended June 30, 2017 and 2016, respectively.

 

7


 

Table of Contents

DISH DBS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

 

New Accounting Pronouncements

 

Revenue from Contracts with Customers.  On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”), and has modified the standard thereafter.  On July 9, 2015, the FASB approved a one year deferral on the effective date for implementation of this standard, which changed the effective date for us to January 1, 2018.  This converged standard on revenue recognition was issued jointly with the International Accounting Standards Board to create common revenue recognition guidance for GAAP and International Financial Reporting Standards.  ASU 2014-09 provides a framework for revenue recognition that replaces most existing GAAP revenue recognition guidance when it becomes effective.  ASU 2014-09 allows for either a full retrospective or modified retrospective adoption.  We are evaluating the effect that ASU 2014-09 will have on our Condensed Consolidated Financial Statements and related disclosures.  We have not yet selected an adoption method.  While we have not determined the effect of the standard on our ongoing financial reporting, we believe that the standard will, among other things, change the allocation and timing of when revenue is recognized for those customers who have a contractual commitment to receive service for a minimum term, including time-limited discounts or free service periods.  Under current accounting rules, we recognize revenue net of discounts during the promotional periods and do not recognize any revenue during free service periods.  Under ASU 2014-09, revenue recognition will be accelerated for these contracts as the impact of discounts or free service periods that are considered performance obligations will be recognized uniformly over the total contractual period.  In addition, the standard will require that incremental costs to obtain a customer, which represent a significant portion of our non-advertising subscriber acquisition costs, be deferred and recognized over the expected customer life, whereas our current policy is to expense these costs as incurred.  As the new standard will impact revenue and cost recognition for a significant number of our contracts, as well as our business processes and information technology systems, our evaluation of the effect of the new standard is ongoing.  We are currently in the process of identifying and implementing changes to our systems, processes, and internal controls to meet the requirements of the standard.  The ultimate impact of adopting ASU 2014-09 for both revenue recognition and costs to obtain and fulfill contracts will depend on the promotions and offers in place during the period leading up to and after the adoption of ASU 2014-09.

 

Recognition and Measurement of Financial Assets and Financial Liabilities.  On January 5, 2016, the FASB issued ASU 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”),  which amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This amendment requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee).  This standard will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  We are evaluating the impact the adoption of ASU 2016-01 will have on our Condensed Consolidated Financial Statements.

 

Leases.  On February 25, 2016, the FASB issued ASU 2016-02 Leases (“ASU 2016-02”), which relates to the accounting of leasing transactions.  This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months.  In addition, this standard requires both lessees and lessors to disclose certain key information about lease transactions.  This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  We are evaluating the impact the adoption of ASU 2016-02 will have on our Condensed Consolidated Financial Statements.

 

Financial Instruments – Credit Losses.  On June 16, 2016, the FASB issued ASU 2016-13 Financial Instruments – Credit Losses, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings.  This standard will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted.  We are evaluating the impact the adoption of ASU 2016-13 will have on our Condensed Consolidated Financial Statements and related disclosures.

 

8


 

Table of Contents

DISH DBS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

 

Statement of Cash Flows - Update.  On August 26, 2016, the FASB issued 2016-15 Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”).  This update consists of eight provisions that provide guidance on the classification of certain cash receipts and cash payments.  If practicable, this update should be applied using a retrospective transition method to each period presented.  For the provisions that are impracticable to apply retrospectively, those provisions may be applied prospectively as of the earliest date practicable.  This update will become effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  We are evaluating the impact the adoption of ASU 2016-15 will have on our Condensed Consolidated Financial Statements.

 

Statement of Cash Flows:  Restricted Cash.  On November 17, 2016, the FASB issued ASU 2016-18 Restricted Cash (“ASU 2016-18”),  which addresses the diversity where changes in restricted cash are classified on the cash flow statement.  ASU 2016-18 requires that changes in restricted cash and cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts on the statement of cash flows.  This standard will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  We expect that the adoption of ASU 2016-18 will have an immaterial impact on our Condensed Consolidated Financial Statements and related disclosures.

 

3.Supplemental Data - Statements of Cash Flows

 

The following table presents our supplemental cash flow and other non-cash data.

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

 

June 30,

 

 

    

2017

    

2016

    

 

 

(In thousands)

 

Cash paid for interest

 

$

443,283

 

$

413,342

 

Cash received for interest

 

 

5,696

 

 

783

 

Cash paid for income taxes

 

 

10,583

 

 

11,338

 

Cash paid for income taxes to DISH Network

 

 

242,541

 

 

329,230

 

Satellites and other assets financed under capital lease obligations

 

 

 —

 

 

7,510

 

 

 

 

 

 

 

 

 

Our parent, DISH Network, provides a centralized system for the management of our cash and marketable investment securities as it does for all of its subsidiaries, among other reasons, to maximize yield of the portfolio.  As a result, the cash and marketable investment securities included on our Condensed Consolidated Balance Sheets is a component or portion of the overall cash and marketable investment securities portfolio included on DISH Network’s Condensed Consolidated Balance Sheets and managed by DISH Network.  We are reflecting the purchases and sales of marketable investment securities on a net basis for each period presented on our Condensed Consolidated Statements of Cash Flows as we believe the net presentation is more meaningful to our cash flows from investing activities.

 

 

 

 

 

 

9


 

Table of Contents

DISH DBS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

 

4.Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investment Securities

 

Our marketable investment securities, restricted cash and cash equivalents, and other investment securities consisted of the following:

 

 

 

 

 

 

 

 

 

 

As of 

 

 

    

June 30, 2017

    

December 31, 2016

 

 

 

(In thousands)

 

Marketable investment securities:

 

 

 

 

 

 

 

Current marketable investment securities

 

$

3,521

 

$

3,833

 

Restricted marketable investment securities (1)

 

 

81,277

 

 

81,679

 

Total marketable investment securities

 

 

84,798

 

 

85,512

 

 

 

 

 

 

 

 

 

Restricted cash and cash equivalents (1)

 

 

156

 

 

681

 

 

 

 

 

 

 

 

 

Other investment securities:

 

 

 

 

 

 

 

Other investment securities - equity method

 

 

111,600

 

 

25,098

 

Other investment securities - cost method

 

 

8,150

 

 

8,150

 

Total other investment securities

 

 

119,750

 

 

33,248

 

 

 

 

 

 

 

 

 

Total marketable investment securities, restricted cash and cash equivalents, and other investment securities

 

$

204,704

 

$

119,441

 

 

 

 

 

 

 

 

 

(1)

Restricted marketable investment securities and restricted cash and cash equivalents are included in “Restricted cash, cash equivalents and marketable investment securities” on our Condensed Consolidated Balance Sheets.

 

Marketable Investment Securities

 

Our marketable investment securities portfolio consists of various debt and equity instruments, all of which are classified as available-for-sale.

 

Current Marketable Investment Securities

 

Our current marketable investment securities portfolio includes investments in equity securities and/or various debt instruments including, among others, commercial paper, corporate securities and U.S. treasury and/or agency securities.

 

Commercial paper consists mainly of unsecured short-term, promissory notes issued primarily by corporations with maturities ranging up to 365 days.  Corporate securities consist of debt instruments issued by corporations with various maturities normally less than 18 months.  U. S. Treasury and agency securities consist of debt instruments issued by the federal government and other government agencies.

 

Restricted Cash, Cash Equivalents and Marketable Investment Securities

 

As of June 30, 2017 and December 31, 2016, our restricted marketable investment securities, together with our restricted cash and cash equivalents, included amounts required as collateral for our letters of credit.

 

Other Investment Securities

 

We have strategic investments in certain debt and equity securities that are included in noncurrent “Other investment securities” on our Condensed Consolidated Balance Sheets and accounted for using the cost, equity and/or available-for-sale methods of accounting.  Certain of our equity method investments are detailed below.

 

NagraStar L.L.C.  As a result of the completion of the Share Exchange on February 28, 2017, we own a 50% interest in NagraStar L.L.C. (“NagraStar”), a joint venture that is our primary provider of encryption and related security systems intended to assure that only authorized customers have access to our programming. 

10


 

Table of Contents

DISH DBS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

 

Invidi Technologies Corporation.  In November 2016, we, DIRECTV, LLC, a wholly-owned indirect subsidiary of AT&T Inc., and Cavendish Square Holding B.V., an affiliate of WPP plc, entered into a series of agreements to acquire Invidi Technologies Corporation (“Invidi”), an entity that provides proprietary software for the addressable advertising market.  The transaction closed in January 2017. 

 

Our ability to realize value from our strategic investments in securities that are not publicly traded depends on the success of the issuers’ businesses and their ability to obtain sufficient capital, on acceptable terms or at all, and to execute their business plans.  Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them.

 

Unrealized Gains (Losses) on Marketable Investment Securities

 

As of June 30, 2017 and December 31, 2016, we had accumulated net unrealized losses of less than $1 million and less than $1 million, respectively.  These amounts, net of related tax effect, were losses of less than $1 million and less than $1 million, respectively.  All of these amounts are included in “Accumulated other comprehensive income (loss)” within “Total stockholder’s equity (deficit).”  The components of our available-for-sale investments are summarized in the table below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2017

 

As of December 31, 2016

 

 

 

Marketable

 

 

 

 

 

 

 

 

 

 

Marketable

 

 

 

 

 

 

 

 

 

 

 

 

Investment

 

Unrealized

 

Investment

 

Unrealized

 

 

    

Securities

    

Gains

    

Losses

    

Net

    

Securities

    

Gains

    

Losses

    

Net

 

 

 

(In thousands)

 

Debt securities (including restricted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U. S. Treasury and agency securities

 

$

81,724

 

$

 —

 

$

(180)

 

$

(180)

 

$

81,982

 

$

13

 

$

(132)

 

$

(119)

 

Corporate securities

 

 

3,074

 

 

 —

 

 

(2)

 

 

(2)

 

 

3,530

 

 

 3

 

 

 —

 

 

 3

 

Total

 

$

84,798

 

$

 —

 

$

(182)

 

$

(182)

 

$

85,512

 

$

16

 

$

(132)

 

$

(116)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2017, restricted and non-restricted marketable investment securities included debt securities of $70 million with contractual maturities within one year and $15 million with contractual maturities extending longer than one year through and including five years.  Actual maturities may differ from contractual maturities as a result of our ability to sell these securities prior to maturity.

 

Fair Value Measurements

 

Our investments measured at fair value on a recurring basis were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of 

 

 

 

June 30, 2017

 

December 31, 2016

 

 

    

Total

    

Level 1

    

Level 2

    

Level 3

    

Total

    

Level 1

    

Level 2

    

Level 3

 

 

 

(In thousands)

 

Cash equivalents (including restricted)

 

$

1,094,273

 

$

55,589

 

$

1,038,684

 

$

 —

 

$

702,331

 

$

4,126

 

$

698,205

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities (including restricted):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U. S. Treasury and agency securities

 

$

81,724

 

$

81,724

 

$

 —

 

$

 —

 

$

81,982

 

$

81,982

 

$

 —

 

$

 —

 

Corporate securities

 

 

3,074