6.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 December 31,
	2015		2014
	(In thousands)
Marketable investment securities:
Current marketable investment securities - strategic	$	259,145	$	711,213
Current marketable investment securities - other		298,766		1,420,532
Total current marketable investment securities		557,911		2,131,745
Restricted marketable investment securities (1)		82,280		76,970
Total marketable investment securities		640,191		2,208,715

Restricted cash and cash equivalents (1)		94		10,014

Other investment securities:
Investment in EchoStar preferred tracking stock - cost method		228,795		228,795
Investment in HSSC preferred tracking stock - cost method		87,409		87,409
Other investment securities - cost method		11,046		11,046
Total other investment securities		327,250		327,250

Total marketable investment securities, restricted cash and cash equivalents, and other investment securities	$	967,535	$	2,545,979

(1)

Restricted marketable investment securities and restricted cash and cash equivalents are included in “Restricted cash and marketable investment securities” on our 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, except as specified below. See Note 2 for further information.

Current Marketable Investment Securities - Strategic

Our current strategic marketable investment securities portfolio includes strategic and financial debt and equity investments in public companies that are highly speculative and have experienced and continue to experience volatility. As of December 31, 2015, this portfolio consisted of securities of a small number of issuers, and as a result the value of that portfolio depends, among other things, on the performance of those issuers. The fair value of certain of the debt and equity securities in this portfolio can be adversely impacted by, among other things, the issuers’ respective performance and ability to obtain any necessary additional financing on acceptable terms, or at all.

Current Marketable Investment Securities – Other

Our current marketable investment securities portfolio includes investments in 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 December 31, 2015 and 2014, our restricted marketable investment securities, together with our restricted cash, 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 Consolidated Balance Sheets and accounted for using the cost, equity and/or available-for-sale methods of accounting.

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.

Investment in Tracking Stock

To improve our position in the growing consumer satellite broadband market, among other reasons, on February 20, 2014, we entered into agreements with EchoStar to implement a transaction pursuant to which, among other things: (i) on March 1, 2014, we transferred to EchoStar and Hughes Satellite Systems Corporation (“HSSC”), a subsidiary of EchoStar, five satellites (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV (collectively the “Transferred Satellites”), including related in-orbit incentive obligations and cash interest payments of approximately $59 million), and approximately $11 million in cash in exchange for an aggregate of 6,290,499 shares of a series of preferred tracking stock issued by EchoStar and an aggregate of 81.128 shares of a series of preferred tracking stock issued by HSSC (collectively, the “Tracking Stock”); and (ii) beginning on March 1, 2014, we lease back certain satellite capacity on the Transferred Satellites (collectively, the “Satellite and Tracking Stock Transaction”). As of November 30, 2015, we no longer lease satellite capacity on the EchoStar I satellite. The Tracking Stock generally tracks the residential retail satellite broadband business of Hughes Network Systems, LLC (“HNS”), a wholly-owned subsidiary of HSSC, including without limitation the operations, assets and liabilities attributed to the Hughes residential retail satellite broadband business (collectively, the “Hughes Retail Group”). The shares of the Tracking Stock issued to us represent an aggregate 80% economic interest in the Hughes Retail Group.

Since the Satellite and Tracking Stock Transaction is among entities under common control, we recorded the Tracking Stock at EchoStar and HSSC’s historical cost basis for these instruments of $229 million and $87 million, respectively. The difference between the historical cost basis of the Tracking Stock received and the net carrying value of the Transferred Satellites of $356 million (including debt obligations, net of deferred taxes), plus the $11 million in cash, resulted in a $51 million capital transaction recorded in “Additional paid-in capital” on our Consolidated Balance Sheets. Although our investment in the Tracking Stock represents an aggregate 80% economic interest in the Hughes Retail Group, we have no operational control or significant influence over the Hughes Retail Group business, and currently there is no public market for the Tracking Stock. As such, the Tracking Stock is accounted for under the cost method of accounting.

On February 20, 2014, DISH Operating L.L.C. (“DOLLC”) and DISH Network L.L.C. (“DNLLC”), each indirect wholly-owned subsidiaries of us, entered into an Investor Rights Agreement with EchoStar and HSSC with respect to the Tracking Stock (the “Investor Rights Agreement”). The Investor Rights Agreement provides, among other things, certain information and consultation rights for us; certain transfer restrictions on the Tracking Stock and certain rights and obligations to offer and sell under certain circumstances (including a prohibition on transfers of the Tracking Stock for one year, with continuing transfer restrictions (including a right of first offer in favor of EchoStar) thereafter, an obligation to sell the Tracking Stock to EchoStar in connection with a change of control of us and a right to require EchoStar to repurchase the Tracking Stock in connection with a change of control of EchoStar, in each case subject to certain terms and conditions); certain registration rights; certain obligations to provide conversion and exchange rights of the Tracking Stock under certain circumstances; and certain protective covenants afforded to holders of the Tracking Stock. The Investor Rights Agreement generally will terminate with respect to our interest should we no longer hold any shares of the HSSC-issued Tracking Stock and any registrable securities under the Investor Rights Agreement.

Unrealized Gains (Losses) on Marketable Investment Securities

As of December 31, 2015 and 2014, we had accumulated net unrealized gains of $98 million and $177 million, respectively. These amounts, net of related tax effect, were $62 million and $175 million, respectively. All of these amounts are included in “Accumulated other comprehensive income (loss)” within “Total stockholders’ equity (deficit).” The components of our available-for-sale investments are summarized in the table below.


	As of December 31,
	2015								2014
	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	$	82,124	$	2	$	(135)	$	(133)	$	58,254	$	7	$	(11)		(4)
Commercial paper		—		—		—		—		68,556		—		—		—
Corporate securities		349,897		29,370		(480)		28,890		1,496,044		72,918		(153)		72,765
Other		47,847		73		(17)		56		192,607		1,293		—		1,293
Equity securities		160,323		68,751		(41)		68,710		393,254		106,971		(4,346)		102,625
Total	$	640,191	$	98,196	$	(673)	$	97,523	$	2,208,715	$	181,189	$	(4,510)	$	176,679

As of December 31, 2015, restricted and non-restricted marketable investment securities included debt securities of $266 million with contractual maturities within one year, $121 million with contractual maturities extending longer than one year through and including five years and $93 million with contractual maturities longer than ten years. Actual maturities may differ from contractual maturities as a result of our ability to sell these securities prior to maturity.

Marketable Investment Securities in a Loss Position

The following table reflects the length of time that the individual securities, accounted for as available-for-sale, have been in an unrealized loss position, aggregated by investment category. As of December 31, 2015, the unrealized losses on our investments in equity securities represented investments in broad-based indices. We are not aware of any factors that indicate the unrealized losses in these investments are due to factors other than temporary market fluctuations. As of December 31, 2015, the unrealized losses related to our investments in debt securities primarily represented investments in corporate securities. We have the ability to hold and do not intend to sell our investments in these debt securities before they recover or mature, and it is more likely than not that we will hold these investments until that time. In addition, we are not aware of any specific factors indicating that the underlying issuers of these debt securities would not be able to pay interest as it becomes due or repay the principal at maturity. Therefore, we believe that these changes in the estimated fair values of these marketable investment securities are related to temporary market fluctuations.


	As of December 31,
	2015				2014
	Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss
	(In thousands)
Debt Securities:
Less than 12 months	$	303,194	$	(612)	$	280,738	$	(105)
12 months or more		7,512		(20)		135,853		(59)
Equity Securities:
Less than 12 months		6,133		(41)		15,338		(4,346)
12 months or more		—		—		—		—
Total	$	316,839	$	(673)	$	431,929	$	(4,510)

Fair Value Measurements

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


	As of December 31,
	2015								2014
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(In thousands)
Cash Equivalents (including restricted)	$	920,689	$	82,675	$	838,014	$	—	$	7,009,897	$	274,123	$	6,735,774	$	—

Debt securities (including restricted):
U. S. Treasury and agency securities	$	82,124	$	77,328	$	4,796	$	—	$	58,254	$	42,710	$	15,544	$	—
Commercial paper		—		—		—		—		68,556		—		68,556		—
Corporate securities		349,897		—		343,733		6,164		1,496,044		—		1,488,340		7,704
Other		47,847		—		47,648		199		192,607		—		58,171		134,436

Equity securities		160,323		160,323		—		—		393,254		393,254		—		—

Subtotal		640,191		237,651		396,177		6,363		2,208,715		435,964		1,630,611		142,140

Derivative financial instruments		556,828		—		556,828		—		383,460		—		383,460		—

Total	$	1,197,019	$	237,651	$	953,005	$	6,363	$	2,592,175	$	435,964	$	2,014,071	$	142,140

As of December 31, 2015, our Level 3 investments consisted predominately of corporate securities. As of December 31, 2014, our Level 3 investments consisted predominately of auction rate securities, which are included in “Other” above. On a quarterly basis we evaluate the reasonableness of significant unobservable inputs used in those measurements. For our Level 3 investments, we evaluate, among other things, the terms of the underlying instruments, the credit ratings of the issuers, current market conditions, and other relevant factors. Based on these factors, we assess the risk of realizing expected cash flows and we apply an observable discount rate that reflects this risk. We may also reduce our valuations to reflect a liquidity discount based on the lack of an active market for these securities.

Changes in Level 3 instruments were as follows:


	Level 3
	Investment
	Securities
	(In thousands)
Balance as of December 31, 2013	$	146,020
Net realized and unrealized gains (losses) included in earnings		(6,522)
Net realized and unrealized gains (losses) included in other comprehensive income (loss)		8,321
Purchases		—
Settlements		(5,679)
Issuances		—
Transfers into or out of Level 3		—
Balance as of December 31, 2014	$	142,140
Net realized and unrealized gains (losses) included in earnings		1,089
Net realized and unrealized gains (losses) included in other comprehensive income (loss)		(2,289)
Purchases		—
Settlements		(134,577)
Issuances		—
Transfers into or out of Level 3		—
Balance as of December 31, 2015	$	6,363

During the years ended December 31, 2015 and 2014, we had no transfers in or out of Level 1 and Level 2 fair value measurements.

Gains and Losses on Sales and Changes in Carrying Amounts of Investments

“Other, net” within “Other Income (Expense)” included on our Consolidated Statements of Operations and Comprehensive Income (Loss) is as follows:



	For the Years Ended December 31,
Other Income (Expense):	2015		2014		2013
	(In thousands)
Marketable investment securities - gains (losses) on sales/exchanges	$	119,448	$	7,649	$	157,444
Marketable investment securities - unrealized gains (losses) on investments accounted for using the Fair Value Option		—		4,727		26,371
Derivative financial instruments - net realized and/or unrealized gains (losses)		173,369		(59,015)		205,779
Marketable investment securities - other-than-temporary impairments		(5,567)		(13,876)		(1,919)
Other		(9,207)		(8,826)		(2,819)
Total	$	278,043	$	(69,341)	$	384,856