Organization and Business Activities

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principal Business

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

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

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

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

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

During 2017, we and certain of our subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries. We, and certain of our subsidiaries, received all of the shares of the Hughes Retail Preferred Tracking Stock previously issued by us and one of our subsidiaries (together, the “Tracking Stock”) in exchange for 100% of the equity interests of certain of our subsidiaries that held substantially all of our former EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Following the consummation of the Share Exchange, we no longer operate our former EchoStar Technologies businesses, the Tracking Stock was retired and is no longer outstanding, and all agreements, arrangements and policy statements with respect to the Tracking Stock terminated. As a result of the Share Exchange, the operating results of the EchoStar Technologies businesses were presented as discontinued operations in our historical consolidated financial statements in our Form 10-K.

Pending Transactions

In May 2019, we and one of our subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), entered into a master transaction agreement (the “Master Transaction Agreement”) with DISH and a wholly-owned subsidiary of DISH (“Merger Sub”). Pursuant to the terms of the Master Transaction Agreement; (i) we will transfer to BSS Corp. certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily relating to the portion of our ESS satellite services business that manages, markets and provides (1) broadcast satellite services primarily to DISH Network and Dish Mexico and its subsidiaries and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of our other businesses (collectively, the “BSS

Business”); (ii) we will distribute to each holder of shares of our Class A and Class B common stock an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to one share of BSS Common Stock for each share of our Class A and Class B common stock owned by such EchoStar stockholder on the record date for the distribution (the “Distribution”), which date has not yet been determined; and (iii) immediately after the Distribution, (1) Merger Sub will merge with and into BSS Corp. (the “Merger”), such that, at the effective time of the Merger (the “Effective Time”), BSS Corp. will become a wholly-owned subsidiary of DISH and DISH will own and operate the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders will be converted into a number of shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”), equal to 22,937,188 divided by the total number of shares of our Class A and Class B common stock outstanding on the record date for the Distribution ((i) - (iii) collectively, the “BSS Transaction”). If the BSS Transaction is consummated, we will no longer operate a substantial portion of our ESS segment.

The Master Transaction Agreement contains customary representations and warranties by the parties, including our representations relating to the assets, liabilities and financial condition of the BSS Business, and representations by DISH Network relating to its financial condition and liabilities. Prior to closing, we have agreed to conduct the BSS Business in the ordinary course and not to undertake specified actions without the written consent of DISH. Completion of the BSS Transaction is subject to the satisfaction or waiver of various closing conditions, including receipt of consents, regulatory approvals and tax opinions. We and DISH Network have agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. The Master Transaction Agreement provides for certain termination rights of EchoStar Corporation and DISH, including the right of either party to terminate the Master Transaction Agreement if the BSS Transaction has not been consummated by February 19, 2020, or if the mutual closing conditions become incapable of being satisfied, or is there is an incurable breach of the Master Transaction Agreement by the other party. In connection with the BSS Transaction, we and DISH and certain of our and its subsidiaries will enter into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property, transition services and certain TT&C satellite services.

In July 2019, a putative class action lawsuit was filed by a purported EchoStar stockholder naming as defendants the members of our board of directors, EchoStar Corporation, certain of our officers, DISH and certain of DISH Network’s and our affiliates. If the plaintiff obtains an injunction or order prohibiting or delaying the completion of the BSS Transaction, then such injunction or order may prevent the BSS Transaction from being completed, or from being completed within the expected timeframe or on the terms provided for in the Master Transaction Agreement. If the litigation delays the BSS Transaction or prevents the BSS Transaction from closing, our business, financial position and results of operation could be adversely affected. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the BSS Transaction is consummated, or any adverse final disposition, may adversely affect our respective business, financial condition, results of operations and cash flows. See Note 15 for further information.

The BSS Transaction, which is intended to be generally tax-free to us and our stockholders for U.S. federal income tax purposes, is expected to be completed during the second half of 2019, but there can be no assurance that the BSS Transaction will be consummated on the terms or within the time frame disclosed, or at all.