2014 Annual Report
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Annual Report NASDAQ: SATS Year Ended December 31, 2014 100 Inverness Terrace East Englewood, CO 80112 303.706.4000 | echostar.com March 20, 2015 Dear EchoStar Corporation Shareholders, 2014 was another outstanding year for EchoStar. From our financial performance to our continued progress in the satellite, broadband and video distribution platforms, we continue to demonstrate why we are a leader in the global provisioning of satellite operations and video-delivery solutions. EchoStar ended the 2014 fiscal year very strong, and we continue to meet our financial goals as a corporation. Revenues were $3.45 billion, increasing 5% over 2013, and EBITDA was $903 million—a 39% increase over the fiscal year 2013. Net Income attributable to EchoStar shareholders increased from $5 million in 2013 to $165 million in 2014. We continue to have a very strong balance sheet, with approximately $1.7 billion of cash and marketable securities, giving us ample resources to continue to pursue our strategic objectives. EchoStar has evolved into one of the world’s largest products-and-services companies for satellite-based broadcast and broadband networking. Our vertical integration gives us a unique position in our current markets and also in other markets that we continue to enter. Each of our four divisions plays a role in this strategy, and as we go into the future we will make investments to increase our market share in all of these segments: x We now own, lease and/or manage 24 satellites and continue to add to this fleet. In addition to the Ku and Ka satellites that we have in our fleet, we now have five satellites under construction, including a satellite for mobility services in Europe. x We are the largest provider of consumer broadband satellite services in North America, and lead the global satellite enterprise market. In the United States and Europe, we have evolved into the managed network services business to serve the enterprise market and their multi-location telecommunication needs. x We have what we believe to be one of the largest technically diverse broadcast operations, fiber networks, online systems and satellite operations centers in the world, serving over 16+ million consumers. When combined with the finest set-top products available, this makes us a key partner for any new satellite DTH program being contemplated. x We are a leading provider of over-the-top (OTT) technology and services through our patented adaptive streaming technology and our proven OTT television distribution platform. Sling TV, a revolutionary first of its kind OTT television service, was recently launched by DISH Network Corporation on the EchoStar OTT platform to outstanding reviews and better than expected subscriber demand. Our new investments currently underway include a broadband consumer business in Brazil, a home automation system, additions to our satellite fleet for consumer broadband and FSS services in North America, a mobility satellite service in Europe, and continued opportunities for DTH services in Brazil. These all are exciting initiatives, and when coupled with our world-class engineers, we are well positioned to continue to evolve and grow the company for the long term. We remain committed to you, our shareholders. Thank you for your continued support. Sincerely, Charles W. Ergen Chairman of the Board of Directors (This page has been left blank intentionally.) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ፤ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014 OR អ 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: 001-33807 EchoStar Corporation (Exact name of registrant as specified in its charter) Nevada 26-1232727 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 100 Inverness Terrace East, Englewood, Colorado 80112-5308 (Address of Principal Executive Offices) (Zip Code) Registrant’s telephone number, including area code: (303) 706-4000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Class A common stock, $0.001 par value The NASDAQ Stock Market LLC Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ፤ No អ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes អ No ፤ 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 អ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 អ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. អ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act. Large accelerated filer ፤ Accelerated filer អ Non-accelerated filer អ Smaller reporting company អ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes អ No ፤ As of June 30, 2014, the aggregate market value of Class A common stock held by non-affiliates of the registrant was $2.29 billion based upon the closing price of the Class A common stock as reported on the Nasdaq Global Select Market as of the close of business on that date. As of February 13, 2015, the registrant’s outstanding common stock consisted of 44,109,045 shares of Class A common stock and 47,687,039 shares of Class B common stock, each $0.001 par value. DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated into this Form 10-K by reference: Portions of the registrant’s definitive Proxy Statement to be filed in connection with its 2015 Annual Meeting of Shareholders are incorporated by reference in Part III. (This page has been left blank intentionally.) TABLE OF CONTENTS Disclosure Regarding Forward Looking Statements .................................. i PART I Item 1. Business ........................................................ 1 Item 1A. Risk Factors ..................................................... 18 Item 1B. Unresolved Staff Comments .......................................... 37 Item 2. Properties ....................................................... 38 Item 3. Legal Proceedings ................................................. 39 Item 4. Mine Safety Disclosures ............................................. 39 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ....................................... 40 Item 6. Selected Financial Data ............................................. 40 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ..................................................... 42 Item 7A. Quantitative and Qualitative Disclosures about Market Risk ................... 76 Item 8. Financial Statements and Supplementary Data ............................. 78 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ..................................................... 78 Item 9A. Controls and Procedures ............................................ 78 Item 9B. Other Information ................................................. 79 PART III Item 10. Directors, Executive Officers and Corporate Governance ..................... 80 Item 11. Executive Compensation ............................................ 80 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............................................. 80 Item 13. Certain Relationships and Related Transactions, and Director Independence ....... 80 Item 14. Principal Accounting Fees and Services .................................. 80 PART IV Item 15. Exhibits, Financial Statement Schedules ................................. 81 Signatures ....................................................... 89 Index to Consolidated Financial Statements ............................... F-1 DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS This Annual Report on Form 10-K (‘‘Form 10-K’’) contains ‘‘forward-looking statements’’ within the meaning of the Private Securities Litigation Reform Act of 1995, including