2016 Annual Report
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ANNUAL REPORT YEAR ENDING DECEMBER 31, 2016 9601 South Meridian Boulevard • Englewood, CO 80112 • 303.723.1000 • dish.com (NASDAQ – DISH) Corporate Profile Board of Directors Executive Officers Annual Meeting Charles W. Ergen Charles W. Ergen The 2017 Annual Meeting of Chairman Chairman & Shareholders will be held on Chief Executive Officer May 1, 2017. George R. Brokaw Director W. Erik Carlson Shareholder Information President & Chief Operating Officer James DeFranco Investor Relations Department Director Thomas A. Cullen DISH Network Corporation Executive Vice President, 9601 S. Meridian Blvd. Cantey M. Ergen Corporate Development Englewood, CO 80112 Director dish.com James DeFranco Steven R. Goodbarn Executive Vice President For more information, please visit Director the investor relations section of R. Stanton Dodge our website at dish.com. Charles M. Lillis Executive Vice President, Director General Counsel & Secretary Afshin Mohebbi Bernard L. Han Director Executive Vice President, Strategic Planning David K. Moskowitz Director Vivek Khemka Executive Vice President & Tom A. Ortolf Chief Technology Officer and Director President, DISH Technologies Carl E. Vogel Roger J. Lynch Director Executive Vice President, Advanced Technologies and CEO, Sling TV Transfer Agent Michael K. McClaskey Computershare Trust Company Executive Vice President & PO Box 43070 Chief Human Resources Officer Providence, RI 02940-3070 Brian V. Neylon Executive Vice President, Indenture Trustees Customer Acquisition & Retention US Bank National Association Paul W. Orban Corporate Trust Administration Chief Accounting Officer 60 Livingston Ave. St. Paul, MN 55107 Warren W. Schlichting Attn: Richard H. Prokosch Executive Vice President, Marketing, Programming & Wells Fargo Bank Media Sales National Association Corporate Trust Services Steven E. Swain 150 East 42nd St., 40th Floor Chief Financial Officer New York, NY 10017 Attn: Raymond Delli Colli John W. Swieringa Executive Vice President, A Nasdaq-100 Company Operations A Nasdaq-100 Company March 22, 2017 Dear DISH Network Shareholder: Before earning our first DISH Network customer in the spring of 1996, we had already spent 15 years selling large C-band satellite dishes. Since launching DISH Network, our hard work and ability to overcome countless obstacles in the Pay-TV industry are setting us up for the next stage in our journey. During 2016, we remained committed to sustaining the long-term profitability of our core DBS business. While total combined Pay-TV subscriber counts for DISH and Sling TV declined in the year, we achieved net subscriber additions in the fourth quarter. For the year, revenue was slightly up, as was ARPU, and we were consistently profitable. We focused on two customer-related goals: promoting profitable, long-term customer relationships and delivering the best customer experience. In the year, we introduced the Flex Pack skinny bundle as a way to give customers more programming choice at a better price point. From a customer perspective, we have worked to improve touchpoints by enhancing the overall service experience and creating apps that allow customers to manage their accounts and track their DISH technician. At the same time, we grew our now two-year-old Sling TV into the industry standard for live, over-the-top (OTT) Internet television. Our Sling TV team launched its Sling TV Blue multi-stream service for $25/month, complementing the $20/month Sling TV Orange single-stream service debuted in 2015. We introduced a beta version of our cloud-based DVR; we expect full deployment of that capability later this year. I’m proud to say that Sling TV offers the most choice and flexibility for customers in the OTT market. While our day-to-day efforts during 2016 were focused on our Pay-TV business, our future lies in our ability to transform DISH into a connectivity company. Our efforts toward that goal began in earnest in 2008 when we acquired 700 MHz E-Block wireless spectrum licenses. This work continues today. In the year, we made meaningful progress on this journey. 3GPP, the global wireless standards body, included part of our spectrum portfolio into a second band plan that allows DISH to participate in wireless infrastructure, including handsets and other devices. Additionally, 3GPP approved NarrowBand Internet of Things support for spectrum bands that include DISH spectrum. These developments pave the way for our entry into the coming 5G wireless ecosystem that we expect will serve tens of billions of devices in industry sectors as diverse as healthcare, entertainment, transportation and machine automation. The transformation we have pursued for many years is the product of hard work, planning, anticipation, and, most of all, patience. Those 15 years of selling C-band dishes enabled us to launch the EchoStar I satellite and ultimately, DISH Network. The subsequent 20 years of growing DISH Network into one of the largest Pay-TV businesses in the United States has provided us with the means to become a connectivity company - a company that will provide customers and businesses with revolutionary products and services. Thank you for your continued support. Sincerely, Charles W. Ergen Chairman and Chief Executive Officer (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, 2016 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: 0-26176 DISH Network Corporation (Exact name of registrant as specified in its charter) Nevada 88-0336997 (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) Registrant’s telephone number, including area code: (303) 723-1000 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, $0.01 par value The Nasdaq Stock Market L.L.C. 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 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 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 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 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. _ 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 Non-accelerated filer Smaller reporting (Do not check if a smaller reporting company) company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No _ As of June 30, 2016, the aggregate market value of Class A common stock held by non-affiliates of the registrant was $11.5 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 the last trading day of the month. As of February 13, 2017, the registrant’s outstanding common stock consisted of 226,918,482 shares of Class A common stock and 238,435,208 shares of Class B common stock, each $0.01 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 2017 Annual Meeting of Shareholders are incorporated by reference in Part III. (This page has been left blank intentionally) TABLE OF CONTENTS PART I Disclosure Regarding Forward-Looking Statements i Item 1. Business 1 Item 1A. Risk Factors 24 Item 1B. Unresolved Staff Comments 57 Item 2. Properties 58 Item 3. Legal Proceedings 58 Item 4. Mine Safety Disclosures 58 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity 59 Securities Item 6. Selected Financial Data 60 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 62 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 92 Item 8. Financial Statements and Supplementary Data 93 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 93 Item 9A. Controls and Procedures 93 Item 9B. Other Information 94 PART III Item 10.