SEC Filing | Dish

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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 SEPTEMBER 30, 2020.

☐ 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: 001-39144

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)

(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)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.01 par value	DISH	The Nasdaq Stock Market L.L.C.

Securities registered pursuant to Section 12(g) of the Act: None

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 every Interactive Data File required to be submitted 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 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 ☐ 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 October 22, 2020, the registrant’s outstanding common stock consisted of 287,530,751 shares of Class A common stock and 238,435,208 shares of Class B common stock.

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TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

	Disclosure Regarding Forward-Looking Statements	i

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets — September 30, 2020 and December 31, 2019 (Unaudited)	1

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2020 and 2019 (Unaudited)	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	78

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	120

Item 4.	Controls and Procedures	120

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	120

Item 1A.	Risk Factors	120

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	121

Item 3.	Defaults Upon Senior Securities	None

Item 4.	Mine Safety Disclosures	None

Item 5.	Other Information	121

Item 6.	Exhibits	124

	Signatures	125

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PART I — FINANCIAL INFORMATION

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Unless otherwise required by the context, in this report, the words “DISH Network,” the “Company,” “we,” “our” and “us” refer to DISH Network Corporation and its subsidiaries and “DISH DBS” refers to DISH DBS Corporation, a wholly-owned, indirect subsidiary of DISH Network, 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 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.

●

The COVID-19 pandemic and its impact on the economic environment generally, and on us specifically, have adversely impacted our business. Furthermore, any continuation or worsening of the pandemic and economic environment could have a material adverse effect on our business, financial condition and results of operations.

●

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.

●

If government regulations relating to the Internet change, we may need to alter the manner in which we conduct our SLING TV business, and/or incur greater operating expenses to comply with those regulations.

●

Changes in how network operators handle and charge for access to data that travels across their networks could adversely impact our business.

●

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.

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Operational and Service Delivery Risks

●

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

●

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

●

Programming expenses are increasing and may 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 certain programming, our subscriber activations and our subscriber churn rate 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 or those of third parties that we use in our operations, including, without limitation, those caused by cyber-attacks or other malicious activities, could disrupt or harm our business.

●

Through the MNSA, we depend on NTM to provide services to our retail wireless customers, and any system failure related to NTM’s wireless network, interruption in the services provided by NTM and/or the termination of the MNSA could negatively impact our subscriber activations and our subscriber churn rate, which in turn could have a material adverse effect on our business, financial condition and results of operations.

●

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 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 DISH TV services that represent a meaningful percentage of our total gross new DISH TV subscriber activations.

●

We have limited satellite capacity and failures or reduced capacity could adversely affect our DISH TV services.

●

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

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●

Satellite anomalies or technological failures could adversely affect the value of a particular satellite or result in a complete loss. Some of the satellites acquired pursuant to the Master Transaction Agreement have experienced anomalies that may affect their useful lives or prohibit us from operating them to their currently expected capacity, and one or more of the satellites may suffer a technological failure, either of which could have an adverse effect on our business, financial condition and results of operations.

●

We generally do not carry commercial in-orbit insurance on any of the satellites that we own and could face significant impairment charges if any of our owned satellites fail.

●

We may have potential conflicts of interest with EchoStar Corporation (“EchoStar”) due to our common ownership and management.

●

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

Acquisition and Capital Structure Risks

●

We have made substantial investments to acquire certain wireless spectrum licenses and other related assets. In addition, we have made substantial non-controlling investments in the Northstar Entities and the SNR Entities related to AWS-3 wireless spectrum licenses.

●

We face certain risks related to our non-controlling investments in the Northstar Entities and the SNR Entities, which may have a material adverse effect on our business, results of operations and financial condition.

●

To the extent that we commercialize our wireless spectrum licenses, we will face certain risks entering and competing in the wireless services industry and operating a facilities-based wireless services business.

●

Our wireless spectrum licenses are subject to certain interim and final build-out requirements, as well as certain renewal requirements. The failure to meet such build-out and/or renewal requirements may have a material adverse effect on our business, results of operations and financial condition.

●

We rely on highly skilled personnel for our wireless business, including without limitation our ability to meet build-out requirements, and if we are unable to hire and retain key personnel or hire qualified personnel then our wireless business may be adversely affected.

●

We may fail to realize all of the anticipated benefits of the Boost Mobile Acquisition.

●

The integration of the BSS Business may not be as successful as anticipated.

●

We may fail to realize all of the anticipated benefits of the Master Transaction Agreement.

●

Despite the acquisition of additional satellites acquired pursuant to the Master Transaction Agreement, we continue to have limited satellite capacity, and failures or reduced capacity could adversely affect our DISH TV services.

●

Current DISH Network stockholders have reduced ownership and voting interest in and exercise less influence over management of DISH Network following the closing of the Master Transaction Agreement.

●

If we were to take certain actions that could cause the Distribution to become taxable to EchoStar, we may be required to indemnify EchoStar for any resulting tax liability, and the indemnity amounts could be substantial.

●

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.

iii

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●

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.

●

The conditional conversion features of our 3 3/8% Convertible Notes due 2026 (the “Convertible Notes due 2026”) and our 2 3/8% Convertible Notes due 2024 (the “Convertible Notes due 2024,” and collectively with the Convertible Notes due 2026, the “Convertible Notes”), if triggered, may adversely affect our financial condition.

●

The convertible note hedge and warrant transactions that we entered into in connection with the offering of the Convertible Notes due 2026 may affect the value of the Convertible Notes due 2026 and our Class A common stock.

●

We are subject to counterparty risk with respect to the convertible note hedge transactions.

●

From time to time a portion of our investment portfolio may be invested in securities that have limited liquidity and may not be immediately accessible to support our financing needs, including investments in public companies that are highly speculative and have experienced and continue to experience volatility.

●

It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders, because of our ownership structure.

●

We are controlled by one principal stockholder who is also our Chairman.

Legal and Regulatory Risks

●

The rulings in the Telemarketing litigation requiring us to pay up to an aggregate amount of $280 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 DISH TV services depend on FCC licenses that can expire or be revoked or modified and applications for FCC licenses that may not be granted.

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●

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 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 our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and June 30, 2020, 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 Discussion and Analysis of Financial Condition and 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.

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Item 1. FINANCIAL STATEMENTS

DISH NETWORK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

(Unaudited)


	As of
	September 30,		December 31,
	2020		2019
Assets
Current Assets:
Cash and cash equivalents	$	1,811,308	$	2,443,643
Marketable investment securities		983,859		416,704
Trade accounts receivable, net of allowance for credit losses and allowance for doubtful accounts of $64,614 and $19,280, respectively		1,143,500		588,358
Inventory		516,216		322,898
Other current assets		550,588		243,497
Total current assets		5,005,471		4,015,100

Noncurrent Assets:
Restricted cash, cash equivalents and marketable investment securities		108,388		61,067
Property and equipment, net		2,226,423		2,706,182
FCC authorizations		26,665,485		25,779,503
Other investment securities		148,246		160,074
Operating lease assets		112,922		144,330
Other noncurrent assets, net		1,031,216		228,264
Intangible assets, net (Note 8)		802,286		136,415
Total noncurrent assets		31,094,966		29,215,835
Total assets	$	36,100,437	$	33,230,935

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Trade accounts payable	$	747,533	$	280,645
Deferred revenue and other		861,843		681,484
Accrued programming		1,330,687		1,308,531
Accrued interest		189,762		236,087
Other accrued expenses		1,307,666		817,978
Current portion of long-term debt and finance lease obligations		2,092,638		1,171,366
Total current liabilities		6,530,129		4,496,091

Long-Term Obligations, Net of Current Portion:
Long-term debt and finance lease obligations, net of current portion		11,989,762		12,968,229
Deferred tax liabilities		3,635,500		2,870,655
Operating lease liabilities		73,057		84,795
Long-term deferred revenue and other long-term liabilities		546,527		695,018
Total long-term obligations, net of current portion		16,244,846		16,618,697
Total liabilities		22,774,975		21,114,788

Commitments and Contingencies (Note 11)

Redeemable noncontrolling interests (Note 2)		633,949		552,075

Stockholders’ Equity (Deficit):
Class A common stock, $.01 par value, 1,600,000,000 shares authorized, 287,530,751 and 284,603,818 shares issued and outstanding, respectively		2,875		2,846
Class B common stock, $.01 par value, 800,000,000 shares authorized, 238,435,208 shares issued and outstanding		2,384		2,384
Additional paid-in capital		5,045,237		4,947,007
Accumulated other comprehensive income (loss)		(1,583)		(18)
Accumulated earnings (deficit)		7,642,343		6,612,302
Total DISH Network stockholders’ equity (deficit)		12,691,256		11,564,521
Noncontrolling interests		257		(449)
Total stockholders’ equity (deficit)		12,691,513		11,564,072
Total liabilities and stockholders’ equity (deficit)	$	36,100,437	$	33,230,935

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

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DISH NETWORK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands, except per share amounts)

(Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenue:
Service revenue	$	4,222,145	$	3,117,191	$	10,537,999	$	9,427,533
Equipment sales and other revenue		309,446		51,172		398,071		139,286
Total revenue		4,531,591		3,168,363		10,936,070		9,566,819

Costs and Expenses (exclusive of depreciation):
Cost of services		2,488,969		2,041,578		6,505,116		6,354,770
Cost of sales - equipment and other		515,643		55,753		586,672		147,210
Selling, general and administrative expenses		516,648		447,959		1,376,861		1,251,893
Impairment of long-lived assets (Note 2)		-		-		356,418		-
Depreciation and amortization		199,083		154,181		518,027		457,022
Total costs and expenses		3,720,343		2,699,471		9,343,094		8,210,895

Operating income (loss)		811,248		468,892		1,592,976		1,355,924

Other Income (Expense):
Interest income		1,647		32,301		21,440		65,944
Interest expense, net of amounts capitalized		6,778		(6,027)		(20,322)		(17,598)
Other, net		(13,200)		(1,796)		(11,592)		10,124
Total other income (expense)		(4,775)		24,478		(10,474)		58,470

Income (loss) before income taxes		806,473		493,370		1,582,502		1,414,394
Income tax (provision) benefit, net		(273,514)		(116,213)		(469,864)		(335,372)
Net income (loss)		532,959		377,157		1,112,638		1,079,022
Less: Net income (loss) attributable to noncontrolling interests, net of tax		28,360		23,853		82,597		68,914
Net income (loss) attributable to DISH Network	$	504,599	$	353,304	$	1,030,041	$	1,010,108

Weighted-average common shares outstanding - Class A and B common stock:
Basic		525,532		477,495		524,329		471,736
Diluted		583,957		535,746		582,595		530,041

Earnings per share - Class A and B common stock:
Basic net income (loss) per share attributable to DISH Network	$	0.96	$	0.74	$	1.96	$	2.14
Diluted net income (loss) per share attributable to DISH Network	$	0.86	$	0.66	$	1.77	$	1.91

Comprehensive Income (Loss):
Net income (loss)	$	532,959	$	377,157	$	1,112,638	$	1,079,022
Other comprehensive income (loss):
Foreign currency translation adjustments		1,411		(237)		(1,735)		(52)
Unrealized holding gains (losses) on available-for-sale debt securities		(21)		(211)		(62)		1,180
Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income (loss)		43		(2)		(11)		(298)
Deferred income tax (expense) benefit, net		(352)		49		243		(208)
Total other comprehensive income (loss), net of tax		1,081		(401)		(1,565)		622
Comprehensive income (loss)		534,040		376,756		1,111,073		1,079,644
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of tax		28,360		23,853		82,597		68,914
Comprehensive income (loss) attributable to DISH Network	$	505,680	$	352,903	$	1,028,476	$	1,010,730

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

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DISH NETWORK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)


					Accumulated
	Class A and B		Additional		Other		Accumulated						Redeemable
	Common		Paid-In		Comprehensive		Earnings		Noncontrolling				Noncontrolling
	Stock		Capital		Income (Loss)		(Deficit)		Interests		Total		Interests
Balance, December 31, 2018	$	4,679	$	3,379,093	$	(874)	$	5,212,790	$	(1,499)	$	8,594,189	$	460,068
Issuance of Class A common stock:
Exercise of stock awards		—		227		—		—		—		227		—
Employee Stock Purchase Plan		2		4,520		—		—		—		4,522		—
Non-cash, stock-based compensation		—		11,537		—		—		—		11,537		—
Change in unrealized holding gains (losses) on available-for-sale debt securities, net		—		—		1,006		—		—		1,006		—
Deferred income tax (expense) benefit attributable to other comprehensive income (loss)		—		—		(236)		—		—		(236)		—
Foreign currency translation		—		—		47		—		—		47		—
Net income (loss) attributable to noncontrolling interests		—		—		—		—		164		164		21,374
Net income (loss) attributable to DISH Network		—		—		—		339,761		—		339,761		—
Balance, March 31, 2019	$	4,681	$	3,395,377	$	(57)	$	5,552,551	$	(1,335)	$	8,951,217	$	481,442
Issuance of Class A common stock:
Exercise of stock awards		6		18,620		—		—		—		18,626		—
Employee benefits		11		26,993		—		—		—		27,004		—
Employee Stock Purchase Plan		1		4,040		—		—		—		4,041		—
Non-cash, stock-based compensation		—		12,105		—		—		—		12,105		—
Change in unrealized holding gains (losses) on available-for-sale debt securities, net		—		—		89		—		—		89		—
Deferred income tax (expense) benefit attributable to other comprehensive income (loss)		—		—		(21)		—		—		(21)		—
Foreign currency translation		—		—		138		—		—		138		—
Net income (loss) attributable to noncontrolling interests		—		—		—		—		269		269		23,254
Net income (loss) attributable to DISH Network		—		—		—		317,043		—		317,043		—
Balance, June 30, 2019	$	4,699	$	3,457,135	$	149	$	5,869,594	$	(1,066)	$	9,330,511	$	504,696
Issuance of Class A common stock:
Exercise of stock awards		1		77		—		—		—		78		—
Employee Stock Purchase Plan	</