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 JUNE 30, 2021.

☐ 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 July 26, 2021, the registrant’s outstanding common stock consisted of 289,454,037 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 — June 30, 2021 and December 31, 2020 (Unaudited)	1

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	2

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For the Three and Six Months Ended June 30, 2021 and 2020 (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2021 and 2020 (Unaudited)	4

	Notes to Condensed Consolidated Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	71

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	106

Item 4.	Controls and Procedures	106

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	106

Item 1A.	Risk Factors	106

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	107

Item 3.	Defaults Upon Senior Securities	None

Item 4.	Mine Safety Disclosures	None

Item 5.	Other Information	None

Item 6.	Exhibits	108

	Signatures	109

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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, “EchoStar” refers to EchoStar 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:

SUMMARY OF RISK FACTORS

COVID-19 Pandemic

●

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.

Competition and Economic Risks

●

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 new technologies in our Pay-TV business 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.

●

We face certain risks competing in the wireless services industry and operating a facilities-based wireless services business.

●

Our pay-TV 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.

●

Through the MNSA, we depend primarily on T-Mobile in providing services to our retail wireless subscribers, and any system failure related to T-Mobile’s wireless network, interruption in the services provided by T-Mobile, including the shutdown of its CDMA Network on or around January 1, 2022 and/or the termination of the MNSA could negatively impact our subscriber activations, our subscriber churn rate and our subscriber base, which in turn could have a material adverse effect our business, financial condition and results of operations.

●

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

●

Economic weakness and uncertainty may adversely affect our ability to grow or maintain our business.

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Operational and Service Delivery Risks

●

Any deterioration in our operational performance and subscriber satisfaction could adversely affect our business, financial condition and results of operations.

●

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.

●

With respect to our Pay-TV business, programming expenses are increasing, which may adversely affect our future financial condition and results of operations.

●

We depend on others to provide the programming that we offer to our Pay-TV subscribers and, if we fail to obtain or lose access to certain programming, our Pay-TV 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.

●

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.

●

Our failure to effectively invest in, introduce, and implement new competitive products and services 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, and the inability of these key vendors to meet our needs could have a material adverse effect on our business.

●

We depend on independent third parties to solicit orders for our services that represent a meaningful percentage of our total gross new subscriber activations.

●

We have limited satellite capacity and failures or reduced capacity could adversely affect our business, financial condition and results of operations.

●

We may have potential conflicts of interest with EchoStar due to our common ownership and management.

●

We rely on highly skilled personnel for our business, and any inability to hire and retain key personnel or hire qualified personnel may negatively affect our business, financial condition and results of operations.

Acquisition and Capital Structure Risks

●

We have made substantial investments to acquire certain wireless spectrum licenses and other related assets, and we may be unable to realize a return on these assets.

●

We have made substantial non-controlling investments in the Northstar Entities and the SNR Entities related to AWS-3 wireless spectrum licenses, and we may be unable to obtain a profitable return on these investments.

●

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.

●

We have substantial debt outstanding and may incur additional debt.

●

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.

●

The conditional conversion features of our 3 3/8% Convertible Notes due 2026 (the “Convertible Notes due 2026”), our 2 3/8% Convertible Notes due 2024 (the “Convertible Notes due 2024”) and 0% Convertible Notes due 2025 (the “Convertible Notes due 2025,” and collectively with the Convertible Notes due 2026 and the Convertible Notes due 2024, the “Convertible Notes”), if triggered, may adversely affect our financial condition.

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●

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.

●

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

●

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.

Legal and Regulatory Risks

●

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 services depend on FCC licenses that can expire or be revoked or modified and applications for FCC licenses that may not be granted.

●

If our internal controls are not effective, our business, stock price and investor confidence in our financial results may be adversely affected.

●

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 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.

iii

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Item 1. FINANCIAL STATEMENTS

DISH NETWORK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

(Unaudited)


	As of
	June 30,		December 31,
	2021		2020
Assets
Current Assets:
Cash and cash equivalents	$	3,676,487	$	3,370,092
Marketable investment securities		1,152,803		362,953
Trade accounts receivable, net of allowance for credit losses of $49,779 and $72,278, respectively		977,284		1,104,202
Inventory		385,396		380,349
Other current assets		412,670		1,804,562
Total current assets		6,604,640		7,022,158

Noncurrent Assets:
Restricted cash, cash equivalents and marketable investment securities		246,352		108,369
Property and equipment, net		2,376,040		2,182,333
FCC authorizations		28,220,188		26,903,939
Other investment securities		153,945		149,706
Operating lease assets		293,570		104,271
Other noncurrent assets		985,627		1,009,045
Intangible assets, net		743,216		760,126
Total noncurrent assets		33,018,938		31,217,789
Total assets	$	39,623,578	$	38,239,947

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Trade accounts payable	$	523,179	$	395,397
Deferred revenue and other		762,354		855,718
Accrued programming		1,212,806		1,388,407
Accrued interest		262,665		264,118
Other accrued expenses		1,199,273		1,095,486
Current portion of long-term debt and finance lease obligations		76,349		2,085,620
Total current liabilities		4,036,626		6,084,746

Long-Term Obligations, Net of Current Portion:
Long-term debt and finance lease obligations, net of current portion (Note 10)		16,163,609		13,616,408
Deferred tax liabilities		3,977,044		3,869,570
Operating lease liabilities		253,321		63,526
Long-term deferred revenue and other long-term liabilities		467,303		474,404
Total long-term obligations, net of current portion		20,861,277		18,023,908
Total liabilities		24,897,903		24,108,654

Commitments and Contingencies (Note 11)

Redeemable noncontrolling interests (Note 2)		371,983		350,648

Stockholders’ Equity (Deficit):
Class A common stock, $.01 par value, 1,600,000,000 shares authorized, 289,439,668 and 287,720,957 shares issued and outstanding, respectively		2,894		2,877
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		4,670,508		5,400,774
Accumulated other comprehensive income (loss)		762		(855)
Accumulated earnings (deficit)		9,676,246		8,374,975
Total DISH Network stockholders’ equity (deficit)		14,352,794		13,780,155
Noncontrolling interests		898		490
Total stockholders’ equity (deficit)		14,353,692		13,780,645
Total liabilities and stockholders’ equity (deficit)	$	39,623,578	$	38,239,947

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 Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenue:
Service revenue	$	4,254,424	$	3,149,813	$	8,463,895	$	6,315,854
Equipment sales and other revenue		232,536		37,277		520,918		88,625
Total revenue		4,486,960		3,187,090		8,984,813		6,404,479

Costs and Expenses (exclusive of depreciation):
Cost of services		2,536,154		1,964,081		5,073,819		4,016,147
Cost of sales - equipment and other		349,769		29,319		773,310		71,029
Selling, general and administrative expenses		507,909		403,916		989,595		860,213
Impairment of long-lived assets (Note 2)		—		—		—		356,418
Depreciation and amortization		186,390		152,124		376,775		318,944
Total costs and expenses		3,580,222		2,549,440		7,213,499		5,622,751

Operating income (loss)		906,738		637,650		1,771,314		781,728

Other Income (Expense):
Interest income		3,286		5,578		5,256		19,794
Interest expense, net of amounts capitalized		(3,825)		(11,494)		(7,698)		(27,100)
Other, net		(7,210)		16		(12,471)		1,608
Total other income (expense)		(7,749)		(5,900)		(14,913)		(5,698)

Income (loss) before income taxes		898,989		631,750		1,756,401		776,030
Income tax (provision) benefit, net		(217,538)		(151,344)		(433,387)		(196,350)
Net income (loss)		681,451		480,406		1,323,014		579,680
Less: Net income (loss) attributable to noncontrolling interests, net of tax		10,404		28,063		21,743		54,238
Net income (loss) attributable to DISH Network	$	671,047	$	452,343	$	1,301,271	$	525,442

Weighted-average common shares outstanding - Class A and B common stock:
Basic		527,690		524,292		527,133		523,722
Diluted		635,976		582,619		634,944		582,071

Earnings per share - Class A and B common stock:
Basic net income (loss) per share attributable to DISH Network	$	1.27	$	0.86	$	2.47	$	1.00
Diluted net income (loss) per share attributable to DISH Network	$	1.06	$	0.78	$	2.05	$	0.90

Comprehensive Income (Loss):
Net income (loss)	$	681,451	$	480,406	$	1,323,014	$	579,680
Other comprehensive income (loss):
Foreign currency translation adjustments		378		(3,521)		2,220		(3,146)
Unrealized holding gains (losses) on available-for-sale debt securities		(17)		167		(21)		(41)
Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income (loss)		—		(54)		(1)		(54)
Deferred income tax (expense) benefit, net		(83)		546		(581)		595
Total other comprehensive income (loss), net of tax		278		(2,862)		1,617		(2,646)
Comprehensive income (loss)		681,729		477,544		1,324,631		577,034
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of tax		10,404		28,063		21,743		54,238
Comprehensive income (loss) attributable to DISH Network	$	671,325	$	449,481	$	1,302,888	$	522,796

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, 2019	$	5,230	$	4,947,007	$	(18)	$	6,612,302	$	(449)	$	11,564,072	$	552,075
Issuance of Class A common stock:
Exercise of stock awards		—		395		—		—		—		395		—
Employee Stock Purchase Plan		3		5,127		—		—		—		5,130		—
Non-cash, stock-based compensation		—		16,418		—		—		—		16,418		—
Change in unrealized holding gains (losses) on available-for-sale debt securities, net		—		—		(208)		—		—		(208)		—
Deferred income tax (expense) benefit attributable to other comprehensive income (loss)		—		—		49		—		—		49		—
Foreign currency translation		—		—		375		—		—		375		—
Net income (loss) attributable to noncontrolling interests		—		—		—		—		263		263		—
Net income (loss) attributable to DISH Network		—		—		—		73,099		—		73,099		25,912
Balance, March 31, 2020	$	5,233	$	4,968,947	$	198	$	6,685,401	$	(186)	$	11,659,593	$	577,987
Issuance of Class A common stock:
Exercise of stock awards		3		(663)		—		—		—		(660)		—
Employee benefits		8		28,293		—		—		—		28,301		—
Employee Stock Purchase Plan		2		4,209		—		—		—		4,211		—
Non-cash, stock-based compensation		—		18,393		—		—		—		18,393		—
Change in unrealized holding gains (losses) on available-for-sale debt securities, net		—		—		113		—		—		113		—
Deferred income tax (expense) benefit attributable to other comprehensive income (loss)		—		—		546		—		—		546		—
Foreign currency translation		—		—		(3,521)		—		—		(3,521)		—
Net income (loss) attributable to noncontrolling interests		—		—		—		—		235		235		27,828
Net income (loss) attributable to DISH Network		—		—		—		452,343		—		452,343		—
Other		—		—		—		—		(17)		(17)		—
Balance, June 30, 2020	$	5,246	$	5,019,179	$	(2,664)	$	7,137,744	$	32	$	12,159,537	$	605,815

Balance, December 31, 2020	$	5,261	$	5,400,774	$	(855)	$	8,374,975	$	490	$	13,780,645	$	350,648
Issuance of Class A common stock:
Exercise of stock awards		1		2,046		—		—		—		2,047		—
Employee benefits		9		30,294		—		—		—		30,303		—
Employee Stock Purchase Plan		2		4,341		—		—		—		4,343		—
Non-cash, stock-based compensation		—		19,375		—		—		—		19,375		—
Change in unrealized holding gains (losses) on available-for-sale debt securities, net		—		—		(5)		—		—		(5)		—
Deferred income tax (expense) benefit attributable to other comprehensive income (loss)		—		—		(498)		—		—		(498)		—
Foreign currency translation		—		—		1,842		—		—		1,842		—
Convertible debt reclassified per ASU 2020-06, net of deferred taxes of $245,778 (Note 2)		—		(805,566)		—		—		—		(805,566)