Dish Network 2015 Annual Report Download - page 127

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-23
Restricted Cash, Cash Equivalents and Marketable Investment Securities
As of December 31, 2015 and 2014, our restricted marketable investment securities, together with our restricted
cash, included amounts required as collateral for our letters of credit.
Other Investment Securities
We have strategic investments in certain debt and equity securities that are included in noncurrent “Other investment
securities” on our Consolidated Balance Sheets and accounted for using the cost, equity and/or available-for-sale
methods of accounting.
Our ability to realize value from our strategic investments in securities that are not publicly traded depends on the
success of the issuers’ businesses and their ability to obtain sufficient capital, on acceptable terms or at all, and to
execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk
that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain
fair value for them.
Investment in Tracking Stock
To improve our position in the growing consumer satellite broadband market, among other reasons, on February 20,
2014, we entered into agreements with EchoStar to implement a transaction pursuant to which, among other things:
(i) on March 1, 2014, we transferred to EchoStar and Hughes Satellite Systems Corporation (“HSSC”), a subsidiary
of EchoStar, five satellites (EchoStar I, EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV (collectively the
“Transferred Satellites”), including related in-orbit incentive obligations and cash interest payments of
approximately $59 million), and approximately $11 million in cash in exchange for an aggregate of 6,290,499 shares
of a series of preferred tracking stock issued by EchoStar and an aggregate of 81.128 shares of a series of preferred
tracking stock issued by HSSC (collectively, the “Tracking Stock”); and (ii) beginning on March 1, 2014, we lease
back certain satellite capacity on the Transferred Satellites (collectively, the “Satellite and Tracking Stock
Transaction”). As of November 30, 2015, we no longer lease satellite capacity on the EchoStar I satellite. The
Tracking Stock generally tracks the residential retail satellite broadband business of Hughes Network Systems, LLC
(“HNS”), a wholly-owned subsidiary of HSSC, including without limitation the operations, assets and liabilities
attributed to the Hughes residential retail satellite broadband business (collectively, the “Hughes Retail Group”).
The shares of the Tracking Stock issued to us represent an aggregate 80% economic interest in the Hughes Retail
Group.
Since the Satellite and Tracking Stock Transaction is among entities under common control, we recorded the
Tracking Stock at EchoStar and HSSC’s historical cost basis for these instruments of $229 million and $87 million,
respectively. The difference between the historical cost basis of the Tracking Stock received and the net carrying
value of the Transferred Satellites of $356 million (including debt obligations, net of deferred taxes), plus the $11
million in cash, resulted in a $51 million capital transaction recorded in “Additional paid-in capital” on our
Consolidated Balance Sheets. Although our investment in the Tracking Stock represents an aggregate 80%
economic interest in the Hughes Retail Group, we have no operational control or significant influence over the
Hughes Retail Group business, and currently there is no public market for the Tracking Stock. As such, the
Tracking Stock is accounted for under the cost method of accounting.
On February 20, 2014, DISH Operating L.L.C. (“DOLLC”) and DISH Network L.L.C. (“DNLLC”), each indirect
wholly-owned subsidiaries of us, entered into an Investor Rights Agreement with EchoStar and HSSC with respect
to the Tracking Stock (the “Investor Rights Agreement”). The Investor Rights Agreement provides, among other
things, certain information and consultation rights for us; certain transfer restrictions on the Tracking Stock and
certain rights and obligations to offer and sell under certain circumstances (including a prohibition on transfers of
the Tracking Stock for one year, with continuing transfer restrictions (including a right of first offer in favor of
EchoStar) thereafter, an obligation to sell the Tracking Stock to EchoStar in connection with a change of control of
us and a right to require EchoStar to repurchase the Tracking Stock in connection with a change of control of
EchoStar, in each case subject to certain terms and conditions); certain registration rights; certain obligations to