Dish Network 1998 Annual Report Download - page 32

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Satellite services revenue totaled $11 million during 1997, an increase of $5 million, or 91%, compared to
1996. The increase in satellite services revenue was primarily attributable to an increase in the number of content
providers, increased usage by our BTV customers, and an entire year of operation in 1997.
C-band and other revenue totaled $30 million for 1997, a decrease of $25 million compared to $55 million
in 1996. Other revenue principally related to domestic and international sales of C-band products and net domestic
C-band programming revenues. This decrease resulted from the world-wide decrease in demand for C-band
products and services. Effective January 1, 1998, we ceased operation of our C-band programming.
DISH Network Operating Expenses. DISH Network operating expenses totaled $193 million during 1997,
an increase of $151 million as compared to 1996. The increase in DISH Network operating expenses was primarily
attributable to operation of the DISH Network during the entirety of 1997 and the increase in the number of DISH
Network subscribers. Subscriber-related expenses totaled $144 million in 1997, an increase of $121 million
compared to 1996. Such expenses totaled 48% of subscription television services revenues, compared to 46% of
subscription television services revenues during 1996. Satellite and transmission expenses increased $8 million in
1997 compared to 1996 primarily as a result of the operation of the DISH Network, including EchoStar II, during the
entirety of 1997. Customer service center and other operating expenses totaled $35 million in 1997, an increase of
$22 million as compared to 1996. The increase in customer service center and other operating expenses was directly
attributable to the operation of the DISH Network during the entirety of 1997, combined with the increase in the
number of DISH Network subscribers.
Cost of sales – DTH equipment and Integration Services. Cost of sales – DTH equipment and integration
services totaled $62 million during 1997, a decrease of $14 million, or 19%, as compared to 1996. During 1997,
cost of sales – DTH equipment and integration services principally represented costs associated with set-top boxes
and related components sold to international DTH operators. For 1996, cost of sales – DTH equipment and
integration services totaled $76 million and represented costs of EchoStar receiver systems sold prior to the August
1996 rollout of our 1996 Promotion.
Cost of sales – C-band and other. Cost of sales – C-band and other totaled $24 million during 1997, a
decrease of $18 million compared to 1996. This decrease was consistent with the decrease in related revenues and
resulted from the world-wide decrease in the demand for C-band products and services.
Marketing Expenses. Marketing expenses totaled $180 million for 1997, an increase of $128 million as
compared to 1996. The increase in marketing expenses was primarily attributable to the increase in subscriber
promotion subsidies. These costs totaled $145 million during 1997, an increase of $111 million over 1996. This
increase resulted from the commencement of the 1997 Promotion, a marketing promotion that maintained the
suggested retail price for a standard EchoStar receiver system at $199, but eliminated the requirement for the coincident
purchase of an extended subscription commitment, and the increase in the number of EchoStar receiver systems sold
during 1997. Advertising and other expenses increased $17 million to $35 million during 1997 as a result of increased
marketing activity and operation of the DISH Network during the entirety of 1997.
General and Administrative Expenses. G&A expenses totaled $69 million for 1997, an increase of
$17 million as compared to 1996. The increase in G&A expenses was principally attributable to increased personnel
expenses to support the growth of the DISH Network. G&A expenses as a percentage of total revenue decreased to
15% during 1997 as compared to 26% during 1996.
Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA was negative $51 million for
1997, as compared to EBITDA of negative $66 million for 1996. EBITDA, as adjusted to exclude amortization of
subscriber acquisition costs, was negative $173 million for 1997 as compared to negative $82 million for 1996. This
improvement in EBITDA resulted from the factors affecting revenue and expenses discussed above. EBITDA does
not purport to represent cash provided by or used by operating activities and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with generally accepted accounting principles.
Depreciation and Amortization. Depreciation and amortization expenses for 1997, including amortization
of subscriber acquisition costs of $122 million, aggregated $173 million in 1997, an increase of $130 million, as
compared to 1996. The increase in depreciation and amortization expenses principally resulted from amortization of