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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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
EchoStar Communications 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.)
5701 S. Santa Fe
Littleton, Colorado 80120
(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: None
Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, $0.01 par value
6 ¾% Series C Cumulative Convertible Preferred Stock
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 [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. [ ]
As of March 7, 2000, the aggregate market value of Class A Common Stock held by non-affiliates* of the
Registrant approximated $13.4 billion based upon the closing price of the Class A Common Stock as reported on the
Nasdaq National Market as of the close of business on that date.
As of March 7, 2000, the Registrant’s outstanding Common stock consisted of 114,079,274 shares of Class A
Common Stock and 119,217,604 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 the Annual Meeting of
Shareholders of Registrant to be held April 28, 2000 are incorporated by reference in Part III herein.
*Without acknowledging that any individual director or executive officer of the Company is an affiliate, the shares
over which they have voting control have been included as owned by affiliates solely for purposes of this
computation.

Table of contents

  • Page 1
    ... _____ to _____. Commission file number: 0-26176 EchoStar Communications Corporation (Exact name of registrant as specified in its charter) Nevada (State or other jurisdiction of incorporation or organization) 5701 S. Santa Fe Littleton, Colorado (Address of principal executive offices) 88-0336997...

  • Page 2
    ... About Market Risk...Financial Statements and Supplementary Data...Changes In and Disagreements with Accountants on Accounting and Financial Disclosure ...PART III Item 10. Item 11. Item 12. Item 13. Directors and Executive Officers of the Registrant...Executive Compensation...Security Ownership of...

  • Page 3
    ... of digital set-top boxes, or satellite receivers, necessary for consumers to receive DISH Network programming, and the sale of set-top boxes to international direct-to-home satellite operators. We have also provided uplink center design, construction oversight and other project integration services...

  • Page 4
    ...the "Satellite TV Providers" category. Components of a DBS System In order to provide programming services to DISH Network subscribers, we have entered into agreements with video, audio and data programmers, who deliver their programming content to our digital broadcast operations center in Cheyenne...

  • Page 5
    ... to include Internet and high-speed data services. We have formed a joint venture with OpenTV which will offer DISH Network customers an interactive digital receiver with a built-in hard disk drive that will permit viewers to pause and record live programs without the need for video tape. We...

  • Page 6
    ...a digital satellite receiver that descrambles signals for television viewing, a remote control, and other related components. We offer a number of set-top box models. Our standard system comes with an infrared remote control, an on-screen program guide, and the ability to switch between DISH Network...

  • Page 7
    ...nationwide retailers. Through our direct sales efforts, customers can call a single telephone number (1-800-333-DISH) 24 hours a day, seven days a week, to order EchoStar receiver systems, activate programming services, resolve billing questions, schedule installation or obtain technical support. We...

  • Page 8
    ...also offer point-of-sale literature, product displays, demonstration kiosks and signage for retail outlets. We provide guides to our dealers and distributors at nationwide educational seminars and directly by mail, that describe DISH Network products and services. Our mobile sales and marketing team...

  • Page 9
    ... watts per channel. EchoStar V has 32 transponders that operate at approximately 110 watts per channel, switchable to 16 transponders operating at approximately 220 watts per channel. Each transponder can transmit multiple digital video, audio and data channels. Each of our satellites has a minimum...

  • Page 10
    ...beam technology which could allow DISH Network to offer local channels or other value added services in as many as 60 or more markets across the United States. The spot beam payloads for each satellite have been designed to work together to maximize the number of local spot markets served across the...

  • Page 11
    ... DISH Network Business Our industry is highly competitive. Our competition includes companies that offer video, audio, data, programming and other entertainment services, including cable television, wireless cable, direct-to-home satellite, other DBS companies and companies that are developing new...

  • Page 12
    ... without extensive cable infrastructure. We also offer consulting and integration services to development stage, international direct-to-home satellite operators, which may result in sales of receiver systems to these customers. We are actively soliciting new business for ETC, but we can not provide...

  • Page 13
    ... Gilat-To-Home we plan to offer consumers two-way, high-speed satellite Internet access along with DISH Network satellite television programming via a single dish. Competition For Our Satellite Services Business We compete with a number of other companies, including those using similar and different...

  • Page 14
    ... special temporary authorization to operate the satellite over additional frequencies and at the 119.35° WL orbital location (instead of the authorized 119.2° WL location). Our current plan is to transition some of the programming now on EchoStar I and II to EchoStar IV, which can provide service...

  • Page 15
    ... We Could Lose We also have conditional authorizations for several other DBS and fixed service satellites that are not operational. One permit for 10 unspecified western frequencies was set to expire on August 15, 1995. Although we filed a timely extension request, the FCC has deferred a decision on...

  • Page 16
    ... business. Certain Other Communications Act Provisions. As a distributor of television programming, we are also affected by numerous laws and regulations, including the Communications Act. The FCC imposes different rules for "subscription" and "broadcast" services. We believe that because we offer...

  • Page 17
    ... or fees on direct-to-home satellite services, including DBS. Finally, the 1996 Act required that multi-channel video programming distributors, including DBS operators, fully scramble or block channels providing indecent or sexually explicit adult programming. If a multi-channel video programming...

  • Page 18
    ... these satellite operations could provide global high-speed data services. This would, among other things, create additional competition for satellite and other services. The FCC has also requested comment on a request that would allow a terrestrial service proposed by Northpoint Communications, Inc...

  • Page 19
    ...delete substantial programming from distant signals, including sports programming. We currently offer programming broadcast by local affiliates of national television networks to over 20 major population centers in the continental United States. Although we believe that the Satellite Home Viewer Act...

  • Page 20
    ... DirecTV. If we fail to receive such consents on or before May 29, 2000, we may have to turn off some viewers access to local network stations which could have an adverse effect on our strategy to compete with cable companies, which provide local programming. While the legislation directs the FCC to...

  • Page 21
    ... or a preliminary injunction is issued, significant material restrictions on the sale of distant ABC, NBC, CBS and Fox channels by us could result, including potentially a nationwide permanent prohibition on our broadcast of ABC, NBC, CBS and Fox network channels by satellite. The litigation and the...

  • Page 22
    ... Officer and President Executive Vice President and Director President, EchoStar Technologies Corporation Chief Operating and Financial Officer Senior Vice President, General Counsel, Secretary and Director Senior Vice President, Satellite Services Senior Vice President, Human Resources and Customer...

  • Page 23
    ...Network and Satellite Services DISH Network ETC and Other 156,000 155,000 132,800 100,000 100,000 Owned Owned Leased Leased Leased 120,000 78,500 Owned Owned Office and distribution center, Sacramento, California...Digital broadcast operations center, Cheyenne, Wyoming...Customer service center...

  • Page 24
    ... Edmonton against certain defendants, including EchoStar. WIC is a company authorized to broadcast certain copyrighted work, such as movies and concerts, to residents of Canada. WIC alleges that the defendants engaged in, promoted, and/or allowed satellite dish equipment from the United States to be...

  • Page 25
    ...CBS and Fox programming to many customers. In November 1999, Congress passed new legislation regarding the satellite delivery of network programming and it was signed into law by President Clinton. This new law has the potential of reducing the number of customers whose network channels EchoStar may...

  • Page 26
    ...RELATED STOCKHOLDER MATTERS Our Class A common stock is quoted on the Nasdaq Stock Market under the symbol "DISH." The high and low closing sale prices of the Class A common stock during 1998 and 1999 on the Nasdaq Stock Market (as reported by Nasdaq) are set forth below: 1998 First Quarter...Second...

  • Page 27
    ... ended December 31, 1999, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this report. 1995 Statements of Operations Data Revenue: DISH Network...DTH equipment sales and integration services...Satellite services ...C-band and other...

  • Page 28
    ...Other Data DISH Network subscribers...Average monthly revenue per subscriber ...EBITDA(2) ...Less amortization of subscriber acquisition costs ...EBITDA, as adjusted to exclude amortization of subscriber acquisition costs...Net cash flows from: Operating activities...Investing activities...Financing...

  • Page 29
    ...the number of DISH Network subscribers increases. As a result of our free system and free installation programs, our ability to provide major local broadcast network signals and general economic conditions, we expect strong sales during the first quarter of 2000. DISH Network subscription television...

  • Page 30
    ...and Canada. As a result, our ETC business currently is economically dependent on these two DTH providers. Our future revenue from the sale of DTH equipment and integration services in international markets depends largely on the success of these DTH operators and continued demand for our digital set...

  • Page 31
    ... marketing promotions to acquire new subscribers. During 1999, our marketing promotions included our DISH Network One-Rate Plan, C-band bounty program, Great Rewards program (PrimeStar bounty), cable bounty and a free installation program. Our subscriber acquisition costs under these programs...

  • Page 32
    ... costs, both in the aggregate and on a per new subscriber activation basis, may materially increase further to the extent that we continue or expand our bounty programs, our "free system/free installation" program, or the DISH Network One-Rate Plan, or if we determine that more aggressive promotions...

  • Page 33
    ... Satellite Services business units. DISH Network subscription television services revenue totaled $669 million for the year ended December 31, 1998, an increase of $370 million or 124% compared to 1997. This increase was directly attributable to the increase in the number of DISH Network subscribers...

  • Page 34
    ...a percentage of subscription television services revenue resulted primarily from a decrease in programming expenses on a per subscriber basis, which resulted from a change in product mix combined with price discounts received from certain content providers. Customer service center and other expenses...

  • Page 35
    ... CAPITAL RESOURCES Cash Sources Since inception, we have financed the development of our EchoStar DBS system and the related commercial introduction of the DISH Network service primarily through the sale of equity and debt securities and cash from operations. From May 1994 through December 31, 1999...

  • Page 36
    ... costs, both in the aggregate and on a per new subscriber activation basis, may materially increase further to the extent that we continue or expand our bounty programs, our "free system/free installation" program, or the DISH Network One-Rate Plan, or if we determine that more aggressive promotions...

  • Page 37
    ...cable and satellite programming has been widely reported and our signal encryption has been pirated and could be further compromised in the future. If other measures are not successful, it could be necessary to replace the credit card size card that controls the security of each consumer set top box...

  • Page 38
    ..., high-powered DBS satellites. The third satellite, EchoStar IX, will be a hybrid Ku/Ka-band satellite. The amount of capital required to fund our 2000 working capital and capital expenditure needs will vary, dependent upon the growth rate of the DISH Network, our subscriber acquisition costs...

  • Page 39
    ..., a 10% decrease in the average interest rate experienced in 1999 would not materially impact our annual interest income. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our Consolidated Financial Statements are included in this report beginning on page F-1. Item 9. CHANGES IN AND DISAGREEMENTS...

  • Page 40
    ...respect to the identity and business experience of our executive officers is set forth on page 20 of this report under the caption "Executive Officers." Item 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in our Proxy Statement for the Annual Meeting of Shareholders to...

  • Page 41
    ... FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: (1) Financial Statements Report of Independent Public Accountants...Consolidated Balance Sheets at December 31, 1998 and 1999...Consolidated Statements of Operations and Comprehensive...

  • Page 42
    ... 31, 1995, Commission File No. 026176). Registration Rights Agreement, dated as of June 25, 1997, by and among DBS Corp., EchoStar Communications Corporation, a Nevada corporation formed in April 1995 ("EchoStar"), EchoStar Satellite Broadcasting Corporation, a Colorado corporation, Dish, Ltd...

  • Page 43
    ... to Exhibit 4.8 to the Quarterly Report on Form 10-Q of EchoStar for the quarterly period ended September 30, 1997, Commission File No. 0-26176). Indenture of Trust, relating to DBS Corp.'s 12 1/4% Senior Notes due 2006 ( the "Seven Year Notes"), dated as of January 25, 1999, among DBS Corp., the...

  • Page 44
    ... to the Satellite Construction Contract, dated as of July 18, 1996, between ESC and Martin Marietta (incorporated by reference to Exhibit 10.1(h) to the Quarterly Report on Form 10-Q of EchoStar for the quarter ended June 30, 1996, Commission File No. 0-26176). Key Employee Bonus Plan, dated as of...

  • Page 45
    ....18 to the Annual Report on Form 10-K of EchoStar for the year ended December 31, 1996, as amended, Commission File No. 0-26176). Amendment No. 9 to Satellite Construction Contract, effective as of July 18, 1996, between Direct Satellite Broadcasting Corporation, a Delaware corporation ("DBSC") and...

  • Page 46
    ... the Current Report on Form 8-K of EchoStar, filed as of July 2, 1999, Commission File No. 0-26176). Registration Rights Agreement, dated June 24, 1999, by and among EchoStar Communications Corporation, MCI Telecommunications Corporation, American Sky Broadcasting, LLC, and News America Incorporated...

  • Page 47
    ... are entitled to one additional share of common stock for each share they own on the record date. On July 2, 1999, we filed a Current Report on Form 8-K to report that on June 24, 1999, we acquired certain high-power direct broadcast satellite assets from News Corporation and MCI in exchange for 34...

  • Page 48
    ...or 15(d) of the Securities Exchange Act of 1934, EchoStar has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ECHOSTAR COMMUNICATIONS CORPORATION By: /s/ Steven B. Schaver Steven B. Schaver Chief Financial Officer Date: March 13, 2000 Pursuant to the...

  • Page 49
    Page Consolidated Financial Statements: Report of Independent Public Accountants...Consolidated Balance Sheets at December 31, 1998 and 1999...Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 1997, 1998 and 1999 ...Consolidated Statements of Changes in ...

  • Page 50
    ... financial statements referred to above present fairly, in all material respects, the consolidated financial position of EchoStar Communications Corporation and subsidiaries as of December 31, 1998 and 1999, and the consolidated results of their operations and their cash flows for each of the three...

  • Page 51
    ...Insurance receivable...Inventories...Other current assets ...Total current assets ...Restricted Assets: Insurance receivable (Note 3) ...Interest and satellite escrows...Restricted cash and marketable investment securities...Total restricted assets...Property and equipment, net...FCC authorizations...

  • Page 52
    ...-related expenses...Customer service center and other ...Satellite and transmission...Total DISH Network operating expenses...Cost of sales - DTH equipment and integration services...Cost of sales - C-band and other ...Marketing: Subscriber promotion subsidies ...Advertising and other...Total...

  • Page 53
    ... public offering, net of stock issuance costs of $2,648 ...13,580 136 Employee benefits ...56 1 Employee Stock Purchase Plan...16 - Cancellation of Class A Common Stock to foreclose on convertible subordinated debentures from (1,080) (11) DBSI ...Unrealized holding losses on available-for-sale...

  • Page 54
    ... acquisition costs...Other current assets...Trade accounts payable...Deferred revenue...Accrued expenses...Net cash flows from operating activities...Cash Flows From Investing Activities: Purchases of marketable investment securities...Sales of marketable investment securities...Purchases of...

  • Page 55
    ...digital broadcast operations centers, customer service facilities, and other assets utilized in its operations. EchoStar's principal business strategy is to continue developing its subscription television service in the United States to provide consumers with a fully competitive alternative to cable...

  • Page 56
    ... addition, EchoStar incurs significant acquisition costs to obtain DISH Network subscribers. The high cost of obtaining new subscribers magnifies the negative effects of subscriber turnover. 2. Summary of Significant Accounting Policies Principles of Consolidation EchoStar accounts for investments...

  • Page 57
    ... Assets acquired from News Corporation and MCI: FCC licenses and other...- Satellites...- Digital broadcast operations center ...- Common Stock issued to News Corporation and MCI ...- The purchase price of DBSC was allocated as follows in the related purchase accounting: EchoStar III satellite under...

  • Page 58
    ... such discounted cash flow analyses reflect interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The following table summarizes the book and fair values of EchoStar's debt facilities and Series B Preferred Stock at December 31, 1998 and 1999 (in...

  • Page 59
    .... FCC Authorizations FCC authorizations are recorded at cost and amortized using the straight-line method over a period of 40 years. Such amortization commences at the time the related satellite becomes operational; capitalized costs are written off at the time efforts to provide services are...

  • Page 60
    ...services are performed. Subscriber Promotion Subsidies and Subscriber Acquisition Costs In August 1996, EchoStar began selling its receiver systems below manufactured cost to consumers conditioned upon the consumer's one-year prepaid subscription to the DISH Network's America's Top 50 CD programming...

  • Page 61
    ... fees...Marketing...Interest...Programming ...Advances from News Corporation and MCI for satellite payments...Other ...$ 53,746 33,463 24,918 35,472 - 36,871 $ 184,470 1999 $ 91,387 88,204 81,574 59,769 67,804 110,527 $ 499,265 Advertising Costs Advertising costs, exclusive of subscriber promotion...

  • Page 62
    ...) $ 1,339,939 Construction in progress consists of the following (in thousands): December 31, 1998 1999 Progress amounts for satellite construction, launch, and launch insurance: EchoStar VI...Digital broadcast operations center...Other ... - - 18,329 $ 18,329 $ $ 243,633 47,000 28,695 $ 319,328...

  • Page 63
    ... 1998, EchoStar filed a $219.3 million insurance claim for a constructive total loss under the launch insurance policy related to EchoStar IV. However, if the Company receive $219.3 million for a constructive total loss on the satellite, the insurers would obtain the sole right to the benefits of...

  • Page 64
    ... was placed in the Satellite Escrow to fund the construction, launch and insurance of EchoStar IV. The 1997 Notes that remain outstanding following the Tender Offers mature on July 1, 2002. Seven and Ten Year Notes On January 25, 1999, DBS Corp sold $375 million principal amount of 9 1/4% Senior...

  • Page 65
    ...Notes and is payable semi-annually in cash, in arrears on January 1 and July 1 of each year, commencing July 1, 2000. The Convertible Notes are general unsecured obligations, which rank junior in right of payment to: • all existing and future senior obligations; • all of EchoStar's secured debts...

  • Page 66
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued will be subject to redemption, at the option of the Company, in whole or in part, at redemption prices decreasing from 102.786% during the year commencing January 1, 2003 to 100% on or after January 1, 2007, ...

  • Page 67
    ...: Year Ended December 31, 1997 1998 1999 Statutory rate...State income taxes, net of Federal benefit ...Research and development and foreign tax credits...Non-deductible interest expense...Other ...Increase in valuation allowance...Total benefit from income taxes...35.0% 1.6 0.7 (0.5) (0.8) (36...

  • Page 68
    ...other...Total current deferred tax liabilities...Gross current deferred tax assets...Valuation allowance...Net current deferred tax assets ...Noncurrent deferred tax assets: General business and foreign tax credits...Net operating loss carryforwards ...Amortization of original issue discount on 1994...

  • Page 69
    ... dividends, as of the date of repurchase was approximately $21 million. All of the shares of Series A Preferred Stock were owned by Charles W. Ergen, President and CEO, and James DeFranco, Executive Vice President. Series C Cumulative Convertible Preferred Stock In November 1997, EchoStar issued...

  • Page 70
    ... each case all accumulated and unpaid dividends to the redemption date. 8. Stock Compensation Plans Stock Incentive Plan In April 1994, EchoStar adopted a stock incentive plan to provide incentive to attract and retain officers, directors and key employees. EchoStar currently has reserved up to 40...

  • Page 71
    ... were intended to create. The fair market value of the Class A common stock was $3.81 on the date of the repricing. Options to purchase approximately 1,024,000 shares of Class A common stock were affected by this repricing. Accounting for Stock-Based Compensation EchoStar has elected to follow...

  • Page 72
    ... input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock-based compensation awards. 9. Employee Benefit Plans Employee Stock Purchase Plan During 1997, the...

  • Page 73
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 401(k) Employee Savings Plan EchoStar sponsors a 401(k) Employee Savings Plan (the "401(k) Plan") for eligible employees. Voluntary employee contributions to the 401(k) Plan may be matched 50% by EchoStar, ...

  • Page 74
    ... Edmonton against certain defendants, including EchoStar. WIC is a company authorized to broadcast certain copyrighted work, such as movies and concerts, to residents of Canada. WIC alleges that the defendants engaged in, promoted, and/or allowed satellite dish equipment from the United States to be...

  • Page 75
    ... that our method of providing distant network programming does not violate the Satellite Home Viewer Act and hence does not infringe the networks' copyrights. In November 1998, the four major broadcast networks and their affiliate groups filed a complaint against EchoStar in federal court in...

  • Page 76
    ...CBS and Fox programming to many customers. In November 1999, Congress passed new legislation regarding the satellite delivery of network programming and it was signed into law by President Clinton. This new law has the potential of reducing the number of customers whose network channels EchoStar may...

  • Page 77
    ... Network - a DBS subscription television service in the United States. EchoStar Technologies Corporation - the design, distribution and sale of EchoStar receiver systems for the DISH Network as well as for direct-to-home projects of other internationally, together with the provision of uplink center...

  • Page 78
    ... location from which the sale originated. Transactions with Major Customers During 1999, export sales to two customers together totaled $126 million and accounted for approximately 8% of EchoStar's total revenue. Revenues from these customers are included within the EchoStar Technologies Corporation...

  • Page 79
    ... to offer DISH Network customers and other video platforms around the world a low cost, interactive digital receiver with a built-in hard disk drive that will permit viewers to pause and record live programs without the need for video tape. The new set-top box is expected to be available during...