Dish Network 1999 Annual Report Download - page 33

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EBITDA. EBITDA represents earnings before interest, taxes, depreciation, amortization, and non-cash ,
stock-based compensation. EBITDA was negative $173 million during the year ended December 31, 1999 compared
to negative $20 million during the same period in 1998. EBITDA, as adjusted to exclude amortization of subscriber
acquisition costs, was negative $173 million for the year ended December 31, 1999 compared to negative $39 million
for the same period in 1998. This decline in EBITDA principally resulted from an increase in DISH Network operating
and marketing expenses. It is important to note that EBITDA does not represent cash provided or used by operating
activities. Further, our calculation of EBITDA for the year ended December 31, 1999 does not include approximately
$61 million of non-cash compensation expense resulting from post-grant appreciation of stock options granted to
employees. EBITDA should not be considered in isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles.
As previously discussed, to the extent we expand our current marketing promotions and our subscriber
acquisition costs materially increase, our EBITDA results will be negatively impacted because subscriber acquisition
costs are expensed as incurred.
Depreciation and Amortization. Depreciation and amortization expenses aggregated $113 million during
1999, a $10 million increase compared to the same period in 1998, during which subscriber acquisition costs were
amortized. Commencing October 1997, we instead expensed all of these costs at the time of sale. The increase in
depreciation and amortization expenses principally resulted from an increase in depreciation related to the
commencement of operation of EchoStar IV in August of 1998, the commencement of operation of EchoStar V in
November 1999 and other depreciable assets placed in service during 1999, partially offset by subscriber acquisition
costs becoming fully amortized during the third quarter of 1998.
Other Income and Expense. Other expense, net totaled $177 million during 1999, an increase of $39 million
compared to the same period in 1998. This increase resulted from a decrease in interest income and an increase in
interest expense. In January 1999, we refinanced our outstanding 12 1/2% Senior Secured Notes due 2002 issued in
June 1997, referred to herein as the 1997 notes; our 12 7/8% Senior Secured Discount Notes due 2004 issued in 1994,
referred to herein as the 1994 notes; and our 13 1/8% Senior Secured Discount Notes due 2004 issued in 1996, referred
to herein as the 1996 notes, at more favorable interest rates and terms. In connection with the refinancing, we
consummated an offering of 9 1/4% Senior Notes due 2006, referred to herein as the seven year notes, and 9 3/8% Senior
Notes due 2009, referred to herein as the ten year notes. Although the seven and ten year notes have lower interest
rates than the debt securities we repurchased, interest expense increased by approximately $34 million because we
raised additional debt to cover tender premiums and consent and other fees related to the refinancing.
Extraordinary Charge for Early Retirement of Debt. In connection with the January 1999 refinancing, we
recognized an extraordinary loss of $269 million comprised of debt costs, discounts, tender costs, and premiums paid
over the accreted values of the debt retired.
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997.
Revenue. Total revenue for the year ended December 31, 1998 was $983 million, an increase of $506 million
compared to total revenue for the year ended December 31, 1997 of $477 million. The increase in total revenue was
primarily attributable to DISH Network subscriber growth combined with increased revenue from our ETC and
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. Average DISH Network subscribers for the year ended
December 31, 1998 increased approximately 120% compared to 1997. As of December 31, 1998, we had
approximately 1.9 million DISH Network subscribers compared to 1.04 million at December 31, 1997. Monthly
revenue per subscriber approximated $39 during the years ended December 31, 1998 and 1997.
For the year ended December 31, 1998, DTH equipment sales and integration services totaled $256 million,
an increase of $164 million compared to 1997. The increase in DTH equipment sales and integration services revenue
was primarily attributable to an increase in the volume of set-top boxes sold.