Dish Network 1999 Annual Report Download - page 35

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purport to represent cash provided 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 during 1998, including amortization
of subscriber acquisition costs of $19 million, aggregated $103 million, a $70 million decrease compared to 1997. The
decrease in depreciation and amortization expenses principally resulted from a decrease in amortization of subscriber
acquisition costs of $103 million, partially offset by an increase in depreciation related to the commencement of
operation of EchoStar III, EchoStar IV and other depreciable assets placed in service during 1998. Promotional
programs changed in October 1997 and we ceased deferral of subscriber acquisition costs after that date. All
previously deferred costs were fully amortized during 1998.
Other Income and Expense. Other expense, net totaled $138 million during 1998, an increase of $50 million
as compared to 1997. The increase in other expense resulted primarily from interest expense associated with our 1997
notes combined with increased interest expense resulting from increased accreted balances on our 1994 notes and our
1996 notes.
LIQUIDITY AND 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, we have raised total gross cash proceeds of approximately
$249 million from the sale of our equity securities and as of December 31, 1999, we had approximately $3.1 billion of
outstanding long-term debt (including current portion). The following summarizes the net proceeds we raised during
1999 from sales of debt securities:
• our seven and ten year notes offering in January 1999 resulting in net proceeds of approximately
$1.8 billion; and
• our convertible notes offering in December 1999 of 4 7/8 % Convertible Subordinated Notes resulting
in net proceeds of approximately $980 million.
As of December 31, 1999, our unrestricted cash, cash equivalents and marketable investment securities totaled
$1.3 billion compared to $324 million as of December 31, 1998. For the years ended December 31, 1999, 1998 and
1997, we reported net cash flows from operating activities of ($59 million), ($17 million) and $43,000, respectively.
Our working capital and capital expenditure requirements were substantial during the three-year period ended
December 31, 1999. Such expenditures principally related to the ongoing development of the EchoStar DBS system.
Capital expenditures, including expenditures for satellite systems under construction and FCC authorizations, totaled
$91 million, $161 million, $232 million and during 1999, 1998 and 1997, respectively.
We expect that our future working capital, capital expenditure and debt service requirements will be satisfied
from existing cash and investment balances and cash generated from operations. Our ability to generate positive future
operating and net cash flows is dependent upon our ability to continue to rapidly expand our DISH Network subscriber
base, retain existing DISH Network subscribers and our ability to grow our ETC and Satellite Services businesses.
There can be no assurance that we will be successful in achieving our goals. The amount of capital required to fund
our 2000 working capital and capital expenditure needs will vary, dependent upon the level of success we experience
relative to our goals. Our working capital and capital expenditure requirements could increase materially in the event
of increased competition for subscription television customers, significant satellite failures, or in the event of a general
economic downturn, among other factors.
Subscriber Turnover
While our churn increased during 1999, we believe that our average churn for the year was lower than satellite
industry averages. Our maturing subscriber base, together with the effects of rapid growth, were responsible for the
increase in churn during the year. That rapid growth has resulted in customer installation delays, and the effectiveness