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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, 2001
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 Drive
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
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. [X]
As of February 25, 2002, the aggregate market value of Class A Common Stock held by non-affiliates* of the
Registrant approximated $5.2 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 February 25, 2002, the Registrant’s outstanding Common stock consisted of 241,282,817 shares of Class A
Common Stock and 238,435,208 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 May 6, 2002 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
    ... non-affiliates* of the Registrant approximated $5.2 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 February 25, 2002, the Registrant's outstanding Common stock consisted of 241,282,817 shares...

  • Page 2
    ... 12. Item 13. Directors and Executive Officers of the Registrant...Executive Compensation...Security Ownership of Certain Beneficial Owners and Management ...Certain Relationships and Related Transactions...PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...57 56 56...

  • Page 3
    ... the subscription television business, and new technologies may increase competition; DISH Network subscriber growth may decrease; subscriber turnover may increase; and subscriber acquisition costs may increase; sales of digital equipment and related services to international direct-tohome service...

  • Page 4
    ... 31, 2001, we had approximately 6.83 million DISH Network subscribers; and EchoStar Technologies Corporation - engaged in the design, development, distribution and sale of DBS set-top boxes, antennae and other digital equipment for the DISH Network, which we refer to as EchoStar receiver systems...

  • Page 5
    ...GM class H common stock in the Hughes split-off. Holders of GM class H common stock would receive one share of New EchoStar class C common for each share of GM class H common stock they own at the time of the Hughes splitoff. • • Immediately after the completion of the Hughes merger, based on...

  • Page 6
    ...introducing local-to-local service in all markets; expanding two-way high-speed satellite Internet consumer and business offerings by providing broadband Internet services at more attractive pricing; expanding new high definition television, video-on-demand, pay-per-view, educational programming and...

  • Page 7
    ..., Vivendi plans to offer our DISH Network customers five new non-exclusive channels of basic and niche programming content. Vivendi will also offer expanded pay-per-view and video-ondemand movies. These services are expected to begin to launch in the fall of 2002. Customary fees per subscriber will...

  • Page 8
    ...satellites in orbit that enable us to offer over 500 video and audio channels, together with limited data services and high definition and interactive TV services, to consumers across the contiguous United States. We believe that the DISH Network offers programming packages that have a better "price...

  • Page 9
    ... and pricing of programming packages available from the DISH Network. For example, we currently sell our entry-level "America's Top 50" programming package, which includes 50 of the most popular video channels, to consumers in digital format for $22.99 per month. We estimate cable operators charge...

  • Page 10
    ... DISH Network subscriber management and billing functions. Sales and Marketing. Independent dealers and distributors, retailers and consumer electronics stores currently sell EchoStar receiver systems and DISH Network programming services. While we also sell receiver systems and programming directly...

  • Page 11
    ... promotion. The Digital Home Plan offers consumers the ability to lease from one to four receiver systems with a one-year commitment to one of several qualifying programming packages. With each plan, consumers receive in-home service and pay a one-time set-up fee. We expect this marketing strategy...

  • Page 12
    ...Ka-band satellites could become a cost effective way to offer consumers high-speed two-way Internet access in the future. If Ka-band satellites prove to be viable, they will be able to serve rural and other areas where high speed DSL and cable modem service is not available. Thus, Ka-band technology...

  • Page 13
    ... of video channels for all DISH Network customers, provide a broader array of programming choices to consumers in Alaska and Hawaii, and increase in-orbit backup capacity. As a result of the failure of EchoStar IV solar arrays to fully deploy and the failure of 30 transponders to date, a maximum...

  • Page 14
    ... 32 Ku-band transponders at 110 watts each, in addition to a Ka-band payload. EchoStar IX is currently expected to be used for expanded DISH Network service such as video, Internet, and other data services. The portion of the satellite expected to be used for Internet and other data services, as...

  • Page 15
    ... cost of the satellite. Competition for Our Dish Network Business We compete in the highly competitive subscription television service industry against cable television and other land-based and satellite-based system operators offering video, audio and data programming and entertainment services...

  • Page 16
    ... able to provide local and other programming in a larger number of geographic areas, and through bundling their analog video service with expanded digital video services delivered terrestrially or via satellite, two-way high speed Internet access, and telephone service on upgraded cable systems. As...

  • Page 17
    ... which in turn, depends on other factors, such as the level of consumer acceptance of direct-to-home satellite TV products and the intensity of competition for international subscription television subscribers. ETC's business also includes our Atlanta-based EchoStar Data Networks Corporation and our...

  • Page 18
    ... Department of Commerce to receive and deliver certain components of direct-to-home satellite TV systems. In addition, the delivery of satellites and related technical information for the purpose of launch by foreign launch services providers is subject to strict export control and prior approval...

  • Page 19
    ...the 148 degree orbital location, in order to help comply with our January 1, 2002 "must carry" obligations. This renewable authority is for 30 days beginning on December 28, 2001. This special temporary authority has been opposed by Pegasus Development Corporation. While we have timely requested the...

  • Page 20
    ... in question. Any such action that might prevent Kelly Broadcasting Systems from operating these earth stations would impair our ability to receive certain types of programming and deliver it to customers. Instead of constructing separate Ka-band and Ku-band satellites for which we have a license...

  • Page 21
    ... from other satellites that are in conformance with the plan. We believe the United States government has filed modification requests with the ITU for EchoStar I, EchoStar II and EchoStar III. The ITU has requested certain technical information in order to process the requested modifications. We...

  • Page 22
    ... than subscription service providers like us. Under a requirement of the Cable Act, the FCC imposed public interest requirements on DBS licensees, such as us, to set aside four percent of channel capacity exclusively for noncommercial programming for which we must charge programmers below-cost rates...

  • Page 23
    ... inquiry into distribution of high-speed Internet access services and a rulemaking concerning interactive television services. In these proceedings, the FCC is considering whether to impose on distributors, including satellite distributors like us, various types of "open access" obligations (such as...

  • Page 24
    ... Ku-based FSS services, and is currently finalizing rules to govern these services. These satellite operations could provide global high-speed data services. In addition to possible interference concerns, this would, among other things, create additional competition for satellite and other services...

  • Page 25
    ... minor changes be made to the Grade B standard, a recommendation that is unfavorable to us. While SHVIA reduces the royalty rate that we currently pay for superstation and distant network signals, it directed the FCC to issue rules by November 29, 2000 requiring us to delete substantial programming...

  • Page 26
    ...' signals, and could have an adverse effect on our strategy to compete with cable and other satellite companies, which provide local channels. SHVIA requires broadcasters to negotiate retransmission consent agreements in good faith. The FCC has promulgated rules governing broadcasters' good faith...

  • Page 27
    ...FCC's rules, cable-affiliated programmers generally must offer programming they have developed to all multi-channel video programming distributors on non-discriminatory terms and conditions. The Cable Act and the FCC's rules also prohibit some types of exclusive programming contracts involving cable...

  • Page 28
    ... import of our receivers and could require us to materially modify certain userfriendly electronic programming guides and related features we currently offer to consumers. See "- Legal Proceedings." EMPLOYEES We had approximately 11,000 employees at December 31, 2001, most of whom are located in the...

  • Page 29
    ... President and Chief Financial Officer Senior Vice President of DISH Network Service Corporation Charles W. Ergen. Mr. Ergen has been Chairman of the Board of Directors and Chief Executive Officer of EchoStar since its formation and, during the past five years, has held various executive officer...

  • Page 30
    ...information concerning our material properties: Description/Use/Location Corporate headquarters and customer service center, Littleton, Colorado ...EchoStar Technologies Corporation office and distribution center, Englewood, Colorado...EchoStar Technologies Corporation engineering offices, Englewood...

  • Page 31
    ... EchoStar Satellite Broadcasting Corporation were subsequently added as defendants. The lawsuit seeks, among other things, interim and permanent injunctions prohibiting the defendants from activating receivers in Canada and from infringing any copyrights held by WIC. During September 1998, WIC filed...

  • Page 32
    ... March 2000, the networks filed an emergency motion again asking the court to issue an injunction requiring us to turn off network programming to certain of our customers. At that time, the networks also argued that our compliance procedures violate the Satellite Home Viewer Improvement Act ("SHVIA...

  • Page 33
    ... of our distant network subscriber base, which could also cause many of these subscribers to cancel their subscription to our other services. Management has determined that such terminations would result in a small reduction in our reported average monthly revenue per subscriber and could result...

  • Page 34
    ... to vigorously defend the lawsuit. A purported class action relating to the use of terms such as "crystal clear digital video," "CD-quality audio," and "on-screen program guide", and with respect to the number of channels available in various programming packages, has also been filed against us in...

  • Page 35
    ... installers in violation of contractual terms; (2) manipulated the accounts of subscribers to deny payments to class members; and (3) misrepresented to class members who own certain equipment related to the provision of satellite television service. On September 18, 2001, the Court granted...

  • Page 36
    ... on the Nasdaq Stock Market under the symbol "DISH." The sale prices reflect inter-dealer quotations and do not include retail markups, markdowns, or commissions. The high and low closing sale prices of the class A common stock during 2000 and 2001 on the Nasdaq Stock Market (as reported by Nasdaq...

  • Page 37
    ... years ended December 31, 2001, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this report. 1997 Statements of Operations Data Revenue: DISH Network...DTH equipment sales and integration services ...Other...Total revenue ...Costs...

  • Page 38
    ...businesses. EBITDA is shown before and after amortization of subscriber acquisition costs, which were deferred through September 1997 and amortized over one year. EBITDA for 1999, 2000 and 2001 also excludes approximately $61 million, $51 million and $20 million in non-cash, stock-based compensation...

  • Page 39
    ..., premium and pay-per-view subscription television services. This increase was directly attributable to continued DISH Network subscriber growth and higher average revenue per subscriber. DISH Network added approximately 1.57 million net new subscribers for the year ended December 31, 2001 compared...

  • Page 40
    ...DTH equipment and integration services in international markets depends largely on the success of these DTH operators and continued demand for our digital set-top boxes. As a result of these factors, we expect total DTH equipment sales and integration services revenue to decrease in 2002 compared to...

  • Page 41
    ... accessories during 2001. Marketing Expenses. Generally, under most promotions, we subsidize the cost and installation of EchoStar receiver systems in order to attract new DISH Network subscribers. Marketing expenses totaled $1.084 billion during the year ended December 31, 2001 compared to $1.159...

  • Page 42
    ... America's Top 100 CD or our DISH Latino Dos programming package for $9 a month for the first year. Subscriber acquisition costs are materially lower under this plan compared to historical promotions. This promotion expired January 31, 2002. Our direct sales to consumers pursuant to our DISH Network...

  • Page 43
    ... of these subscriber acquisition costs, which would be materially higher if we expensed rather than capitalized Digital Home Plan equipment costs. Comparatively, our subscriber acquisition costs during the year ended December 31, 2000 totaled $1.155 billion, or approximately $452 per new subscriber...

  • Page 44
    ... the number of DISH Network subscribers and higher average revenue per subscriber, resulting in recurring revenue which was large enough to support the cost of new and existing subscribers, together with the introduction of our Digital Home Plan in July 2000. Our calculation of EBITDA for the years...

  • Page 45
    ... increased availability of local channels by satellite together with the earlier successful introduction of our America's Top 150 programming package. For the year ended December 31, 2000, DTH equipment sales and integration services totaled $260 million, an increase of $76 million compared to the...

  • Page 46
    ...-cash compensation expense resulting from post-grant appreciation of employee stock options. In addition, EBITDA does not include the impact of amounts capitalized under our Digital Home Plan of approximately $65.4 million during 2000. It is important to note that EBITDA and pre-marketing cash flow...

  • Page 47
    ...an increase in the number of DISH Network subscribers, increased penetration of our Digital Home Plan promotions, changes in working capital and higher average revenue per subscriber, resulting in recurring revenue which is large enough to support the cost of new and existing subscribers, though not...

  • Page 48
    ...and changes in business strategy. Certain of the companies in which we have investments cancelled their planned initial public offerings and have minimal cash on hand. The ability of certain of these entities to raise additional capital in the future is currently uncertain, and attempts to date have...

  • Page 49
    ... a built-in hard drive that allows viewers to pause and record live programming without the need for videotape, the consumer will incur a onetime set-up fee of $148.99. Our Digital Home Plan promotion requires us to capitalize and depreciate over four years equipment costs that would otherwise...

  • Page 50
    ... not successful, it could be necessary to replace the credit card size smart card that controls the security of each consumer set top box at a material cost to us. In order to combat piracy and to generate additional future revenue opportunities, we may decide to replace smart cards at any time in...

  • Page 51
    ...PanAmSat stock purchase agreement. The contingent value rights will be recorded as of the date of consummation of the investment and will be periodically adjusted to the current settlement amount of the contingent value rights, based on the current price of the class A common stock, through a charge...

  • Page 52
    ... such time, if ever, as we can again insure our satellites on acceptable terms and for acceptable amounts. If we lease or transfer ownership of EchoStar VII, EchoStar VIII or EchoStar IX to EDBS, which we are currently considering, we would need to reserve additional cash for the depreciated cost of...

  • Page 53
    ... change depending on a variety of factors including Digital Home Plan penetration and the extent we contract for the construction of additional satellites. In addition to our DBS business plan, we have licenses, or applications pending with the FCC, for a two satellite FSS Ku-band satellite system...

  • Page 54
    ...that would complement our current services and products, enhance our technical capabilities or otherwise offer growth opportunities. As a result, acquisition discussions and offers, and in some cases, negotiations may take place and future material investments or acquisitions involving cash, debt or...

  • Page 55
    ... costs are depreciated over a period of four years. If a Digital Home Plan subscriber disconnects from the service, the subscriber is required to return the leased equipment to us or be charged for the equipment. While we do not recover all of the equipment upon termination of service, EchoStar...

  • Page 56
    ... associated with specific industries, and other factors. These investments are subject to significant fluctuations in fair market value due to the volatility of the securities markets and of the underlying businesses. A hypothetical 10% adverse change in the price of our public strategic debt and...

  • Page 57
    ... cost basis for greater than nine months are considered other than temporary and are recorded as charges to earnings, absent specific factors to the contrary. During the year ended December 31, 2001, we recorded an aggregate charge to earnings for other than temporary declines in the fair market...

  • Page 58
    ... to the identity and business experience of our executive officers is set forth on page 27 of this report under the caption "Executive Officers." Item 11. EXECUTIVE COMPENSATION The information required by this Item will be set forth in our Proxy Statement for the Annual Meeting of Shareholders to...

  • Page 59
    ... (incorporated by reference to Exhibit 3(ii) to the Current Report on Form 8-K, dated January 23, 2002, of EchoStar, Commission File No. 0-26176). Articles of Incorporation of EchoStar Broadband Corporation ("EBC") (incorporated by reference to Exhibit 3.1(a) to the Registration Statement on Form...

  • Page 60
    ... Quarterly Report on Form 10-Q of EchoStar for the quarter ended September 30, 2000, Commission File No.0-26176). Registration Rights Agreement dated as of September 25, 2000, by and among EchoStar Broadband Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, Banc of America Securities...

  • Page 61
    ... and Lockheed Martin Corporation (incorporated by reference to Exhibit 10.18 to the Quarterly Report on Form 10-Q of EchoStar for the quarter ended June 30, 1996, Commission File No. 0-26176). Confidential Amendment to Satellite Construction Contract between DBSC and Martin Marietta, dated as of May...

  • Page 62
    ..., LLC, and News America Incorporated (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8K of EchoStar, filed as of July 2, 1999, Commission File No. 0-26176). Satellite Construction Contract dated as of January 27, 2000, between EchoStar Orbital Corporation and Lockheed Martin...

  • Page 63
    ... 99.2 to the Current Report on Form 8-K of EchoStar, filed as of October 31, 2001, Commission File No. 026176). Stock Purchase Agreement, dated October 28, 2001, among EchoStar, Hughes Electronics Corporation, Hughes Communications Galaxy, Inc., Hughes Communications Satellite Services, Inc. and...

  • Page 64
    ... Suisse First Boston. On December 14, 2001, we filed a Current Report on Form 8-K to announce: 1) a proposed $1.5 billion investment by Vivendi Universal and the formation of a strategic alliance to offer new programming and interactive television services to consumers; 2) that our EDBS subsidiary...

  • Page 65
    ... 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/ Michael R. McDonnell Michael R. McDonnell Senior Vice President and Chief Financial Officer Date: February 28, 2002...

  • Page 66
    ... Public Accountants ...Report of Ernst & Young LLP, Independent Public Accountants ...Consolidated Balance Sheets at December 31, 2000 and 2001 ...Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 1999, 2000 and 2001 ...Consolidated Statements of Changes...

  • Page 67
    REPORT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS To EchoStar Communications Corporation: We have audited the accompanying consolidated balance sheets of EchoStar Communications Corporation (a Nevada corporation) and subsidiaries as of December 31, 2000 and 2001, and the related ...

  • Page 68
    ... of operations, stockholders' deficit, mandatorily redeemable convertible preferred stock, and cash flows for the year ended December 31, 2001 (not presented separately herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion...

  • Page 69
    ECHOSTAR COMMUNICATIONS CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands) December 31, 2000 Assets Current Assets: Cash and cash equivalents ...Marketable investment securities ...Trade accounts receivable, net of allowance for uncollectible accounts of $31,241 and $22,770, ...

  • Page 70
    ...Expenses: Subscriber-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 - other...Marketing: Subscriber promotion subsidies - cost of sales (exclusive of...

  • Page 71
    ... benefits...Employee Stock Purchase Plan...Forfeitures of deferred non-cash, stock-based compensation...Deferred stock-based compensation recognized ...Unrealized holding losses on available-for-sale securities, net...Net loss...Balance, December 31, 2000 ...Series C Preferred Stock dividends...

  • Page 72
    ...3)...Change in cash reserved for satellite insurance due to depreciation on related satellites (Note 3) ...Funds released from escrow and restricted cash and marketable investment securities...Purchases of property and equipment...Advances and payments under in-orbit satellite contract...Capitalized...

  • Page 73
    ... - a direct broadcast satellite ("DBS") subscription television service in the United States. and EchoStar Technologies Corporation ("ETC") - engaged in the design, development, distribution and sale of DBS set-top boxes, antennae and other digital equipment for the DISH Network ("EchoStar receiver...

  • Page 74
    ... outstanding PanAmSat shares and payment of the termination fee to Hughes would require at least $3.4 billion of cash and approximately $600 million of EchoStar's class A common stock. EchoStar expects that it would meet this cash requirement by utilizing a portion of cash on hand. Organization and...

  • Page 75
    ... 15, 2002. There are no scheduled principal payment or sinking fund requirements prior to maturity of any of these notes. EchoStar's ability to meet its debt service obligations will depend on, among other factors, the successful execution of its business strategy, which is subject to uncertainties...

  • Page 76
    ... below cost basis for greater than nine months are considered other than temporary and are recorded as charges to earnings, absent specific factors to the contrary. As a result of EchoStar's quarterly evaluations, during the year ended December 31, 2001 EchoStar recorded an aggregate charge to...

  • Page 77
    ... of these companies are not publicly traded. EchoStar's ability to create realizable value for its strategic investments in companies that are not public is dependent on the success of their business and ability to obtain sufficient capital to execute their business plans. Since private markets are...

  • Page 78
    ... of insurance proceeds received, if any, as a result of the launch or in-orbit failure. Depreciation is recorded on a straight-line basis for financial reporting purposes. Repair and maintenance costs are charged to expense when incurred. Renewals and betterments are capitalized. EchoStar reviews...

  • Page 79
    ... subscriber acquisition cost recognition policies relating to the marketing promotions for the periods presented are discussed below. During the year ended December 31, 2001, our marketing promotions included the DISH Network One-Rate Plan, Bounty Programs, Free Now, I Like 9, and Digital Home Plan...

  • Page 80
    ..., received free installation and either EchoStar's America's Top 100 CD or EchoStar's DISH Latino Dos programming package for $9 a month for the first year. This promotion expired January 31, 2002. EchoStar's direct sales to consumers pursuant to its DISH Network One-Rate Plan, Bounty Programs, Free...

  • Page 81
    ... equipment similar to the accounting for its DISH Network One-Rate Plan, Bounty Programs, and Free Now promotion, as discussed in subscriber promotion subsidies below. EchoStar offers a bundled price of $100.99 for EchoStar's America's Top 150 ("AT 150") programming and the Starband Internet service...

  • Page 82
    ... signal on the DISH Network. Such amounts are deferred and recognized as revenue on a straight-line basis over the related contract terms (up to ten years). Accrued Expenses Accrued expenses consist of the following (in thousands): December 31, 2000 2001 Programming ...Royalties and copyright fees...

  • Page 83
    ... 141 requires the purchase method of accounting for all business combinations initiated after June 30, 2001. The application of FAS 141 has not had a material impact on EchoStar's financial position or results of operations. In July 2001, the Financial Accounting Standards Board issued Statement of...

  • Page 84
    ... of the following (in thousands): Life (In Years) EchoStar I...EchoStar II...EchoStar III...EchoStar IV ...EchoStar V ...EchoStar VI ...Furniture, fixtures and equipment ...Buildings and improvements ...Digital Home Plan equipment...Tooling and other ...Land ...Vehicles...Construction in progress...

  • Page 85
    ... number of backup thrusters. EchoStar V is also equipped with a total of 48 traveling-wave-tube amplifiers ("TWTAs"), including 16 spares. A total of two TWTAs were taken out of service and replaced by spares between the launch of the satellite and June 30, 2001. During the third quarter 2001...

  • Page 86
    ...of its claim, EchoStar has added causes of action in its EchoStar IV demand for arbitration for breach of the duty of good faith and fair dealing, and unfair claim practices. Additionally, EchoStar filed a lawsuit against the insurance carriers in the U.S. District Court for the District of Colorado...

  • Page 87
    ... received from the sale of the 9 1/4% Seven Year and 9 3/8% Ten Year Notes to complete the tender offers related to the 12 1/8% Senior Exchange Notes due 2004, issued on January 4, 1999, in exchange for all issued and outstanding 12 1/8% Series B Senior Redeemable Exchangeable Preferred Stock...

  • Page 88
    ...and unpaid interest thereon to the redemption date. In the event of a change of control, as defined in the 10 3/8% Seven Year Notes Indenture, EBC will be required to make an offer to repurchase all or any part of a holder's 10 3/8% Seven Year Notes at a purchase price equal to 101% of the aggregate...

  • Page 89
    ...capital stock; make certain investments; create liens; enter into transactions with affiliates; merge or consolidate with another company; and transfer and sell assets In the event of a change of control, as defined in the 9 1/8% Seven Year Notes Indenture, EDBS will be required to make an offer to...

  • Page 90
    ...at an annual rate of 5 3/4% and is payable semi-annually in cash, in arrears on May 15 and November 15 of each year, commencing November 15, 2001. The 5 3/4% Convertible Notes are general unsecured obligations, which rank equal to EchoStar's 4 7/8% Convertible Notes and junior in right of payment to...

  • Page 91
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued which EchoStar is unable to amend, or 3) present to Hughes a plan, taking into account prevailing market conditions for the relevant notes, designed so that at and after the effective time of the Hughes merger...

  • Page 92
    ... by applying the statutory Federal tax rate to income before taxes as follows: Year Ended December 31, 1999 2000 2001 Statutory rate ...State income taxes, net of Federal benefit ...Employee stock option exercise and sale ...Cumulative effect of change in tax rate resulting from a revision of...

  • Page 93
    ... deferred tax assets ...Valuation allowance...Net current deferred tax assets ...Noncurrent deferred tax assets: General business, foreign tax, alternative minimum tax credits ...Net operating loss carryforwards ...Incentive plan stock compensation...Unrealized loss on investments...Loss on equity...

  • Page 94
    ..., significant deferred income tax benefits will need to be recorded and such benefits may be material. Internal Revenue Service Proposed Adjustment During 2001, the Internal Revenue Service conducted an audit of EchoStar's consolidated federal income tax returns for the years 1997, 1998, and 1999...

  • Page 95
    ...Stock Incentive Plan. In general, stock options granted through December 31, 2001 have included exercise prices not less than the fair market value of EchoStar's class A common stock at the date of grant, and vest, as determined by EchoStar's Board of Directors, generally at the rate of 20% per year...

  • Page 96
    ... in accounting for its stock-based compensation plans. Under APB 25, EchoStar generally does not recognize compensation expense on the issuance of stock under its Stock Incentive Plan because the option terms are typically fixed and typically the exercise price equals or exceeds the market price of...

  • Page 97
    ... all stock purchase plans of EchoStar at a rate which would exceed $25,000 in fair market value of capital stock in any one year. The purchase price of the stock is 85% of the closing price of the class A common stock on the last business day of each calendar quarter in which such shares of class...

  • Page 98
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 9. Other Commitments and Contingencies Leases Future minimum lease payments under noncancelable operating leases as of December 31, 2001, are as follows (in thousands): Year ending December 31, 2002 ...2003 ...

  • Page 99
    ...network channels to many of its customers, and henceforth to sell those channels to consumers in accordance with certain stipulations in the injunction. In October 1998, EchoStar filed a declaratory judgment action against ABC, NBC, CBS and FOX in the U.S. District Court for the District of Colorado...

  • Page 100
    ... 2000, the networks filed an emergency motion again asking the court to issue an injunction requiring EchoStar to turn off network programming to certain of its customers. At that time, the networks also argued that EchoStar's compliance procedures violate the Satellite Home Viewer Improvement Act...

  • Page 101
    ... of its distant network subscriber base, which could also cause many of these subscribers to cancel their subscription to its other services. Management has determined that such terminations would result in a small reduction in EchoStar's reported average monthly revenue per subscriber and could...

  • Page 102
    ... defend the lawsuit. A purported class action relating to the use of terms such as "crystal clear digital video," "CD-quality audio," and "on-screen program guide", and with respect to the number of channels available in various programming packages, has also been filed against EchoStar in the...

  • Page 103
    ... installers in violation of contractual terms; (2) manipulated the accounts of subscribers to deny payments to class members; and (3) misrepresented to class members who own certain equipment related to the provision of satellite television service. On September 18, 2001, the Court granted EchoStar...

  • Page 104
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 10. Segment Reporting Financial Data by Business Unit (in thousands) Statement of Financial Accounting Standard No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("FAS No. 131") ...

  • Page 105
    ... international sales accounted for approximately 8%, 7% and 4% of EchoStar's total revenue during each of the three years ended December 31, 2001, respectively. Revenues from these customers are included within the EchoStar Technologies Corporation business unit. 11. Summary Financial Information of...

  • Page 106
    ... Financial Data (Unaudited) EchoStar's quarterly unaudited results of operations are summarized as follows (in thousands, except per share amounts): March 31 Year Ended December 31, 2000: Total revenue ...Operating loss ...Net loss...Basic and diluted loss per share ...Year Ended December 31, 2001...

  • Page 107
    ...to offer EchoStar's DISH Network customers five new nonexclusive channels of basic and niche programming content. Vivendi Universal will also offer expanded pay-per-view and video-on-demand movies. These services are expected to begin to launch in the fall of 2002. Customary fees per subscriber will...

  • Page 108
    ...as a non-exclusive middleware solution that will provide DISH Network customers using personal video records unique interactive television services, such as movies from Vivendi Universal and music from Universal Music Group. EchoStar III During January 2002, a transponder pair on EchoStar III failed...