Dish Network 2001 Annual Report Download - page 75

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–10
Semi-annual debt service requirements related to EchoStar’s 5 3/4% Convertible Subordinated Notes due
2008 commenced on November 15, 2001. Semi-annual debt service requirements related to EchoStar’s 9 1/8% Senior
Notes due 2009 will commence on July 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 and
contingencies beyond EchoStar’s control.
Expected Operating Losses. Since 1996, EchoStar has reported significant operating and net losses.
Improvements in EchoStar’s future results of operations are largely dependent upon its ability to increase its
customer base while maintaining its overall cost structure, controlling subscriber turnover and effectively managing
its subscriber acquisition costs. No assurance can be given that EchoStar will be effective with regard to these
matters. In addition, generally 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
The accompanying consolidated financial statements include the accounts of EchoStar and all of its wholly-
owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. EchoStar accounts
for investments in 50% or less owned entities using the equity or cost method, except for its investments in marketable
equity securities, which are carried at fair value.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses for each reporting period. Actual results could differ from those estimates.
Stock Splits
On each of July 19, 1999, October 25, 1999 and March 22, 2000, EchoStar completed a two-for-one split of
its outstanding class A and class B common stock. An amount equal to the par value of the common shares issued for
the July, October and March stock splits was transferred from additional paid-in capital to class A common stock and
class B common stock. All references to shares and per share amounts included herein retroactively give effect to the
stock splits completed in July 1999, October 1999 and March 2000.
Foreign Currency Transaction Gains and Losses
The functional currency of EchoStar’s foreign subsidiaries is the U.S. dollar because their sales and purchases
are predominantly denominated in that currency. Transactions denominated in currencies other than U.S. dollars are
recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in
transaction gains and losses which are reflected in income as unrealized (based on period-end translation) or realized
(upon settlement of the transaction). Net transaction gains (losses) during 1999, 2000 and 2001 were not material to
EchoStar’s results of operations.