Dish Network 2001 Annual Report Download - page 78

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–13
Fair Value of Financial Instruments
Fair values for EchoStar’s high-yield debt are based on quoted market prices. The fair values of EchoStar’s
mortgages and other notes payable are estimated using discounted cash flow analyses. The interest rates assumed in
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 at December 31, 2000
and 2001 (in thousands):
December 31, 2000 December 31, 2001
Book Value Fair Value Book Value Fair Value
9 1/4% Seven Year Notes................................ $ 375,000 $ 365,625 $ 375,000 $ 382,500
9 3/8% Ten Year Notes ................................... 1,625,000 1,584,375 1,625,000 1,673,750
10 3/8% Seven Year Notes.............................. 1,000,000 985,000 1,000,000 1,040,000
9 1/8% Seven Year Notes................................ ––700,000 701,750
4 7/8% Convertible Notes ............................... 1,000,000 750,000 1,000,000 891,300
5 3/4% Convertible Notes ............................... ––1,000,000 896,300
Mortgages and other notes payable .................. 35,944 35,495 21,262 21,262
Inventories
Inventories are stated at the lower of cost or market value. Cost is determined using the first-in, first-out
method. Proprietary products are manufactured by outside suppliers to EchoStar’s specifications. Manufactured
inventories include materials, labor, freight-in, royalties and manufacturing overhead. Cost of other inventories
includes parts, contract manufacturers’ delivered price, assembly and testing labor, and related overhead, including
handling and storage costs. Inventories consist of the following (in thousands):
December 31,
2000 2001
Finished goods - DBS................................................................... $ 96,362 $ 127,186
Raw materials .............................................................................. 40,247 45,725
Finished goods - reconditioned and other ....................................... 23,101 19,548
Work-in-process........................................................................... 8,879 7,924
Consignment................................................................................ 2,478 3,611
Reserve for excess and obsolete inventory...................................... (9,906) (13,247)
$ 161,161 $ 190,747
Property and Equipment
Property and equipment are stated at cost. Cost includes interest capitalized of approximately $5 million and
$26 million during the years ended December 31, 2000 and 2001, respectively. No interest was capitalized during
1999. The costs of satellites under construction are capitalized during the construction phase, assuming the eventual
successful launch and in-orbit operation of the satellite. If a satellite were to fail during launch or while in-orbit, the
resultant loss would be charged to expense in the period such loss was incurred. The amount of any such loss would be
reduced to the extent 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 its long-lived assets and identifiable intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For assets which are