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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, 2002
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. [ ]
As of February 26, 2003, the aggregate market value of Class A Common Stock held by non-affiliates* of the
Registrant approximated $6 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 26, 2003, the Registrant’s outstanding Common stock consisted of 242,630,606 shares of Class A
Common Stock and 238,435,208 shares of Class B Common Stock, each $0.01 par value.
Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange
Act). Yes _X_ No ___
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, 2003 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
    ... to _____. Commission file number: 0-26176 EchoStar Communications Corporation (Exact name of registrant as specified in its charter) Nevada (State or other jurisdiction of incorporation or organization) 5701 S. Santa Fe Drive Littleton, Colorado (Address of principal executive offices) 88-0336997...

  • Page 2
    ... and Supplementary Data...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ...PART III Item 10. Directors and Executive Officers of the Registrant ...Item 11. Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and...

  • Page 3
    ... the cable television industry, new competitors may enter 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; satellite programming signals...

  • Page 4
    ... over 500 video and audio channels to consumers across the United States. We believe that the DISH Network offers programming packages that have a better "price-to-value" relationship than packages currently offered by most other subscription television providers. As of December 31, 2002, there were...

  • Page 5
    ..., Marketing and Distribution Sales and Marketing. Independent distributors, retailers and consumer electronics stores currently sell EchoStar receiver systems and solicit orders for DISH Network programming services. While we also sell receiver systems and programming directly, independent retailers...

  • Page 6
    ... Home Plan 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...

  • Page 7
    ... EchoStar VIII enables us to increase the number of markets where we provide local channels, but reduces the number of video channels that could otherwise be offered across the entire United States. Each transponder can transmit multiple digital video, audio and data channels. Each of our satellites...

  • Page 8
    ... by Space Systems/Loral. EchoStar IX will be capable of operating 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 and other services. The Ka-band portion will be used to test and...

  • Page 9
    ... features such as personal video recording of up to 90 hours of programming, a UHF/infrared universal remote, and an expansion port for future upgradeability. We also offer a variety of specialized products such as HDTV receivers. DISH Network reception equipment is incompatible with competitors...

  • Page 10
    ... number to receive assistance for hardware, programming, billing, installation and technical support. We continue to work to automate simple phone responses and to increase Internet-based customer assistance in order to better manage customer service costs. Subscriber Management. We presently use...

  • Page 11
    ...: quality and variety of video, audio and interactive programming, quality of picture, pricing, customer service, access to service, and availability of related services such as broadband Internet, telephony, and other data and entertainment services. Cable Television. Cable television operators are...

  • Page 12
    ... specifications. We created our ETC division in connection with the development of the DISH Network. However, in addition to supplying EchoStar receiver systems for the DISH Network, ETC also sells similar digital satellite receivers internationally, either directly to television service operators...

  • Page 13
    .... We transmit our programming to and from satellites using radio frequencies in a portion of this spectrum. The FCC grants us licenses to use those frequencies and assigns the locations in space where we are authorized to operate our satellites. More specifically, the Communications Act gives the...

  • Page 14
    ... applicable Communications Act requirements. Ka-Band, Ku-Band and Extended Ku-Band Licenses. We have received conditional licenses from the FCC to operate satellites in the Ka-band and the Ku-band, and we have an application pending for a system that would use extended Ku-band frequencies (although...

  • Page 15
    ... regulation than subscription television service providers like us. Under a requirement of the Cable Act, the FCC imposed public interest requirements on direct broadcast satellite licensees, such as us, to set aside four percent of channel capacity exclusively for noncommercial programming...

  • Page 16
    ...operators starting in 2007. We filed an application to use those expansion frequencies on March 28, 2002. There can be no assurance that the FCC will grant our application to use these expansion frequencies. Foreign satellite systems also are potential providers of direct broadcast satellite service...

  • Page 17
    ... rules allow the satellite operators to file complaints against those broadcasters with the FCC. While we have been able to reach retransmission consent agreements with most of the local network stations we currently carry, any additional roll-out of local channels in other cities will require new...

  • Page 18
    ... adverse effect on our business. In order, among other things, to plan for the potential reimplementation of the injunction, we may terminate the delivery of distant network channels to certain subscribers. Dependence on Cable Act for Program Access We purchase a substantial percentage of our...

  • Page 19
    ... have a material adverse effect on our business. SEGMENT REPORTING DATA AND GEOGRAPHIC AREA DATA For operating segment and principal geographic area data for 2000, 2001 and 2002 see Note 10 in the Notes to the Consolidated Financial Statements in Item 15 of this Annual Report on Form 10-K. EMPLOYEES...

  • Page 20
    ... of DISH Network Service Corporation Senior Vice President of Programming Senior Vice President 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 and...

  • Page 21
    ... for companies in the technology and information communications industries. Michael Kelly. Mr. Kelly was named Senior Vice President of DISH Network Service Corporation in June 2001. Mr. Kelly joined EchoStar in March 2000 as Senior Vice President of International Programming upon consummation...

  • Page 22
    ...or Leased Description/Use/Location Corporate headquarters and customer service center, Littleton, Colorado...EchoStar Technologies Corporation engineering offices and service center, Englewood, Colorado...EchoStar Technologies Corporation engineering offices, Englewood, Colorado...Digital broadcast...

  • Page 23
    ... 1998, we filed a declaratory judgment action against ABC, NBC, CBS and FOX in the United States District Court for the District of Colorado. We asked the Court to enter judgment declaring that our method of providing distant network programming did not violate the Satellite Home Viewer Act and...

  • Page 24
    ...conclusion is supported by findings of the International Trade Commission ("ITC") which are discussed below. Gemstar has moved to stay the North Carolina action pending appeal of the ITC decision. We have opposed Gemstar's motion. In December 2000, we filed suit against Gemstar-TV Guide (and certain...

  • Page 25
    ... the late fee charged by EchoStar is appropriate and will not change. 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...

  • Page 26
    ..., installers, and servicers of satellite equipment who contract with EchoStar and who allege that we: (1) charged back certain fees paid by members of the class to professional installers in violation of contractual terms; (2) manipulated the accounts of subscribers to deny payments to class members...

  • Page 27
    ...The insurers assert, among other things, that EchoStar IV was not a total loss, as that term is defined in the policy, and that we did not abide by the exact terms of the insurance policies. We strongly disagree and filed arbitration claims against the insurers for breach of contract, failure to pay...

  • Page 28
    ...include retail markups, markdowns, or commissions. The high and low closing sale prices of the class A common stock during 2001 and 2002 on the Nasdaq Stock Market (as reported by Nasdaq) are set forth below. 2001 First Quarter ...Second Quarter...Third Quarter...Fourth Quarter ...2002 First Quarter...

  • Page 29
    ...31, 2002, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this report. 1998 Statements of Operations Data Revenue: DISH Network ...$ 683,032 256,193 DTH equipment sales...43,441 Other...982,666 Total revenue...Costs and Expenses: DISH...

  • Page 30
    ... a helpful measure for those evaluating companies in the multi-channel video programming distribution market. Some investment analysts track the relationship of EBITDA to total debt as one measure of financial strength. However, EBITDA does not purport to represent cash provided or used by operating...

  • Page 31
    ... from basic, premium, local, international and pay-per-view subscription television services. This increase was attributable to continued DISH Network subscriber growth. DISH Network added approximately 1.35 million net new subscribers for the year ended December 31, 2002 compared to approximately...

  • Page 32
    ... of consumer acceptance of direct-to-home satellite TV products and the increasing intensity of competition for international subscription television subscribers. DISH Network Operating Expenses. "DISH Network operating expenses" totaled $2.218 billion during the year ended December 31, 2002, an...

  • Page 33
    ... one-year commitment, provide a valid major credit card, have an acceptable credit score and incur a one-time set-up fee of $49.99. From January to July 2002, the promotion also included the first three months of qualified programming free for qualified Digital Home Plan programming packages and for...

  • Page 34
    ... costs. Equipment capitalized under our Digital Home Plan promotion totaled approximately $278 million and $338 million for the years ended December 31, 2002 and 2001, respectively. Payments and returned equipment received from disconnecting Digital Home Plan subscribers, which became available...

  • Page 35
    Year Ended December 31 2001 2002 Customer service center and other ...Satellite and transmission ...General and administrative...Total non-cash, stock-based compensation ...$ 1,767 1,115 17,291 $ 20,173 729 (7) 10,557 $ 11,279 $ Options to purchase an additional 9.1 million shares are outstanding ...

  • Page 36
    ... and believed these can be helpful measures for those evaluating companies in the multi-channel video programming distribution industry. Conceptually, EBITDA measures the amount of income generated each period that could be used to service debt, pay taxes and fund capital expenditures because...

  • Page 37
    ... availability of local channels by satellite, the introduction of our high-end America's Top 150 basic programming package during April 2000, together with an increase in subscriber penetration in our higher priced Digital Home Plans. For the year ended December 31, 2001, "DTH equipment sales...

  • Page 38
    ... costs. Equipment capitalized under our Digital Home Plan promotion totaled approximately $338 million and $65 million for the years ended December 31, 2001 and 2000, respectively. Payments and returned equipment received from disconnecting Digital Home Plan subscribers, which became available...

  • Page 39
    ...,173 Customer service center and other ...Satellite and transmission ...General and administrative...Total non-cash, stock-based compensation ... Pre-Marketing Cash Flow. Pre-marketing cash flow is comprised of EBITDA, as defined below, plus "cost of sales - subscriber promotion subsidies," "other...

  • Page 40
    ...our Digital Home Plan. Our capital expenditures will also vary depending on the number of satellites under construction at any point in time. Our working capital and capital expenditure requirements could increase materially in the event of increased competition for subscription television customers...

  • Page 41
    ... and offers, and in some cases, negotiations may take place and future material investments or acquisitions involving cash, debt or equity securities or a combination thereof may result. Investment Securities We currently classify all marketable investment securities as available-for-sale. In...

  • Page 42
    ... costs. Equipment capitalized under our Digital Home Plan promotion totaled approximately $278 million and $338 million for the years ended December 31, 2002 and 2001, respectively. Payments and returned equipment received from disconnecting Digital Home Plan subscribers, which became available...

  • Page 43
    ... of our receivers and could require us to materially modify certain userfriendly electronic programming guides and related features we currently offer to consumers. Obligations and Future Capital Requirements We have semi-annual cash debt service obligations for all of our outstanding long-term debt...

  • Page 44
    ... be available. From time to time we evaluate opportunities for strategic investments or acquisitions 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...

  • Page 45
    ... other satellite services is recognized as revenue in the period such services are provided. Revenue from international sales of digital set-top boxes and related accessories is recognized upon shipment to customers. Certain of our DISH Network sales promotions offers include programming discounts...

  • Page 46
    ... the impact of such advertising and promotion is realized in future periods. Inflation Inflation has not materially affected our operations during the past three years. We believe that our ability to increase the prices charged for our products and services in future periods will depend primarily...

  • Page 47
    ... with an average annual return for the year ended December 31, 2002 of approximately 2.6%. A hypothetical 10% decrease in interest rates would result in a decrease of approximately $7 million in annual interest income. We also invest in debt and equity of public and private companies for strategic...

  • Page 48
    ...approximately $5.9 billion using quoted market prices where available, or 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 fair value...

  • Page 49
    ... AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Equity Compensation Plan Information We have adopted stock incentive plans to provide incentives to attract and retain officers, directors and key employees. We currently have reserved 80 million shares of our class A common stock for granting awards...

  • Page 50
    ... be awarded options to purchase more than 10,000 shares in any twelve month period. The exercise price of options granted under the plan is 100% of the fair market value of our Class A common stock as of the last day of the calendar quarter in which the non-employee director receiving the option is...

  • Page 51
    ...3.1(a) on the Annual Report on Form 10-K of EchoStar for the year ended December 31, 2001, Commission File No. 0-26176). Amended and Restated Bylaws of EchoStar (incorporated by reference to Exhibit 3(ii) to the Current Report on Form 8-K of EchoStar, filed as of January 23, 2002, Commission File No...

  • Page 52
    ...17 to the Annual Report on Form 10-K of EchoStar for the year ended December 31, 2001, Commission File No. 0-26176). Registration Rights Agreement, relating to the 9 1/8% Senior Notes Due 2009, dated as of December 28, 2001, by and among EDBS and Deutsche Banc Alex. Brown, Inc., Credit Suisse First...

  • Page 53
    ... to Exhibit 10.28 to the Annual Report on Form 10-K of EchoStar for the year ended December 31, 1998, Commission File No. 0-26176). Satellite Construction Contract dated as of January 27, 2000, between EchoStar Orbital Corporation and Lockheed Martin Corporation (incorporated by reference to Exhibit...

  • Page 54
    ....1 to the Quarterly Report on Form 10-Q of EchoStar for the quarter ended June 30, 2001, Commission File No. 0-26176). Amended and Restated Contract dated February 1, 2001, between EchoStar Orbital Corporation and Space Systems/Loral, Inc., EchoStar VIII Satellite Program (110 degree West Longitude...

  • Page 55
    ... Launch Services contract, dated January 10, 2002, between Lockheed Martin's International Launch Services and EchoStar Orbital Corporation. (incorporated by reference to Exhibit 10.4 to the Quarterly Report as amended on Form 10-Q/A of EchoStar for the quarter ended March 31, 2002, Commission File...

  • Page 56
    ...10 to the Quarterly Report on Form 10-Q of EchoStar for the quarter ended September 30, 2002, Commission File No. 0-26176) Amendment No. 10 to License and OEM Manufacturing Agreement, dated July 1, 2002, between EchoStar Satellite Corporation, EchoStar Technologies Corporation and Thomson multimedia...

  • Page 57
    ... been requested pursuant to Rule 24.b-2 for certain portions thereof. A conforming electronic copy is filed herewith. (b) Reports on Form 8-K On November 5, 2002, we filed a Current Report on Form 8-K to report that on November 5, 2002, our subsidiary, EchoStar DBS Corporation, completed its offer...

  • Page 58
    ...ECHOSTAR COMMUNICATIONS CORPORATION By: /s/ Michael R. McDonnell Michael R. McDonnell Senior Vice President and Chief Financial Officer Date...Chief Executive Officer and Chairman (Principal Executive Officer) Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer...

  • Page 59
    CERTIFICATION OF CHIEF EXECUTIVE OFFICER Section 302 Certification I, Charles W. Ergen, certify that: 1. 2. I have reviewed this annual report on Form 10-K of EchoStar Communications Corporation; Based on my knowledge, this annual report does not contain any untrue statement of a material fact or ...

  • Page 60
    ... McDonnell, certify that: 1. 2. I have reviewed this annual report on Form 10-K of EchoStar Communications Corporation; Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light...

  • Page 61
    ... Financial Statements: Report of KPMG LLP, Independent Public Accountants ...Report of Arthur Andersen, Independent Public Accountants ...Consolidated Balance Sheets at December 31, 2001 and 2002 ...Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31...

  • Page 62
    REPORT OF KPMG LLP, INDEPENDENT PUBLIC ACCOUNTANTS To EchoStar Communications Corporation: We have audited the 2002 financial statements of Echostar Communications Corporation as listed in the accompanying index. These financial statements are the responsibility of the Company's management. Our ...

  • Page 63
    ... report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of EchoStar Communications Corporation...

  • Page 64
    ... payable, net of current portion...Long-term deferred distribution and carriage payments and other long-term liabilities ...Total long-term obligations, net of current portion ...Total liabilities...Commitments and Contingencies (Notes 3, 4 and 9) Stockholders' Deficit: Class A Common Stock, $.01...

  • Page 65
    ECHOSTAR COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share amounts) 2000 Revenue: DISH Network: Subscription television services...Other...Total DISH Network...DTH equipment sales ...Other ...Total revenue ...Costs and Expenses: ...

  • Page 66
    ... of Class A Common Stock: Exercise of stock options ...Employee benefits ...Employee Stock Purchase Plan ...Forfeitures of deferred non-cash, stock-based compensation ...Deferred stock-based compensation recognized ...Change in unrealized holding gains (losses) on available-for-sale securities...

  • Page 67
    ... cash and marketable investment securities...Purchases of property and equipment...Payments under in-orbit satellite contract ...Capitalized merger-related costs...Investment in Wildblue Communications...Investment in SONICblue (fka Replay TV) ...Investment in StarBand Communications...Other...Net...

  • Page 68
    ... DISH Network - a direct broadcast satellite ("DBS") subscription television service in the United States. and EchoStar Technologies Corporation ("ETC") - engaged in the design and development of DBS set-top boxes, antennae and other digital equipment for the DISH Network ("EchoStar receiver systems...

  • Page 69
    ... or in EchoStar's class A common stock at EchoStar's option, would have been settled 30 months after termination of the merger agreement and the PanAmSat stock purchase agreement. The terms of the contingent value rights also provided that, generally, in the event that the price of EchoStar's class...

  • Page 70
    ... placed ownership of all of its direct broadcast satellites and related FCC licenses into subsidiaries of EDBS. Dish, Ltd. and EchoStar Satellite Broadcasting Company were merged into EDBS. EchoStar IV and the related FCC licenses were transferred to EchoStar Satellite Corporation. During 2002...

  • Page 71
    ... 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...

  • Page 72
    ... 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. During the three months ended June 30, 2002, EchoStar recorded an adjustment to "Cost of sales - subscriber promotion subsidies" of...

  • Page 73
    ... in companies that are not public is dependent on the success of their business and their ability to obtain sufficient capital to execute their business plans. Since private markets are not as liquid as public markets, there is also increased risk that EchoStar will not be able to sell these...

  • Page 74
    ...sell these securities prior to maturity. 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 built by contract manufacturers to EchoStar's specifications. Manufactured inventories include materials...

  • Page 75
    ... using discounted cash flows. Assets which are to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. EchoStar considers relevant cash flow, estimated future operating results, trends and other available information including the fair value of frequency...

  • Page 76
    ... 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...

  • Page 77
    ... promotion, subscribers who purchased an EchoStar receiver system for $199 or higher received free installation and either our 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...

  • Page 78
    ...to receive free professional installation of up to two receivers. Digital Home Plan - Our Digital Home Plan promotion offers several choices to consumers, ranging from the use of one EchoStar receiver system and our America's Top 50 CD programming package for $29.99 per month, to providing consumers...

  • Page 79
    ... useful life. Research and Development Costs Research and development costs are expensed as incurred. Research and development costs totaled $17 million, $19 million and $33 million for the years ended December 31, 2000, 2001 and 2002, respectively. Accounting for Stock-Based Compensation EchoStar...

  • Page 80
    ... subjective input assumptions can materially affect the fair value estimate, the existing models do not necessarily provide a reliable single measure of the fair value of stock-based compensation awards. Basic and Diluted Loss Per Share Statement of Financial Accounting Standards No. 128, "Earnings...

  • Page 81
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued As of December 31, 2000, 2001 and 2002, options to purchase approximately 25,118,000; 22,748,000 and 20,829,000 shares of class A common stock were outstanding, respectively. New Accounting Pronouncements In ...

  • Page 82
    ... (In Years) EchoStar I ...EchoStar II...EchoStar III...EchoStar IV ...EchoStar V...EchoStar VI ...EchoStar VII...EchoStar VIII...Furniture, fixtures and equipment ...Buildings and improvements...Digital Home Plan equipment...Tooling and other ...Land ...Vehicles ...Construction in progress...Total...

  • Page 83
    ... September and October 2002, two of the thrusters on EchoStar VIII experienced anomalous events and are not currently in use. The satellite is equipped with a total of 12 thrusters that help control spacecraft location, attitude, and pointing and is currently operating using a combination of the...

  • Page 84
    ... further material degradation, or total loss of use, of EchoStar IV will not occur in the immediate future. Currently no programming is being transmitted to customers on EchoStar IV, and the satellite functions as an in-orbit spare. In September 1998, EchoStar filed a $219.3 million insurance claim...

  • Page 85
    ... or leases. All of EchoStar's eight in-orbit DBS satellites are currently owned by direct or indirect subsidiaries of EDBS. Insurance coverage is therefore required for at least four of EchoStar's eight satellites. The launch and/or in-orbit insurance policies for EchoStar I through EchoStar VIII...

  • Page 86
    ... subsidiary, EDBS to make an offer to exchange (the "EDBS Exchange Offer") all of the outstanding 10 3/8% Seven Year Notes for a new class of notes issued by EDBS as soon as practical following the first date (as reflected in EDBS' most recent quarterly or annual financial statements) on which EDBS...

  • Page 87
    ... accrues at an annual rate of 9 1/8% and is payable semi-annually in cash, in arrears on January 15 and July 15 of each year, commencing July 15, 2002. The proceeds of the 9 1/8% Seven Year Notes are intended to be used for the construction, launch and insurance of additional satellites, strategic...

  • Page 88
    ... are not redeemable at EchoStar's option prior to May 15, 2004. Thereafter, the 5 3/4% Convertible Notes will be subject to redemption, at the option of the Company, in whole or in part, at redemption prices decreasing from 103.286% during the year commencing May 15, 2004 to 100% on May 15, 2008...

  • Page 89
    ... Convertible Notes, unless previously redeemed, are convertible at the option of the holder any time after 90 days following the date of their original issuance and prior to maturity into shares of EchoStar's class A common stock at a conversion price of $43.29 per share. The indenture related to...

  • Page 90
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued future payments under these guarantees are equal to the respective amounts of outstanding principal and accrued interest. 5. Income Taxes As of December 31, 2002, EchoStar had net operating loss carryforwards...

  • Page 91
    ... Internal Revenue Service ("IRS") conducted an audit of EchoStar's consolidated federal income tax returns for the years 1997, 1998, and 1999. As a result of this review the IRS challenged the timing of deduction of certain subscriber acquisition costs. In July 2002, EchoStar received notification...

  • Page 92
    ...): For the year ended December 31. 2001 2002 $ 1,767 1,115 17,291 $ 20,173 729 (7) 10,557 $ 11,279 $ 2000 Customer service center and other ...Satellite and transmission ...General and administrative...Total non-cash, stock-based compensation ...$ 1,744 3,061 46,660 $ 51,465 Options to purchase an...

  • Page 93
    ... in material non-cash, stock-based compensation expense in our statements of operations. A summary of EchoStar's stock option activity for the years ended December 31, 2000, 2001 and 2002 is as follows: 2000 WeightedAverage Exercise Price Options Options outstanding, beginning of year...Granted...

  • Page 94
    ... for operating leases approximated $9 million, $14 million and $16 million in 2000, 2001 and 2002, respectively. Purchase Commitments As of December 31, 2002, EchoStar's purchase commitments totaled approximately $359 million. The majority of these commitments relate to EchoStar receiver systems...

  • Page 95
    ... 1998, EchoStar filed a declaratory judgment action against ABC, NBC, CBS and FOX in the United States District Court for the District of Colorado. EchoStar asked the Court to enter judgment declaring that its method of providing distant network programming did not violate the Satellite Home Viewer...

  • Page 96
    ... trial date has now been moved to April 7, 2003. During April 2002, the District Court denied the networks' motion for preliminary injunction as moot. In June 2002, EchoStar filed a counterclaim against the networks asking the District Court to find that EchoStar is not violating the Satellite Home...

  • Page 97
    ... is supported by findings of the International Trade Commission ("ITC") which are discussed below. Gemstar has moved to stay the North Carolina action pending appeal of the ITC decision. EchoStar has opposed Gemstar's motion. In December 2000, EchoStar filed suit against Gemstar-TV Guide (and...

  • Page 98
    ... the late fee charged by EchoStar is appropriate and will not change. 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...

  • Page 99
    ..., and servicers of satellite equipment who contract with EchoStar and who allege that EchoStar: (1) charged back certain fees paid by members of the class to professional installers in violation of contractual terms; (2) manipulated the accounts of subscribers to deny payments to class members; and...

  • Page 100
    ... current members of its Board of Directors and named EchoStar as a nominal defendant. The Plaintiff filed the action in the United States District Court of Clark County, Nevada. The complaint alleges breach of fiduciary duties, corporate waste and other unlawful acts relating to EchoStar's agreement...

  • Page 101
    ... EchoStar currently operates as two business units. The All Other column consists of revenue and expenses from other operating segments for which the disclosure requirements of FAS No. 131 do not apply. DISH Network Year Ended December 31, 2000 Revenue ...Depreciation and amortization ...Total costs...

  • Page 102
    ... totaled $169 million. These international sales accounted for approximately 7%, 4% and 3.5% of EchoStar's total revenue during each of the years ended December 31, 2000, 2001 and 2002, respectively. Revenues from these customers are included within the EchoStar Technologies Corporation operating...

  • Page 103
    ... December 31, 2001: Total revenue ...Operating income (loss) ...Net income (loss)...Basic and diluted loss per share ...Year Ended December 31, 2002: Total revenue ...Operating income ...Net income (loss)...Basic income (loss) per share...Diluted income (loss) per share...Three Months Ended June 30...