Dish Network 2003 Annual Report Download - page 13

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8
The investigation into the anomaly is continuing. Until the root causes of these anomalies are finally determined, there
can be no assurance future anomalies will not cause further losses which could impact commercial operation of the
satellite.
During 2002, two of the thrusters on EchoStar VIII experienced anomalous events and are not currently in use.
During March 2003, an additional thruster on EchoStar VIII experienced an anomalous event and is 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 other nine thrusters. This workaround requires more frequent
maneuvers to maintain the satellite at its specified orbital location, which are less efficient and therefore result in
accelerated fuel use. In addition, the workaround has resulted in certain gyroscopes being utilized for aggregate
periods of time substantially in excess of their originally qualified limits. However, neither of these workarounds
are expected to reduce the estimated design life of the satellite to less than 12 years. An investigation of the thruster
anomalies, including the development of additional workarounds for long term operations, is continuing. None of
these events has impacted commercial operation of the satellite to date. Until the root cause of these anomalies has
been finally determined, there can be no assurance that these or future anomalies will not cause further losses which
could impact commercial operation of the satellite.
EchoStar VIII is equipped with two solar arrays which convert solar energy into power for the satellite. Those
arrays rotate continuously to maintain optimal exposure to the sun. During June and July 2003, EchoStar VIII
experienced anomalies that temporarily halted rotation of one of the solar arrays. In December 2003 the other array
experienced a similar anomaly. Both arrays are currently fully functional, but rotating in a mode recommended by
the satellite manufacturer which allows full rotation but is different than the originally prescribed mode. An
investigation of the solar array anomalies, none of which have impacted commercial operation of the satellite, is
continuing. Until the root cause of these anomalies is finally determined, there can be no assurance future anomalies
will not cause losses which could impact commercial operation of the satellite.
During September 2003, a single battery cell on EchoStar VIII exhibited reduced capacity. There are 72 battery
cells on EchoStar VIII and all loads can be maintained for the full design life of the satellite with up to two battery
cells fully failed. An investigation of the battery cell anomaly, which has not impacted commercial operation of the
satellite, is underway. Until the root cause of the anomaly is determined, there can be no assurance future anomalies
will not cause losses which could impact commercial operation of the satellite.
Satellite Insurance. We currently do not carry launch and/or in-orbit insurance for any of our nine in-orbit
satellites. To satisfy insurance covenants related to EDBS’ senior notes, we have reclassified an amount equal to the
depreciated cost of five of our satellites from cash and cash equivalents to cash reserved for satellite insurance on
our balance sheet. As of December 31, 2003, cash reserved for satellite insurance totaled approximately $176.8
million. Effective February 2, 2004, as a result of the redemption of EDBS’ 9 3/8% Senior Notes due 2009, our
obligation to reserve for satellite insurance declined to the depreciated cost of three of our satellites. As an indirect
result of this redemption, during February 2004, we were able to reduce our reserve and reclassify approximately
$57.2 million, representing the depreciated cost of two of our satellites, from cash reserved for satellite insurance to
cash and cash equivalents. We will continue to reserve cash for satellite insurance on our balance sheet until such
time, if ever, as we can again insure our satellites on acceptable terms and for acceptable amounts, or until the
indenture covenants requiring the insurance are no longer applicable.
We believe we have in-orbit satellite capacity sufficient to expeditiously recover transmission of most programming
in the event one of our in-orbit satellites fails. However, the cash reserved for satellite insurance is not adequate to
fund the construction, launch and insurance for a replacement satellite in the event of a complete loss of a satellite.
Programming continuity cannot be assured in the event of multiple satellite losses.
In September 1998, we filed a $219.3 million insurance claim for a total loss under the launch insurance policies
covering EchoStar IV. The insurance carriers offered us a total of approximately $88.0 million, or 40% of the total
policy amount, in settlement of the EchoStar IV insurance claim. We are currently in arbitration with the insurers
regarding this claim. See “Item 3 – Legal Proceedings.”