Dish Network 2004 Annual Report Download

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ANNUAL REPORT
Year ended December 31, 2004

Table of contents

  • Page 1
    ANNUAL REPORT Year ended December 31, 2004

  • Page 2

  • Page 3
    ... households now receives DISH Network service. Our subscriber growth is driven to a great extent by our offer of the lowest all-digital price in America, industry-leading customer service and expansion of our programming options. We ended 2004 offering local channels in over 150 markets and all...

  • Page 4

  • Page 5
    ... ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 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...

  • Page 6
    ...Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...Item 13. Certain Relationships and Related Transactions ...Item 14. Principal Accountant Fees and Services...PART IV Item 15. Exhibits and Financial Statement Schedules...

  • Page 7
    ...their efforts to acquire DISH Network subscribers, or may begin offering non-DISH Network video services, which would cause our subscriber additions and related revenue to decline and could cause our subscriber turnover and other costs to increase; satellite programming signals have been pirated and...

  • Page 8
    ...internal controls over financial reporting), we could lose investor confidence in our financial reports, which could have a material adverse effect on our stock price and our business; and we may face other risks described from time to time in periodic and current reports we file with the Securities...

  • Page 9
    ... and data channels, interactive television channels, digital video recording, high definition television, international programming, professional installation and 24-hour customer service. We started offering subscription television services on the DISH Network in March 1996. As of December 31, 2004...

  • Page 10
    ...Enforcement of the Securities and Exchange Commission inquiring about the matters described in the news article. The Company intends to fully respond to that inquiry. On March 11, 2005, a purported class action lawsuit was filed against us and several of our current and former officers in the United...

  • Page 11
    ... "America's Top 180" package and more than 30 commercial-free premium movie channels including HBO, Cinemax, Showtime and Starz!, currently sells for $81.99 per month. Cable operators do typically include local channels in their programming packages. However, we can provide satellite-delivered local...

  • Page 12
    ... television services revenue. During July 2000, we began offering our DISH Network subscribers the option to lease receiver systems. Our current equipment lease program, the Digital Home Advantage promotion, offers new customers the ability to lease up to four installed EchoStar receivers...

  • Page 13
    ... our DISH Network service bundled together with SBC's telephony, high-speed data and other communications services. SBC is marketing the bundled service and is responsible for certain integrated order-entry, customer service and billing. SBC also purchases set-top box equipment from us to lease to...

  • Page 14
    .... We currently broadcast the majority of our programming from the 110 and 119 degree locations. The majority of our customers have satellite receiver systems that are equipped to receive signals from both of these locations. Satellite Fleet We presently have twelve owned or leased satellites in...

  • Page 15
    ... currently located at the 119 degree orbital location. This satellite is equipped with a total of 96 solar array strings, 92 of which are required to assure full power availability for the 12-year design life of the satellite. Prior to 2004, EchoStar V experienced anomalies resulting in the loss of...

  • Page 16
    ... location. This satellite has 32 Ku-band transponders that operate at approximately 110 watts per channel, along with transponders that can provide services in Ka-Band (a "Ka-band payload"). EchoStar IX provides expanded video and audio channels to DISH Network subscribers who install a specially...

  • Page 17
    ...use the capacity on AMC-15 to offer a combination of programming including local network channels in additional markets, together with satellite-delivered high-speed internet services. AMC-16. AMC-16 is currently located at the 85 degree orbital location. This SES Americom FSS satellite is virtually...

  • Page 18
    ...and data programmers who generally make their programming content available to our digital broadcast operations centers in Cheyenne, Wyoming and Gilbert, Arizona, via commercial satellites or fiber optic networks. We monitor those signals for quality, and can add promotional messages, public service...

  • Page 19
    ... also offer a variety of specialized products including high definition television ("HDTV") receivers. Set-top boxes communicate with our authorization center through telephone lines to, among other things, report the purchase of pay-per-view movies and other events. DISH Network reception equipment...

  • Page 20
    ... subscribers can call a single telephone 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...

  • Page 21
    ... to supplying EchoStar receiver systems and related accessories for the DISH Network, ETC also sells similar digital satellite receivers internationally, either directly to television service operators or to our independent distributors worldwide. This has created a source of additional business for...

  • Page 22
    ... sales or maintain its existing business. Through 2004, our primary international customer was Bell ExpressVu, a subsidiary of Bell Canada, Canada's national telephone company. We currently have certain binding purchase orders from Bell ExpressVu, and we are actively trying to secure new orders...

  • Page 23
    ... rules and regulations governing the operations of satellite communications providers and multi-channel video distributors. In order to obtain FCC satellite licenses and authorizations, communication satellite operators must satisfy strict legal, technical and financial qualification requirements...

  • Page 24
    ...and marketable investment securities, to satisfy this requirement for all of our Ka-band and extended Ku-band licenses. New Satellite License Auction Proceedings. The FCC has proposed to auction licenses for two DBS frequencies at the 61.5 degree orbital location. On December 27, 2004, the FCC ruled...

  • Page 25
    ... direct-to-home services to consumers in the United States and certain British Overseas Territories in the Caribbean. SES Americom proposes to employ a satellite licensed by the Government of Gibraltar to operate in the same uplink and downlink frequency bands as us, from an orbital position located...

  • Page 26
    ...Requirements. The FCC has also commenced an open access proceeding regarding distribution of high-speed Internet access services and interactive television services. We cannot be sure that the FCC will not ultimately impose open access obligations on us, which could be very onerous, and could create...

  • Page 27
    ... limitations may force us to move the local channels in as many as 30 markets to different satellites, requiring subscribers in those markets to install a second or a different dish to continue receiving their local network channels. We may be forced to stop offering local channels in some of those...

  • Page 28
    ... to which our compliance reports are accepted), further orders by a bureau of the FCC or by the FCC itself could result in a decrease in the number of local areas where we will offer local network programming until new satellites are launched. This, in turn, could significantly increase the churn of...

  • Page 29
    ... government to receive and deliver 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 requirements. PATENTS...

  • Page 30
    ... Vice President, DISH Network Service L.L.C. and Customer Service Operations Executive Vice President, General Counsel, Secretary and Director Executive Vice President and Chief Financial Officer President, EchoStar International Corporation Executive Vice President, Programming and Marketing 22

  • Page 31
    ... Senior Vice President of EchoStar Technologies Corporation from April 2000 until June 2004 and as Senior Vice President of Satellite Services from December 1997 until April 2000. Michael Kelly. Mr. Kelly is the Executive Vice President of DISH Network Service L.L.C. and Customer Service Operations...

  • Page 32
    ...In addition to the principal properties listed above, we operate several DISH Network service centers strategically located in regions throughout the United States. Item 3. LEGAL PROCEEDINGS Distant Network Litigation Until July 1998, we obtained feeds of distant broadcast network channels (ABC, NBC...

  • Page 33
    ... receive network channels, including migration to local channels by satellite where available, and free off air antenna offers in other markets. However, we cannot predict with any degree of certainty how many subscribers would cancel their primary DISH Network programming as a result of termination...

  • Page 34
    ... agreed to settle our insurance claim and related claims for accrued interest and bad faith with all carriers who agree to pay their proportionate share of an aggregate net amount of $240.0 million. We retained title to and use of the EchoStar IV satellite. Payment from each settling carrier is due...

  • Page 35
    ... circuitry for a pay television system on removable cards. We examined these patents and believe that they are not infringed by any of our products or services. Subsequently, DirecTV and Thomson settled with Broadcast Innovation leaving us as the only defendant. During January 2004, the judge issued...

  • Page 36
    ... class action relating to the use of terms such as "crystal clear digital video," "CD-quality audio," and "onscreen program guide," and with respect to the number of channels available in various programming packages was filed against us in the California State Superior Court for Los Angeles...

  • Page 37
    ... contends that our contractual relationship with Dominion Video Satellite, Inc., a direct broadcast provider that airs only Christian programming, constitutes a breach of a commercial television services agreement between ESLLC and CCN (the "CCN Agreement"). Further, CCN contends that our reluctance...

  • Page 38
    ... Communications Corporation in the United States District Court for the Southern District of New York alleging that we have anticipatorily repudiated or are in breach of an alleged agreement between EchoStar and Vivendi pursuant to which we are allegedly required to broadcast a music-video channel...

  • Page 39
    ... Ergen, our Chairman and Chief Executive Officer. There is currently no trading market for our Class B common stock. Dividend. On December 14, 2004, we paid a one-time cash dividend of $1.00 per share, or approximately $455.7 million, on outstanding shares of our Class A and Class B common stock to...

  • Page 40
    ... program discussed below in open market transactions. (b) Our Board of Directors authorized the purchase of up to $1.0 billion of our Class A Common Stock on August 9, 2004. All purchases were made in accordance with Rule 10b-18 of the Securities Exchange Act of 1934 pursuant to our Rule 10b5-1 plan...

  • Page 41
    ... Operations Data Revenue: Subscriber-related revenue...Equipment sales...Other ...Total revenue ...Costs and Expenses: Subscriber related expenses (exclusive of depreciation shown below)...Satellite and transmission expenses (exclusive of depreciation shown below)...Cost of sales - equipment ...Cost...

  • Page 42
    ... heightened credit requirements and tailoring our promotions toward subscribers desiring multiple receivers and advanced products such as digital video recorders and high definition receivers. We also plan to continue to offer advanced products to existing customers through our lease promotions and...

  • Page 43
    ...additional satellite capacity. Explanation of Key Metrics and Other Items Subscriber-related revenue. "Subscriber-related revenue" consists principally of revenue from basic, movie, local, international and pay-per-view subscription television services, advertising sales, digital video recorder fees...

  • Page 44
    ... the C-band subscription television service business of SNG we acquired in April 2004. Subscriber acquisition costs. Under most promotions, we subsidize the installation and all or a portion of the cost of EchoStar receiver systems in order to attract new DISH Network subscribers. Our "Subscriber...

  • Page 45
    ... into account, periodically, price changes and other factors), and include the resulting number, which is substantially smaller than the actual number of commercial units served, in our DISH Network subscriber count. During April 2004, we acquired the C-band subscription television service business...

  • Page 46
    ...Operations Data Revenue: Subscriber-related revenue...Equipment sales...Other...Total revenue...Costs and Expenses: Subscriber-related expenses...% of Subscriber-related revenue...Satellite and transmission expenses...% of Subscriber-related revenue...Cost of sales - equipment...% of Equipment sales...

  • Page 47
    ... subscribers receiving subsidized programming through our free and discounted programming promotions, the increased availability of local channels by satellite, increases in our advertising sales and increases in the number of DISH Network subscribers with multiple set-top boxes and digital video...

  • Page 48
    ... efficiencies related to our installation, in-home service and call center operations. We currently offer local broadcast channels in approximately 155 markets across the United States. In 38 of those markets, two dishes are necessary to receive all local channels in the market. SHVERA now requires...

  • Page 49
    ... in-orbit satellite insurance, as we increase the number and operations of our digital broadcast centers and as additional local markets and other programming services are launched. Cost of sales - equipment. "Cost of sales - equipment" totaled $305.3 million during the year ended December 31, 2004...

  • Page 50
    ..., including digital video recorders and high definition receivers, require additional upgrade fees. The Free Dish promotion ended on January 31, 2005. Free for All - Effective February 1, 2004, our Free for All promotion provides new subscribers who purchase one or two installed receiver systems for...

  • Page 51
    ... from additional depreciation related to the commencement of commercial operation of our EchoStar IX satellite in October 2003, and increases in depreciation related to equipment leased to customers and other depreciable assets, including finite lived intangible assets, placed in service during...

  • Page 52
    ... differences between the tax bases of assets and liabilities and amounts reported in our accompanying consolidated balance sheets, as well as operating loss, tax credit and other carry-forwards. We follow the guidelines set forth in Statement of Financial Accounting Standards No. 109, "Accounting...

  • Page 53
    ...Operations Data Revenue: Subscriber-related revenue...Equipment sales...Other...Total revenue...Costs and Expenses: Subscriber-related expenses...% of Subscriber-related revenue...Satellite and transmission expenses...% of Subscriber-related revenue...Cost of sales - equipment...% of Equipment sales...

  • Page 54
    ... to price increases of up to $2.00 in February 2003 on some of our most popular packages, the increased availability of local channels by satellite and an increase in the number of DISH Network subscribers with multiple set-top boxes. During 2003, we launched 47 additional local markets compared to...

  • Page 55
    ...to three free receivers or a free digital video recorder, together with a decrease in subscriber equipment leases. The increase also resulted from an increase in acquisition marketing in 2003 compared to 2002. Equipment capitalized under our lease program for new customers totaled approximately $108...

  • Page 56
    ... as the base compensation for key employees who participate in the 1999 incentive plan: For the Years Ended December 31, 2003 2002 (In thousands) Subscriber-related...$ 34 $ 729 Satellite and transmission...359 (7) General and administrative...3,151 10,557 Total non-cash, stock-based compensation...

  • Page 57
    ... capitalized costs associated with our new and existing subscriber equipment lease programs. The amount of capital required in 2005 will also depend on our levels of investment in infrastructure necessary to support local markets and other possible strategic initiatives. We currently anticipate...

  • Page 58
    ... attributable to increased spending for equipment under our lease programs, satellite construction payments and prepayments under our satellite service agreements, and for general expansion to support the growth of the DISH Network. The increase in "Net cash flows from operating activities" was...

  • Page 59
    ... means to receive network channels, including migration to local channels by satellite where available, and free off air antenna offers in other markets. However, we cannot predict with any degree of certainty how many subscribers might ultimately cancel their primary DISH Network programming as...

  • Page 60
    ..., we repurchased approximately 25.9 million shares of our Class A common stock in open market transactions for a total cost of approximately $809.6 million. On December 14, 2004, we paid a cash dividend of $455.7 million to holders of our Class A and Class B common stock. This decrease from 2003 to...

  • Page 61
    ... limitations may force us to move the local channels in as many as 30 markets to different satellites, requiring subscribers in those markets to install a second or a different dish to continue receiving their local network channels. We may be forced to stop offering local channels in some of those...

  • Page 62
    ... income (loss) and free cash flow. While there can be no assurance, we believe continued tightening of credit requirements, together with promotions tailored towards subscribers with multiple receivers and advanced products such as digital video recorders and high definition receivers, will attract...

  • Page 63
    ... due 2014... Interest accrues on our Floating Rate Senior Notes due 2008 based on the three month London Interbank Offered Rate ("LIBOR") plus 3.25%. The interest rate at December 31, 2004 was 5.81%. Semi-annual cash interest requirements related to our 3% Convertible Subordinated Note due 2011...

  • Page 64
    ...2004 and are required to make monthly payments for this satellite for the 15-year period following commencement of commercial operations. Future commitments related to this satellite are included in the table above. During August 2003, we exercised our option under the SES Americom agreement for AMC...

  • Page 65
    ... equipment during 2005. In addition, in order to support the continued increase in the number of local markets in which we offer local network channels by satellite and for possible future broadband services, during 2005 we are constructing several new mini digital broadcast operations centers...

  • Page 66
    ... 15 of this Annual Report on Form 10-K. • Capitalized satellite receivers. Since we retain ownership of equipment provided pursuant to our new and existing subscriber equipment lease programs, we capitalize and depreciate equipment costs that would otherwise be expensed at the time of sale. Such...

  • Page 67
    ..., including embedding microchips in credit card-sized access cards, or "smart cards," to encrypt our programming so only those who pay can receive it. Our signal encryption has been pirated, allowing illegal receipt of our programming, and our security systems could be further compromised in...

  • Page 68
    ... Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and its related implementation guidance, and (ii) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments, including grants of employee stock options, based...

  • Page 69
    ... as cash is received and used in our business. Our restricted and unrestricted cash, cash equivalents and marketable investment securities had an average annual return for the year ended December 31, 2004 of approximately 2.1%. A hypothetical 10.0% decrease in interest rates would result in...

  • Page 70
    ... from our strategic investments in companies that are not publicly traded 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 we will...

  • Page 71
    ... Developments -- Internal Review and Filing of Purported Securities Class Action". That Review reported one instance in which one of our executive officers in charge of certain business functions directed the preparation in prior years of inaccurate documentation that was used to determine payments...

  • Page 72
    ...on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan...

  • Page 73
    31, 2004 and 2003, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 16, 2005 expressed an unqualified opinion on ...

  • Page 74
    ... SCHEDULES (a) The following documents are filed as part of this report: (1) Financial Statements Report of KPMG LLP, Independent Registered Public Accounting Firm ...Consolidated Balance Sheets at December 31, 2004 and 2003...Consolidated Statements of Operations and Comprehensive Income (Loss...

  • Page 75
    ..., Inc., Credit Suisse First Boston Corporation, Lehman Brothers Inc. and UBS Warburg L.L.C. (incorporated by reference to Exhibit 4.18 to the Annual Report on Form 10-K of EchoStar for the year ended December 31, 2001, Commission File No. 0-26176). Indenture, relating to EDBS 5 ¾% Senior Notes due...

  • Page 76
    ..., as Trustee (incorporated by reference to Exhibit 4.14 to the Annual Report on Form 10-K of EchoStar for the year ended December 31, 2003, Commission File No.0-26176).. First Supplemental Indenture, relating to the Floating Rate Senior Notes Due 2008, dated as of December 31, 2003 between EDBS...

  • Page 77
    ....57 to the Annual Report on Form 10-K of EchoStar for the year ended December 31, 2002, Commission File No.0-26176). Satellite Service Agreement, dated as of March 21, 2003, between SES Americom, Inc., EchoStar Satellite Corporation and EchoStar Communications Corporation (incorporated by reference...

  • Page 78
    ... Quarterly Report on Form 10Q of EchoStar for the quarter ended June 30, 2004, Commission File No.0-26176). Third Amendment to Whole RF Channel Service Agreement, dated October 12, 2004, between Telesat Canada and EchoStar. *** Amendment No. 4 to Satellite Service Agreement, dated October 21, 2004...

  • Page 79
    ..., thereunto duly authorized. ECHOSTAR COMMUNICATIONS CORPORATION By: /s/ David J. Rayner David J. Rayner Executive Vice President and Chief Financial Officer Date: March 16, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 80
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  • Page 81
    ... Page Consolidated Financial Statements: Report of KPMG LLP, Independent Registered Public Accounting Firm ...Consolidated Balance Sheets at December 31, 2004 and 2003...Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2004, 2003 and 2002...

  • Page 82
    ... with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of EchoStar Communications Corporation's internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by the...

  • Page 83
    ECHOSTAR COMMUNICATIONS CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands) As of December 31, 2004 2003 Assets Current Assets: Cash and cash equivalents...$ 704,560 Marketable investment securities...451,073 Trade accounts receivable, net of allowance for uncollectible accounts of $9,542...

  • Page 84
    ECHOSTAR COMMUNICATIONS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands, except per share amounts) For the Years Ended December 31, 2004 2003 2002 Revenue: Subscriber-related revenue...$ 6,677,370 Equipment sales...373,253 Other...100,593 Total revenue...

  • Page 85
    ...-for-sale securities, net...Foreign currency translation...Reversal of deferred tax asset for book stock-based compensation that exceeded the related tax deduction ...Cash dividend on Class A and Class B common stock ($1.00 per share)...Net income (loss)...455,670 $ 4,874 Balance, December 31, 2004...

  • Page 86
    ... Non-cash, stock-based compensation recognized ...1,180 Deferred tax expense (benefit)...5,362 Change in valuation of contingent value rights, net of gain on extinguishment...Amortization of debt discount and deferred financing costs ...22,262 Recognition of bridge commitment fees from reduction of...

  • Page 87
    ..., our owned and leased satellites, EchoStar receiver systems, digital broadcast operations centers, customer service facilities, and certain other assets utilized in our operations. Our principal business strategy is to continue developing our subscription television service in the United States...

  • Page 88
    ...service" revenue and "Other subscriber-related revenue" into "Subscriber-related revenue." Additionally, "Equipment sales" and "Cost of sales - equipment" now include non-DISH Network receivers and other accessories sold by our EchoStar International Corporation subsidiary to international customers...

  • Page 89
    ... royalty obligations related to the production of EchoStar receiver systems. The following details the decrease in the financial statement line items affected by this change in estimate (in thousands): Cost of sales - equipment ...Cost of sales - subscriber promotion subsidies ...Depreciation...

  • Page 90
    ... from our strategic investments in companies that are not publicly traded 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 we will...

  • Page 91
    ...the years ended December 31, 2004, 2003 and 2002, respectively. The costs of satellites under construction, including certain amounts prepaid under our satellite service agreements (Note 9), are capitalized during the construction phase, assuming the eventual successful launch and in-orbit operation...

  • Page 92
    ... licensed orbital locations, including revenue attributable to programming offerings from such satellites, the direct operating and subscriber acquisition costs related to such programming, and future capital costs for replacement satellites. Projected revenue and cost amounts included current and...

  • Page 93
    ... useful lives of twelve years, and customer relationships totaling approximately $73.3 million with estimated weighted-average useful lives of four years. The business combination did not have a material impact on our results of operations for the year ended December 31, 2004 and would not have...

  • Page 94
    ... embedding microchips in credit card-sized access cards, or "smart cards," to encrypt the programming we transmit to subscribers so that only those who pay for service can receive our programming. Theft of cable and satellite programming has been widely reported and our signal encryption has been...

  • Page 95
    ...arrangement exists, prices are determinable, collectibility is reasonably assured and the goods or services have been delivered. Revenue from our subscription television services is recognized when programming is broadcast to subscribers. Subscriber fees for multiple set-top receivers, digital video...

  • Page 96
    ... customer acquisition distribution channel. Subscriber acquisition costs include the following line items from our consolidated statements of operations and comprehensive income (loss Cost of sales - subscriber promotion subsidies" includes the cost of EchoStar receiver systems sold to retailers...

  • Page 97
    ..., including digital video recorders and high definition receivers, require additional upgrade fees. The Free Dish promotion ended on January 31, 2005. Free for All - Effective February 1, 2004, our Free for All promotion provides new subscribers who purchase one or two installed receiver systems for...

  • Page 98
    ... is reversed to the extent applicable to forfeitures of unvested options. The following table illustrates the effect on net income (loss) per share if we had accounted for our stock-based compensation plans using the fair value method: For the Years Ended December 31, 2004 2003 2002 (In thousands...

  • Page 99
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued volatility. Accordingly, we specifically identified extraordinary events in our history which resulted in irregular movements in our stock price, and have disregarded the related periods in calculating our ...

  • Page 100
    ... Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and its related implementation guidance, and (ii) requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments, including grants of employee stock options, based...

  • Page 101
    ...2004 and prior periods, certain satellites within our fleet have experienced various anomalies, some of which have had a significant adverse impact on their commercial operation. EchoStar I and II EchoStar I and II currently operate at the 148 degree orbital location. Each of these Series 7000 class...

  • Page 102
    ... currently located at the 119 degree orbital location. This satellite is equipped with a total of 96 solar array strings, 92 of which are required to assure full power availability for the 12-year design life of the satellite. Prior to 2004, EchoStar V experienced anomalies resulting in the loss of...

  • Page 103
    ... 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. During March 2004, our EchoStar VII satellite lost...

  • Page 104
    ... location. This satellite has 32 Ku-band transponders that operate at approximately 110 watts per channel, along with transponders that can provide services in Ka-Band (a "Ka-band payload"). EchoStar IX provides expanded video and audio channels to DISH Network subscribers who install a specially...

  • Page 105
    ... 2009, fully exercising our optional partial redemption right. During the second quarter of 2004, we repurchased in open market transactions approximately $8.8 million principal amount of our 9 1/8% Senior Notes due 2009. The approximate $1.1 million difference between the market price paid and the...

  • Page 106
    ... 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% Senior Notes Indenture, we will be required to make an offer to repurchase all or any part of...

  • Page 107
    ... 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 related indenture, we will be required to make an offer to repurchase all or any part of a holder's Floating Rate Senior Notes at a purchase price equal...

  • Page 108
    ...; 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 related indenture, we will be required to make an offer to repurchase all or any part of a holder's 5 3/4% Senior...

  • Page 109
    ...to offer to exchange the 6 5/8% Senior Notes for new issues of identical debt securities registered under the Securities Act of 1933. The 6 5/8% Senior Notes will be redeemable, in whole or in part, at any time at a redemption price equal to 100% of their principal amount plus a "make-whole" premium...

  • Page 110
    ... new Fixed Satellite Service ("FSS") satellite, AMC-15, which successfully launched during the fourth quarter of 2004 and commenced commercial operations in January 2005. In connection with this agreement, we prepaid $50.0 million to SES Americom during 2003. The ten-year satellite service agreement...

  • Page 111
    ... lease of the orbital location and estimated executory costs (primarily insurance and maintenance) including profit thereon, included in total minimum lease payments...Net minimum lease payments...Less: Amount representing interest...Present value of net minimum lease payments...Less: Current...

  • Page 112
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued During 2004 and 2003, stock option compensation expenses related to the 1999 Incentive Plan, for which an estimated deferred tax benefit was previously recorded, exceeded the actual tax deductions allowed. Tax...

  • Page 113
    ... own outstanding Class A common stock. There are no shares of Class C common stock outstanding. Common Stock Repurchase Programs During the fourth quarter of 2003, our Board of Directors authorized the repurchase of an aggregate of up to $1.0 billion of our Class A common stock. During 2004 and 2003...

  • Page 114
    ...of our Class A common stock pursuant to a new share repurchase plan. As of December 31, 2004, we had not repurchased any shares under this plan. Our share repurchase program does not require us to acquire any specific number or amount of securities and may be terminated at any time. Cash Dividend On...

  • Page 115
    ... $ 11,279 Subscriber-related...Satellite and transmission...General and administrative...Total non-cash, stock-based compensation... Options to purchase an additional 7.0 million shares are outstanding as of December 31, 2004 and were granted with exercise prices equal to the fair market value of...

  • Page 116
    ... 8. Employee Benefit Plans Employee Stock Purchase Plan During 1997, the Board of Directors and shareholders approved an employee stock purchase plan (the "ESPP"), effective beginning October 1, 1997. Under the ESPP, we are authorized to issue a total of 800,000 shares of Class A common stock...

  • Page 117
    ...use this additional satellite, which is currently located at the 85 degree orbital location, as backup for AMC-15, and may also utilize the satellite to offer local network channels in additional markets, together with satellite-delivered high-speed internet services. This ten-year satellite service...

  • Page 118
    ..., launch or lease of additional satellites. Purchase Obligations Our 2005 purchase obligations primarily consist of binding purchase orders for EchoStar receiver systems and related equipment, and for products and services related to the operation of our DISH Network. Our purchase obligations...

  • Page 119
    ... to make a firm assessment of the probable outcome of plaintiffs' outstanding request for fees. The District Court's injunction requires us to use a computer model to re-qualify, as of June 2003, all of our subscribers who receive ABC, NBC, CBS or Fox programming by satellite from a market other...

  • Page 120
    ... receive network channels, including migration to local channels by satellite where available, and free off air antenna offers in other markets. However, we cannot predict with any degree of certainty how many subscribers would cancel their primary DISH Network programming as a result of termination...

  • Page 121
    ...we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly electronic programming guide and related features that we currently offer to consumers. It is not possible to make a firm assessment of the...

  • Page 122
    ... class action relating to the use of terms such as "crystal clear digital video," "CD-quality audio," and "onscreen program guide," and with respect to the number of channels available in various programming packages was filed against us in the California State Superior Court for Los Angeles...

  • Page 123
    ... of the class to professional installers in violation of contractual terms; (2) manipulated the accounts of subscribers to deny payments to class members; and (3) misrepresented, to class members, the ownership of certain equipment related to the provision of our satellite television service. During...

  • Page 124
    ... contends that our contractual relationship with Dominion Video Satellite, Inc., a direct broadcast provider that airs only Christian programming, constitutes a breach of a commercial television services agreement between ESLLC and CCN (the "CCN Agreement"). Further, CCN contends that our reluctance...

  • Page 125
    ... limitations may force us to move the local channels in as many as 30 markets to different satellites, requiring subscribers in those markets to install a second or a different dish to continue receiving their local network channels. We may be forced to stop offering local channels in some of those...

  • Page 126
    ... Under this definition we currently operate as two business units. The All Other column consists of revenue from other satellite services and expenses from other operating segments for which the disclosure requirements of SFAS 131 do not apply. DISH Network Year Ended December 31, 2002 Total revenue...

  • Page 127
    ..., respectively. These international sales accounted for approximately 1.8%, 2.2% and 3.5% of our total revenue during each of the years ended December 31, 2004, 2003 and 2002, respectively. Revenues from these customers are included within the EchoStar Technologies Corporation operating segment. 11...

  • Page 128
    ECHOSTAR COMMUNICATIONS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 12. Quarterly Financial Data (Unaudited) Our quarterly results of operations are summarized as follows: For the Three Months Ended, June 30 September 30 December 31 (In thousands, except per share data) (...

  • Page 129
    ... agreed to settle our insurance claim and related claims for accrued interest and bad faith with all carriers who agree to pay their proportionate share of an aggregate net amount of $240.0 million. We retained title to and use of the EchoStar IV satellite. Payment from each settling carrier is due...

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  • Page 131
    ... ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 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...

  • Page 132
    ... filed with respect to the EchoStar Communications Corporation ("EchoStar") Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed with the Securities and Exchange Commission on March 16, 2005 (the "10-K"). The 10-K omitted the information required by Part III (Items 10, 11, 12...

  • Page 133
    ...Executive Compensation ...Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...Item 13. Certain Relationships and Related Transactions ...Item 14. Principal Accountant Fees and Services...PART IV Item 15. Exhibits and Financial Statement Schedules...

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  • Page 135
    ... 47 47 56 Current Tenure as Director Began 1980 2004 2001 1980 1995 2002 1998 2003 Position with EchoStar Director and Executive Vice President Director and Senior Advisor Director and Employee Chairman of the Board of Directors and Chief Executive Officer Director Director Director, Executive Vice...

  • Page 136
    .... CSS served retailers selling satellite systems, televisions and a range of consumer electronics products. Mr. Schroeder also founded a programming division that grew to serve over 400,000 subscribers. Executive Officers Information regarding EchoStar's executive officers is contained in Part I of...

  • Page 137
    ... Position Charles W. Ergen Chairman and Chief Executive Officer David K. Moskowitz Executive Vice President, Director, General Counsel and Secretary Steven B. Schaver President EchoStar International Corporation Michael Kelly Executive Vice President DISH Network Service LLC and Customer Service...

  • Page 138
    ... that the Named Executive Officers will receive the potential realizable values shown in this table. Option Grants in Fiscal 2004 Percent of Total Options Granted to Employees In Fiscal Year Name Number of Securities Underlying Options Granted (#) Exercise Price Per Share ($/Sh) Expiration Date...

  • Page 139
    ..., Mr. Goodbarn and Mr. Schroeder. None of these individuals was an officer or employee of EchoStar at any time during the 2004 fiscal year or at any other time. No executive officer of EchoStar served on the board of directors or compensation committee of another entity, or on any other committee of...

  • Page 140
    ... exercise price of options granted under the 2001 Director Plan is 100% of the fair market value of our Class A Shares as of the last day of the calendar quarter in which the nonemployee director receiving the option is elected, appointed or reelected to our Board, as applicable. We currently have...

  • Page 141
    ... is c/o EchoStar Communications Corporation, 9601 S. Meridian Blvd., Englewood, Colorado 80112. As of the close of business on April 13, 2005, there were 215,695,773 outstanding shares of Class A Common Stock and 238,435,208 shares of Class B Common Stock. The following table sets forth, to the best...

  • Page 142
    ...calculating the aggregate number of shares owned by directors and executive officers as a group. Includes: (i) 5,834,424 Class A shares; (ii) 105,408 Class A Shares held in the 401(k) Plan; (iii) the right to acquire 3,142,677 Class A Shares within 60 days upon the exercise of employee stock options...

  • Page 143
    ... related fees Tax Fees (3) All Other Fees Total Fees (1) The fees for 2003 have been adjusted to account for payments owed for 2003 that were not billed until later in 2004. (2) Consists of fees for audit of financial statements of certain employee benefit plans and other audit related services...

  • Page 144
    PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (3) Exhibits 31.1H 31.2H 32.1H 32.2H H Section 302 Certification by Chairman and Chief Executive Officer. Section 302 Certification by Executive Vice President and Chief Financial Officer. Section 906 Certification by Chairman and Chief ...

  • Page 145
    ..., thereunto duly authorized. ECHOSTAR COMMUNICATIONS CORPORATION By: /s/ David J. Rayner David J. Rayner Executive Vice President and Chief Financial Officer Date: April 28, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

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  • Page 147
    ... and Chief Operating Officer David J. Rayner Executive Vice President and Chief Financial Officer Steven B. Schaver President - EchoStar International Corporation Carl E. Vogel Vice Chairman TRANSFER AGENT Computershare Investor Services 350 Indiana St. Suite 800 Golden, Colorado 80401 INDENTURE...

  • Page 148
    (NASDAQ: DISH) 9601 S. Meridian Blvd. • Englewood, CO • 80112 • 303.723.1000 w w w. e c h o s t a r. c o m • w w w. d i s h n e t w o r k . c o m