Dish Network 2004 Annual Report Download - page 52

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
44
The following table reconciles EBITDA to the accompanying financial statements:
For the Years Ended
December 31,
2004 2003
(In thousands)
EBITDA............................................................... 1,192,724$ 1,124,520$
Less:
Interest expense, net .......................................... 463,445 487,432
Income tax provision (benefit), net..................... 11,609 14,376
Depreciation and amortization........................... 502,901 398,206
N
et income (loss).................................................. 214,769$ 224,506$
EBITDA is not a measure determined in accordance with accounting principles generally accepted in the United
States, or GAAP, and should not be considered a substitute for operating income, net income or any other measure
determined in accordance with GAAP. EBITDA is used as a measurement of operating efficiency and overall
financial performance and we believe it to be a helpful measure 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. EBITDA should not be considered
in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Income tax benefit (provision), net. Our income tax policy is to record the estimated future tax effects of temporary
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 for Income Taxes” (“SFAS 109”) regarding the
recoverability of any tax assets recorded on the balance sheet and provide any necessary valuation allowances as
required. Determining necessary valuation allowances requires us to make assessments about the timing of future
events, including the probability of expected future taxable income and available tax planning opportunities. We
currently have an approximate $1.0 billion valuation allowance recorded as an offset against all of our net deferred tax
assets. In accordance with SFAS 109, we periodically evaluate our need for a valuation allowance based on historical
evidence, including trends, and future expectations in each reporting period. In the future, at such time as is required by
SFAS 109, all or a portion of the current valuation allowance may be reversed. We recognized “Net income” for the
years ended December 31, 2004 and 2003, and accordingly, now believe that if this trend continues it is more likely
than not we will reverse our current recorded valuation allowance in the near term which will have a material positive
impact on our “Net income (loss).” However, there can be no assurance if or when all or a portion of our valuation
allowance will be reversed.
Net income (loss). “Net income” was $214.8 million during the year ended December 31, 2004, a decrease of $9.7
million or 4.3% compared to $224.5 million for the same period in 2003. The decrease was primarily attributable to
lower “Operating income,” “Interest income” and “Other income” partially offset by the decrease in “Interest
expense” resulting from the factors discussed above.