Dish Network 2005 Annual Report Download - page 62

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS – Continued
52
Interest expense, net of amounts capitalized. “Interest expense” totaled $373.8 million during the year ended
December 31, 2005, a decrease of $131.9 million or 26.1% compared to 2004. This decrease primarily resulted from
a decrease in prepayment premiums and write-off of debt issuance costs totaling $134.4 million, and a net reduction
in interest expense of $40.2 million related to the redemption, repurchases and refinancing of our previously
outstanding senior debt which occurred during 2004. This decrease was partially offset by $38.0 million of
additional interest expense during 2005 associated with our capital lease obligations for the AMC-15 and AMC-16
satellites.
Gain on insurance settlement. During March 2005, we settled an insurance claim and related claims for accrued
interest and bad faith with the insurers of our EchoStar IV satellite for the net amount of $240.0 million. The $134.0
million received in excess of our previously recorded $106.0 million receivable related to this insurance claim was
recognized as a “Gain on insurance settlement” during the year ended December 31, 2005.
Other. “Other” income totaled $36.2 million during the year ended December 31, 2005 compared to “Other”
expense of $13.5 million during 2004. The increase of $49.7 million primarily resulted from a $38.8 million
unrealized gain for the change in fair value of a non-marketable strategic investment accounted for at fair value and
$28.4 million in gains related to the conversion of bond instruments into common stock during the year ended
December 31, 2005. These gains were partially offset by a $25.4 million charge to earnings for other than
temporary declines in the fair value of an investment in the marketable common stock of a company in the home
entertainment industry during the fourth quarter of 2005.
Earnings before interest, taxes, depreciation and amortization. EBITDA was $2.143 billion during the year ended
December 31, 2005, an increase of $947.6 million or 79.3% compared to $1.195 billion during 2004. The increase in
EBITDA was primarily attributable to the changes in operating revenues and expenses discussed above.
The following table reconciles EBITDA to the accompanying financial statements:
For the Years Ended
December 31,
2005 2004
(In thousands)
EBITDA................................................................ 2,142,990$ 1,195,384$
Less:
Interest expense, net ........................................... 330,326 463,445
Income tax provision (benefit), net...................... (507,449) 11,609
Depreciation and amortization............................ 805,573 505,561
Net income (loss).................................................. 1,514,540$ 214,769$
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.