Dish Network 2006 Annual Report Download - page 109

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ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–24
Construction in progress consists of the following:
As of December 31,
2006 2005
(In thousands)
Progress amounts for satellite construction, including certain amounts
prepaid under satellite service agreements and launch costs............................... $ 380,774 $ 292,020
Regional digital broadcast operations centers......................................................... - 91,966
Software related projects......................................................................................... 21,429 47,028
Other ...................................................................................................................... 31,640 60,734
Construction in progress.................................................................................... 433,843$ 491,748$
Depreciation and amortization expense consists of the following:
For the Years Ended December 31,
2006 2005 2004
(In thousands)
Equipment leased to customers............................................. $ 686,125 $ 437,587 $ 213,093
Satellites .............................................................................. 231,977 197,495 134,619
Furniture, fixtures, equipment and other............................... 152,204 126,125 119,235
Identifiable intangible assets subject to amortization .......... 36,787 39,035 33,939
Buildings and improvements ............................................... 7,201 5,331 4,675
Total depreciation and amortization................................ 1,114,294$ 805,573$ 505,561$
Cost of sales and operating expense categories included in our accompanying Consolidated Statements of Operations
and Comprehensive Income (Loss) do not include depreciation expense related to satellites or equipment leased to
customers.
Our Satellites
We presently transmit programming from 14 satellites in geostationary orbit approximately 22,300 miles above the
equator. Of these 11 are owned and three are leased. Each of the owned satellites had an original minimum useful life
of at least 12 years. Two of the leased satellites are accounted for as capital leases pursuant to Statement of Financial
Accounting Standards No. 13, “Accounting for Leases” (“SFAS 13”) and are depreciated over the ten-year terms of the
satellite service agreements. Our satellite fleet is a major component of our EchoStar DBS System. While we
believe that overall our satellite fleet is generally in good condition, during 2006 and prior periods, certain satellites
in our fleet have experienced anomalies, some of which have had a significant adverse impact on their commercial
operation. We currently do not carry insurance for any of our owned in-orbit satellites. We believe we generally have
in-orbit satellite capacity sufficient to recover, in a relatively short time frame, transmission of most of our critical
programming in the event one of our in-orbit satellites were to fail. We could not, however, recover certain local
markets, international and other niche programming in the event of such failure, with the extent of disruption dependent
on the specific satellite experiencing the failure. Further, programming continuity cannot be assured in the event of
multiple satellite losses.
EchoStar I. EchoStar I was launched during December 1995 and currently operates at the 148 degree orbital location.
The satellite can operate up to 16 transponders at 130 watts per channel. During the second quarter of 2006, the
satellite experienced anomalies resulting in the possible loss of two solar array strings. An investigation of the
anomalies is continuing. The anomalies have not impacted commercial operation of the satellite to date. Even if
permanent loss of the two solar array strings is confirmed, the original minimum 12-year design life of the satellite is
not expected to be impacted since the satellite is equipped with a total of 104 solar array strings, only approximately
98 of which are required to assure full power availability for the design life of the satellite. However, there can be
no assurance future anomalies will not cause further losses which could impact the remaining life or commercial
operation of the satellite.