Dish Network 2007 Annual Report Download - page 62

Table of Contents
Income tax benefit (provision), net.
Our income tax benefit was $507.4 million during the year ended December 31, 2005 compared to an
income tax provision of $11.6 million during 2004. This decrease was primarily related to credits of $592.8 million and $322.0 million to our
provision for income taxes in 2005 resulting from the reversal and current year activity, respectively, of our recorded valuation allowance for
those deferred tax assets that we believed were more likely than not to be realizable.
Net income (loss).
“Net income” was $1.515 billion during the year ended December 31, 2005, an increase of $1.300 billion compared to
$214.8 million for 2004. The increase was primarily attributable to the reversal of our recorded valuation allowance for deferred tax assets,
higher “Operating income,” the “Gain on insurance settlement” and lower “Interest expense, net of amounts capitalized.”
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of cash during 2006 were operating activities and the issuance of long-
term notes. Our principal uses of cash during 2006
were to purchase property and equipment, redemption of certain of our long-term notes and purchases of marketable investment securities.
Effective February 15, 2007, we redeemed all of our outstanding 5 3/4% Convertible Subordinated Notes due 2008. In accordance with the
terms of the indenture governing the notes, the $1.0 billion principal amount of the notes was redeemed at a redemption price of 101.643% of
the principal amount, for a total of $1.016 billion. The premium paid of $16.4 million, along with unamortized debt issuance costs of
$3.6 million, were recorded as charges to earnings in February 2007.
We expect that our future working capital, capital expenditure and debt service requirements will be satisfied primarily from existing cash and
investment balances and cash generated from operations. Our ability to generate positive future operating and net cash flows is dependent upon,
among other things, our ability to retain existing DISH Network subscribers. There can be no assurance we will be successful in executing our
business plan. The amount of capital required to fund our 2007 working capital and capital expenditure needs will vary, depending, among
other things, on the rate at which we acquire new subscribers and the cost of subscriber acquisition and retention, including capitalized costs
associated with our new and existing subscriber equipment lease programs. The amount of capital required in 2007 will also depend on our
levels of investment in infrastructure necessary to support growth in the DISH Network, our wholesale commercial fixed satellite service
business and other strategic initiatives, previously discussed. We currently anticipate that 2007 capital expenditures will be higher than 2006
capital expenditures of $1.396 billion due to, among other things, increased spending on equipment leased to subscribers and expenditures on
satellites. Our capital expenditures will vary depending on the number of satellites leased or under construction at any point in time. Our
working capital and capital expenditure requirements could increase materially in the event of increased competition for subscription television
customers, significant satellite failures, in the event we make strategic investments or acquisitions, or in the event of general economic
downturn, among other factors. These factors could require that we raise additional capital in the future. There can be no assurance that we
could raise all required capital or that required capital would be available on acceptable terms.
Cash, cash equivalents and marketable investment securities.
We consider all liquid investments purchased within 90 days of their maturity to
be cash equivalents. See “Item 7A. – Quantitative and Qualitative Disclosures About Market Risk” for further discussion regarding our
marketable investment securities. As of December 31, 2006, our
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Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —
Continued
For the Years
Ended December 31,
2005 2004
(In thousands)
Adjusted income tax benefit (provision), net
$
(378,687
)
$
(93,771
)
Less:
Valuation allowance reversal
(592,804
)
—
Current year valuation allowance activity
(321,982
)
(76,786
)
Deferred tax asset for filed returns
28,650
(5,376
)
Income tax benefit (provision), net
$
507,449
$
(11,609
)