Dish Network 2007 Annual Report Download - page 69

Table of Contents
Programming Contracts
In the normal course of business, we have entered into numerous contracts to purchase programming content where our payment obligations
are fully contingent on the number of subscribers to whom we provide the content. These programming commitments are not included in the
table above. The terms of our contracts typically range from one to ten years with annual rate increases. Our programming expenses will
continue to increase to the extent we are successful growing our subscriber base. Programming expenses are included in “Subscriber-related
expenses” in the accompanying consolidated statements of operations and comprehensive income (loss).
Satellite insurance.
We currently have no commercial insurance coverage on the satellites we own. We do not use commercial insurance to
mitigate the potential financial impact of in-orbit failures because we believe that the premium costs are uneconomic relative to the risk of
satellite failure. 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 fails. We could not, however, recover certain local markets,
international and other niche programming. Further, programming continuity cannot be assured in the event of multiple satellite losses.
Future capital requirements. In addition to our DBS business plan, we are exploring business plans for FSS extended Ku band and FSS Ka-
band satellite systems, including licenses to operate at the 97, 109, 113 and 121 degree orbital locations.
As a result of expected penetration of our new and existing subscriber equipment lease programs, we anticipate an increase in capitalized
subscriber equipment during 2007. We expect our capital expenditures for 2007 to be higher than 2006 capital expenditures of $1.396 billion.
From time to time we evaluate opportunities for strategic investments or acquisitions that would complement our current services and products,
enhance our technical capabilities or otherwise offer growth opportunities. We may make investments in or partner with others to expand our
business into mobile and portable video, data and voice services. Future material investments or acquisitions may require that we obtain
additional capital. Also, as discussed previously, our Board of Directors approved extending the plan to repurchase our Class A common stock,
which could require that we raise additional capital. The maximum dollar value of shares that may still be purchased under the plan is
$625.8 million. There can be no assurance that we could raise all required capital or that required capital would be available on acceptable
terms.
Security Ratings
Our current credit ratings are Ba3 and BB- on our long-term senior notes, and B2 and B with respect to our publicly traded convertible
subordinated notes, as rated by Moody’s Investor Service and Standard and Poor’s Rating Service, respectively. Debt ratings by the various
rating agencies reflect each agency’s opinion of the ability of issuers to repay debt obligations as they come due.
With respect to Moody’s, the Ba3 rating for our senior debt indicates that the obligations are judged to have speculative elements and are
subject to substantial credit risk. For S&P, the BB- rating indicates the issuer is less vulnerable to nonpayment of interest and principal
obligations than other speculative issues. However, the issuer faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
Effective February 15, 2007, we redeemed all of our outstanding 5 3/4% Convertible Subordinated Notes due 2008.
Critical Accounting Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and
assumptions that affect amounts reported therein. Management bases its estimates, judgments and assumptions on historical experience and on
various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates,
actual results reported in future
61
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —
Continued