Dish Network 2011 Annual Report Download - page 77

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
67
67
The table above does not include $267 million of liabilities associated with unrecognized tax benefits which were
accrued, as discussed in Note 12 in the Notes to our Consolidated Financial Statements in Item 15 of this Annual
Report on Form 10-K, and are included on our Consolidated Balance Sheets as of December 31, 2011. We do not
expect any portion of this amount to be paid or settled within the next twelve months.
Other than the “Guarantees” disclosed in Note 16 in the Notes to our Consolidated Financial Statements in Item 15
of this Annual Report on Form 10-K, we generally do not engage in off-balance sheet financing activities.
Satellite-Related Obligations
Satellites Under Construction. As of December 31, 2011, we have agreed to lease capacity on one satellite from
EchoStar that is currently under construction. Future commitments related to this satellite are included in the table
above under “Satellite-related obligations.”
x EchoStar XVI. During December 2009, we entered into a ten-year transponder service agreement with
EchoStar to lease all of the capacity on EchoStar XVI, a DBS satellite, which is expected to be launched
during the second half of 2012.
Satellite Insurance
We generally do not have commercial insurance coverage on the satellites we use. We do not use commercial
insurance to mitigate the potential financial impact of in-orbit failures because we believe that the premium costs are
uneconomical relative to the risk of satellite failure. While we generally have had in-orbit satellite capacity
sufficient to transmit our existing channels and some backup capacity to recover the transmission of certain critical
programming, our backup capacity is limited. In the event of a failure or loss of any of our satellites, we may need
to acquire or lease additional satellite capacity or relocate one of our other satellites and use it as a replacement for
the failed or lost satellite.
Purchase Obligations
Our 2012 purchase obligations primarily consist of binding purchase orders for receiver systems and related
equipment, digital broadcast operations, satellite and transponder leases, engineering and for products and services
related to the operation of DISH. Our purchase obligations also include certain guaranteed fixed contractual
commitments to purchase programming content. Our purchase obligations can fluctuate significantly from period to
period due to, among other things, management’s control of inventory levels, and can materially impact our future
operating asset and liability balances, and our future working capital requirements.
Programming Contracts
In the normal course of business, we enter into contracts to purchase programming content in which our payment
obligations are fully contingent on the number of subscribers to whom we provide the respective content. These
programming commitments are not included in the “Contractual obligations and off-balance sheet arrangements”
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. In
addition, our margins may face further downward pressure from price increases and the renewal of long term
programming contracts on less favorable pricing terms.
Future Capital Requirements
We expect to fund our future working capital, capital expenditure and debt service requirements from cash generated
from operations, existing cash and marketable investment securities balances, and cash generated through raising
additional capital. The amount of capital required to fund our future working capital and capital expenditure needs
varies, depending on, among other things, 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 majority of our capital expenditures for 2012 are driven by the costs associated with subscriber
premises equipment, included in our firm purchase obligations, as well as capital expenditures for our satellite-