Dish Network 2012 Annual Report Download - page 49

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - Continued
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underlying business. A hypothetical 10% adverse change in the price of our public strategic debt and equity
investments would result in a decrease of approximately $126 million in the fair value of these investments.
Restricted Cash and Marketable Investment Securities and Noncurrent Marketable and Other Investment
Securities
Restricted Cash and Marketable Investment Securities
As of December 31, 2012, we had $134 million of restricted cash and marketable investment securities invested in: (a)
cash; (b) VRDNs convertible into cash at par value plus accrued interest generally in five business days or less; (c)
debt instruments of the United States Government and its agencies; (d) commercial paper and corporate notes with an
overall average maturity of less than one year and rated in one of the four highest rating categories by at least two
nationally recognized statistical rating organizations; and/or (e) instruments with similar risk, duration and credit
quality characteristics to the commercial paper described above. Based on our December 31, 2012 investment
portfolio, a hypothetical 10% increase in average interest rates would not have a material impact in the fair value of our
restricted cash and marketable investment securities.
Noncurrent Auction Rate and Other Investment Securities
As of December 31, 2012, we held investments in ARS of $106 million, which are reported at fair value. Events in the
credit markets have reduced or eliminated current liquidity for certain of our ARS investments. As a result, we classify
these investments as noncurrent assets as we intend to hold these investments until they recover or mature, and
therefore interest rate risk associated with these securities is mitigated. A hypothetical 10% adverse change in the price
of these investments would result in a decrease of approximately $11 million in the fair value of these investments.
Long-Term Debt
As of December 31, 2012, we had long-term debt of $11.639 billion, excluding capital lease obligations, on our
Consolidated Balance Sheets. We estimated the fair value of this debt to be approximately $12.807 billion using
quoted market prices for our publicly traded debt, which constitutes approximately 99% of our debt. The fair value of
our debt is affected by fluctuations in interest rates. A hypothetical 10% decrease in assumed interest rates would
increase the fair value of our debt by approximately $290 million. To the extent interest rates increase, our costs of
financing would increase at such time as we are required to refinance our debt or raise additional debt. As of December
31, 2012, a hypothetical 10% increase in assumed interest rates would increase our annual interest expense by
approximately $75 million.
Derivative Financial Instruments
From time to time, we speculate using derivative financial instruments, such amounts, however, are typically
insignificant.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements are included in this report beginning on page F-1.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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Item 9A. CONTROLS AND PROCEDURES
Disclosure controls and procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon
that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this report.
Changes in internal control over financial reporting
On March 9, 2012, we completed the DBSD Transaction and the TerreStar Transaction. We are currently
integrating policies, processes, people, technology and operations for each of the combined companies.
Management will continue to evaluate our internal control over financial reporting as we execute integration
activities. Except as discussed above, there has been no change in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during our most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our
transactions and dispositions of our assets;
(ii) provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our
financial statements in accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of our management and our
directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may
deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based
on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over
financial reporting was effective as of December 31, 2012. Our evaluation of internal control over financial
reporting for 2012 did not include the internal control of DBSD and TerreStar, which we acquired on March 9,
2012. Our consolidated financial statements as of and for the year ended December 31, 2012 included $3.386
billion of assets and $1 million of revenue associated with these businesses.
The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by
KPMG LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a)
of this Annual Report on Form 10-K.
Item 9B. OTHER INFORMATION
None.