Dish Network 2012 Annual Report Download - page 76

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Capital Lease Obligations
Anik F3. Anik F3, an FSS satellite, was launched and commenced commercial operation during April 2007. This
satellite is accounted for as a capital lease and depreciated over the term of the satellite service agreement. We have
leased 100% of the Ku-band capacity on Anik F3 for a period of 15 years.
Ciel II. Ciel II, a Canadian DBS satellite, was launched in December 2008 and commenced commercial operation
during February 2009. This satellite is accounted for as a capital lease and depreciated over the term of the satellite
service agreement. We have leased 100% of the capacity on Ciel II for an initial 10 year term.
As of December 31, 2012 and 2011, we had $500 million capitalized for the estimated fair value of satellites
acquired under capital leases included in “Property and equipment, net,” with related accumulated depreciation of
$194 million and $151 million, respectively. In our Consolidated Statements of Operations and Comprehensive
Income (Loss), we recognized $43 million, $43 million and $43 million in depreciation expense on satellites
acquired under capital lease agreements during the years ended December 31, 2012, 2011 and 2010, respectively.
Future minimum lease payments under the capital lease obligation, together with the present value of the net
minimum lease payments as of December 31, 2012 are as follows (in thousands):
For the Years Ended December 31,
2013.............................................................................................................................................................. 82,968$
2014.............................................................................................................................................................. 77,775
2015.............................................................................................................................................................. 75,970
2016.............................................................................................................................................................. 75,970
2017.............................................................................................................................................................. 75,970
Thereafter..................................................................................................................................................... 238,299
Total minimum lease payments.................................................................................................................... 626,952
Less: Amount representing lease of the orbital location and estimated executory costs (primarily
insurance and maintenance) including profit thereon, included in total minimum lease payments............. (288,999)
Net minimum lease payments....................................................................................................................... 337,953
Less: Amount representing interest.............................................................................................................. (88,808)
Present value of net minimum lease payments.............................................................................................. 249,145
Less: Current portion................................................................................................................................... (29,515)
Long-term portion of capital lease obligations............................................................................................. 219,630$
The summary of future maturities of our outstanding long-term debt as of December 31, 2012 is included in the
commitments table in Note 16.
12. Income Taxes and Accounting for Uncertainty in Income Taxes
Income Taxes
Our income tax policy is to record the estimated future tax effects of temporary differences between the tax bases of
assets and liabilities and amounts reported on our Consolidated Balance Sheets, as well as probable operating loss, tax
credit and other carryforwards. Deferred tax assets are offset by valuation allowances when we believe it is more
likely than not that net deferred tax assets will not be realized. We periodically evaluate our need for a valuation
allowance. Determining necessary valuation allowances requires us to make assessments about historical financial
information as well as the timing of future events, including the probability of expected future taxable income and
available tax planning opportunities.
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DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
We file consolidated tax returns in the U.S. The income taxes of domestic and foreign subsidiaries not included in the
U.S. tax group are presented in our consolidated financial statements based on a separate return basis for each tax
paying entity.
As of December 31, 2012, we had no net operating loss carryforwards (“NOLs”) for federal income tax purposes and
$18 million of NOL benefit for state income tax purposes. The state NOLs begin to expire in the year 2020. In
addition, there are $4 million of tax benefits related to credit carryforwards which are partially offset by a valuation
allowance. The credit carryforwards began to expire in 2012.
As of December 31, 2012, we had benefits of foreign tax credits and net operating loss carryforwards of approximately
$19 million, which are fully offset by a valuation allowance.
The components of the (provision for) benefit from income taxes are as follows:
2012 2011 2010
Current (provision) benefit:
Federal............................................................................. $ 35,848 $ (235,357) $ (287,523)
State................................................................................. 9,689 (27,523) (68,550)
Foreign............................................................................. (2,242) (4,199) -
43,295
(
267,079
)
(
356,073
)
Deferred
(p
rovision
)
benefit:
Federal.............................................................................
(
337,595
)
(
590,618
)
(
227,024
)
State.................................................................................
(
46,564
)
(
34,128
)
16,341
Foreign............................................................................. - (4,939) -
Decrease (increase) in valuation allowance..................... 33,835 1,758 9,283
(350,324) (627,927) (201,400)
Total benefit (provision).................................................. (307,029)$ (895,006)$ (557,473)$
For the Years Ended December 31,
(In thousands)
Of our $933 million of “Income (loss) before income taxes” on our Consolidated Statements of Operations and
Comprehensive Income (Loss), a loss of $31 million relates to our foreign operations.
The actual tax provisions for 2012, 2011 and 2010 reconcile to the amounts computed by applying the statutory Federal
tax rate to income before taxes as follows:
2012 2011 2010
Statutory rate............................................................................... (35.0) (35.0) (35.0)
State income taxes, net of Federal benefit................................... (2.5) (1.7) (2.5)
Stock option compensation......................................................... 0.1 - 0.3
Other............................................................................................ 0.9 (0.5) 0.6
Decrease (increase) in valuation allowance................................. 3.6 0.1 0.5
Total benefit (provision) for income taxes.................................. (32.9) (37.1) (36.1)
For the Years Ended December 31,
% of pre-tax (income)/loss
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