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YEAR ENDING DECEMBER 31, 2014
ANNUAL REPORT

Table of contents

  • Page 1
    ANNUAL REPORT YEAR ENDING DECEMBER 31, 2014

  • Page 2
    A Nasdaq-100 Company

  • Page 3
    ... average monthly revenue per user. Instead of remaining content to deliver our established video service, we took steps to serve a growing generation of consumers who have rejected the traditional pay-TV model. During 2014, we struck groundbreaking programming agreements with The Walt Disney Company...

  • Page 4

  • Page 5
    ... Boulevard Englewood, Colorado (Address of principal executive offices) 80112 (Zip Code) Registrant's telephone number, including area code: (303) 723-1000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Class A common stock...

  • Page 6
    ... Supplementary Data...Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...Controls and Procedures...Other Information...PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance...Executive Compensation...Security...

  • Page 7
    ... consent agreements at acceptable rates, or at all, from local network stations. We may be required to make substantial additional investments to maintain competitive programming offerings. Any failure or inadequacy of our information technology infrastructure and communications systems could...

  • Page 8
    ...upgrade existing subscribers with more advanced equipment could cause our products and services to become obsolete. We rely on a single vendor or a limited number of vendors to provide certain key products or services to us such as information technology support, billing systems, and security access...

  • Page 9
    ... constraints. Our business, investor confidence in our financial results and stock price may be adversely affected if our internal controls are not effective. We may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange Commission, or...

  • Page 10
    (This page has been left blank intentionally.)

  • Page 11
    ... largest pay-TV provider. Our common stock is publicly traded on the Nasdaq Global Select Market under the symbol "DISH." Our principal executive offices are located at 9601 South Meridian Boulevard, Englewood, Colorado 80112 and our telephone number is (303) 723-1000. DISH Network Corporation is...

  • Page 12
    ...-cost provider in the pay-TV industry in the U.S. because we seek to offer the lowest everyday prices available to consumers after introductory promotions expire. ï,· ï,· DISH Products and Services Pay-TV Programming. We offer a wide selection of video services under the DISH brand, with access...

  • Page 13
    ..., search program listings and remotely control certain features of their DVRs. Dishanywhere.com and our mobile applications provide access to more than 80,000 movies, television shows, clips and trailers. Technology. Our subscribers receive programming via equipment that includes a small satellite...

  • Page 14
    ... Channels While we offer receiver systems and programming through direct sales channels, a significant percentage of our gross new subscriber activations are generated through independent third parties such as small satellite retailers, direct marketing groups, local and regional consumer...

  • Page 15
    ... 54% of pay-TV subscribers. Cable companies are typically able to bundle their video services with broadband Internet access and voice services and many have significant investments in companies that provide programming content. During February 2014, Comcast Corporation ("Comcast") announced...

  • Page 16
    ... and consumer demand for new features may render the returned equipment obsolete. Installation Services. We incur significant upfront costs to install satellite dishes and receivers in the homes of our new customers. New Customer Promotions. We often offer programming at no additional charge and...

  • Page 17
    ...quality installations, upgrades, and in-home repairs are critical to providing good customer service. Such in-home service is performed by both DISH Network employees and a network of independent contractors and includes, among other things, priority technical support, replacement equipment, cabling...

  • Page 18
    ... FCC's Mobile Satellite Service ("MSS") "integrated service" and spare satellite requirements and various technical provisions. On March 21, 2012, the FCC released a Notice of Proposed Rule Making proposing the elimination of the integrated service, spare satellite and various technical requirements...

  • Page 19
    ... November 13, 2014 and concluded on January 29, 2015. The FCC's prohibition on certain communications related to the AWS-3 Auction expired on February 13, 2015. Also, on February 13, 2015, Northstar Wireless and SNR Wireless each filed applications with the FCC to acquire certain AWS-3 Licenses for...

  • Page 20
    ... our Chairman, and by certain trusts established by Mr. Ergen for the benefit of his family. EchoStar is our primary supplier of digital set-top boxes and digital broadcast operations. In addition, EchoStar provides the vast majority of our transponder capacity, is a key supplier of related services...

  • Page 21
    ...and to address new video and data applications consumers may desire in the future. We currently utilize satellites in geostationary orbit approximately 22,300 miles above the equator detailed in the table below. Estimated Useful Life (Years) / Lease Termination Date 15 Satellites Owned: EchoStar XV...

  • Page 22
    ... other things, HD programming. During October 2013, we entered into an agreement with ArianeSpace S.A. ("Ariane") for launch services for this satellite, which is expected to be launched during the fourth quarter 2015. Satellite Anomalies Operation of our DISH branded pay-TV service requires that we...

  • Page 23
    ..., the granting of related authorizations, and evaluation of the fitness of a company to be a licensee; approval for the relocation of satellites to different orbital locations or the replacement of an existing satellite with a new satellite; ensuring compliance with the terms and conditions of such...

  • Page 24
    ...location and a lease for FSS capacity available from EchoStar on a satellite located at the 103 degree orbital location. During September 2014, we filed an application with the FCC for authorization to provide service to the United States from a Canadian-licensed satellite using Reverse Band Working...

  • Page 25
    ... below-cost rates and for which we may not impose additional charges on subscribers. The Satellite Television Extension and Localism Act of 2010 ("STELA") required the FCC to decrease this set-aside to 3.5 percent for satellite carriers who provide retransmission of state public affairs networks in...

  • Page 26
    ... additional cable programming in exchange for retransmission consent of their local broadcast stations. These requirements may place constraints on available capacity on our satellites for other programming. Furthermore, the rates we are charged for retransmitting local channels have been increasing...

  • Page 27
    ... rules that required DBS providers to phase in carry-one, carry-all obligations with respect to the carriage of full-power broadcasters' HD signals by February 17, 2013 in markets in which they elect to provide local channels in HD. We have met this requirement in all applicable markets. In addition...

  • Page 28
    In addition, affiliates of certain cable providers have denied us access to sports programming that they supply to their cable systems terrestrially, rather than by satellite. The FCC has held that new denials of such service are unfair if they have the purpose or effect of significantly hindering ...

  • Page 29
    ...the FCC in February 2009. At the time they were granted, these licenses were subject to certain interim and final build-out requirements. By June 2013, we were required to provide signal coverage and offer service to at least 35% of the geographic area in each area covered by each individual license...

  • Page 30
    ... November 13, 2014 and concluded on January 29, 2015. The FCC's prohibition on certain communications related to the AWS-3 Auction expired on February 13, 2015. Also, on February 13, 2015, Northstar Wireless and SNR Wireless each filed applications with the FCC to acquire certain AWS-3 Licenses for...

  • Page 31
    ...included and will include $899 million in total equity and debt investments in the Northstar Entities and SNR Entities during the fourth quarter 2014, cash and marketable investment securities as of December 31, 2014, cash generated from operations during 2015, and a $400 million refund from the FCC...

  • Page 32
    ... particular orbital locations that are used or to be used by our current satellite networks and potential future satellite networks we may build or acquire. Our satellite services also must conform to the ITU service plans for Region 2 (which includes the United States). If any of our operations are...

  • Page 33
    ...from the United States government to receive and deliver certain components of direct-to-home satellite television systems. In addition, the delivery of satellites and the supply of certain related ground control equipment, technical services and data, and satellite communication/control services to...

  • Page 34
    ... executive officer and senior financial officers, in accordance with Section 406 of the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder. Our code of ethics is available on our corporate website at http://www.dish.com. In the event that we make changes in, or provide...

  • Page 35
    ...was Senior Vice President of Retail Services, a position he held since mid-2006. He joined DISH Network in 1995 and has held operating roles of increasing responsibility over the years. Thomas A. Cullen. Mr. Cullen has served as our Executive Vice President, Corporate Development since July 2011. Mr...

  • Page 36
    ... held various positions of increasing responsibility in DISH Network's legal department. Bernard L. Han. Mr. Han has served as our Executive Vice President and Chief Operating Officer since April 2009 and is in charge of all sales, operations and information technology functions for DISH Network. Mr...

  • Page 37
    ... services, HD offerings, interactive services and video on demand services that consumers may find attractive. We and our competitors increasingly must seek to attract a greater proportion of new subscribers from each other's existing subscriber bases rather than from first-time purchasers of pay-TV...

  • Page 38
    ...and Google that offer online services distributing movies, television shows and other video programming. In addition, traditional providers of video entertainment, including broadcasters and cable network operators, are increasing their Internet-based video offerings. Moreover, new technologies have...

  • Page 39
    ...the ability of consumers to access our OTT services through an Internet connection, changes in how network operators handle and charge for access to data that travel across their networks could adversely impact our OTT services. For example, if the proposed Comcast/Time Warner Cable and AT&T/DirecTV...

  • Page 40
    ...than other receivers. Meanwhile, retention costs may be driven higher by increased upgrades of existing subscribers' equipment to HD and DVR receivers and by providing retention credits. Additionally, certain of our promotions, including, among others, pay-in-advance, allow consumers with relatively...

  • Page 41
    ... gross new Pay-TV subscriber activations, lower net Pay-TV subscriber additions and higher Pay-TV churn rates as we did beginning in the fourth quarter 2014 and continuing in the first quarter 2015. We typically have a few programming contracts with major content providers up for renewal each year...

  • Page 42
    ... services such as access to video via smartphones and tablets continue to be significant factors in consumers' choice among pay-TV providers. Other pay-TV providers may have more successfully marketed and promoted their HD programming packages and value-added services and may also be better equipped...

  • Page 43
    ... suitable replacement products and services from third parties. EchoStar is our primary supplier of digital set-top boxes and digital broadcast operations. In addition, EchoStar provides the vast majority of our transponder capacity, is a key supplier of related services to us, and provides the...

  • Page 44
    ... and upgrade existing subscribers with more advanced equipment, such as receivers with DVR and HD technology and by otherwise making additional infrastructure investments, such as those related to our information technology and call centers. Furthermore, the continued demand for HD programming...

  • Page 45
    ... and services exist, we may not be able to develop these alternative sources quickly and cost-effectively, which could materially impair our ability to timely deliver our products to our subscribers or operate our business. Furthermore, our vendors may request changes in pricing, payment terms or...

  • Page 46
    ... activations. While we offer receiver systems and programming through direct sales channels, a significant percentage of our total gross new subscriber activations are generated through independent third parties such as small satellite retailers, direct marketing groups, local and regional consumer...

  • Page 47
    ... materially and adversely affect our operations and revenues and our relationship with current customers, as well as our ability to attract new customers for our pay-TV services. In particular, future anomalies may result in the loss of individual transponders on a satellite, a group of transponders...

  • Page 48
    ... and use it as a replacement for the failed or lost satellite. If one or more of our owned in-orbit satellites fail, we could be required to record significant impairment charges. We may have potential conflicts of interest with EchoStar due to our common ownership and management. Questions relating...

  • Page 49
    ...this Annual Report on Form 10-K for additional information. ï,· Intercompany agreements with EchoStar. In connection with and following the Spin-off, we and EchoStar have entered into certain agreements pursuant to which we obtain certain products, services and rights from EchoStar, EchoStar obtains...

  • Page 50
    ...the FCC in February 2009. At the time they were granted, these licenses were subject to certain interim and final build-out requirements. By June 2013, we were required to provide signal coverage and offer service to at least 35% of the geographic area in each area covered by each individual license...

  • Page 51
    ...2024, we must provide reliable signal coverage and offer service to at least 75% of the population in each area covered by an individual H Block license (the "H Block Final Build-Out Requirement"). If we fail to meet the H Block Interim Build-Out Requirement, the H Block license term and the H Block...

  • Page 52
    ... November 13, 2014 and concluded on January 29, 2015. The FCC's prohibition on certain communications related to the AWS-3 Auction expired on February 13, 2015. Also, on February 13, 2015, Northstar Wireless and SNR Wireless each filed applications with the FCC to acquire certain AWS-3 Licenses for...

  • Page 53
    ... conditions make it difficult for us to accurately forecast and plan future business activities because we may not have access to funding sources necessary for us to pursue organic and strategic business development opportunities. See "We face certain risks related to our non-controlling investments...

  • Page 54
    ... firsttime purchasers of wireless services. Furthermore, the cost of attracting a new customer is generally higher than the cost associated with retaining an existing customer. In addition, we may face increasing competition from wireless telecommunications providers who offer mobile video offerings...

  • Page 55
    ..., such as chipsets, used in their devices. If these suppliers or vendors fail to provide equipment or services on a timely basis or fail to meet performance expectations, we may be unable to provide products and services as and when expected by our customers. Any difficulties experienced with...

  • Page 56
    ...to fund ongoing operations and service our debt. As a result, these conditions make it difficult for us to accurately forecast and plan future business activities because we may not have access to funding sources necessary for us to pursue organic and strategic business development opportunities. We...

  • Page 57
    ... additional capital in the future, which may not be available on acceptable terms or at all, to among other things, continue investing in our businesses, construct and launch new satellites, and to pursue acquisitions and other strategic transactions. Weakness in the equity markets could make...

  • Page 58
    ... except upon a change in control of our company in which case the holders of Class C are entitled to ten votes per share; a provision that authorizes the issuance of "blank check" preferred stock, which could be issued by our Board of Directors to increase the number of outstanding shares and thwart...

  • Page 59
    ... time-consuming and costly to defend and divert management's attention and resources away from our business. We currently have pending lawsuits with two major broadcast television networks alleging, among other things, that the PrimeTime Anytime™ and AutoHop™ features of the Hopper® set-top box...

  • Page 60
    ... our distribution of content over broadband networks. For more information, see "Item 1. Business - Government Regulations - FCC Regulations Governing our DBS Operations - Net Neutrality" of this Annual Report on Form 10-K. Changes in the Cable Act, and/or the rules of the FCC that implement the...

  • Page 61
    ... prevented from expiring on their own terms. In addition, affiliates of certain cable providers have denied us access to sports programming they feed to their cable systems terrestrially, rather than by satellite. The FCC has held that new denials of such service are unfair if they have the purpose...

  • Page 62
    ... rules that required DBS providers to phase in carry-one, carry-all obligations with respect to the carriage of full-power broadcasters' HD signals by February 17, 2013 in markets in which they elect to provide local channels in HD. We have met this requirement in all applicable markets. In addition...

  • Page 63
    ... related to our business segments. Leased From Other EchoStar (1) Third Party X X X Description/Use/Location Segment(s) Using Property Owned Corporate headquarters, Englewood, Colorado...DISH/Wireless Customer call center and general offices, Roseland, New Jersey...DISH Customer call center...

  • Page 64
    ...benefit of his family. There is currently no trading market for our Class B common stock. Dividends. On December 28, 2012, we paid a cash dividend of $1.00 per share, or approximately $453 million, on our outstanding Class A and Class B common stock to stockholders of record at the close of business...

  • Page 65
    ... our Class A common stock made by us for the period from October 1, 2014 through December 31, 2014. Maximum Approximate Total Number of Dollar Value of Shares Shares Purchased that May Yet be as Part of Publicly Average Purchased Under the Price Paid Announced Plans Plans or Programs (1) or Programs...

  • Page 66
    ...securities...Total assets...Long-term debt and capital lease obligations (including current portion)...Total stockholders' equity (deficit)... 2014 $ 9,236,241 22,107,462 14,463,780 2,012,134 2010 $ 2,940,377 9,632,153 6,514,936 (1,133,443) Statements of Operations Data Total revenue...Total costs...

  • Page 67
    ... demand for high-quality, reasonably priced subscription television services. We generate revenue primarily by providing pay-TV programming and broadband services to our subscribers. We also generate revenue from pay-TV equipment rental fees and other hardware related fees, including fees for DVRs...

  • Page 68
    ... pay-TV services. As of December 31, 2014, we had 0.577 million broadband subscribers in the United States. Connecting our subscribers' receivers to broadband service enhances the video experience and facilitates access to DISH programming services on mobile devices. During 2012, we began marketing...

  • Page 69
    ... first-time purchasers of pay-TV services. Some of our competitors have been especially aggressive by offering discounted programming and services for both new and existing subscribers. We incur significant costs to retain our existing customers, mostly as a result of upgrading their equipment to HD...

  • Page 70
    ... our long-term programming contracts on favorable pricing and other economic terms. Increases in programming costs could cause us to increase the rates that we charge to our subscribers, which could in turn cause our existing Pay-TV subscribers to disconnect our service or cause potential new Pay-TV...

  • Page 71
    ... the increase in available transponder capacity outweighs the short-term cost of these equipment changes. EXPLANATION OF KEY METRICS AND OTHER ITEMS Subscriber-related revenue. "Subscriber-related revenue" consists principally of revenue from basic, premium movie, local, HD programming, pay-per-view...

  • Page 72
    ... Pay-TV subscriber count. We also provide pay-TV service to hotels, motels and other commercial accounts. For certain of these commercial accounts, we divide our total revenue for these commercial accounts by an amount approximately equal to the retail price of our DISH America programming package...

  • Page 73
    ...churn rate, the same methodology for calculating average number of Pay-TV subscribers is used as when calculating Pay-TV ARPU. Adjusted free cash flow. We define adjusted free cash flow as "Net cash flows from operating activities from continuing operations" less "Purchases of property and equipment...

  • Page 74
    ... 31, 2014 Compared to the Year Ended December 31, 2013. Statements of Operations Data Revenue: Subscriber-related revenue...Equipment sales and other revenue...Equipment sales, services and other revenue - EchoStar...Total revenue...Costs and Expenses: Subscriber-related expenses...% of Subscriber...

  • Page 75
    ... promotional offers. Our Pay-TV churn rate is also impacted by, among other things, the credit quality of previously acquired subscribers, our ability to consistently provide outstanding customer service, price increases, programming interruptions in connection with the scheduled expiration...

  • Page 76
    ... costs for next generation Hopper receiver systems and a higher percentage of remanufactured receivers being activated on new subscriber accounts. During the years ended December 31, 2014 and 2013, the amount of equipment capitalized under our lease program for new Pay-TV subscribers totaled...

  • Page 77
    ... - Continued Our Pay-TV SAC calculation does not reflect any benefit from payments we received in connection with equipment not returned to us from disconnecting lease subscribers and returned equipment that is made available for sale or used in our existing customer lease program rather than being...

  • Page 78
    ...2009. Net income (loss) attributable to DISH Network. Net income attributable to DISH Network was $945 million during the year ended December 31, 2014, an increase of $137 million compared to $807 million for the same period in 2013. This increase was primarily attributable to the changes in revenue...

  • Page 79
    ... CONDITION AND RESULTS OF OPERATIONS - Continued Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012. Statements of Operations Data Revenue: Subscriber-related revenue...Equipment sales and other revenue...Equipment sales, services and other revenue - EchoStar...Total revenue...

  • Page 80
    ... marketing and discounted promotional offers. Our Pay-TV churn rate is also impacted by, among other things, the credit quality of previously acquired subscribers, our ability to consistently provide outstanding customer service, price increases, programming interruptions driven by contract...

  • Page 81
    ...-top box. Advertising costs increased due to brand spending related to the launch of our new second-generation Hopper set-top box in February 2013. During the years ended December 31, 2013 and 2012, the amount of equipment capitalized under our lease program for new Pay-TV subscribers totaled $621...

  • Page 82
    ... instruments during 2013 compared to net gains of $122 million in 2012. In addition, the year ended December 31, 2012 was positively impacted by the noncash gain of $99 million related to the conversion of our DBSD North America 7.5% Convertible Senior Secured Notes due 2009 in connection with the...

  • Page 83
    ... fund ongoing operations and service our debt. As a result, these conditions make it difficult for us to accurately forecast and plan future business activities because we may not have access to funding sources necessary for us to pursue organic and strategic business development opportunities. See...

  • Page 84
    ... activities from continuing operations" of $305 million. The increase in "Purchases of property and equipment" in 2013 was primarily attributable to an increase in expenditures for equipment under our lease programs for new and existing Pay-TV and Broadband subscribers and an increase in satellite...

  • Page 85
    ..., 2013 and 2012, we reported "Net cash outflows from investing activities from continuing operations" of $984 million, $3.035 billion and $3.004 billion, respectively. During the years ended December 31, 2014, 2013 and 2012, capital expenditures for new and existing pay-TV customer equipment totaled...

  • Page 86
    ...to acquire or lease additional satellite capacity. Security Systems Increases in theft of our signal or our competitors' signals could, in addition to reducing gross new subscriber activations, also cause subscriber churn to increase. We use Security Access Devices in our receiver systems to control...

  • Page 87
    ... 31, 2014, 2013 and 2012, there were no repurchases of our Class A common stock. Subscriber Acquisition and Retention Costs We incur significant upfront costs to acquire subscribers, including advertising, retailer incentives, equipment subsidies, installation services, and new customer promotions...

  • Page 88
    ... obligations...Interest expense on long-term...debt and capital lease obligations...Satellite-related obligations...Operating lease obligations...Purchase obligations ...Total...$ 14,284,085 194,914 5,057,786 2,413,176 164,843 2,442,056 $ 24,556,860 $ 2015 653,089 28,378 Payments due by period 2017...

  • Page 89
    ... 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...

  • Page 90
    ... 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 2015, with the exception of the purchase and commercialization of...

  • Page 91
    ... Annual Report on Form 10-K. ï,· Capitalized premise equipment. Since we retain ownership of certain equipment provided pursuant to our subscriber equipment lease programs for Pay-TV and Broadband subscribers, we capitalize and depreciate equipment costs that would otherwise be expensed at the time...

  • Page 92
    ... where observable market data is available. We make certain assumptions related to expected maturity date, credit and interest rate risk based upon market conditions and prior experience. As a result, such calculated fair value estimates may not be realizable in a current sale or immediate...

  • Page 93
    ... rate than the second and third quarters. However, we cannot provide assurance that this will continue in the future. Inflation Inflation has not materially affected our operations during the past three years. We believe that our ability to increase the prices charged for our products and services...

  • Page 94
    ... AND RESULTS OF OPERATIONS - Continued New Accounting Pronouncements Revenue from Contracts with Customers. On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers. This converged standard...

  • Page 95
    ...credit quality characteristics to the commercial paper described above. Based on our December 31, 2014 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. Long-Term...

  • Page 96
    ... 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...

  • Page 97
    ...Statements Report of KPMG LLP, Independent Registered Public Accounting Firm ...Consolidated Balance Sheets at December 31, 2014 and 2013...Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012 ...Consolidated Statements of Changes...

  • Page 98
    ...reference to Exhibit 4.1 to the Current Report on Form 8-K of DISH Network Corporation filed May 16, 2012, Commission File No. 0-26176). Indenture, relating to the 4.250% Senior Notes due 2018, dated as of April 5, 2013, among DISH DBS Corporation, the guarantors named on the signature pages thereto...

  • Page 99
    ...Current Report on Form 8-K of DISH Network Corporation filed November 21, 2014, Commission File No. 0-26176). 2002 Class B CEO Stock Option Plan (incorporated by reference to Appendix A to DISH Network Corporation's Definitive Proxy Statement on Schedule 14A dated April 9, 2002).** Satellite Service...

  • Page 100
    ...No. 0-26176). *** Amendment No. 4 to Satellite Service Agreement, dated October 21, 2004, between SES Americom, Inc. and DISH Network Corporation (incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of DISH Network Corporation for the year ended December 31, 2004, Commission...

  • Page 101
    ... Restricted Stock Unit Agreement (2005 Long-Term Incentive Plan) (incorporated by reference to Exhibit 99.8 to the Current Report on Form 8-K of DISH Network Corporation filed July 7, 2005, Commission File No. 0-26176).** Separation Agreement between EchoStar Corporation and DISH Network Corporation...

  • Page 102
    ... Exhibit 10.30 to the Annual Report on Form 10-K of EchoStar Corporation for the year ended December 31, 2009, Commission File No. 001-33807).*** NIMIQ 5 Whole RF Channel Service Agreement, dated September 15, 2009, between EchoStar Corporation and DISH Network L.L.C. (incorporated by reference from...

  • Page 103
    ... Corporation, a direct wholly-owned subsidiary of EchoStar, and DISH Network L.L.C. (incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K of EchoStar Corporation for the year ended December 31, 2009, Commission File No. 001-33807).*** Receiver Agreement dated January 1, 2012...

  • Page 104
    ... Report on Form 10-K of DISH Network Corporation for the year ended December 31, 2012, Commission File No. 0-26176).*** Transaction Agreement, dated February 20, 2014, by and among EchoStar Corporation, Hughes Satellite Systems Corporation, Alpha Company LLC, DISH Network L.L.C., DISH Operating...

  • Page 105
    101 The following materials from the Annual Report on Form 10-K of DISH Network Corporation for the year ended December 31, 2014, filed on February 23, 2015, formatted in eXtensible Business Reporting Language ("XBRL"): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and...

  • Page 106
    ... by the undersigned, thereunto duly authorized. DISH NETWORK CORPORATION By: /s/ Steven E. Swain Steven E. Swain Senior Vice President and Chief Financial Officer Date: February 23, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 107
    ...: Report of KPMG LLP, Independent Registered Public Accounting Firm...Consolidated Balance Sheets at December 31, 2014 and 2013 ...Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012...Consolidated Statements of Changes in...

  • Page 108
    ... PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders DISH Network Corporation: We have audited the accompanying consolidated balance sheets of DISH Network Corporation and subsidiaries (the Company) as of December 31, 2014 and 2013, and the related consolidated statements of operations...

  • Page 109
    DISH NETWORK CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share amounts) As of December 31, 2014 2013 Assets Current Assets: Cash and cash equivalents...$ 7,104,496 Marketable investment securities...2,131,745 Trade accounts receivable - other, net of allowance for doubtful ...

  • Page 110
    DISH NETWORK CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Dollars in thousands, except per share amounts) For the Years Ended December 31, 2014 2013 2012 Revenue: Subscriber-related revenue...$ 14,495,091 Equipment sales and other revenue...85,815 Equipment ...

  • Page 111
    ... to DISH Network...5,144 $ 2,588,224 Balance, December 31, 2013...$ Issuance of Class A common stock: Exercise of stock awards ...29 44,719 Employee benefits...4 25,777 Employee Stock Purchase Plan...1 6,185 Non-cash, stock-based compensation...34,055 Income tax (expense) benefit related to stock...

  • Page 112
    ......Release of restricted debt escrow...Repurchases and redemption of long-term debt...Debt issuance costs...Repayment of long-term debt and capital lease obligations...Net proceeds from Class A common stock options exercised and stock issued under the Employee Stock Purchase Plan...Cash dividend...

  • Page 113
    ...our owned and leased satellites, receiver systems, third-party broadcast operations, customer service facilities, a leased fiber optic network, in-home service and call center operations, and certain other assets utilized in our operations. In addition, we market broadband services under the dishNET...

  • Page 114
    ... Sling TV. Sling TV Holding L.L.C. ("Sling TV," formerly known as DISH Digital Holding L.L.C.) has been consolidated into our financial statements since July 1, 2012. Effective August 1, 2014, EchoStar Corporation ("EchoStar") and Sling TV entered into an exchange agreement (the "Exchange Agreement...

  • Page 115
    ..., 2013, Blockbuster had ceased material operations. The results of Blockbuster are presented for all periods as discontinued operations in our consolidated financial statements. On January 14, 2014, we completed the sale of our Blockbuster operations in Mexico. See Note 10 for additional information...

  • Page 116
    ... the price of each security, and any market and company specific factors related to each security. Declines in the fair value of debt and equity investments below cost basis are generally accounted for as follows: Length of Time Investment Has Been In a Continuous Loss Position Less than six months...

  • Page 117
    ...sell the security. In general, we use the first in, first out method to determine the cost basis on sales of marketable investment securities. Trade Accounts Receivable Management estimates the amount of required allowances for the potential non-collectability of accounts receivable based upon past...

  • Page 118
    ... to programming offerings from such satellites, the direct operating and subscriber acquisition costs related to such programming, and future capital costs for replacement satellites. Projected revenue and cost amounts include projected subscribers. In conducting our annual impairment test in 2014...

  • Page 119
    ... Deferred Revenue, Distribution and Carriage Payments Certain programmers provide us up-front payments. Such amounts are deferred and recognized as reductions to "Subscriber-related expenses" on a straight-line basis over the relevant remaining contract term (generally up to ten years). The current...

  • Page 120
    ... are based on quoted market prices, when available. The fair values of private debt are estimated based on an analysis in which we evaluate market conditions, related securities, various public and private offerings, and other publicly available information. In performing this analysis, we make...

  • Page 121
    ... for pay-TV and broadband services incurred in connection with our in-home service and call center operations, billing costs, refurbishment and repair costs related to receiver systems, subscriber retention, other variable subscriber expenses and monthly wholesale fees paid to broadband providers...

  • Page 122
    ... price of the indexed common equity securities, which may be volatile and vary depending on, among other things, the issuer's financial and operational performance and market conditions. Equipment Lease Programs Pay-TV subscribers have the choice of leasing or purchasing the satellite receiver...

  • Page 123
    ... computed using the treasury stock method based on the average market value of our Class A common stock. The following table presents EPS amounts for all periods and the basic and diluted weighted-average shares outstanding used in the calculation. For the Years Ended December 31, 2014 2013 2012 (In...

  • Page 124
    ... 106,323 Employee benefits paid in Class A common stock...25,781 24,230 22,280 Satellites and other assets financed under capital lease obligations...3,462 1,070 5,857 Assets contributed from EchoStar to Sling TV Holding L.L.C...44,712 Satellite and Tracking Stock Transaction with EchoStar: Transfer...

  • Page 125
    ...31, 2014 2013 (In thousands) Marketable investment securities: Current marketable investment securities - strategic...$ 711,213 Current marketable investment securities - other...1,420,532 Total current marketable investment securities...2,131,745 Restricted marketable investment securities (1)...76...

  • Page 126
    ... are classified as available-for-sale, except as specified below. See Note 2 for further discussion. Current Marketable Investment Securities - Strategic Our current strategic marketable investment securities include strategic and financial debt and equity investments in public companies that are...

  • Page 127
    ...operational control or significant influence over the Hughes Retail Group business, and currently there is no public market for the Tracking Stock. As such, the Tracking Stock is accounted for under the cost method of accounting. On February 20, 2014, DISH Operating L.L.C. ("DOLLC") and DISH Network...

  • Page 128
    ... to our interest should we no longer hold any shares of the HSSC-issued Tracking Stock and any registrable securities under the Investor Rights Agreement. Unrealized Gains (Losses) on Marketable Investment Securities As of December 31, 2014 and 2013, we had accumulated net unrealized gains of $177...

  • Page 129
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Marketable Investment Securities in a Loss Position The following table reflects the length of time that the individual securities, accounted for as available-for-sale, have been in an unrealized loss position, ...

  • Page 130
    ...(losses)...Marketable investment securities - other-than-temporary impairments...Other...Total... $ (1) During the year ended December 31, 2012, we recognized a $99 million non-cash gain related to the conversion of our DBSD North America 7.5% Convertible Senior Secured Notes due 2009 in connection...

  • Page 131
    ... Life (In Years) Equipment leased to customers...EchoStar I (1)...EchoStar VII (1)...EchoStar X (1)...EchoStar XI (1)...EchoStar XIV (1)...EchoStar XV...D1...T1...Satellites acquired under capital lease agreements...Furniture, fixtures, equipment and other...Buildings and improvements...Land...

  • Page 132
    ... in 2014 as a result of the Satellite and Tracking Stock Transaction. See Note 6 and Note 20 for further discussion. (2) During 2013, we ceased operations of our TerreStar Mobile Satellite Service ("MSS") business, which had less than 2,000 customers and had less than $1 million in revenue. As...

  • Page 133
    ...lease from EchoStar, which were accounted for as operating leases. As of December 31, 2014, we also leased two satellites from third parties, which were accounted for as capital leases and were depreciated over the shorter of the economic life or the term of the satellite agreement. Estimated Useful...

  • Page 134
    ...: T2 (1)... Launch Date July 2009 April 2008 NA NA NA (1) During the fourth quarter 2014, EchoStar purchased our rights to the T2 satellite. See Note 20 for further discussion of our Related Party Transactions with EchoStar. Based on the FCC's rules applicable to our AWS-4 authorizations no...

  • Page 135
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued In the event of a failure or loss of any of our owned or leased satellites, we may need to acquire or lease additional satellite capacity or relocate one of our other owned or leased satellites and use it as a ...

  • Page 136
    ...New York City, Chicago and several other major metropolitan areas. By August 2014, we were required to meet certain FCC build-out requirements related to our MVDDS licenses, and we are subject to certain FCC service rules applicable to these licenses. In January 2015, the FCC granted our application...

  • Page 137
    ... had ceased material operations. Blockbuster - Mexico During the third quarter 2013, we determined that our Blockbuster operations in Mexico ("Blockbuster Mexico") were "held for sale." As a result, we recorded pre-tax impairment charges of $19 million related to exiting the business, which was...

  • Page 138
    ... related to our Senior Notes contain restrictive covenants that, among other things, impose limitations on the ability of DISH DBS and its restricted subsidiaries to: ï,· ï,· incur additional debt; pay dividends or make distributions on DISH DBS' capital stock or repurchase DISH DBS' capital stock...

  • Page 139
    ... plus a "make-whole" premium, as defined in the related indenture, together with accrued and unpaid interest. 4 5/8% Senior Notes due 2017 On May 16, 2012, we issued $900 million aggregate principal amount of our five-year 4 5/8% Senior Notes due July 15, 2017. Interest accrues at an annual rate of...

  • Page 140
    ... annual rate of 7 7/8% and is payable semi-annually in cash, in arrears on March 1 and September 1 of each year. The 7 7/8% Senior Notes are redeemable, in whole or in part, at any time at a redemption price equal to 100% of the principal amount plus a "make-whole" premium, as defined in the related...

  • Page 141
    ...-annually in cash, in arrears on May 15 and November 15 of each year, commencing on May 15, 2015. The 5 7/8% Senior Notes are redeemable, in whole or in part, at any time at a redemption price equal to 100.0% of the principal amount plus a "make-whole" premium, as defined in the related indenture...

  • Page 142
    ...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, 2014 and 2013, we had $500...

  • Page 143
    ... 2015. The components of the (provision for) benefit from income taxes were as follows: For the Years Ended December 31, 2014 2013 2012 (In thousands) Current (provision) benefit: Federal...$ State...Foreign...Total from continuing operations...Deferred (provision) benefit: Federal...State...Foreign...

  • Page 144
    ... beginning and ending amount of unrecognized tax benefits included in "Long-term deferred revenue, distribution and carriage payments and other long-term liabilities" on our Consolidated Balance Sheets was as follows: For the Years Ended December 31, 2014 2013 2012 (In thousands) $ 151,353 $ 328,951...

  • Page 145
    ... of record at the close of business on December 14, 2012. 14. Employee Benefit Plans Employee Stock Purchase Plan Our employees participate in the DISH Network employee stock purchase plan (the "ESPP"), in which we are authorized to issue up to 2.8 million shares of Class A common stock. At...

  • Page 146
    ...price of the Class A common stock on the last business day of each calendar quarter in which such shares of Class A common stock are deemed sold to an employee under the ESPP. During the years ended December 31, 2014, 2013 and 2012, employee purchases of Class A common stock through the ESPP totaled...

  • Page 147
    ... and set-top box business and certain infrastructure assets (the "Spin-off") into a separate publicly-traded company, EchoStar. In connection with the Spin-off, each DISH Network stock award was converted into an adjusted DISH Network stock award and a new EchoStar stock award consistent with...

  • Page 148
    .... We realized tax benefits from stock awards exercised as follows: For the Years Ended December 31, 2014 2013 2012 (In thousands) $ 52,366 $ 38,947 $ 23,378 Tax benefit from stock awards exercised... Based on the closing market price of our Class A common stock on December 31, 2014, the aggregate...

  • Page 149
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Our restricted stock unit activity was as follows: For the Years Ended December 31, 2014 2013 2012 WeightedWeightedWeightedAverage Average Average Restricted Restricted Restricted Grant Date Grant Date Grant Date Stock ...

  • Page 150
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Other Employee Performance Awards. In addition to the above long-term, performance stock incentive plans, we have other stock awards that vest based on certain other company-specific subscriber, operational and/or ...

  • Page 151
    ... operations...Total non-cash, stock-based compensation ... As of December 31, 2014, our total unrecognized compensation cost related to our non-performance based unvested stock awards was $15 million. This cost was based on an estimated future forfeiture rate of approximately 3.2% per year...

  • Page 152
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Valuation The fair value of each stock option granted for the years ended December 31, 2014, 2013 and 2012 was estimated at the date of the grant using a Black-Scholes option valuation model with the following ...

  • Page 153
    ...the FCC in February 2009. At the time they were granted, these licenses were subject to certain interim and final build-out requirements. By June 2013, we were required to provide signal coverage and offer service to at least 35% of the geographic area in each area covered by each individual license...

  • Page 154
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued provide terrestrial signal coverage and offer terrestrial service to at least 40% of the aggregate population represented by all of the areas covered by the licenses (the "AWS-4 Interim Build-Out Requirement"). By March ...

  • Page 155
    ... November 13, 2014 and concluded on January 29, 2015. The FCC's prohibition on certain communications related to the AWS-3 Auction expired on February 13, 2015. Also, on February 13, 2015, Northstar Wireless and SNR Wireless each filed applications with the FCC to acquire certain AWS-3 Licenses for...

  • Page 156
    ... ten years with annual rate increases. Our programming expenses will continue to increase to the extent we are successful in growing our Pay-TV subscriber base. In addition, our margins may face further downward pressure from price increases and the renewal of long-term pay-TV programming contracts...

  • Page 157
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Rent Expense Total rent expense for operating leases related to our continuing operations was $469 million, $307 million and $254 million in 2014, 2013 and 2012, respectively. Rent expense in 2014 increased as a result ...

  • Page 158
    ...the operative Amended Complaint, served on March 6, 2014, Caltech claims that our Hopper set-top box, as well as the Hughes defendants' satellite broadband products and services, infringe the asserted patents by implementing the DVB-S2 standard. On February 17, 2015, Caltech filed a new complaint in...

  • Page 159
    ... third-party retailers, from placing any outbound telemarketing calls to market or promote its goods or services for five years, and enjoin DISH Network L.L.C. from accepting activations or sales from certain existing independent third-party retailers and from certain new independent third...

  • Page 160
    ... subsidiary DISH Network L.L.C. filed a lawsuit against ESPN, Inc.; ESPN Classic, Inc.; ABC Cable Networks Group; Soapnet L.L.C. and International Family Entertainment (collectively, "ESPN") for breach of contract in New York State Supreme Court. Our complaint alleged that ESPN failed to provide us...

  • Page 161
    ..., 2012, our wholly-owned subsidiary, DISH Network L.L.C., filed a lawsuit in the United States District Court for the Southern District of New York against American Broadcasting Companies, Inc.; CBS Corporation; Fox Entertainment Group, Inc.; Fox Television Holdings, Inc.; Fox Cable Network Services...

  • Page 162
    ... of our CBS retransmission consent agreement. On November 23, 2012, the ABC plaintiffs filed a motion for a preliminary injunction to enjoin the Hopper set-top box's PrimeTime Anytime and AutoHop features. On September 18, 2013, the New York court denied that motion. The ABC plaintiffs appealed, and...

  • Page 163
    ... be comparable in quality or cost to our existing programming. Loss of access to existing programming could have a material adverse effect on our business, financial condition and results of operations, including, among other things, our gross new subscriber activations and subscriber churn rate. We...

  • Page 164
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued On October 29, 2013, the Bankruptcy Court dismissed all of the claims in Harbinger's complaint in their entirety, but granted leave for LightSquared to file its own complaint in intervention. On November 15, 2013, ...

  • Page 165
    ... Beach Police Officers and Firefighters Retirement System, Louisiana Municipal Police Employees' Retirement System and Iron Worker Mid-South Pension Fund filed duplicative putative derivative complaints in the United States District Court for the District of Colorado. Also on October 2, 2013, Iron...

  • Page 166
    ... 10, 2013, Norman filed a sixth amended complaint in the 2011 Action, in which it asserted claims against our wholly-owned subsidiary DISH Network L.L.C. replacing us as defendant, alleging that the use of certain Broadcom chipsets in DISH DVR systems infringes the 689 patent. In addition, Norman...

  • Page 167
    ...! Inc.; Wal-Mart Stores, Inc.; Vudu, Inc. and ESPN Internet Ventures as defendants. Preservation Technologies alleges that our BLOCKBUSTER On Demand, DISH branded pay-TV and DISH Online services and our Hopper and Joey® settop boxes infringe United States Patent Nos. 5,813,014; 5,832,499; 6,092,080...

  • Page 168
    ...TQ Beta LLC ("TQ Beta") filed a complaint against us; our wholly-owned subsidiaries DISH DBS Corporation and DISH Network L.L.C; EchoStar; and EchoStar's subsidiaries EchoStar Technologies L.L.C., Hughes Satellite Systems Corporation, and Sling Media Inc., in the United States District Court for the...

  • Page 169
    ... DISH Network L.L.C., in New York Supreme Court, alleging breach of contract and other claims arising from our termination of the affiliation agreement governing carriage of certain Voom HD channels on the DISH branded payTV service and seeking over $2.5 billion in damages. On October 21, 2012...

  • Page 170
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Since the Voom Settlement Agreement and the multi-year affiliation agreement were entered into contemporaneously, we accounted for all components of both agreements at fair value in the context of the Voom Settlement ...

  • Page 171
    DISH NETWORK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 17. Segment Reporting Operating segments are components of an enterprise for which separate financial information is available and regularly evaluated by the chief operating decision maker(s) of an enterprise. Operating ...

  • Page 172
    ...the products are delivered and services are provided. All revenue from continuing operations was derived from the United States. 18. Valuation and Qualifying Accounts Our valuation and qualifying accounts as of December 31, 2014, 2013 and 2012 were as follows: Balance at Beginning of Year Charged to...

  • Page 173
    ...Ergen for the benefit of his family. EchoStar is our primary supplier of set-top boxes and digital broadcast operations and a supplier of the vast majority of our transponder capacity. Generally, the amounts we pay EchoStar for products and services are based on pricing equal to EchoStar's cost plus...

  • Page 174
    ... to which EchoStar leases certain satellite capacity on certain satellites owned by us. The fees for the services provided under these satellite capacity agreements depend, among other things, upon the orbital location of the applicable satellite, the number of transponders that are leased on the...

  • Page 175
    ... December 2009, we entered into a transponder service agreement with EchoStar to lease all of the capacity on EchoStar XVI, a DBS satellite, after its service commencement date. EchoStar XVI was launched during November 2012 to replace EchoStar XV at the 61.5 degree orbital location and is currently...

  • Page 176
    ..., we make certain monthly payments to EchoStar that commenced in September 2009 when the Nimiq 5 satellite was placed into service and continue through the service term. Unless earlier terminated under the terms and conditions of the DISH Nimiq 5 Agreement, the service term will expire ten years...

  • Page 177
    ... to receive service on a replacement satellite. TT&C Agreement. Effective January 1, 2012, we entered into a telemetry, tracking and control ("TT&C") agreement pursuant to which we receive TT&C services from EchoStar for a period ending on December 31, 2016 (the "2012 TT&C Agreement"). The fees for...

  • Page 178
    ... monthly basis based on the number of receivers utilizing such security measures each month. Sling Trademark License Agreement. On December 31, 2014, Sling TV L.L.C. entered into an agreement with Sling Media, Inc., a subsidiary of EchoStar, pursuant to which we have the right for a fixed fee to use...

  • Page 179
    ... term. On May 5, 2014, we provided EchoStar notice to extend the 2012 Receiver Agreement for one additional year until December 31, 2015. The 2012 Receiver Agreement allows us to purchase digital set-top boxes, related accessories and other equipment from EchoStar either: (i) at a cost (decreasing...

  • Page 180
    ... in six equal annual installments between 2012 and 2017. Pursuant to the terms and conditions of the agreements entered into in connection with the Spin-off of EchoStar from us, we made the initial payment to TiVo in May 2011, except for the contribution from EchoStar totaling approximately $10...

  • Page 181
    ... Madison Square Garden Company relating to the Voom programming services. Radio Access Network Agreement. On November 29, 2012, we entered into an agreement with HNS pursuant to which HNS will construct for us a ground-based satellite radio access network ("RAN") for a fixed fee. The completion of...

  • Page 182
    ... agreement with EchoStar pursuant to which we receive, among other things, certain remote DVR management services. The fees for the services provided under this services agreement depend, among other things, upon the cost to develop and operate such services. This agreement has a term of five years...

  • Page 183
    ... Group, we have no operational control or significant influence over the Hughes Retail Group business, and currently there is no public market for the Tracking Stock. As such, the Tracking Stock is accounted for under the cost method of accounting. The Transaction Agreement includes, among other...

  • Page 184
    ... solely a DISH Network employee. Related Party Transactions with NagraStar L.L.C. NagraStar is a joint venture between EchoStar and Nagra USA, Inc. that is our provider of encryption and related security systems intended to assure that only authorized customers have access to our programming. These...

  • Page 185
    ... of dividends and market capitalization weighting. We have included an industry peer group comprised of: AT&T Inc., Cablevision Systems Corporation, Comcast Corporation, DISH Network Corporation, The DirecTV Group, Inc., Time Warner Cable, Inc., and Verizon Communications. Although the companies...

  • Page 186
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  • Page 187
    ... Executive Vice President & Chief Human Resources Officer Steven E. Swain Chief Financial Officer Annual Meeting The 2015 Annual Meeting of Shareholders will be held on November 3, 2015. Shareholder Information Investor Relations Department DISH Network Corporation 9601 S. Meridian Blvd. Englewood...

  • Page 188
    9601 South Meridian Boulevard • Englewood, CO 80112 (NASDAQ - DISH) • 303.723.1000 • dish.com