Dish Network 2014 Annual Report Download - page 84

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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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,” as shown on our Consolidated Statements of Cash Flows. We believe
adjusted free cash flow is an important liquidity metric because it measures, during a given period, the amount of
cash generated that is available to repay debt obligations, make investments, fund acquisitions and for certain other
activities. Adjusted free cash flow is not a measure determined in accordance with GAAP and should not be
considered a substitute for “Operating income,” “Net income,” “Net cash flows from operating activities” or any
other measure determined in accordance with GAAP. Since adjusted free cash flow includes investments in
operating assets, we believe this non-GAAP liquidity measure is useful in addition to the most directly comparable
GAAP measure “Net cash flows from operating activities from continuing operations.”
During the years ended December 31, 2014, 2013 and 2012, adjusted free cash flow was significantly impacted by
changes in operating assets and liabilities and in “Purchases of property and equipment” as shown in the “Net cash
flows from operating activities from continuing operations” and “Net cash flows from investing activities from
continuing operations” sections, respectively, of our Consolidated Statements of Cash Flows included herein.
Operating asset and liability balances can fluctuate significantly from period to period and there can be no assurance
that adjusted free cash flow will not be negatively impacted by material changes in operating assets and liabilities in
future periods, since these changes depend upon, among other things, management’s timing of payments and control of
inventory levels, and cash receipts. In addition to fluctuations resulting from changes in operating assets and liabilities,
adjusted free cash flow can vary significantly from period to period depending upon, among other things, subscriber
growth, subscriber revenue, subscriber churn, subscriber acquisition and retention costs including amounts capitalized
under our equipment lease programs, operating efficiencies, increases or decreases in purchases of property and
equipment, and other factors.
The following table reconciles adjusted free cash flow to “Net cash flows from operating activities from continuing
operations.”
2014 2013 2012
Adjusted free cash flow.................................................................................. 1,192,270$ 1,055,698$ 1,058,384$
Add back:
Purchase of property and equipment........................................................... 1,215,861 1,253,499 945,334
Net cash flows from operating activities from continuing operations............. 2,408,131$ 2,309,197$ 2,003,718$
For the Years Ended December 31,
(In thousands)
The increase in adjusted free cash flow from 2013 to 2014 of $137 million primarily resulted from an increase in
“Net cash flows from operating activities from continuing operations” of $99 million and from a decrease in
“Purchases of property and equipment” of $38 million. The decrease in “Purchases of property and equipment” in
2014 was primarily attributable to a decrease in expenditures for equipment under our lease programs for new and
existing Pay-TV and Broadband subscribers, partially offset by an increase in satellite construction and other
corporate capital expenditures. The increase in “Net cash flows from operating activities from continuing
operations” was primarily attributable to a $135 million increase in income from continuing operations adjusted to
exclude non-cash charges for “Deferred tax expense (benefit),” “Impairment of long-lived assets,” “Realized and
unrealized losses (gains) on investments” and “Depreciation and amortization” expense. This increase was partially
offset by a decrease in cash resulting from changes in operating assets and liabilities principally attributable to
timing differences between book expense and cash payments.
The decrease in adjusted free cash flow from 2012 to 2013 of $3 million primarily resulted from an increase in
“Purchases of property and equipment” of $308 million, partially offset by an increase in “Net cash flows from
operating 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 construction and other
corporate capital expenditures. The increase in “Net cash flows from operating activities from continuing
operations” was primarily attributable to a $243 million increase of income from continuing operations adjusted to
exclude non-cash charges for “Impairment of long-lived assets,” “Depreciation and amortization” expense,