Dish Network 1999 Annual Report Download - page 37

35
Conditional Access System
The access control system is central to the security network that prevents unauthorized viewing of
programming. Theft of cable and satellite programming has been widely reported and our signal encryption has been
pirated and could be further compromised in the future. If other measures are not successful, it could be necessary to
replace the credit card size card that controls the security of each consumer set top box at a material cost to us.
Obligations
Interest accrues at the rate of 9 ¼% and 9 3/8% on the seven and ten year notes, respectively. Interest on the
seven and ten year notes is payable semi-annually in cash in arrears on February 1 and August 1 of each year,
commencing August 1, 1999. Although the seven and ten year notes have lower interest rates than the debt securities
we repurchased, reported interest expense will increase because we raised additional debt to cover tender premiums and
consent and other fees related to the refinancing.
Interest accrues at an annual rate of 4 7/8% on the convertible notes. Interest on the convertible notes is
payable semi-annually in cash, in arrears on January 1 and July 1 of each year, commencing July 1, 2000.
Future Capital Requirements
As of December 31, 1999, we had approximately $3.1 billion of outstanding long-term debt (including current
portion), which includes $2.6 million of 1994 notes, 1996 notes, 1997 notes, and Senior Exchange notes which remain
outstanding. We are required to retire these remaining notes when they mature, and the indentures governing the 1994,
1996 and 1997 notes will remain outstanding (although substantially all of the restrictive covenants have been
eliminated) until each series of notes has been retired in full. Additionally, our semi-annual cash debt service
requirements of approximately $94 million related to the seven and ten year notes commenced in August 1999. Our
semi-annual cash debt service requirements of approximately $24 million related to the convertible notes will
commence in July 2000.There are no scheduled principal payment or sinking fund requirements prior to maturity of
these notes.
We utilized $91 million of satellite vendor financing for our first four satellites. As of December 31, 1999,
approximately $40 million of that satellite vendor financing remained outstanding. The satellite vendor financing bears
interest at 8 ¼% and is payable in equal monthly installments over five years following launch of the satellite to which
it relates.
Dividends on our 6 ¾% Series C Cumulative Convertible Preferred Stock began to accrue on
November 2, 1999, and holders of the Series C Preferred Stock are entitled to receive cumulative dividends at an
annual rate of 6 ¾% of the Liquidation Preference of $50 per share. Dividends are payable quarterly in arrears,
commencing February 1, 2000, when, as, and if declared by our Board of Directors. All accumulated and unpaid
dividends may, at our option, be paid in cash, Class A common stock, or a combination thereof upon conversion or
redemption.
During 2000, we anticipate total capital expenditures of approximately $350-$450 million. This amount
includes approximately, $200-$250 million related to the construction and launch of EchoStar VI, EchoStar VII,
EchoStar VIII and EchoStar IX, approximately $50-$100 million related to EchoStar receiver systems to be provided
under our leasing program and $50 million for capital expenditures related to the build-out of our digital broadcast
centers.
As a result of the anomalies experienced by EchoStar IV and in order to fully exploit certain of our remaining
FCC-allocated DBS frequencies, we have deployed and intend to deploy additional DBS satellites. Upon
consummation of the 110 acquisition we acquired two additional DBS satellites, EchoStar V and EchoStar VI.
EchoStar V was successfully launched and deployed in September 1999. However, there can be no assurance that
EchoStar VI will be launched and deployed successfully. We are also evaluating other contingency plans. There can
be no assurance that net insurance proceeds will be sufficient to fully cover the costs to deploy replacement DBS
satellites.