Dish Network 2002 Annual Report Download - page 37

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“Purchases of property and equipment” were $436 million and $637 million during the years ended December
31, 2002 and 2001, respectively. This decrease was primarily attributable to reduced spending on the construction of
satellites and the capitalization of less equipment under our Digital Home Plan in 2002 as compared to 2001.
“Net cash flows from operating activities” less “Purchases of property and equipment” was negative $369
million and negative $148 million for the years ended December 31, 2002 and 2001, respectively. The decrease from
2001 was primarily attributable to a Hughes merger termination fee noted above. Exclusive of the $600 million merger
termination fee, “net cash flows from operating activities” less “purchases of property and equipment” would have
been $231 million for the year ended December 31, 2002. While there can be no assurance, assuming the addition of 1
million net new subscribers, we currently expect “net cash flows from operating activities” less “purchases of property
and equipment” to be greater than $231 million during 2003. Our estimate could vary significantly depending upon,
among other things, subscriber growth, subscriber revenue, subscriber churn, operating efficiencies, the timing of
payments and receipts, inventory levels, increases or decreases in capital expenditures and other factors. Our estimate
includes capital expenditures of approximately $300 million for satellite construction, local market expansion, upgrades
to our information technology infrastructure and other general corporate purposes. Our capital expenditure estimate
could increase or decrease depending on the strength of the economy, strategic opportunities or other factors. In
addition to these capital expenditures, we will have capital expenditures for equipment under our Digital Home Plan
promotion. The amount of equipment capitalized under our Digital Home Plan promotion in 2003 will depend upon
the level of Digital Home Plan penetration during 2003. The cost of equipment capitalized under the Digital Home
Plan is included in “purchases of property and equipment.” Net equipment costs for all other promotions is generally
expensed as incurred and included in “net cash flows from operating activities.”
Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000.
Revenue. “Total revenue” for the year ended December 31, 2001 was $4.001 billion, an increase of
$1.286 billion or 47% compared to total revenue for the year ended December 31, 2000 of $2.715 billion. The increase
in “total revenue” was primarily attributable to continued DISH Network subscriber growth and higher average revenue
per subscriber.
DISH Network “Subscription television services” revenue totaled $3.588 billion for the year ended
December 31, 2001, an increase of $1.241 billion or 53% compared to the same period in 2000. This increase was
directly attributable to continued DISH Network subscriber growth and higher average revenue per subscriber. DISH
Network added approximately 1.57 million net new subscribers for the year ended December 31, 2001 compared to
approximately 1.85 million net new subscriber additions during the same period in 2000. As of December 31, 2001,
we had approximately 6.83 million DISH Network subscribers compared to approximately 5.26 million at
December 31, 2000, an increase of approximately 30%. Monthly average revenue per subscriber was approximately
$49.32 during the year ended December 31, 2001 and approximately $45.33 during the same period in 2000. The
increase in monthly average revenue per subscriber is primarily due to the $1.00 price increase in May 2000 and
February 2001, the increased availability of local channels by satellite, the introduction of our high-end America’s Top
150 basic programming package during April 2000, together with an increase in subscriber penetration in our higher
priced Digital Home Plans.
For the year ended December 31, 2001, “DTH equipment sales” totaled $271 million, an increase of
$11 million compared to the same period during 2000. This increase in “DTH equipment sales” was primarily
attributable to an increase in sales of StarBand equipment and DBS accessories. This increase was partially offset by a
decrease in demand for digital set-top boxes from our two primary international DTH customers.
DISH Network Operating Expenses. “DISH Network operating expenses” totaled $1.758 billion during the
year ended December 31, 2001, an increase of $493 million or 39% compared to the same period in 2000. “DISH
Network operating expenses” represented 49% and 54% of “Subscription television services” revenue during the years
ended December 31, 2001 and 2000, respectively. The increase in “DISH Network operating expenses” in total was
consistent with, and primarily attributable to, the increase in the number of DISH Network subscribers.
“Subscriber-related expenses” totaled $1.433 billion during the year ended December 31, 2001, an increase
of $463 million compared to the same period in 2000. The increase in total “Subscriber-related expenses” is