Dish Network 2002 Annual Report Download - page 48

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46
months are considered other than temporary and are recorded as charges to earnings, absent specific factors to the
contrary.
As of December 31, 2002, we recorded unrealized gains of approximately $6 million as a separate
component of stockholders’ deficit. During the year ended December 31, 2002, we also recorded an aggregate
charge to earnings for other than temporary declines in the fair market value of certain of our marketable investment
securities of approximately $117 million, and established a new cost basis for these securities. This amount does not
include realized gains of approximately $12 million on the sales of marketable investment securities. Our
approximately $2.8 billion of restricted and unrestricted cash, cash equivalents and marketable investment securities
include debt and equity securities which we own for strategic and financial purposes. The fair market value of these
strategic marketable investment securities aggregated approximately $73 million as of December 31, 2002. During the
year ended December 31, 2002, our portfolio generally, and our strategic investments particularly, experienced and
continue to experience, volatility. If the fair market value of our marketable securities portfolio does increase to cost
basis or if we become aware of any market or company specific factors that indicate that the carrying value of
certain of our securities is impaired, we may be required to record additional charges to earnings in future periods
equal to the amount of the decline in fair value.
We also have made strategic equity investments in certain non-marketable investment securities. The
securities of these companies are not publicly traded. Our ability to create realizable value from our strategic
investments in companies that are not public is dependent on the success of their business and their ability to obtain
sufficient capital to execute their business plans. Since private markets are not as liquid as public markets, there is also
increased risk that we will not be able to sell these investments, or that when we desire to sell them that we will not be
able to obtain full value for them. We evaluate our non-marketable investment securities on a quarterly basis to
determine whether the carrying value of each investment is impaired. This quarterly evaluation consists of reviewing,
among other things, company business plans and current financial statements, if available, for factors which may
indicate an impairment in our investment. Such factors may include, but are not limited to, cash flow concerns,
material litigation, violations of debt covenants and changes in business strategy.
We made a strategic investment in StarBand Communications, Inc. During the first quarter of 2002, we
determined that the carrying value of our investment in StarBand, net of approximately $8 million of equity in losses of
StarBand already recorded during 2002, was not recoverable and recorded an impairment charge of approximately $28
million to reduce the carrying value of our StarBand investment to zero. This determination was based, among other
things, on our continuing evaluation of StarBand’s business model, including further deterioration of StarBand’s
limited available cash, combined with increasing cash requirements, resulting in a critical need for additional funding,
with no clear path to obtain that cash. Further, during April 2002, we changed our sales and marketing relationship
with StarBand and ceased subsidizing StarBand equipment. StarBand subsequently filed for bankruptcy during June
2002.
As of December 31, 2002, we estimated the fair value of our fixed-rate debt and mortgages and other notes
payable to be approximately $5.9 billion using quoted market prices where available, or discounted cash flow analyses.
The interest rates assumed in such discounted cash flow analyses reflect interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality. The fair value of our fixed rate debt and mortgages is affected
by fluctuations in interest rates. A hypothetical 10% decrease in assumed interest rates would increase the fair value of
our debt by approximately $200 million. To the extent interest rates increase, our costs of financing would increase at
such time as we are required to refinance our debt. As of December 31, 2002, a hypothetical 10% increase in assumed
interest rates would increase our annual interest expense by approximately $46 million.
We have not used derivative financial instruments for speculative purposes. We have not hedged or
otherwise protected against the risks associated with any of our investing or financing activities.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements are included in this report beginning on page F-1.