Dish Network 2002 Annual Report Download - page 72

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-12
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses for each reporting period. Actual results could differ from those estimates.
During the three months ended June 30, 2002, EchoStar recorded an adjustment to “Cost of sales – subscriber
promotion subsidies” of approximately $17 million to reduce accrued royalty expenses related to the production of
EchoStar receiver systems. The reduction in accrued royalty expenses primarily resulted from the completion of royalty
arrangements with more favorable terms than the estimate previously accrued.
During the three months ended September 30, 2002, as a result of favorable litigation developments, EchoStar
recorded a non-recurring reduction in the cost of set-top box equipment. The following details the decrease in the
financial statement line items affected by this adjustment (in thousands):
Three Months
Ended September
30, 2002
Property and equipment, net..................................................................... $ (5,916)
Cost of sales – DTH equipment ............................................................... (5,002)
Cost of sales – subscriber promotion subsidies ...................................... (30,872)
Depreciation and amortization ................................................................. (1,430)
Foreign Currency Transaction Gains and Losses
The functional currency of the majority of EchoStar’s foreign subsidiaries is the U.S. dollar because their sales
and purchases are predominantly denominated in that currency. Transactions denominated in currencies other than U.S.
dollars are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates
result in transaction gains and losses which are reflected in income as unrealized (based on period-end translation) or
realized (upon settlement of the transaction). Net transaction gains (losses) during 2000, 2001 and 2002 were not
material to EchoStar’s results of operations.
Statements of Cash Flows Data
The following presents EchoStar’s supplemental cash flow statement disclosure (in thousands):
Year Ended December 31,
2000 2001 2002
.
Cash paid for interest, net of amounts capitalized ................................................................. $211,064 $377,038 $ 500,879
Cash paid for income taxes .................................................................................................... 641 1,832 8,396
6 3/4% Series C Cumulative Convertible Preferred Stock dividends................................... 1,146 337 –
Class A common stock issued related to acquisition of Kelly Broadcasting Systems.......... 31,556 – –
Conversion of 6 ¾% Series C Cumulative Convertible Preferred Stock to Class A
common stock .................................................................................................................... 34,373 10,948 –
Forfeitures of deferred non-cash, stock-based compensation................................................ 8,072 12,564 5,520
EchoStar VII and EchoStar VIII satellite vendor financing.................................................. – – 30,000
Cash and Cash Equivalents
EchoStar considers all liquid investments purchased within 90 days of their maturity to be cash equivalents.
Cash equivalents as of December 31, 2001 and 2002 consist of money market funds, corporate notes and commercial
paper. The cost of these investments approximates their fair market value.