Dish Network 2013 Annual Report Download - page 92

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Continued
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Other than the “Guarantees” disclosed in Note 16 in the Notes to our Consolidated Financial Statements in Item 15
of this Annual Report on Form 10-K, we generally do not engage in off-balance sheet financing activities.
Satellite Insurance
We generally do not carry commercial insurance for any of the in-orbit satellites that we use, other than certain
satellites leased from third parties. We generally do not use commercial insurance to mitigate the potential financial
impact of launch or in-orbit failures because we believe that the cost of insurance premiums is uneconomical relative
to the risk of such failures. While we generally have had in-orbit satellite capacity sufficient to transmit our existing
channels and some backup capacity to recover the transmission of certain critical programming, our backup capacity
is limited. In the event of a failure or loss of any of our satellites, we may need to acquire or lease additional
satellite capacity or relocate one of our other satellites and use it as a replacement for the failed or lost satellite.
Purchase Obligations
Our 2014 purchase obligations primarily consist of binding purchase orders for receiver systems and related
equipment, digital broadcast operations, satellite and transponder leases, engineering services, and products and
services related to the operation of our DISH branded pay-TV service. Our purchase obligations also include certain
fixed contractual commitments to purchase programming content. Our purchase obligations can fluctuate
significantly from period to period due to, among other things, management’s control of inventory levels, and can
materially impact our future operating asset and liability balances, and our future working capital requirements.
Programming Contracts
In the normal course of business, we enter into contracts to purchase programming content in which our payment
obligations are fully contingent on the number of subscribers to whom we provide the respective content. These
programming commitments are not included in the “Contractual obligations and off-balance sheet arrangements”
table above. The terms of our contracts typically range from one to ten years with annual rate increases. Our
programming expenses will continue to increase to the extent we are successful growing our subscriber base. In
addition, our margins may face further downward pressure from price increases and the renewal of long term
programming contracts on less favorable pricing terms.
Future Capital Requirements
We expect to fund our future working capital, capital expenditure and debt service requirements from cash generated
from operations, existing cash and marketable investment securities balances, and cash generated through raising
additional capital. The amount of capital required to fund our future working capital and capital expenditure needs
varies, depending on, among other things, the rate at which we acquire new subscribers and the cost of subscriber
acquisition and retention, including capitalized costs associated with our new and existing subscriber equipment
lease programs. The majority of our capital expenditures for 2014 are expected to be driven by the costs associated
with subscriber premises equipment and capital expenditures for our satellite-related obligations. These
expenditures are necessary to operate and maintain our pay-TV service. Consequently, we consider them to be non-
discretionary. The amount of capital required will also depend on the levels of investment necessary to support
potential strategic initiatives, including our plans to expand our national HD offerings and other strategic
opportunities that may arise from time to time. Our capital expenditures vary depending on the number of satellites
leased or under construction at any point in time, and could increase materially as a result of increased competition,
significant satellite failures, or sustained economic weakness. These factors could require that we raise additional
capital in the future.
Volatility in the financial markets has made it more difficult at times for issuers of high-yield indebtedness, such as
us, to access capital markets at acceptable terms. These developments may have a significant effect on our cost of
financing and our liquidity position.