Document and Company Informatio
Document and Company Information (USD $) | ||||
In Billions, except Share data | 9 Months Ended
Sep. 30, 2009 | Jun. 30, 2008
| Oct. 23, 2009
Class A common stock | Oct. 23, 2009
Class B common stock |
Entity Registrant Name | DISH Network CORP | |||
Entity Central Index Key | 0001001082 | |||
Document Type | 10-Q | |||
Document Period End Date | 2009-09-30 | |||
Amendment Flag | false | |||
Current Fiscal Year End Date | --12-31 | |||
Entity Well-known Seasoned Issuer | Yes | |||
Entity Voluntary Filers | No | |||
Entity Current Reporting Status | Yes | |||
Entity Filer Category | Large Accelerated Filer | |||
Entity Public Float | 5.9 | |||
Entity Common Stock, Shares Outstanding | 208,430,895 | 238,435,208 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | ||
In Thousands | Sep. 30, 2009
| Dec. 31, 2008
|
Current Assets: | ||
Cash and cash equivalents | $155,570 | $98,574 |
Marketable investment securities | 2,477,882 | 460,558 |
Trade accounts receivable - other, net of allowance for doubtful accounts of $15,786 and $15,207, respectively | 799,417 | 799,139 |
Trade accounts receivable - EchoStar, net of allowance for doubtful accounts of zero | 20,516 | 21,570 |
Inventories, net | 278,118 | 426,671 |
Deferred tax assets | 101,867 | 86,331 |
Income tax receivable | 0 | 148,747 |
Other current assets | 173,769 | 56,394 |
Total current assets | 4,007,139 | 2,097,984 |
Noncurrent Assets: | ||
Restricted cash and marketable investment securities | 141,701 | 83,606 |
Property and equipment, net of accumulated depreciation of $2,396,694 and $2,432,959, respectively | 2,869,236 | 2,663,289 |
FCC authorizations | 1,391,441 | 1,391,441 |
Marketable and other investment securities | 168,784 | 158,296 |
Other noncurrent assets, net | 80,438 | 65,431 |
Total noncurrent assets | 4,651,600 | 4,362,063 |
Total assets | 8,658,739 | 6,460,047 |
Current Liabilities: | ||
Trade accounts payable - other | 262,061 | 174,216 |
Trade accounts payable - EchoStar | 297,715 | 297,629 |
Deferred revenue and other | 810,612 | 830,529 |
Accrued programming | 971,922 | 1,020,086 |
Other accrued expenses | 902,070 | 619,210 |
3% Convertible Subordinated Note due 2011 | 25,000 | 25,000 |
Current portion of long-term debt and capital lease obligations | 27,193 | 13,333 |
Total current liabilities | 3,296,573 | 2,980,003 |
Long-Term Obligations, Net of Current Portion: | ||
Long-term debt and capital lease obligations, net of current portion | 6,075,629 | 4,969,423 |
Deferred tax liabilities | 280,442 | 235,551 |
Long-term deferred revenue, distribution and carriage payments and other long-term liabilities | 387,467 | 224,176 |
Total long-term obligations, net of current portion | 6,743,538 | 5,429,150 |
Total liabilities | 10,040,111 | 8,409,153 |
Stockholders' Equity (Deficit): | ||
Additional paid-in capital | 2,113,743 | 2,090,527 |
Accumulated other comprehensive income (loss) | (2,123) | (107,998) |
Accumulated earnings (deficit) | (2,036,138) | (2,492,804) |
Treasury stock, at cost | (1,462,380) | (1,443,786) |
Total DISH Network stockholders' equity (deficit) | (1,381,929) | (1,949,106) |
Noncontrolling interest | 557 | 0 |
Total stockholders' equity (deficit) | (1,381,372) | (1,949,106) |
Total liabilities and stockholders' equity (deficit) | 8,658,739 | 6,460,047 |
Class A common stock | ||
Stockholders' Equity (Deficit): | ||
Common Stock | 2,585 | 2,571 |
Class B common stock | ||
Stockholders' Equity (Deficit): | ||
Common Stock | 2,384 | 2,384 |
Class C common stock | ||
Stockholders' Equity (Deficit): | ||
Common Stock | $0 | $0 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $) | ||
In Thousands, except Share data | Sep. 30, 2009
| Dec. 31, 2008
|
Current Assets: | ||
Allowance for doubtful accounts on trade accounts receivable - other | $15,786 | $15,207 |
Allowance for doubtful accounts on trade accounts recievable - EchoStar | 0 | 0 |
Noncurrent Assets: | ||
Accumulated depreciation on property and equipment | $2,396,694 | $2,432,959 |
Class A common stock | ||
Stockholders' Equity (Deficit): | ||
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 1,600,000,000 | 1,600,000,000 |
Common stock, shares issued | 258,522,297 | 257,117,733 |
Common stock, shares outstanding | 208,424,144 | 208,968,052 |
Class B common stock | ||
Stockholders' Equity (Deficit): | ||
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 800,000,000 | 800,000,000 |
Common stock, shares issued | 238,435,208 | 238,435,208 |
Common stock, shares outstanding | 238,435,208 | 238,435,208 |
Class C common stock | ||
Stockholders' Equity (Deficit): | ||
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 800,000,000 | 800,000,000 |
Common stock, shares issued | 0 | 0 |
Common stock, shares outstanding | 0 | 0 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (USD $) | ||||
In Thousands, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Revenue: | ||||
Subscriber-related revenue | $2,862,554 | $2,886,157 | $8,605,608 | $8,572,163 |
Equipment sales and other revenue | 23,393 | 41,918 | 74,876 | 95,755 |
Equipment sales - EchoStar | 1,277 | 2,433 | 6,486 | 8,533 |
Transitional services and other revenue - EchoStar | 4,923 | 6,273 | 14,199 | 19,714 |
Total revenue | 2,892,147 | 2,936,781 | 8,701,169 | 8,696,165 |
Costs and Expenses: | ||||
Subscriber-related expenses (exclusive of depreciation shown below - Note 11) | 1,623,397 | 1,534,133 | 4,705,551 | 4,402,771 |
Satellite and transmission expenses (exclusive of depreciation shown below - Note 11): | ||||
EchoStar | 78,911 | 76,848 | 246,866 | 232,798 |
Other | 8,962 | 7,651 | 24,701 | 22,890 |
Equipment, transitional services and other cost of sales | 28,651 | 69,315 | 96,244 | 131,488 |
Subscriber acquisition costs: | ||||
Cost of sales - subscriber promotion subsidies - EchoStar (exclusive of depreciation shown below - Note 11) | 56,293 | 53,418 | 152,215 | 116,489 |
Other subscriber promotion subsidies | 310,844 | 310,879 | 776,575 | 888,849 |
Subscriber acquisition advertising | 72,453 | 73,469 | 191,275 | 178,800 |
Total subscriber acquisition costs | 439,590 | 437,766 | 1,120,065 | 1,184,138 |
General and administrative expenses - EchoStar | 11,022 | 14,300 | 34,577 | 40,740 |
General and administrative expenses | 146,626 | 133,282 | 415,857 | 371,364 |
Tivo litigation expense | 131,930 | 0 | 328,335 | 0 |
Depreciation and amortization (Note 11) | 228,395 | 245,646 | 696,988 | 766,260 |
Total costs and expenses | 2,697,484 | 2,518,941 | 7,669,184 | 7,152,449 |
Operating income (loss) | 194,663 | 417,840 | 1,031,985 | 1,543,716 |
Other Income (Expense): | ||||
Interest income | 7,591 | 16,609 | 23,637 | 44,082 |
Interest expense, net of amounts capitalized | (98,857) | (101,802) | (273,926) | (284,845) |
Other, net | (1,915) | (106,055) | (42,072) | (124,583) |
Total other income (expense) | (93,181) | (191,248) | (292,361) | (365,346) |
Income (loss) before income taxes | 101,482 | 226,592 | 739,624 | 1,178,370 |
Income tax (provision) benefit, net | (20,989) | (134,697) | (283,027) | (492,007) |
Net income (loss) | 80,493 | 91,895 | 456,597 | 686,363 |
Less: Net income (loss) attributable to noncontrolling interest | (69) | 0 | (69) | 0 |
Net income (loss) attributable to DISH Network common shareholders | 80,562 | 91,895 | 456,666 | 686,363 |
Comprehensive Income (Loss): | ||||
Net income (loss) | 80,493 | 91,895 | 456,597 | 686,363 |
Foreign currency translation adjustments | 0 | (1,384) | (106) | (2,961) |
Unrealized holding gains (losses) on available-for-sale securities | 55,599 | (170,447) | 100,406 | (231,869) |
Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income (loss) | (8) | 148,423 | 5,447 | 146,112 |
Deferred income tax (expense) benefit | 0 | (29,398) | 128 | (10,174) |
Comprehensive income (loss) | 136,084 | 39,089 | 562,472 | 587,471 |
Less: Comprehensive income (loss) attributable to noncontrolling interest | (69) | 0 | (69) | 0 |
Comprehensive income (loss) attributable to DISH Network common shareholders | $136,153 | $39,089 | $562,541 | $587,471 |
Weighted-average common shares outstanding - Class A and B common stock: | ||||
Basic | 446,823 | 449,425 | 446,816 | 449,318 |
Diluted | 447,431 | 460,042 | 448,313 | 461,040 |
Earnings per share - Class A and B common stock: | ||||
Basic net income (loss) per share attributable to DISH Network common shareholders | 0.18 | 0.2 | 1.02 | 1.53 |
Diluted net income (loss) per share attributable to DISH Network common shareholders | 0.18 | 0.2 | 1.02 | 1.5 |
2_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Thousands | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Cash Flows From Operating Activities: | ||
Net income (loss) | $456,597 | $686,363 |
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||
Depreciation and amortization | 696,988 | 766,260 |
Equity in losses (earnings) of affiliates | 4,149 | 1,884 |
Realized and unrealized losses (gains) on investments | 40,518 | 120,669 |
Non-cash, stock-based compensation | 8,557 | 11,690 |
Deferred tax expense (benefit) | 29,131 | 151,638 |
Other, net | 4,117 | 5,878 |
Change in noncurrent assets | 6,769 | 8,470 |
Change in long-term deferred revenue, distribution and carriage payments and other long-term liabilities | 44,074 | 31,010 |
Changes in current assets and current liabilities, net | 600,829 | 41,525 |
Net cash flows from operating activities | 1,891,729 | 1,825,387 |
Cash Flows From Investing Activities: | ||
Purchases of marketable investment securities | (4,056,711) | (4,344,319) |
Sales and maturities of marketable investment securities | 2,116,604 | 4,457,908 |
Purchases of property and equipment | (724,316) | (844,265) |
Change in restricted cash and marketable investment securities | (58,398) | 1,700 |
Deposit for 700 MHz wireless spectrum acquisition | 0 | (711,871) |
Purchase of strategic investments included in noncurrent marketable and other investment securities | (47,142) | 0 |
Proceeds from the sale of strategic investment | 0 | 106,200 |
Other | (83) | (705) |
Net cash flows from investing activities | (2,770,046) | (1,335,352) |
Cash Flows From Financing Activities: | ||
Distribution of cash and cash equivalents to EchoStar in connection with the Spin-off | 0 | (585,147) |
Proceeds from issuance of long-term debt | 1,000,000 | 750,000 |
Deferred debt issuance costs | (28,618) | (4,972) |
Repayment of long-term debt and capital lease obligations | (20,043) | (535,513) |
Class A common stock repurchases | (18,594) | (81,906) |
Net proceeds from Class A common stock options exercised and Class A common stock issued under the Employee Stock Purchase Plan | 2,568 | 19,903 |
Net cash flows from financing activities | 935,313 | (437,635) |
Net increase (decrease) in cash and cash equivalents | 56,996 | 52,400 |
Cash and cash equivalents, beginning of period | 98,574 | 919,543 |
Cash and cash equivalents, end of period | 155,570 | 971,943 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for interest | 238,696 | 240,437 |
Capitalized interest | 13,454 | 11,812 |
Cash received for interest | 10,511 | 36,354 |
Cash paid for income taxes | 150,576 | 361,737 |
Employee benefits paid in Class A common stock | 12,198 | 19,374 |
Vendor financing | 0 | 23,314 |
Satellites and other assets financed under capital lease obligations | 131,178 | 0 |
Net assets contributed in connection with the Spin-off, excluding cash and cash equivalents | $0 | $2,765,398 |
Organization and Business Activ
Organization and Business Activities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Organization and Business Activities [Abstract] | |
Organization and Business Activities | 1. Organization and Business Activities Principal Business DISH Network Corporation is a holding company. Its subsidiaries (which together with DISH Network Corporation are referred to as DISH Network, the Company, we, us and/or our) operate the DISH Network direct broadcast satellite (DBS) subscription television service in the United States which had 13.851million subscribers as of September30, 2009. We have deployed substantial resources to develop the DISH Network DBS System. The DISH Network DBS System consists of our licensed Federal Communications Commission (FCC) authorized DBS and Fixed Satellite Service (FSS) spectrum, our owned and leased satellites, receiver systems, third-party broadcast operations, customer service facilities, in-home service and call center operations and certain other assets utilized in our operations. Spin-off of Technology and Certain Infrastructure Assets On January1, 2008, we completed a tax-free distribution of our technology and set-top box business and certain infrastructure assets (the Spin-off) into a separate publicly-traded company, EchoStar Corporation (EchoStar). DISH Network and EchoStar now operate as separate publicly-traded companies, and neither entity has any ownership interest in the other. However, a substantial majority of the voting power of both companies is owned beneficially by Charles W. Ergen, our Chairman, President and Chief Executive Officer or by certain trusts established by Mr. Ergen for the benefit of his family. The two entities consist of the following: DISH Network Corporation which retained its DISH Network subscription television business and EchoStar Corporation which sells equipment, including set-top boxes and related components, to DISH Network and international customers, and provides digital broadcast operations and satellite services to DISH Network and other customers. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and with the instructions to Form 10-Q and Article10 of RegulationS-X for interim financial information. Accordingly, these statements do not include all of the information and notes required for complete financial statements prepared under GAAP. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September30, 2009 are not necessarily indicative of the results that may be expected for the year ending December31, 2009. For further information, refer to the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December31, 2008 (2008 10-K). Certain prior period amounts have been reclassified to conform to the current period presentation. In addition, the Income tax (provision)benefit, net was reduced by prior period adjustments totaling $25million for each of the three and nine months ended September30, 2009. Further, in connection with preparation of the condensed consolidated financial statements, we have evaluated subsequent events through the issuance of these financial statements on November9, 2009. Accounting Standards Codification In June2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles A Replacement of FASB Statement No.162 (SFAS 168). SFAS 168 establishes the FASB Accounting Standards Codification (the Codification) as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. The Codification does not change current GAAP, but is intended to simplify user access to all authoritative GAAP by providing all the authoritative literature in one place related to a particular topic. We were required to implement the Codification during the third quarter of 2009. The Codification did not have any impact on our consolidated financial position or results of operations. However, it affects the way we reference authoritative accounting literature in our Condensed Consolidated Financial Statements. Accordingly, this Quarterly Report on Form 10-Q and all subsequent applicable public filings will reference the Codification as the source of authoritative literature. Principles of Consolidation We consolidate all majority owned subsidiaries, investments in entities in which we have controlling influence and variable interest entities where we have been determined to be the primary beneficiary. Non-majority owned investments are accounted for using the equity method when we have the ability to significantly influence the operating decisions of the investee. When we do not have the ability to significantly |
Basic and Diluted Income
Basic and Diluted Income (Loss) Per Share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Basic and Diluted Income (Loss) Per Share [Abstract] | |
Basic and Diluted Income (Loss) Per Share | 3. Basic and Diluted Income (Loss) Per Share We present both basic earnings per share (EPS) and diluted EPS. Basic EPS excludes dilution and is computed by dividing Net income (loss)attributable to DISH Network common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock awards were exercised and convertible securities were converted to common stock. The potential dilution from our subordinated notes convertible into common stock was computed using the if converted method. The potential dilution from stock awards was computed using the treasury stock method based on the average market value of our ClassA common stock. The following table presents earnings per share amounts for all periods and the basic and diluted weighted-average shares outstanding used in the calculation. For the Three Months For the Nine Months Ended September 30, Ended September 30, 2009 2008 2009 2008 (In thousands, except per share amounts) Basic net income (loss)attributable to DISH Network common shareholders $ 80,562 $ 91,895 $ 456,666 $ 686,363 Interest on dilutive subordinated convertible notes, net of related tax effect 1,537 351 6,494 Diluted net income (loss)attributable to DISH Network common shareholders $ 80,562 $ 93,432 $ 457,017 $ 692,857 Weighted-average common shares outstanding ClassA and B common stock: Basic 446,823 449,425 446,816 449,318 Dilutive impact of stock awards outstanding 608 2,318 1,015 2,941 Dilutive impact of subordinated notes convertible into common shares 8,299 482 8,781 Diluted 447,431 460,042 448,313 461,040 Earnings per share ClassA and B common stock: Basic net income (loss)per share attributable to DISH Network common shareholders $ 0.18 $ 0.20 $ 1.02 $ 1.53 Diluted net income (loss)per share attributable to DISH Network common shareholders $ 0.18 $ 0.20 $ 1.02 $ 1.50 Shares of ClassA common stock issuable upon conversion of: 3% Convertible Subordinated Note due 2010 (repaid during third quarter 2008) 8,299 8,299 3% Convertible Subordinated Note due 2011 (repaid in October2009) 482 482 482 482 As of September30, 2009 and 2008, there were stock awards to purchase 9.1million shares and 3.4 million shares, respectively, of ClassA common stock outstanding not included in the above denominator as their effect is antidilutive. In addition, during the three months ended September 30, 2009, the convertible note is not included in the diluted EPS calculation as its conversion would be antidilutive. Vesting of options and |
Marketable Investment Securitie
Marketable Investment Securities, Restricted Cash and Other Investment Securities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Marketable Investment Securities Restricted Cash and Other Investment Securities [Abstract] | |
Marketable Investment Securities, Restricted Cash and Other Investment Securities | 4. Marketable Investment Securities, Restricted Cash and Other Investment Securities Our marketable investment securities, restricted cash and other investment securities consist of the following: As of September 30, December 31, 2009 2008 (In thousands) Marketable investment securities: Current marketable investment securities VRDNs $ 1,663,367 $ 239,611 Current marketable investment securities strategic 211,503 13,561 Current marketable investment securities other 603,012 207,386 Total current marketable investment securities 2,477,882 460,558 Restricted marketable investment securities (1) 10,388 22,407 Noncurrent marketable investment securities ARS and MBS (2) 119,211 113,394 Total marketable investment securities 2,607,481 596,359 Restricted cash and cash equivalents (1) 131,313 61,199 Other investment securities: Other investment securities cost method 49,573 15,795 Other investment securities equity method 26,784 Other investment securities fair value method 2,323 Total other investment securities (2) 49,573 44,902 Total marketable investment securities, restricted cash and other investment securities $ 2,788,367 $ 702,460 (1) Restricted marketable investment securities and restricted cash and cash equivalents are included in Restricted cash and marketable investment securities on our Condensed Consolidated Balance Sheets. (2) Noncurrent marketable investment securities auction rate securities (ARS), mortgage backed securities (MBS) and other investment securities are included in Marketable and other investment securities on our Condensed Consolidated Balance Sheets. Marketable Investment Securities Our marketable investment securities portfolio consists of various debt and equity instruments, all of which are classified as available-for-sale. Current Marketable Investment Securities VRDNs Variable rate demand notes (VRDNs) are long-term floating rate municipal bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest. All of the put options are secured by a pledged liquidity source. Our VRDN portfolio is comprised of many municipalities and financial institutions that serve as the pledged liquidity source. While they are classified as marketable investment securities, the put option allows for VRDNs to be liquidated on a same day or on a five business day settlement basis. Current Marketable Investment Securities Strategic Our strategic marketable investment securities are highly speculative and have experienced and continue to experience volatility. As of September30, 2009, a significant portion of our strategic investment portfolio consisted of securities of a few issuers and the value of that portfolio therefore depends on those issuers. We account for certain de |
Inventories
Inventories | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Inventories [Abstract] | |
Inventories | 5. Inventories Inventories consist of the following: As of September 30, December 31, 2009 2008 (In thousands) Finished goods DBS $ 179,648 $ 238,343 Raw materials 72,310 146,353 Work-in-process used 58,109 61,663 Work-in-process new 1,234 2,414 Subtotal 311,301 448,773 Inventory allowance (33,183 ) (22,102 ) Inventories, net $ 278,118 $ 426,671 At September30, 2009 our inventory balance was $278million, a decline of $149million compared to our balance at December31, 2008. This decline primarily related to the impact of our sales and marketing promotions and reduced churn during the third quarter of 2009. |
Satellites
Satellites | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Satellites [Abstract] | |
Satellites | 6. Satellites We currently utilize eleven satellites in geostationary orbit approximately 22,300 miles above the equator, four of which are owned by us. Each of the owned satellites had an original estimated minimum useful life of at least 12years. We currently lease capacity on five satellites from EchoStar with terms ranging from two to ten years. We account for these as operating leases. See Note 12 for further discussion of our satellite leases with EchoStar. We also lease two satellites from third parties, which are accounted for as capital leases and are depreciated over the shorter of the economic life or the term of the satellite agreement. Operation of our programming service requires that we have adequate satellite transmission capacity for the programming we offer. Moreover, current competitive conditions require that we continue to expand our offering of new programming, particularly by expanding local HD coverage and offering more HD national channels. 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. Such a failure could result in a prolonged loss of critical programming or a significant delay in our plans to expand programming as necessary to remain competitive and thus may have a material adverse effect on our business, financial condition and results of operations. Prior to 2009, certain satellites in our fleet have experienced anomalies, some of which have had a significant adverse impact on their remaining life and commercial operation. There can be no assurance that future anomalies will not further impact the remaining life and commercial operation of any of these satellites. See Long-Lived Satellite Assets below for further discussion of evaluation of impairment. There can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail. We do not anticipate carrying insurance for any of the in-orbit satellites that we own, and we will bear the risk associated with any in-orbit satellite failures. Recent developments with respect to our satellites are discussed below. Owned Satellites EchoStar V. EchoStar V was originally designed with a minimum 12-year design life. Momentum wheel failures in prior years, together with relocation of the satellite between orbital locations, resulted in increased fuel consumption, as disclosed in previous SEC filings. During 2005, as a result of this increased fuel consumption, we reduced the remaining estimated useful life of the satellite and as of October2008, the satellite was fully depreciated. In late July2009, it was determined that the satellite had less fuel remaining than previously estimated. The satellite was removed from the 148 degree orbital location and retired from commercial service on August3, |
Long-Term Debt
Long-Term Debt | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Long-Term Debt [Abstract] | |
Long-Term Debt | 7. Long-Term Debt 7 7/8% Senior Notes due 2019 On August17, 2009, we issued $1.0billion aggregate principal amount of our ten-year, 7 7/8% Senior Notes due September1, 2019 at an issue price of 97.467%. Interest accrues at an annual rate of 7 7/8% and is payable semi-annually in cash, in arrears on March 1 and September 1 of each year, commencing on March1, 2010. On October5, 2009, we issued $400million aggregate principal amount of additional 7 7/8% Senior Notes due 2019 at an issue price of 101.750% plus accrued interest from August17, 2009. These notes were issued as additional notes under the indenture, dated as of August17, 2009 (the Indenture), pursuant to which we issued the $1.0billion discussed above. These notes and the notes previously issued under the Indenture will be treated as a single class of debt securities under the Indenture. The 7 7/8% Senior Notes are redeemable, in whole or in part, at any time at a redemption price equal to 100% of the principal amount plus a make-whole premium, as defined in the related Indenture, together with accrued and unpaid interest. Prior to September1, 2012, we may also redeem up to 35% of each of the 7 7/8% Senior Notes at specified premiums with the net cash proceeds from certain equity offerings or capital contributions. The 7 7/8% Senior Notes are: general unsecured senior obligations of DISH DBS Corporation (DDBS); ranked equally in right of payment with all of DDBS and the guarantors existing and future unsecured senior debt; and ranked effectively junior to our and the guarantors current and future secured senior indebtedness up to the value of the collateral securing such indebtedness. The Indenture related to the 7 7/8% Senior Notes contains restrictive covenants that, among other things, impose limitations on the ability of DDBS and its restricted subsidiaries to: incur additional debt; pay dividends or make distributions on DDBS capital stock or repurchase DDBS capital stock; make certain investments; create liens or enter into sale and leaseback transactions; enter into transactions with affiliates; merge or consolidate with another company; and transfer or sell assets. In the event of a change of control, as defined in the related indenture, we would be required to make an offer to repurchase all or any part of a holders 7 7/8% Senior Notes at a purchase price equal to 101% of the aggregate principal amount thereof, together with accrued and unpaid interest thereon, to the date of repurchase. Fair Value of our Long-Term Debt The following table summarizes the carrying value and fair values of our debt facilities as of September30, 2009 and December31, 2008: As of September 30, 2009 December 31, 2008 Carrying Carrying Value Fair Value Value Fair Value (In thousands) 3% Convertible Subordinated Note due 2011 $ 25,000 $ 25,000 $ 25,000 $ 23,768 6 3/8% Senior Notes due 2011 1,000,000 1,021,250 1,000,000 899,000 7% Senio |
Stockholders Equity
Stockholders Equity (Deficit) | |
1/1/2009 - 9/30/2009
USD / shares | |
Stockholders' Equity (Deficit) [Abstract] | |
Stockholders' Equity (Deficit) | 8. Stockholders Equity (Deficit) Common Stock Repurchase Program Our board of directors previously authorized stock repurchases of up to $1.0billion of our ClassA common stock. During the nine months ended September30, 2009, we repurchased 1.9million shares of our common stock for $19million. On November3, 2009, our board of directors extended the plan and authorized an increase in the maximum dollar value of shares that may be repurchased under the plan, such that we are currently authorized to repurchase up to $1.0billion of our outstanding shares through and including December31, 2010. |
Stock Based Compensation
Stock Based Compensation | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | 9. Stock-Based Compensation Stock Incentive Plans In connection with the Spin-off, as permitted by our existing stock incentive plans and consistent with the Spin-off exchange ratio, each DISH Network stock option was converted into two stock options as follows: an adjusted DISH Network stock option for the same number of shares that were exercisable under the original DISH Network stock option, with an exercise price equal to the exercise price of the original DISH Network stock option multiplied by 0.831219. a new EchoStar stock option for one-fifth of the number of shares that were exercisable under the original DISH Network stock option, with an exercise price equal to the exercise price of the original DISH Network stock option multiplied by 0.843907. Similarly, each holder of DISH Network restricted stock units retained his or her DISH Network restricted stock units and received one EchoStar restricted stock unit for every five DISH Network restricted stock units that they held. Consequently, the fair value of the DISH Network stock award and the new EchoStar stock award immediately following the Spin-off was equivalent to the fair value of such stock award immediately prior to the Spin-off. We maintain stock incentive plans to attract and retain officers, directors and key employees. Stock awards under these plans include both performance and non-performance based stock incentives. As of September30, 2009, we had outstanding under these plans stock options to acquire 21.7million shares of our ClassA common stock and 0.8million restricted stock units. Stock options granted through September30, 2009 were granted with exercise prices equal to or greater than the market value of our ClassA common stock at the date of grant and with a maximum term of ten years. While historically we have issued stock awards subject to vesting, typically at the rate of 20% per year, some stock awards have been granted with immediate vesting and other stock awards vest only upon the achievement of certain company-wide objectives. As of September30, 2009, we had 79.7million shares of our Class A common stock available for future grant under our stock incentive plans. The 2009 Stock Incentive Plan, which was approved at the annual meeting of shareholders on May11, 2009, allows us to grant new stock awards following the expiration of our 1999 Stock Incentive Plan on April16, 2009. As of September30, 2009, the following stock awards were outstanding: As of September 30, 2009 DISH Network Awards EchoStar Awards Restricted Restricted Stock Stock Stock Stock Stock Awards Outstanding Options Units Options Units Held by DISH Network employees 18,221,050 400,068 1,398,788 63,833 Held by EchoStar employees 3,451,851 410,374 N/A N/A Total 21,672,901 810,442 1,398,788 63,833 We are responsible for fulfilling all stock awards related to DISH Network common stock and EchoStar is responsible for fulfilling all stock awards r |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | 10. Commitments and Contingencies Commitments As of September30, 2009, future maturities of our debt and contractual obligations are summarized as follows: Payments due by period Total 2009 2010 2011 2012 2013 Thereafter (In thousands) Long-term debt obligations $ 5,818,287 $ 26,181 $ 4,142 $ 1,004,375 $ 4,622 $ 504,183 $ 4,274,784 Capital lease obligations 309,535 4,886 22,382 21,054 20,582 22,646 217,985 Interest expense on long-term debt and capital lease obligations 2,695,287 118,866 438,690 433,780 368,089 365,985 969,877 Satellite-related obligations 1,639,821 81,900 116,795 107,082 154,222 154,005 1,025,817 Operating lease obligations 120,285 12,032 45,753 25,220 19,402 9,817 8,061 Purchase obligations 1,342,570 1,093,823 194,480 19,160 15,450 15,827 3,830 Total $ 11,925,785 $ 1,337,688 $ 822,242 $ 1,610,671 $ 582,367 $ 1,072,463 $ 6,500,354 The table above does not include $246million of liabilities associated with unrecognized tax benefits which were accrued and are included on our Condensed Consolidated Balance Sheets as of September30, 2009. We do not expect any portion of this amount to be paid or settled within the next twelve months. In certain circumstances the dates on which we are obligated to make these payments could be delayed. These amounts will increase to the extent we procure insurance for our satellites or contract for the construction, launch or lease of additional satellites. We have not yet procured a contract for the launch of our EchoStar XV satellite. While the cost of this launch will depend upon the terms and conditions of the contract, we estimate that the cost could range from approximately $90million to $120million, which is not included in the table above. We anticipate incurring this cost between the current period and the expected launch of the satellite in late 2010. On November6, 2009, our board of directors declared a dividend of $2.00 per share on our outstanding ClassA and ClassB common stock. The dividend will be payable in cash on December 2, 2009 to shareholders of record on November20, 2009. Based on the number of shares of our Class A and B common stock outstanding as of October23, 2009, we will distribute approximately $894 million in cash to our shareholders as part of the dividend. This dividend is not included in the table above. Guarantees In connection with the Spin-off, we distributed certain satellite lease agreements to EchoStar and remained the guarantor under those capital leases for payments totaling approximately $444million over the next eight years that are not included in the table above. In addition, during the third quarter of 2009, EchoStar entered into a new satellite transponder service agreement for Nimiq 5 through 2024. We s |
Depreciation and Amortization E
Depreciation and Amortization Expense | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Depreciation and Amortization Expense [Abstract] | |
Depreciation and Amortization Expense | 11. Depreciation and Amortization Expense Depreciation and amortization expense consists of the following: For the Three Months For the Nine Months Ended September 30, Ended September 30, 2009 2008 2009 2008 (In thousands) Equipment leased to customers $ 191,778 $ 203,730 $ 591,729 $ 625,769 Satellites 22,184 21,581 64,247 71,596 Furniture, fixtures, equipment and other 11,824 18,817 35,327 60,674 Identifiable intangible assets subject to amortization 1,396 290 1,977 4,718 Buildings and improvements 1,213 1,228 3,708 3,503 Total depreciation and amortization $ 228,395 $ 245,646 $ 696,988 $ 766,260 Cost of sales and operating expense categories included in our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) do not include depreciation expense related to satellites or equipment leased to customers. |
Related Party Transactions with
Related Party Transactions with EchoStar | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Related Party Transactions [Abstract] | |
Related Party Transactions with EchoStar | 12. Related Party Transactions with EchoStar Following the Spin-off, EchoStar has operated as a separate public company and we have no continued ownership interest in EchoStar. However, a substantial majority of the voting power of the shares of both companies is owned beneficially by our Chairman, President and Chief Executive Officer, Charles W. Ergen or by certain trusts established by Mr. Ergen for the benefit of his family. EchoStar is our primary supplier of set-top boxes and digital broadcast operations and our key supplier of transponder leasing. Generally the prices charged for products and services provided under the agreements entered into in connection with the Spin-off are based on pricing equal to EchoStars cost plus a fixed margin (unless noted differently below), which will vary depending on the nature of the products and services provided. Prior to the Spin-off, these products were provided and services were performed internally at cost. In connection with the Spin-off, we and EchoStar also entered into certain transitional services agreements pursuant to which we obtain certain services and rights from EchoStar, EchoStar obtains certain services and rights from us, and we and EchoStar have indemnified each other against certain liabilities arising from our respective businesses. Subsequent to the Spin-off, we also entered into certain agreements with EchoStar and may enter into additional agreements with EchoStar in the future. The following is a summary of the terms of the principal agreements that we have entered into with EchoStar that may have an impact on our financial position and results of operations. Equipment sales EchoStar Remanufactured Receiver Agreement. We entered into a remanufactured receiver agreement with EchoStar under which EchoStar has the right to purchase remanufactured receivers and accessories from us for a two-year period ending on January1, 2010. In August2009, we and EchoStar agreed to extend this agreement through January1, 2011. Under the remanufactured receiver agreement, EchoStar has the right, but not the obligation, to purchase remanufactured receivers and accessories from us at cost plus a fixed margin, which varies depending on the nature of the equipment purchased. EchoStar may terminate the remanufactured receiver agreement for any reason upon sixty days written notice to us. We may also terminate this agreement if certain entities acquire us. Transitional services and other revenue EchoStar Transition Services Agreement. We entered into a transition services agreement with EchoStar pursuant to which EchoStar has the right, but not the obligation, to receive the following services from us: finance, information technology, benefits administration, travel and event coordination, human resources, human resources development (training), program management, internal audit, legal, accounting and tax, and other support services. The fees for the services provided under the transition services agreement are equal to cost plus a fixed margin, which varies depending on the nature of the services provided. The transition services agreement has a term of two years ending |
Subsequent Events
Subsequent Events | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Subsequent Events Abstract | |
Subsequent Events | 13. Subsequent Events 3% Convertible Subordinated Note due 2011 On October5, 2009, we repaid our $25million 3% Convertible Subordinated Note due 2011. Dividend On November6, 2009, our board of directors declared a dividend of $2.00 per share on our outstanding ClassA and ClassB common stock. The dividend will be payable in cash on December 2, 2009 to shareholders of record on November20, 2009. Based on the number of shares of our Class A and B common stock outstanding as of October23, 2009, we will distribute approximately $894 million in cash to our shareholders as part of the dividend. |