x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30,
2007.
|
|
OR
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934 FOR THE TRANSITION PERIOD FROM_______________
TO________________.
|
Nevada
|
88-0336997
|
(State
or other
jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
9601
South Meridian Boulevard
|
|
Englewood,
Colorado
|
80112
|
(Address
of principal executive offices)
|
(Zip
code)
|
Large
Accelerated Filer x
|
Accelerated
Filer ¨
|
Non-Accelerated
Filer ¨
|
i
|
||
1
|
||
2
|
||
3
|
||
4
|
||
21
|
||
35
|
||
37
|
||
37
|
||
41
|
||
41
|
||
Item
3.
|
Defaults
Upon Senior Securities
|
None
|
42
|
||
Item
5.
|
Other
Information
|
None
|
42
|
||
43
|
|
·
|
we
face intense and increasing competition from satellite and cable
television providers as well as new competitors, including telephone
companies; our competitors are increasingly offering video service
bundled
with 2-way high-speed Internet access and telephone
services that consumers may find attractive and which are likely
to
further increase competition. We also expect to face increasing
competition from content and other providers who distribute video
services
directly to consumers over the
Internet;
|
|
·
|
as
technology changes, and in order to remain competitive, we will
have to
upgrade or replace some, or all, subscriber equipment
periodically. We will not be able to pass on to our customers
the entire cost of these upgrades;
|
|
·
|
DISH
Network® subscriber growth may decrease, subscriber turnover may increase
and subscriber acquisition costs may increase; we may have difficulty
controlling other costs of continuing to maintain and grow our
subscriber
base;
|
|
·
|
satellite
programming signals are subject to theft; theft of service will
continue
and could increase in the future, causing us to lose subscribers
and
revenue, and also resulting in higher costs to
us;
|
|
·
|
we
depend on others to produce programming; programming costs may
increase
beyond our current expectations; we may be unable to obtain or
renew
programming agreements on acceptable terms or at all; existing
programming
agreements could be subject to cancellation; we may be denied access
to
sports programming; foreign programming is increasingly offered
on other
platforms; our inability to obtain or renew attractive programming
could
cause our subscriber additions and related revenue to decline and
could
cause our subscriber turnover to
increase;
|
|
·
|
we
depend on Federal Communications Commission (“FCC”) program access rules
(which will expire this year unless extended by the FCC), and the
Telecommunications Act of 1996 as Amended to secure nondiscriminatory
access to programming produced by others, neither of which assure
that we
have fair access to all programming that we need to remain
competitive;
|
|
·
|
our
industry is heavily regulated by the FCC. Those regulations
could become more burdensome at any time, causing us to expend
additional
resources on compliance;
|
|
·
|
absent
reversal of the jury verdict in our Tivo patent infringement case,
and if
we are unable to successfully implement alternative technology,
we will be
required to pay substantial damages as well as materially modify
or
eliminate certain user-friendly digital video recorder features
that we
currently offer to consumers, and we could be forced to discontinue
offering digital video recorders to our customers completely, any
of which
could have a significant adverse affect on our
business;
|
|
·
|
if
our EchoStar X satellite experienced a significant failure, we
could lose
the ability to deliver local network channels in many markets;
if our
EchoStar VIII satellite experienced a significant failure, we could
lose
the ability to provide certain programming to the continental United
States;
|
|
·
|
our
satellite launches may be delayed or fail, or our satellites may
fail in
orbit prior to the end of their scheduled lives causing extended
interruptions of some of the channels we
offer;
|
|
·
|
we
currently do not have commercial insurance covering losses incurred
from
the failure of satellite launches and/or in-orbit satellites we
own;
|
|
·
|
service
interruptions arising from technical anomalies on satellites or
on-ground
components of our direct broadcast satellite system, or caused
by war,
terrorist activities or natural disasters, may cause customer
cancellations or otherwise harm our
business;
|
|
·
|
we
are heavily dependent on complex information technologies; weaknesses
in
our information technology systems could have an adverse impact
on our
business; we may have difficulty attracting and retaining qualified
personnel to maintain our information technology
infrastructure;
|
|
·
|
we
rely on key personnel including Charles W. Ergen, our chairman
and chief
executive officer, and other
executives;
|
|
·
|
we
may be unable to obtain needed retransmission consents, FCC authorizations
or export licenses, and we may lose our current or future
authorizations;
|
|
·
|
we
are party to various lawsuits which, if adversely decided, could
have a
significant adverse impact on our
business;
|
|
·
|
we
may be unable to obtain patent licenses from holders of intellectual
property or redesign our products to avoid patent
infringement;
|
|
·
|
sales
of digital equipment and related services to international direct-to-home
service providers may decrease;
|
|
·
|
we
depend on telecommunications providers, independent retailers and
others
to solicit orders for DISH Network services. Certain of these
resellers account for a significant percentage of our total new
subscriber
acquisitions. Loss of one or more of these relationships could
have an adverse effect on our net new subscriber additions and
certain of
our other key operating metrics because we may not be able to develop
comparable alternative distribution
channels;
|
|
·
|
we
are highly leveraged and subject to numerous constraints on our
ability to
raise additional debt;
|
|
·
|
we
may pursue acquisitions, business combinations, strategic partnerships,
divestitures and other significant transactions that involve
uncertainties; these transactions may require us to raise additional
capital, which may not be available on acceptable terms. These
transactions, which could become substantial over time, involve
a high
degree of risk and could expose us to significant financial losses
if the
underlying ventures are not
successful;
|
|
·
|
we
have entered into certain strategic transactions in Asia, and we
may
increase our strategic investment activity in these and other
international markets. These transactions, which could become
substantial over time, involve a high degree of risk and could
expose us
to significant financial losses if the underlying ventures are
not
successful;
|
|
·
|
weakness
in the global or U.S. economy may harm our business generally,
and adverse
political or economic developments, including increased mortgage
defaults
as a result of subprime lending practices, may impact some of our
markets;
|
|
·
|
terrorist
attacks, the possibility of war or other hostilities, natural and
man-made
disasters, and changes in political and economic conditions as
a result of
these events may continue to affect the U.S. and the global economy
and
may increase other risks;
|
|
·
|
we
periodically evaluate and test our internal control over financial
reporting in order to satisfy the requirements of Section 404 of
the
Sarbanes-Oxley Act. Although our management concluded that our
internal control over financial reporting was effective as of December
31,
2006, and while no change in our internal control over financial
reporting
occurred during our most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting, if in the future we are unable
to report
that our internal control over financial reporting is effective
(or if our
auditors do not agree with our assessment of the effectiveness
of, or are
unable to express an opinion on, our internal control over financial
reporting), we could lose investor confidence in our financial
reports,
which could have a material adverse effect on our stock price and
our
business; and
|
|
·
|
we
may face other risks described from time to time in periodic and
current
reports we file with the Securities and Exchange Commission
(“SEC”).
|
As
of
|
||||||||
June
30,
2007
(Unaudited)
|
December
31,
2006
|
|||||||
Assets
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ |
1,076,876
|
$ |
1,923,105
|
||||
Marketable
investment securities
|
1,322,682
|
1,109,465
|
||||||
Trade
accounts receivable, net of allowance for uncollectible accounts
of
$17,654 and $15,006, respectively
|
706,962
|
665,149
|
||||||
Inventories,
net
|
289,345
|
237,507
|
||||||
Current
deferred tax assets
|
387,859
|
548,766
|
||||||
Other
current assets
|
160,183
|
115,549
|
||||||
Total
current assets
|
3,943,907
|
4,599,541
|
||||||
Restricted
cash and marketable investment securities
|
172,114
|
172,941
|
||||||
Property
and equipment, net of accumulated depreciation of $3,279,275 and
$2,872,015, respectively
|
4,017,089
|
3,765,596
|
||||||
FCC
authorizations
|
748,101
|
748,101
|
||||||
Intangible
assets, net
|
176,175
|
197,863
|
||||||
Other
noncurrent assets, net
|
336,999
|
284,654
|
||||||
Total
assets
|
$ |
9,394,385
|
$ |
9,768,696
|
||||
Liabilities
and Stockholders' Equity (Deficit)
|
||||||||
Current
Liabilities:
|
||||||||
Trade
accounts payable
|
$ |
274,141
|
$ |
283,471
|
||||
Deferred
revenue and other
|
837,080
|
819,899
|
||||||
Accrued
programming
|
958,951
|
913,687
|
||||||
Other
accrued expenses
|
481,457
|
535,953
|
||||||
Current
portion of capital lease obligations, mortgages and other notes
payable
|
47,210
|
38,464
|
||||||
5
3/4% Convertible Subordinated Notes due 2008 (Note 8)
|
-
|
1,000,000
|
||||||
Total
current liabilities
|
2,598,839
|
3,591,474
|
||||||
Long-term
obligations, net of current portion:
|
||||||||
3%
Convertible Subordinated Note due 2010
|
500,000
|
500,000
|
||||||
5
3/4% Senior Notes due 2008
|
1,000,000
|
1,000,000
|
||||||
6
3/8% Senior Notes due 2011
|
1,000,000
|
1,000,000
|
||||||
3%
Convertible Subordinated Note due 2011
|
25,000
|
25,000
|
||||||
6
5/8% Senior Notes due 2014
|
1,000,000
|
1,000,000
|
||||||
7
1/8% Senior Notes due 2016
|
1,500,000
|
1,500,000
|
||||||
7%
Senior Notes due 2013
|
500,000
|
500,000
|
||||||
Capital
lease obligations, mortgages and other notes payable, net of current
portion
|
573,085
|
403,857
|
||||||
Deferred
tax liabilities
|
217,382
|
192,617
|
||||||
Long-term
deferred revenue, distribution and carriage payments and other
long-term
liabilities
|
253,669
|
275,131
|
||||||
Total
long-term obligations, net of current portion
|
6,569,136
|
6,396,605
|
||||||
Total
liabilities
|
9,167,975
|
9,988,079
|
||||||
Commitments
and Contingencies (Note 10)
|
||||||||
Stockholders'
Equity (Deficit):
|
||||||||
Class
A common stock, $01 par value, 1,600,000,000 shares authorized,
254,045,533and 252,481,907 shares issued, 209,032,733 and 207,469,107
shares outstanding, respectively
|
2,540
|
2,525
|
||||||
Class
B common stock, $01 par value, 800,000,000 shares authorized,238,435,208
shares issued and outstanding
|
2,384
|
2,384
|
||||||
Class
C common stock, $01 par value, 800,000,000 shares authorized, none
issued
and outstanding
|
-
|
-
|
||||||
Additional
paid-in capital
|
1,986,599
|
1,927,897
|
||||||
Accumulated
other comprehensive income (loss)
|
55,111
|
49,874
|
||||||
Accumulated
earnings (deficit)
|
(459,171 | ) | (841,010 | ) | ||||
Treasury
stock, at cost
|
(1,361,053 | ) | (1,361,053 | ) | ||||
Total
stockholders' equity (deficit)
|
226,410
|
(219,383 | ) | |||||
Total
liabilities and stockholders' equity (deficit)
|
$ |
9,394,385
|
$ |
9,768,696
|
For
the Three Months
Ended
June 30,
|
For
the Six Months
Ended
June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Revenue:
|
||||||||||||||||
Subscriber-related
revenue
|
$ |
2,676,230
|
$ |
2,332,227
|
$ |
5,228,293
|
$ |
4,527,337
|
||||||||
Equipment
sales
|
77,348
|
114,742
|
153,615
|
199,471
|
||||||||||||
Other
|
6,430
|
19,186
|
23,085
|
38,738
|
||||||||||||
Total
revenue
|
2,760,008
|
2,466,155
|
5,404,993
|
4,765,546
|
||||||||||||
Costs
and Expenses:
|
||||||||||||||||
Subscriber-related
expenses (exclusive of depreciation shown below - Note 11)
|
1,354,265
|
1,190,313
|
2,682,886
|
2,297,640
|
||||||||||||
Satellite
and transmission expenses (exclusive of depreciation shown below
- Note
11)
|
40,759
|
33,623
|
75,678
|
72,365
|
||||||||||||
Cost
of sales - equipment
|
59,418
|
84,456
|
119,764
|
153,253
|
||||||||||||
Cost
of sales - other
|
657
|
1,931
|
3,067
|
3,295
|
||||||||||||
Subscriber
acquisition costs:
|
||||||||||||||||
Cost
of sales - subscriber promotion subsidies (exclusive of depreciation
shown
below - Note 11)
|
35,555
|
46,100
|
63,529
|
79,138
|
||||||||||||
Other
subscriber promotion subsidies
|
294,232
|
273,691
|
616,964
|
552,191
|
||||||||||||
Subscriber
acquisition advertising
|
46,621
|
53,448
|
97,000
|
100,865
|
||||||||||||
Total
subscriber acquisition costs
|
376,408
|
373,239
|
777,493
|
732,194
|
||||||||||||
General
and administrative
|
142,915
|
143,818
|
300,202
|
273,265
|
||||||||||||
Litigation
expense (Note 10)
|
-
|
14,243
|
-
|
88,235
|
||||||||||||
Depreciation
and amortization (Note 11)
|
343,932
|
274,891
|
664,051
|
521,462
|
||||||||||||
Total
costs and expenses
|
2,318,354
|
2,116,514
|
4,623,141
|
4,141,709
|
||||||||||||
Operating
income (loss)
|
441,654
|
349,641
|
781,852
|
623,837
|
||||||||||||
Other
Income (Expense):
|
||||||||||||||||
Interest
income
|
28,411
|
31,501
|
61,843
|
53,470
|
||||||||||||
Interest
expense, net of amounts capitalized
|
(96,662 | ) | (111,960 | ) | (216,162 | ) | (241,567 | ) | ||||||||
Other
|
(16,139 | ) | (11,256 | ) | (17,975 | ) |
53,004
|
|||||||||
Total
other income (expense)
|
(84,390 | ) | (91,715 | ) | (172,294 | ) | (135,093 | ) | ||||||||
Income
(loss) before income taxes
|
357,264
|
257,926
|
609,558
|
488,744
|
||||||||||||
Income
tax (provision) benefit, net
|
(133,065 | ) | (89,147 | ) | (228,219 | ) | (172,684 | ) | ||||||||
Net
income (loss)
|
$ |
224,199
|
$ |
168,779
|
$ |
381,339
|
$ |
316,060
|
||||||||
Denominator
for basic and diluted net income (loss) per
share:
|
||||||||||||||||
Denominator
for basic net income (loss) per share -weighted-average common
shares
outstanding
|
447,217
|
444,597
|
446,750
|
444,263
|
||||||||||||
Denominator
for diluted net income (loss) per share -weighted-average common
shares
outstanding
|
456,282
|
453,126
|
455,815
|
452,733
|
||||||||||||
Net
income (loss) per share:
|
||||||||||||||||
Basic
net income (loss)
|
$ |
0.50
|
$ |
0.38
|
$ |
0.85
|
$ |
0.71
|
||||||||
Diluted
net income (loss)
|
$ |
0.50
|
$ |
0.38
|
$ |
0.85
|
$ |
0.71
|
For
the Six Months
Ended
June 30,
|
||||||||
2007
|
2006
|
|||||||
Cash
Flows From Operating Activities:
|
||||||||
Net
income (loss)
|
$ |
381,339
|
$ |
316,060
|
||||
Adjustments
to reconcile net income (loss) to net cash flows from operating
activities:
|
||||||||
Depreciation
and amortization
|
664,051
|
521,462
|
||||||
Equity
in losses (earnings) of affiliates
|
2,649
|
1,937
|
||||||
Realized
and unrealized losses (gains) on investments
|
12,901
|
(61,713 | ) | |||||
Non-cash,
stock-based compensation recognized
|
11,258
|
7,766
|
||||||
Deferred
tax expense (benefit)
|
183,887
|
148,044
|
||||||
Other,
net
|
5,200
|
5,177
|
||||||
Change
in noncurrent assets
|
4,684
|
5,188
|
||||||
Change
in long-term deferred revenue, distribution and carriage payments
and
other long-term liabilities
|
(21,462 | ) |
43,676
|
|||||
Changes
in current assets and current liabilities, net
|
(55,041 | ) |
161,638
|
|||||
Net
cash flows from operating activities
|
1,189,466
|
1,149,235
|
||||||
Cash
Flows From Investing Activities:
|
||||||||
Purchases
of marketable investment securities
|
(1,753,924 | ) | (880,993 | ) | ||||
Sales
and maturities of marketable investment securities
|
1,554,864
|
620,706
|
||||||
Purchases
of property and equipment
|
(740,095 | ) | (611,716 | ) | ||||
Change
in restricted cash and marketable investment securities
|
2,271
|
(37,901 | ) | |||||
FCC
authorizations (Note 7)
|
(57,463 | ) |
-
|
|||||
Purchase
of non-marketable investments included in noncurrent assets and
other
|
(51,906 | ) | (17,013 | ) | ||||
Other
|
198
|
2,298
|
||||||
Net
cash flows from investing activities
|
(1,046,055 | ) | (924,619 | ) | ||||
Cash
Flows From Financing Activities:
|
||||||||
Redemption
of 9 1/8% Senior Notes due 2009
|
-
|
(441,964 | ) | |||||
Redemption
of 5 3/4% Convertible Subordinated Notes due 2008
|
(999,985 | ) |
-
|
|||||
Proceeds
from issuance of 7 1/8% Senior Notes due 2016
|
-
|
1,500,000
|
||||||
Deferred
debt issuance costs
|
-
|
(7,500 | ) | |||||
Class
A common stock repurchases
|
-
|
(11,677 | ) | |||||
Repayment
of capital lease obligations, mortgages and other notes
payable
|
(20,245 | ) | (21,950 | ) | ||||
Net
proceeds from Class A common stock options exercised and Class
A common
stock issued under the Employee Stock Purchase Plan
|
26,570
|
4,695
|
||||||
Tax
benefits recognized on stock option exercises
|
4,020
|
1,694
|
||||||
Net
cash flows from financing activities
|
(989,640 | ) |
1,023,298
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
(846,229 | ) |
1,247,914
|
|||||
Cash
and cash equivalents, beginning of period
|
1,923,105
|
615,669
|
||||||
Cash
and cash equivalents, end of period
|
$ |
1,076,876
|
$ |
1,863,583
|
||||
Supplemental
Disclosure of Cash Flow Information:
|
||||||||
Cash
paid for interest
|
$ |
206,299
|
$ |
193,122
|
||||
Capitalized
interest
|
$ |
6,967
|
$ |
4,321
|
||||
Cash
received for interest
|
$ |
49,932
|
$ |
30,572
|
||||
Cash
paid for income taxes
|
$ |
49,753
|
$ |
14,463
|
||||
Employee
benefits paid in Class A common stock
|
$ |
17,674
|
$ |
22,026
|
||||
Satellite
and other vendor financing
|
$ |
-
|
$ |
15,000
|
||||
Satellite
financed under capital lease obligations (Note 8)
|
$ |
198,219
|
$ |
-
|
1.
|
Organization
and Business Activities
|
|
·
|
The
DISH Network – which provides a direct broadcast satellite (“DBS”)
subscription television service in the United States;
and
|
|
·
|
EchoStar
Technologies Corporation (“ETC”) – which designs and develops DBS
receivers, antennae and other digital equipment for the DISH
Network. We refer to this equipment collectively as “EchoStar
receiver systems.” ETC also designs, develops and distributes
similar equipment for international satellite service providers
and
others.
|
2.
|
Significant
Accounting Policies
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
income (loss)
|
$ |
224,199
|
$ |
168,779
|
$ |
381,339
|
$ |
316,060
|
||||||||
Foreign
currency translation adjustments
|
2,012
|
3,044
|
2,616
|
3,434
|
||||||||||||
Unrealized
holding gains (losses) on available-for-sale securities
|
470
|
750
|
6,081
|
22,531
|
||||||||||||
Recognition
of previously unrealized (gains) losses on available-for-sale
securities included in net income (loss)
|
2,055
|
(135 | ) | (1,995 | ) | (135 | ) | |||||||||
Deferred
income tax (expense) benefit attributable to unrealized holding gains
(losses) on available-for-sale securities
|
(673 | ) | (57 | ) | (1,465 | ) | (8,218 | ) | ||||||||
Comprehensive
income (loss)
|
$ |
228,063
|
$ |
172,381
|
$ |
386,576
|
$ |
333,672
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Numerator
for basic net income (loss) per share - Net income (loss)
|
$ |
224,199
|
$ |
168,779
|
$ |
381,339
|
$ |
316,060
|
||||||||
Interest
on subordinated notes convertible into common shares, net of related
tax
effect
|
2,460
|
2,505
|
4,920
|
5,010
|
||||||||||||
Numerator
for diluted net income (loss) per common share
|
$ |
226,659
|
$ |
171,284
|
$ |
386,259
|
$ |
321,070
|
||||||||
Denominator:
|
||||||||||||||||
Denominator
for basic net income (loss) per common share – weighted-average
common shares outstanding
|
447,217
|
444,597
|
446,750
|
444,263
|
||||||||||||
Dilutive
impact of options outstanding
|
1,800
|
1,264
|
1,800
|
1,205
|
||||||||||||
Dilutive
impact of subordinated notes convertible into common
shares
|
7,265
|
7,265
|
7,265
|
7,265
|
||||||||||||
Denominator
for diluted net income (loss) per share – weighted-average diluted
common shares outstanding
|
456,282
|
453,126
|
455,815
|
452,733
|
||||||||||||
Net
income (loss) per share:
|
||||||||||||||||
Basic
net income (loss)
|
$ |
0.50
|
$ |
0.38
|
$ |
0.85
|
$ |
0.71
|
||||||||
Diluted
net income (loss)
|
$ |
0.50
|
$ |
0.38
|
$ |
0.85
|
$ |
0.71
|
||||||||
Shares
of Class A common stock issuable upon conversion
of:
|
||||||||||||||||
5
3/4% Convertible Subordinated Notes due 2008
|
-
|
23,100
|
-
|
23,100
|
||||||||||||
3%
Convertible Subordinated Note due 2010
|
6,866
|
6,866
|
6,866
|
6,866
|
||||||||||||
3%
Convertible Subordinated Note due 2011
|
399
|
399
|
399
|
399
|
As
of June 30,
|
||||||||
2007
|
2006
|
|||||||
(In
thousands)
|
||||||||
Performance
based options
|
10,312
|
10,900
|
||||||
Restricted
performance units
|
685
|
615
|
||||||
Total
|
10,997
|
11,515
|
3.
|
Stock-Based
Compensation
|
For
the Six Months
|
||||||||
Ended
June 30, 2007
|
||||||||
Options
|
Weighted-Average
Exercise Price
|
|||||||
Options
outstanding, beginning of period
|
22,741,833
|
$ |
25.67
|
|||||
Granted
|
1,184,250
|
43.42
|
||||||
Exercised
|
(1,040,338 | ) |
24.19
|
|||||
Forfeited
and cancelled
|
(1,138,300 | ) |
16.74
|
|||||
Options
outstanding, end of period
|
21,747,445
|
27.17
|
||||||
Exercisable
at end of period
|
6,600,245
|
32.41
|
For
the Six Months
|
||||||||
Ended
June 30, 2007
|
||||||||
Restricted
Stock
Awards
*
|
Weighted-Average
Grant Date Fair Value
|
|||||||
Restricted
stock awards outstanding, beginning of period
|
855,298
|
$ |
30.88
|
|||||
Granted
|
39,580
|
43.43
|
||||||
Exercised
|
(20,000 | ) |
30.16
|
|||||
Forfeited
and cancelled
|
(79,384 | ) |
31.15
|
|||||
Restricted
stock awards outstanding, end of period
|
795,494
|
31.49
|
*
|
As
of June 30, 2007, the restricted stock awards included 685,494
restricted
performance units outstanding pursuant to our 2005 long-term,
performance-based stock incentive plan (the “2005
LTIP”). Vesting of these restricted performance units is
contingent upon meeting a long-term goal which management has determined
is not probable as of June 30,
2007.
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Subscriber-related
expenses
|
$ |
130
|
$ |
151
|
$ |
306
|
$ |
260
|
||||||||
Satellite
and transmission expenses
|
93
|
87
|
220
|
153
|
||||||||||||
General
and administrative
|
3,354
|
2,629
|
6,509
|
4,528
|
||||||||||||
Total
non-cash, stock based compensation
|
$ |
3,577
|
$ |
2,867
|
$ |
7,035
|
$ |
4,941
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Risk-free
interest rate
|
4.98 | % | 5.18 | % | 4.55 | % | 4.93 | % | ||||||||
Volatility
factor
|
20.15 | % | 24.71 | % | 20.37 | % | 25.05 | % | ||||||||
Expected
term of options in years
|
5.5
|
5.7
|
5.9
|
6.2
|
||||||||||||
Weighted-average
fair value of options granted
|
$ |
13.29
|
$ |
10.70
|
$ |
13.63
|
$ |
10.95
|
4.
|
Inventories
|
As
of
|
||||||||
June 30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
(In
thousands)
|
||||||||
Finished
goods - DBS
|
$ |
141,633
|
$ |
132,604
|
||||
Raw
materials
|
102,158
|
50,039
|
||||||
Work-in-process
- service repair and refurbishment
|
45,948
|
51,870
|
||||||
Work-in-process
- new
|
12,711
|
14,203
|
||||||
Consignment
|
4,452
|
1,669
|
||||||
Inventory
allowance
|
(17,557 | ) | (12,878 | ) | ||||
Inventories,
net
|
$ |
289,345
|
$ |
237,507
|
5.
|
Investment
Securities
|
6.
|
Satellites
|
7.
|
FCC
Authorizations and Intangible
Assets
|
As
of
|
||||||||||||||||
June
30, 2007
|
December
31, 2006
|
|||||||||||||||
Intangible
Assets
|
Accumulated
Amortization
|
Intangible
Assets
|
Accumulated
Amortization
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Contract-based
|
$ |
188,346
|
$ | (52,721 | ) | $ |
189,426
|
$ | (45,924 | ) | ||||||
Customer
relationships
|
73,298
|
(59,305 | ) |
73,298
|
(50,142 | ) | ||||||||||
Technology-based
|
33,500
|
(6,943 | ) |
33,500
|
(5,655 | ) | ||||||||||
Total
|
$ |
295,144
|
$ | (118,969 | ) | $ |
296,224
|
$ | (101,721 | ) |
For
the Years Ending December 31,
|
||||
2007
(remaining six months)
|
$ |
18,203
|
||
2008
|
22,912
|
|||
2009
|
18,081
|
|||
2010
|
18,081
|
|||
2011
|
18,081
|
|||
2012
|
18,079
|
|||
Thereafter
|
62,738
|
|||
Total
|
$ |
176,175
|
8.
|
Long-Term
Debt
|
For
the Years Ending December 31,
|
||||
2007
(remaining six months)
|
$ |
71,175
|
||
2008
|
134,351
|
|||
2009
|
134,351
|
|||
2010
|
134,351
|
|||
2011
|
134,351
|
|||
Thereafter
|
746,374
|
|||
Total
minimum lease payments
|
1,354,953
|
|||
Less: Amount
representing lease of the orbital location and estimated executory
costs
(primarily insurance and maintenance) including profit thereon,
included
in total minimum lease payments
|
(497,408 | ) | ||
Net
minimum lease payments
|
857,545
|
|||
Less: Amount
representing interest
|
(272,497 | ) | ||
Present
value of net minimum lease payments
|
585,048
|
|||
Less: Current
portion
|
(44,149 | ) | ||
Long-term
portion of capital lease obligations
|
$ |
540,899
|
9.
|
Stockholders’
Equity (Deficit)
|
10.
|
Commitments
and Contingencies
|
11.
|
Depreciation
and Amortization Expense
|
|
For
the Three Months
|
For
the Six Months
|
||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Equipment
leased to customers
|
$ |
215,322
|
$ |
169,639
|
$ |
422,001
|
$ |
317,548
|
||||||||
Satellites
|
61,189
|
59,421
|
120,233
|
115,151
|
||||||||||||
Furniture,
fixtures, equipment and other
|
55,881
|
35,021
|
98,719
|
67,538
|
||||||||||||
Identifiable
intangible assets subject to amortization
|
9,102
|
9,172
|
18,239
|
18,343
|
||||||||||||
Buildings
and improvements
|
2,438
|
1,638
|
4,859
|
2,882
|
||||||||||||
Total
depreciation and amortization
|
$ |
343,932
|
$ |
274,891
|
$ |
664,051
|
$ |
521,462
|
12.
|
Segment
Reporting
|
For
the Three Months
|
For
the Six Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Revenue:
|
||||||||||||||||
DISH
Network
|
$ |
2,701,601
|
$ |
2,346,816
|
$ |
5,285,388
|
$ |
4,588,206
|
||||||||
ETC
|
34,010
|
77,333
|
69,585
|
131,025
|
||||||||||||
All
other
|
29,819
|
47,552
|
64,460
|
56,307
|
||||||||||||
Eliminations
|
(5,422 | ) | (5,546 | ) | (14,440 | ) | (9,992 | ) | ||||||||
Total
revenue
|
$ |
2,760,008
|
$ |
2,466,155
|
$ |
5,404,993
|
$ |
4,765,546
|
||||||||
Net
income (loss):
|
||||||||||||||||
DISH
Network
|
$ |
229,006
|
$ |
141,583
|
$ |
386,410
|
$ |
296,583
|
||||||||
ETC
|
(3,574 | ) |
14,949
|
(9,240 | ) |
9,547
|
||||||||||
All
other
|
(1,233 | ) |
12,247
|
4,169
|
9,930
|
|||||||||||
Total
net income (loss)
|
$ |
224,199
|
$ |
168,779
|
$ |
381,339
|
$ |
316,060
|
13.
|
Related
Party
|
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
–
Continued
|
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
–
Continued
|
For
the Three Months
|
||||||||||||||||
Ended
June 30,
|
Variance
|
|||||||||||||||
2007
|
2006
|
Amount
|
%
|
|||||||||||||
Statements
of Operations Data
|
(In
thousands)
|
|||||||||||||||
Revenue:
|
||||||||||||||||
Subscriber-related
revenue
|
$ |
2,676,230
|
$ |
2,332,227
|
$ |
344,003
|
14.7
|
|||||||||
Equipment
sales
|
77,348
|
114,742
|
(37,394 | ) | (32.6 | ) | ||||||||||
Other
|
6,430
|
19,186
|
(12,756 | ) | (66.5 | ) | ||||||||||
Total
revenue
|
2,760,008
|
2,466,155
|
293,853
|
11.9
|
||||||||||||
Costs
and Expenses:
|
||||||||||||||||
Subscriber-related
expenses
|
1,354,265
|
1,190,313
|
163,952
|
13.8
|
||||||||||||
%
of Subscriber-related revenue
|
50.6 | % | 51.0 | % | ||||||||||||
Satellite
and transmission expenses
|
40,759
|
33,623
|
7,136
|
21.2
|
||||||||||||
%
of Subscriber-related revenue
|
1.5 | % | 1.4 | % | ||||||||||||
Cost
of sales - equipment
|
59,418
|
84,456
|
(25,038 | ) | (29.6 | ) | ||||||||||
%
of Equipment sales
|
76.8 | % | 73.6 | % | ||||||||||||
Cost
of sales - other
|
657
|
1,931
|
(1,274 | ) | (66.0 | ) | ||||||||||
Subscriber
acquisition costs
|
376,408
|
373,239
|
3,169
|
0.8
|
||||||||||||
General
and administrative
|
142,915
|
143,818
|
(903 | ) | (0.6 | ) | ||||||||||
%
of Total revenue
|
5.2 | % | 5.8 | % | ||||||||||||
Litigation
expense
|
-
|
14,243
|
(14,243 | ) | (100.0 | ) | ||||||||||
Depreciation
and amortization
|
343,932
|
274,891
|
69,041
|
25.1
|
||||||||||||
Total
costs and expenses
|
2,318,354
|
2,116,514
|
201,840
|
9.5
|
||||||||||||
Operating
income (loss)
|
441,654
|
349,641
|
92,013
|
26.3
|
||||||||||||
Other
Income (Expense):
|
||||||||||||||||
Interest
income
|
28,411
|
31,501
|
(3,090 | ) | (9.8 | ) | ||||||||||
Interest
expense, net of amounts capitalized
|
(96,662 | ) | (111,960 | ) |
15,298
|
13.7
|
||||||||||
Other
|
(16,139 | ) | (11,256 | ) | (4,883 | ) | (43.4 | ) | ||||||||
Total
other income (expense)
|
(84,390 | ) | (91,715 | ) |
7,325
|
8.0
|
||||||||||
Income
(loss) before income taxes
|
357,264
|
257,926
|
99,338
|
38.5
|
||||||||||||
Income
tax (provision) benefit, net
|
(133,065 | ) | (89,147 | ) | (43,918 | ) | (49.3 | ) | ||||||||
Effective
tax rate
|
37.2 | % | 34.6 | % | ||||||||||||
Net
income (loss)
|
$ |
224,199
|
$ |
168,779
|
$ |
55,420
|
32.8
|
|||||||||
Other
Data:
|
||||||||||||||||
DISH
Network subscribers, as of period end (in millions)
|
13.585
|
12.460
|
1.125
|
9.0
|
||||||||||||
DISH
Network subscriber additions, gross (in millions)
|
0.850
|
0.824
|
0.026
|
3.2
|
||||||||||||
DISH
Network subscriber additions, net (in millions)
|
0.170
|
0.195
|
(0.025 | ) | (12.8 | ) | ||||||||||
Average
monthly subscriber churn rate
|
1.68 | % | 1.70 | % | (0.02 | %) | (1.2 | ) | ||||||||
Average
monthly revenue per subscriber ("ARPU")
|
$ |
66.06
|
$ |
62.91
|
$ |
3.15
|
5.0
|
|||||||||
Average
subscriber acquisition cost per subscriber ("SAC")
|
$ |
645
|
$ |
683
|
$ | (38 | ) | (5.6 | ) | |||||||
EBITDA
|
$ |
769,447
|
$ |
613,276
|
$ |
156,171
|
25.5
|
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
–
Continued
|
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
–
Continued
|
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
–
Continued
|