DISH
DBS CORPORATION
9601
South Meridian Boulevard
Englewood,
Colorado 80112
RESPONSE
TO SEC LETTER OF JUNE 4, 2009
July 1,
2009
Via
EDGAR
Larry
Spirgel
Assistant
Director
Division
of Corporation Finance
U.S.
Securities and Exchange Commission
100 F.
Street, N.E.
Washington,
D.C. 20549-0404
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Re:
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DISH
DBS Corporation (the “Company”)
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Form 10-K
for the Fiscal Year Ended December 31, 2008
Filed
March 16, 2009, as amended March 31, 2009
Form 10-Q
for the Quarterly Period Ended March 31, 2009
File No.
333-31929
Dear Mr.
Spirgel:
We are
supplying the following responses to the comments contained in your letter dated
June 4, 2009, regarding the above-referenced documents. Our responses
are numbered in accordance with the numbered comments in your
letter.
Form 10-K for the Year Ended
December 31, 2008
Management’s Discussion and
Analysis of Financial Condition and Results of Operations
General
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1.
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We
note your response to prior comment 2 and the disclosure in your Form 10-Q
for March 31, 2009 to which you
refer.
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·
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Please
quantify the impact of the lost subscribers, both the regular churn and
the loss of the AT&T arrangement on your financial
results. This should include a dollar amount as well as the
number of lost subscribers and should discuss the trend for the year as
well as the impact on the current quarter. If you know the
dollar impact of the loss of the AT&T arrangement, that information
should be provided.
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9601
South Meridian Blvd., Englewood, CO 80112 Tel:
303.723.1000 Fax: 303.723.1299
Mr. Larry
Spirgel
United
States Securities and Exchange Commission
Page 2
of 8
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·
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Please
quantify the higher fees you will pay to access assets or receive certain
services as a result of the spin-off of assets to Echostar or disclose
that the higher fees did not have or will not have a significant impact on
your operations.
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Please
provide us with your proposed disclosures.
Response:
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·
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Please
quantify the impact of the lost subscribers, both the regular churn and
the loss of the AT&T arrangement on your financial
results. This should include a dollar amount as well as the
number of lost subscribers and should discuss the trend for the year as
well as the impact on the current quarter. If you know the
dollar impact of the loss of the AT&T arrangement, that information
should be provided.
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We make a
significant upfront investment in each new subscriber that we
acquire. Once the upfront investment has been recouped for a new
subscriber, the subsequent cash flow is generally positive. The
impact of the loss of an AT&T subscriber is generally no different than the
loss of any other subscriber. As described in our quarterly report on
Form 10-Q for the quarter ended March 31, 2009, average revenue per subscriber
was approximately $70.03 per month. Therefore, we would expect a
reduction of approximately $70.03 per month, on average, for each lost
subscriber.
With
respect to our AT&T relationship, as described in our response to prior
comment 2, AT&T was the largest telecommunications company that offered our
services. As described in our quarterly report on Form 10-Q for the
quarter ended March 31, 2009, AT&T accounted for approximately 17% of our
gross subscriber additions for the year ended December 31, 2008 and 5% of our
gross subscriber additions for the three months ended March 31,
2009. Our AT&T agreement expired on February 1, 2009 but we
continued to activate new subscribers that had ordered DISH Network service
through AT&T prior to February 1st. It may be difficult for us to
develop alternative distribution channels that will fully replace AT&T and
if we are unable to do so, our gross and net subscriber additions may be further
impacted, our subscriber churn may increase, and our results of operations may
be adversely affected. We cannot quantify the effect of the loss of our AT&T
relationship given the short period of time since it ended. In the
future, as we are able to assess the results of our alternative distribution
channels, we will be in a better position to determine if the loss of the
AT&T relationship has had a material impact on our financial
results.
9601
South Meridian Blvd., Englewood, CO 80112 Tel:
303.723.1000 Fax: 303.723.1299
Mr. Larry
Spirgel
United
States Securities and Exchange Commission
Page 3
of 8
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·
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Please
quantify the higher fees you will pay to access assets or receive certain
services as a result of the spin-off of assets to Echostar or disclose
that the higher fees did not have or will not have a significant impact on
your operations.
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Please
provide us with your proposed disclosures.
In
response to the Staff’s comment, in future applicable SEC filings, we will
include the following disclosure (updated as appropriate to reflect the
then-current circumstances).
The
higher fees we pay to EchoStar Corporation to access assets or receive certain
services following the spin-off, after taking into account the cost savings
realized from the spin-off, have not had a significant impact on our
operations.
Executive
Summary
DISH Network subscribers,
page 24
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2.
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We
note your response to prior comment 4. As we previously
requested, in your next filing, show the actual subscribers and not your
estimation of the number of subscribers represented by commercial
accounts. You may show your estimations as separate
calculations that are clearly labeled as supplementary
data.
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Response:
The
number of DISH Network subscribers represented by commercial accounts is
immaterial to our total subscriber count. For many of these
commercial accounts, we do not have detailed end-user information because they
are billed under bulk payment arrangements. We are not aware of any
uniform industry standards for calculating the number of subscribers for these
types of accounts and we do not believe the disclosure of actual commercial
accounts is material to the readers of our SEC filings. We will
include such disclosure in applicable future filings if the number of such
subscribers becomes material when compared to our overall subscriber
base.
9601
South Meridian Blvd., Englewood, CO 80112 Tel:
303.723.1000 Fax: 303.723.1299
Mr. Larry
Spirgel
United
States Securities and Exchange Commission
Page 4
of 8
Notes to Consolidated
Financial Statements
2. Summary of
Significant Accounting Policies
Principles of Consolidation
and Basis of Presentation, page F-9
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3.
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We
note your response to prior comment 6. Please provide us with
your SAB 99 analysis.
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Response:
In our
financial statements issued prior to the third quarter 2008, we had classified
VRDNs as “Cash and cash equivalents.” These VRDNs should have been
classified as “Marketable investment securities.” As of September 30,
2008, we included our VRDNs in “Marketable investment securities” and
reclassified all prior periods to conform to the current period
presentation. This reclassification affected our financial statements
as follows:
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●
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Condensed
Consolidated Balance Sheets – A reclassification from “Cash and cash
equivalents” to “Marketable investment securities” both of which are
current assets and therefore, there was no reclassification between
current and long-term assets.
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●
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Condensed
Consolidated Statements of Cash Flows – A reclassification between “Net
cash flows from investing activities” which was previously overstated with
the offset to “Net increase (decrease) in cash and cash
equivalents.”
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It is
unlikely that the judgment of a reasonable person relying upon the financial
statements would have been changed or influenced by this
reclassification. Since “Cash and cash equivalents” and “Marketable
investment securities” are the two most liquid captions on the Consolidated
Balance Sheets, changes between the two do not affect any significant metrics
that our investors are likely to track as discussed in the qualitative
assessment below. Also, while the VRDNs are classified as “Marketable
Investment Securities,” they can be liquidated per the put option on a same day
or on a five business day settlement basis.
Our
management’s assessment of each of the qualitative considerations within SAB 99
is presented below in italics. This assessment indicates that the
reclassification is immaterial from a qualitative perspective.
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·
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Whether
the misstatement arises from items capable of precise measurement or
whether they arise from an estimate and, if so, the degree of imprecision
inherent in the estimate
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This represents a reclassification between two financial statement captions
within current assets. It is not an estimation or measurement
issue.
9601
South Meridian Blvd., Englewood, CO 80112 Tel:
303.723.1000 Fax: 303.723.1299
Mr.
Larry Spirgel
United
States Securities and Exchange Commission
Page 5
of 8
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·
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Whether
the misstatement masks a change in earnings or other
trends
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This
reclassification had no effect on reported earnings and therefore did not mask a
change in earnings or other trends.
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·
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Whether
the misstatement hides a failure to meet analysts’ consensus expectations
for the enterprise
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This
reclassification had no effect on any of the key measures used by analysts in
evaluating our financial or operating performance and therefore did not affect
our ability to meet analysts’ consensus expectations (see specific
considerations below).
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·
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Whether
the misstatement changes a loss into income or vice
versa
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This
reclassification had no effect on reported earnings. As the purchases
and sales of VRDNs were at par, the purchases and sales had no effect on any
revenue classifications. Notwithstanding the classification on the
balance sheet, the related income is still represented in its entirety as
interest income.
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·
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Whether
the misstatement concerns a segment or other portion of the registrant’s
business that has been identified as playing a significant role in the
registrant’s operations or
profitability
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The
reclassification does not concern a specific segment or other critical portion
of the business.
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·
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Whether
the misstatement affects the registrant’s compliance with regulatory
requirements
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The
reclassification has no impact on compliance with any regulatory
requirements.
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·
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Whether
the misstatement affects the registrant’s compliance with loan covenants
or other contractual requirements
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The
reclassification does not affect loan covenants or any other contractual
requirements.
9601
South Meridian Blvd., Englewood, CO 80112 Tel:
303.723.1000 Fax: 303.723.1299
Mr.
Larry Spirgel
United
States Securities and Exchange Commission
Page 6
of 8
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·
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Whether
the misstatement has the affect of increasing management’s compensation -
for example, by satisfying requirements for the award of bonuses or other
forms of incentive compensation
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The
reclassification has no effect on compensation.
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●
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Whether
the misstatement involves concealment of an unlawful
transaction
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There
is no concealment of any unlawful transactions.
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·
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Among
other factors, the demonstrated volatility of the price of a registrant’s
securities in response to certain types of disclosures may provide
guidance as to whether investors regard quantitatively small misstatements
as material. Consideration of potential market reaction to disclosure of a
misstatement is by itself “too blunt an instrument to be depended on” in
considering whether a fact is material. When, however,
management or the independent auditor expects (based, for example, on a
pattern of market performance) that known misstatements may result in a
significant positive or negative market reaction, that expected reaction
should be taken into account when considering whether a misstatement is
material.
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We
did not expect this reclassification to result in a market reaction, either
positive or negative. Based on the changes in market price of our
bonds subsequent to this reclassification, we believe our analysis was
accurate. See specific considerations below.
Specific
Considerations
We
believe the following metrics, measures or financial statement captions are the
primary ones used by the readers of our SEC filings to evaluate our operating
efficiency and overall financial performance:
GAAP
Items
Net
Income (loss)
Operating
income (loss)
Net cash
flow from operating activities
Assets
& liabilities (current v. non-current and in total)
Key Non-GAAP
Measures/Metrics
APRU
Churn
Sub
Growth
SAC
EBITDA
9601
South Meridian Blvd., Englewood, CO 80112 Tel:
303.723.1000 Fax: 303.723.1299
Mr.
Larry Spirgel
United
States Securities and Exchange Commission
Page 7
of 8
The
reclassification between “Cash and cash equivalent” and “Marketable investment
securities” does not impact any of the above metrics.
The
quantitative effects of the reclassification were as follows:
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As
of December 31, 2007
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||||||||||||||||
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As
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As
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Change
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||||||||||||||
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Balance
Sheet:
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Reported
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Adjusted
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$
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%
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||||||||||||
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(In
thousands)
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||||||||||||||||
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Cash
and cash equivalent
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$ | 606,990 | $ | 482,251 | $ | (124,739 | ) | (21 | ) | |||||||
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Marketable
investment securities
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495,760 | 620,499 | 124,739 | 25 | ||||||||||||
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For
the Year Ended December 31, 2007
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||||||||||||||||
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As
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As
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Change
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||||||||||||||
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Statements
of Cash Flows:
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Reported
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Adjusted
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$
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% | ||||||||||||
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(In
thousands)
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||||||||||||||||
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Net
cash flows from investing activities
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$ | (1,027,940 | ) | $ | (999,183 | ) | $ | 28,757 | 3 | |||||||
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Net
increase (decrease) in cash and cash equivalent
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(1,060,140 | ) | (1,031,383 | ) | 28,757 | 3 | ||||||||||
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For
the Year Ended December 31, 2006
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||||||||||||||||
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As
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As
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Change
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||||||||||||||
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Reported
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Adjusted
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$
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% | |||||||||||||
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(In
thousands)
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||||||||||||||||
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Net
cash flows from investing activities
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$ | (1,864,661 | ) | $ | (1,999,737 | ) | $ | (135,076 | ) | (7 | ) | |||||
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Net
increase (decrease) in cash and cash equivalent
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1,084,744 | 949,668 | (135,076 | ) | (12 | ) | ||||||||||
9601
South Meridian Blvd., Englewood, CO 80112 Tel:
303.723.1000 Fax: 303.723.1299
Mr.
Larry Spirgel
United
States Securities and Exchange Commission
Page 8
of 8
In
accordance with your request, we acknowledge that:
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●
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We
are responsible for the adequacy and accuracy of the disclosure in our
filings;
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●
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Staff
comments or changes to disclosures in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filings; and
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●
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We
may not assert staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the
United States.
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We
appreciate your assistance in our compliance with applicable disclosure
requirements and enhancing the overall disclosures in our
filings. Should you have any questions or comments regarding our
responses, please call me at (303) 723-1285. I can also be reached by
fax at (720) 514-5957.
Sincerely,
60; /s/ Robert E. Olson
Robert E. Olson
Executive Vice President
and Chief Financial Officer
cc: Kyle
Moffatt, SEC
Dean
Suehiro, SEC
9601
South Meridian Blvd., Englewood, CO 80112 Tel:
303.723.1000 Fax: 303.723.1299