UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-26176

DISH Network Corporation

(Exact name of registrant as specified in its charter)

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)

(303) 723-1000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of July 24, 2009, the registrant’s outstanding common stock consisted of 208,369,696 shares of Class A common stock and 238,435,208 shares of Class B common stock.

 

 

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
				Disclosure Regarding Forward-Looking Statements			i
	Item 1.			Financial Statements
				Condensed Consolidated Balance Sheets — June 30, 2009 and December 31, 2008 (Unaudited)			1
				Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For the Three and Six Months Ended June 30, 2009 and 2008 (Unaudited)			2
				Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2009 and 2008 (Unaudited)			3
				Notes to Condensed Consolidated Financial Statements (Unaudited)			4
	Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
	Item 3.			Quantitative and Qualitative Disclosures about Market Risk			51
	Item 4.			Controls and Procedures			52
PART II — OTHER INFORMATION
	Item 1.			Legal Proceedings			53
	Item 1A.			Risk Factors			58
	Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			59
	Item 3.			Defaults Upon Senior Securities		None
	Item 4.			Submission of Matters to a Vote of Security Holders			60
	Item 5.			Other Information			60
	Item 6.			Exhibits			61
				Signatures			62
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We make “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 throughout this report. Whenever you read a statement that is not simply a statement of historical fact (such as when we describe what we “believe,” “intend,” “plan,” “estimate,” “expect” or “anticipate” will occur, and other similar statements), you must remember that our expectations may not be achieved, even though we believe they are reasonable. We do not guarantee that any future transactions or events described herein will happen as described or that they will happen at all. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. Whether actual events or results will conform with our expectations and predictions is subject to a number of risks and uncertainties. The risks and uncertainties include, but are not limited to, the following:

	•		Weakening economic conditions, including the recent downturn in financial markets and reduced consumer spending, may adversely affect our ability to grow or maintain our business.
	•		If we do not improve our operational performance and customer satisfaction, our gross subscriber additions may decrease and our subscriber churn may increase.
	•		If declines in DISH Network gross subscriber additions, increases in subscriber churn and higher subscriber acquisition and retention costs continue, our financial performance will be further adversely affected.
	•		We face intense and increasing competition from satellite television providers, cable television providers, telecommunications companies, and companies that provide/facilitate the delivery of video content via the internet.
	•		We may be required to make substantial additional investments in order to maintain competitive high definition, or HD, programming offerings.
	•		Technology in our industry changes rapidly and could cause our services and products to become obsolete.
	•		We may need additional capital, which may not be available on acceptable terms or at all, in order to continue investing in our business and to finance acquisitions and other strategic transactions.
	•		A portion of our investment portfolio is invested in securities that have experienced limited or no liquidity in recent months and may not be immediately accessible to support our financing needs.
	•		The termination of our distribution agreement with AT&T Inc., or AT&T, may reduce subscriber additions and increase churn if we are not able to develop alternative distribution channels.
	•		As technology changes, and in order to remain competitive, we may have to upgrade or replace subscriber equipment and make substantial investments in our infrastructure.
	•		We rely on EchoStar Corporation, or EchoStar, to design and develop all of our new set-top boxes and certain related components, and to provide transponder capacity, digital broadcast operations and other services for us. Our business would be adversely affected if EchoStar ceases to provide these services to us and we are unable to obtain suitable replacement services from third parties.
	•		We rely on one or a limited number of vendors, and the inability of these key vendors to meet our needs could have a material adverse effect on our business.
	•		Our programming signals are subject to theft, and we are vulnerable to other forms of fraud that could require us to make significant expenditures to remedy.
	•		We depend on third parties to solicit orders for DISH Network services that represent a significant percentage of our total gross subscriber acquisitions.
	•		We depend on others to provide the programming that we offer to our subscribers and, if we lose access to this programming, our subscriber losses and subscriber churn may increase.

	•		Our competitors may be able to leverage their relationships with programmers so that they are able to reduce their programming costs and offer exclusive content that will place them at a competitive advantage to us.
	•		We depend on the Cable Act for access to programming from cable-affiliate programmers at cost-effective rates.
	•		We face increasing competition from other distributors of foreign language programming that may limit our ability to maintain our foreign language programming subscriber base.
	•		Our local programming strategy faces uncertainty because we may not be able to obtain necessary retransmission consents from local network stations.
	•		We are subject to significant regulatory oversight and changes in applicable regulatory requirements could adversely affect our business.
	•		We have made a substantial investment in certain 700 MHz wireless licenses and will be required to make significant additional investments in order to commercialize these licenses and recoup our investment.
	•		We have substantial debt outstanding and may incur additional debt that could have a dilutive effect on our outstanding equity capital or future earnings.
	•		If we are unsuccessful in overturning the District Court’s ruling on Tivo’s motion for contempt, we are not successful in developing and deploying potential new alternative technology and we are unable to reach a license agreement with Tivo on reasonable terms, we would be subject to substantial liability and would be prohibited from offering digital video recorder, or DVR, functionality that would result in a significant loss of subscribers and place us at a significant disadvantage to our competitors.
	•		We have limited owned and leased satellite capacity and satellite failures could adversely affect our business.
	•		Our owned and leased satellites under construction are subject to risks related to launch that could limit our ability to utilize these satellites.
	•		Our owned and leased satellites in orbit are subject to significant operational and environmental risks that could limit our ability to utilize these satellites.
	•		Our owned and leased satellites have minimum design lives of 12 years, but could fail or suffer reduced capacity before then.
	•		We currently have no commercial insurance coverage on the satellites we own and could face significant impairment charges if one of our satellites fails.
	•		We may have potential conflicts of interest with EchoStar due to our common ownership and management.
	•		We rely on key personnel and the loss of their services may negatively affect our businesses.
	•		We are controlled by one principal stockholder who is also our Chairman, President and Chief Executive Officer.
	•		We are party to various lawsuits which, if adversely decided, could have a significant adverse impact on our business, particularly lawsuits regarding intellectual property.
	•		We may pursue acquisitions and other strategic transactions to complement or expand our business that may not be successful and with respect to which we may lose the entire value of our investment.
	•		Our business depends substantially on Federal Communications Commission, or FCC, licenses that can expire or be revoked or modified and applications for FCC licenses that may not be granted.
	•		We are subject to digital HD “carry-one-carry-all” requirements that cause capacity constraints.
	•		It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders, because of our capital structure.

	•		We cannot assure you that there will not be deficiencies leading to material weaknesses in our internal control over financial reporting.
	•		We may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange Commission, or SEC.

All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. Investors should consider the risks described herein and should not place undue reliance on any forward-looking statements. We assume no responsibility for updating forward-looking information contained or incorporated by reference herein or in other reports we file with the SEC.

In this report, the words “DISH Network,” the “Company,” “we,” “our” and “us” refer to DISH Network Corporation and its subsidiaries, unless the context otherwise requires. “EchoStar” refers to EchoStar Corporation and its subsidiaries.

Item 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited)

		As of
		June 30,				December 31,
		2009				2008
Assets
Current Assets:
Cash and cash equivalents		$	112,861			$	98,574
Marketable investment securities			1,208,054				460,558
Trade accounts receivable — other, net of allowance for doubtful accounts of $13,079 and $15,207, respectively			826,148				799,139
Trade accounts receivable — EchoStar			20,456				21,570
Inventories, net			323,104				426,671
Deferred tax assets			110,789				86,331
Income tax receivable			—				148,747
Other current assets			182,938				56,394
Total current assets			2,784,350				2,097,984
Noncurrent Assets:
Restricted cash and marketable investment securities			145,289				83,606
Property and equipment, net of accumulated depreciation of $2,556,766 and $2,432,959, respectively			2,794,368				2,663,289
FCC authorizations			1,391,441				1,391,441
Marketable and other investment securities			94,577				158,296
Other noncurrent assets, net			55,735				65,431
Total noncurrent assets			4,481,410				4,362,063
Total assets		$	7,265,760			$	6,460,047
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Trade accounts payable — other		$	233,487			$	174,216
Trade accounts payable — EchoStar			222,779				297,629
Deferred revenue and other			810,748				830,529
Accrued programming			961,416				1,020,086
Other accrued expenses			748,544				619,210
3% Convertible Subordinated Note due 2011			25,000				25,000
Current portion of long-term debt and capital lease obligations			22,866				13,333
Total current liabilities			3,024,840				2,980,003
Long-Term Obligations, Net of Current Portion:
Long-term debt and capital lease obligations, net of current portion			5,078,790				4,969,423
Deferred tax liabilities			289,700				235,551
Long-term deferred revenue, distribution and carriage payments and other long-term liabilities			392,379				224,176
Total long-term obligations, net of current portion			5,760,869				5,429,150
Total liabilities			8,785,709				8,409,153
Commitments and Contingencies (Note 10)
Stockholders’ Equity (Deficit):
Class A common stock, $.01 par value, 1,600,000,000 shares authorized, 258,465,402 and 257,117,733 shares issued, 208,367,249 and 208,968,052 shares outstanding, respectively			2,585				2,571
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			2,111,876				2,090,527
Accumulated other comprehensive income (loss)			(57,714	)			(107,998	)
Accumulated earnings (deficit)			(2,116,700	)			(2,492,804	)
Treasury stock, at cost			(1,462,380	)			(1,443,786	)
Total stockholders’ equity (deficit)			(1,519,949	)			(1,949,106	)
Total liabilities and stockholders’ equity (deficit)		$	7,265,760			$	6,460,047

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands, except per share amounts)
(Unaudited)

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2009				2008				2009				2008
Revenue:
Subscriber-related revenue		$	2,878,115			$	2,875,580			$	5,743,054			$	5,686,006
Equipment sales and other revenue			19,137				28,785				51,483				53,837
Equipment sales — EchoStar			2,526				3,462				5,209				6,100
Transitional services and other revenue — EchoStar			3,923				7,163				9,276				13,441
Total revenue			2,903,701				2,914,990				5,809,022				5,759,384
Costs and Expenses:
Subscriber-related expenses (exclusive of depreciation shown below — Note 11)			1,532,076				1,423,997				3,082,154				2,868,638
Satellite and transmission expenses (exclusive of depreciation shown below — Note 11):
EchoStar			87,198				77,697				167,955				155,950
Other			8,718				7,575				15,739				15,239
Equipment, transitional services and other cost of sales			27,094				30,359				67,593				62,173
Subscriber acquisition costs:
Cost of sales — subscriber promotion subsidies — EchoStar (exclusive of depreciation shown below — Note 11)			71,786				32,284				95,922				63,071
Other subscriber promotion subsidies			248,171				297,773				465,731				577,970
Subscriber acquisition advertising			68,315				41,359				118,822				105,331
Total subscriber acquisition costs			388,272				371,416				680,475				746,372
General and administrative expenses — EchoStar			12,413				12,670				23,555				26,440
General and administrative expenses			143,466				122,321				269,231				238,082
Tivo litigation expense			196,405				—				196,405				—
Depreciation and amortization (Note 11)			245,300				248,247				468,593				520,614
Total costs and expenses			2,640,942				2,294,282				4,971,700				4,633,508
Operating income (loss)			262,759				620,708				837,322				1,125,876
Other Income (Expense):
Interest income			11,262				13,372				16,046				27,473
Interest expense, net of amounts capitalized			(91,132	)			(93,231	)			(175,069	)			(183,043	)
Other, net			(44,334	)			(11,500	)			(40,157	)			(18,528	)
Total other income (expense)			(124,204	)			(91,359	)			(199,180	)			(174,098	)
Income (loss) before income taxes			138,555				529,349				638,142				951,778
Income tax (provision) benefit, net			(75,135	)			(193,464	)			(262,038	)			(357,310	)
Net income (loss)		$	63,420			$	335,885			$	376,104			$	594,468
Comprehensive Income (Loss):
Foreign currency translation adjustments			274				87				(106	)			(1,577	)
Unrealized holding gains (losses) on available-for-sale securities			59,155				(10,318	)			44,807				(59,209	)
Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income (loss)			7,171				—				5,455				(4,523	)
Deferred income tax (expense) benefit			(103	)			(1,999	)			128				19,224
Comprehensive income (loss)		$	129,917			$	323,655			$	426,388			$	548,383
Weighted-average common shares outstanding — Class A and B common stock:
Basic			446,752				449,724				446,813				449,263
Diluted			447,421				460,853				448,263				460,682
Earnings per share — Class A and B common stock:
Basic net income (loss) per share		$	0.14			$	0.75			$	0.84			$	1.32
Diluted net income (loss) per share		$	0.14			$	0.73			$	0.84			$	1.30

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

		For the Six Months
		Ended June 30,
		2009				2008
Cash Flows From Operating Activities:
Net income (loss)		$	376,104			$	594,468
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization			468,593				520,614
Equity in losses (earnings) of affiliates			4,149				1,069
Realized and unrealized losses (gains) on investments			39,687				15,227
Non-cash, stock-based compensation			7,275				7,801
Deferred tax expense (benefit)			29,819				15,207
Other, net			2,412				3,407
Change in noncurrent assets			5,095				5,372
Change in long-term deferred revenue, distribution and carriage payments and other long-term liabilities			47,606				72,086
Changes in current assets and current liabilities, net			265,103				106,638
Net cash flows from operating activities			1,245,843				1,341,889
Cash Flows From Investing Activities:
Purchases of marketable investment securities			(1,767,305	)			(1,574,637	)
Sales and maturities of marketable investment securities			1,094,018				1,132,729
Purchases of property and equipment			(466,733	)			(528,342	)
Change in restricted cash and marketable investment securities			(62,473	)			(105	)
Deposit for 700 MHz wireless spectrum acquisition			—				(711,871	)
Other			(529	)			(2,600	)
Net cash flows from investing activities			(1,203,022	)			(1,684,826	)
Cash Flows From Financing Activities:
Distribution of cash and cash equivalents to EchoStar in connection with the Spin-off			—				(585,147	)
Proceeds from issuance of 7 3/4% Senior Notes due 2015			—				750,000
Deferred debt issuance costs			—				(5,033	)
Repayment of long-term debt and capital lease obligations			(11,814	)			(5,018	)
Class A common stock repurchases			(18,594	)			—
Net proceeds from Class A common stock options exercised and Class A common stock issued under the Employee Stock Purchase Plan			1,874				18,478
Net cash flows from financing activities			(28,534	)			173,280
Net increase (decrease) in cash and cash equivalents			14,287				(169,657	)
Cash and cash equivalents, beginning of period			98,574				919,542
Cash and cash equivalents, end of period		$	112,861			$	749,885
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest		$	177,614			$	180,783
Capitalized interest		$	8,451			$	7,972
Cash received for interest		$	8,321			$	20,978
Cash paid for income taxes		$	245,976			$	251,282
Employee benefits paid in Class A common stock		$	12,198			$	19,374
Vendor financing		$	—			$	5,814
Satellites and other assets financed under capital lease obligations		$	130,714			$	—
Net assets contributed in connection with the Spin-off, excluding cash and cash equivalents		$	—			$	2,765,398

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 13.610 million subscribers as of June 30, 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 January 1, 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. 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.

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 Article 10 of Regulation S-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 six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 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 December 31, 2008 (“2008 10-K”). Certain prior period amounts have been reclassified to conform to the current period presentation. Further, in connection with preparation of the condensed consolidated financial statements and in accordance with the recently issued Statement of Financial Accounting Standards No. 165 “Subsequent Events” (“SFAS 165”), we evaluated subsequent events after the balance sheet date of June 30, 2009 through August 10, 2009.

Principles of Consolidation

We consolidate all majority owned subsidiaries and investments in entities in which we have controlling influence. 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

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

influence the operating decisions of an investee, the cost method is used. For entities that are considered variable interest entities we apply the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidation of Variable Interest Entities – An Interpretation of ARB No. 51” (“FIN 46R”). All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses for each reporting period. Estimates are used in accounting for, among other things, allowances for doubtful accounts, inventory allowances, self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair value of financial instruments, fair value of options granted under our stock-based compensation plans, fair values of assets and liabilities acquired in business combinations, capital leases, asset impairments, useful lives of property, equipment and intangible assets, retailer incentives, programming expenses, subscriber lives and royalty obligations. Illiquid credit markets and general downward economic conditions have increased the inherent uncertainty in the estimates and assumptions indicated above. Actual results may differ from previously estimated amounts, and such differences may be material to the Condensed Consolidated Financial Statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected prospectively in the period they occur.

Fair Value of Financial Instruments

As of June 30, 2009 and December 31, 2008, the carrying value of our cash and cash equivalents, marketable investment securities, trade accounts receivable, net of allowance for doubtful accounts, and current liabilities is equal to or approximates fair value due to their short-term nature. See Note 7 for the fair value of our long-term debt.

3. Basic and Diluted Income (Loss) Per Share

Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS 128”) requires entities to present both basic earnings per share (“EPS”) and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income (loss) 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 Class A common stock. The following table reflects the basic and diluted weighted-average shares outstanding used to calculate basic and diluted earnings per share. Earnings per share amounts for all periods are presented below in accordance with the requirements of SFAS 128.

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2009				2008				2009				2008
Basic net income (loss)		$	63,420			$	335,885			$	376,104			$	594,468
Interest on dilutive subordinated convertible notes, net of related tax effect			—				2,461				234				4,922
Diluted net income (loss)		$	63,420			$	338,346			$	376,338			$	599,390
Weighted-average common shares outstanding — Class A and B common stock:
Basic			446,752				449,724				446,813				449,263
Dilutive impact of stock awards outstanding			669				2,348				968				2,638
Dilutive impact of subordinated notes convertible into common shares			—				8,781				482				8,781
Diluted			447,421				460,853				448,263				460,682
Earnings per share — Class A and B common stock:
Basic net income (loss) per share		$	0.14			$	0.75			$	0.84			$	1.32
Diluted net income (loss) per share		$	0.14			$	0.73			$	0.84			$	1.30
Shares of Class A 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			482				482				482				482

As of June 30, 2009 and 2008, there were stock awards to purchase 10.7 million and 3.6 million shares of Class A common stock outstanding, respectively, not included in the above denominator as their effect is antidilutive. In addition, during the three months ended June 30, 2009, the convertible note is not included in the diluted EPS calculation as its conversion would be antidilutive.

Vesting of options and rights to acquire shares of our Class A common stock (“Restricted performance units”) granted pursuant to our long-term incentive plans is contingent upon meeting certain long-term goals which have not yet been achieved. As a consequence, the following are not included in the diluted EPS calculation:

		As of June 30,
		2009				2008
		(In thousands)
Performance-based options			10,300				9,568
Restricted performance units			603				577
Total			10,903				10,145

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

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
		June 30,				December 31,
		2009				2008
		(In thousands)
Marketable investment securities:
Current marketable investment securities — VRDNs		$	837,857			$	239,611
Current marketable investment securities — strategic			139,814				13,561
Current marketable investment securities — other			230,383				207,386
Total current marketable investment securities			1,208,054				460,558
Restricted marketable investment securities (1)			12,936				22,407
Noncurrent marketable investment securities — ARS and MBS (2)			91,772				113,394
Total marketable investment securities			1,312,762				596,359
Restricted cash and cash equivalents (1)			132,353				61,199
Other investment securities:
Other investment securities — cost method			2,805				15,795
Other investment securities — equity method			—				26,784
Other investment securities — fair value method			—				2,323
Total other investment securities (2)			2,805				44,902
Total marketable investment securities, restricted cash and other investment securities		$	1,447,920			$	702,460

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 June 30, 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.

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

We account for debt securities, purchased at a discount that is related to credit quality, pursuant to the guidance of Statement of Position 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” (“SOP 03-3”). SOP 03-3 limits the yield that may be accreted (accretable yield) to the excess of our estimate of undiscounted expected principal, interest, and other cash flows (including the effects of prepayments) expected to be collected over our initial investment. These investments are accounted for under the cost recovery method, partial accrual or full accrual methods based on management’s quarterly evaluation of these securities. The face value of these securities as of June 30, 2009 and December 31, 2008 was $137 million and $9 million, respectively. The carrying value, which is equal to fair value, of these securities at June 30, 2009 and December 31, 2008 was $54 million and $2 million, respectively. The total discount on these securities was $92 million as of June 30, 2009 with $13 million classified as accretable yield and the remaining $79 million classified as non-accretable yield. As of December 31, 2008, the entire discount of $6 million was classified as non-accretable yield.

Current Marketable Investment Securities — Other

Our other current marketable investment securities portfolio includes investments in various debt instruments including corporate and government bonds.

Restricted Cash and Marketable Investment Securities

As of June 30, 2009 and December 31, 2008, our restricted marketable investment securities, together with our restricted cash, included amounts required as collateral for our letters of credit. Restricted cash and marketable investment securities as of June 30, 2009 included $62 million related to our litigation with Tivo.

Noncurrent Marketable Investment Securities — ARS and MBS

We have investments in ARS and MBS which are classified as available-for-sale securities and reported at fair value. Recent events in the credit markets have reduced or eliminated current liquidity for certain of our ARS and MBS investments. As a result, we classify these investments as noncurrent assets as we intend to hold these investments until they recover or mature.

The valuation of our ARS and MBS investments portfolio is subject to uncertainties that are difficult to estimate. Due to the lack of observable market quotes for identical assets, we utilize analyses that rely on Level 2 and/or Level 3 inputs as defined by Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”). These inputs include, among other things, observed prices on similar assets as well as our assumptions and estimates related to the counterparty credit quality, default risk underlying the security and overall capital market liquidity. These securities were also compared, when possible, to other observable market data with similar characteristics.

Other Investment Securities

We have several strategic investments in certain equity securities that are included in noncurrent “Marketable and other investment securities” on our Condensed Consolidated Balance Sheets accounted for using the cost, equity or fair value methods of accounting.

Our ability to realize value from our strategic investments in companies that are not publicly traded depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them.

Unrealized Gains (Losses) on Marketable Investment Securities

As of June 30, 2009 and December 31, 2008, we had accumulated net unrealized losses of $66 million and $116 million, both net of related tax effect, respectively, as a part of “Accumulated other comprehensive income (loss)” within “Total stockholders’ equity (deficit).” A full valuation allowance has been established against the deferred

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

tax assets associated with these unrealized capital losses. The components of our available-for-sale investments are detailed in the table below.

		As of June 30, 2009																As of December 31, 2008
		Marketable																Marketable
		Investment				Unrealized												Investment				Unrealized
		Securities				Gains				Losses				Net				Securities				Gains				Losses				Net
														(In thousands)
Debt securities:
VRDNs		$	837,857			$	1			$	—			$	1			$	239,611			$	—			$	—			$	—
ARS and MBS			91,772				443				(103,303	)			(102,860	)			113,394				—				(103,943	)			(103,943	)
Other (including restricted)			358,890				23,556				(4,087	)			19,469				231,863				—				(12,442	)			(12,442	)
Equity securities:
Other			24,243				17,307				(40	)			17,267				11,491				—				—				—
Total marketable investment securities		$	1,312,762			$	41,307			$	(107,430	)		$	(66,123	)		$	596,359			$	—			$	(116,385	)		$	(116,385	)

As of June 30, 2009, restricted and non-restricted marketable investment securities include debt securities of $1.156 billion with contractual maturities of one year or less and $133 million with contractual maturities greater than one year. Actual maturities may differ from contractual maturities as a result of our ability to sell these securities prior to maturity.

Marketable Investment Securities in a Loss Position

In accordance with the guidance of FASB Staff Position No. 115-1 (“FSP 115-1”) “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” the following table reflects the length of time that the individual securities, accounted for as available-for-sale, have been in an unrealized loss position, aggregated by investment category. As of June 30, 2009, the unrealized losses on our investments in debt securities primarily represent investments in auction rate, mortgage and asset-backed securities. We are not aware of any specific factors indicating that the underlying issuers of these investments would not be able to pay interest as it becomes due or repay the principal at maturity. Therefore, we believe that these changes in the estimated fair values of these marketable investment securities are related to temporary market fluctuations. In addition, we have the ability and intent to hold our investments in these debt securities until they recover or mature.

										As of June 30, 2009
		Primary				Total				Less than Six Months								Six to Nine Months								Nine Months or More
Investment		Reason for				Fair				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
Category		Unrealized Loss				Value				Value				Loss				Value				Loss				Value				Loss
																		(In thousands)
Debt securities		Temporary market fluctuations				$	209,779			$	35,517			$	(70	)		$	—			$	—			$	174,262			$	(107,320	)
Equity securities		Temporary market fluctuations					217				—				—				217				(40	)			—				—
Total						$	209,996			$	35,517			$	(70	)		$	217			$	(40	)		$	174,262			$	(107,320	)

										As of December 31, 2008
										(In thousands)
Debt securities		Temporary market fluctuations				$	295,676			$	2,070			$	(540	)		$	8,114			$	(24	)		$	285,492			$	(115,821	)
Total						$	295,676			$	2,070			$	(540	)		$	8,114			$	(24	)		$	285,492			$	(115,821	)

Fair Value Measurements

SFAS 157 “Fair Value Measurements” established a new framework for measuring fair value for all financial and non-financial instruments and expands related disclosures. Broadly, the SFAS 157 framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

participants. SFAS 157 established market or observable inputs as the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs.

	•		Level 1, defined as observable inputs being quoted prices in active markets for identical assets;
	•		Level 2, defined as observable inputs including quoted prices for similar assets; and
	•		Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring assumptions based on the best information available.

Our assets measured at fair value on a recurring basis were as follows:

		Total Fair Value As of June 30, 2009
Assets		Total				Level 1				Level 2				Level 3
						(In thousands)
Marketable investment securities		$	1,312,762			$	34,226			$	1,195,225			$	83,311

Changes in Level 3 instruments are as follows:

		Level 3
						Current and
						Noncurrent
						Marketable				Other
						Investment				Investment
		Total				Securities				Securities
		(In thousands)
Balance as of December 31, 2008		$	106,679			$	104,356			$	2,323
Net realized/unrealized gains/(losses) included in earnings			(10,809	)			(8,486	)			(2,323	)
Net realized/unrealized gains/(losses) included in other comprehensive income (loss)			1,298				1,298				—
Purchases, issuances and settlements, net			(13,857	)			(13,857	)			—
Balance as of June 30, 2009		$	83,311			$	83,311			$	—

Gains and Losses on Sales and Changes in Carrying Values of Investments

“Other, net” income and expense included on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) includes other changes in the carrying amount of our marketable and non-marketable investments as follows:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
Other Income (Expense):		2009				2008				2009				2008
						(In thousands)
Marketable investment securities — gains (losses) on sales/exchange		$	(11,994	)		$	208			$	(4,732	)		$	2,483
Marketable investment securities — other-than-temporary impairments			—				(12,903	)			—				(12,903	)
Other investment securities — unrealized gains (losses) on fair value investments and other-than-temporary impairments			(34,020	)			(175	)			(34,955	)			(4,807	)
Other			1,680				1,370				(470	)			(3,301	)
Total		$	(44,334	)		$	(11,500	)		$	(40,157	)		$	(18,528	)

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

5. Inventories

Inventories consist of the following:

		As of
		June 30,				December 31,
		2009				2008
		(In thousands)
Finished goods — DBS		$	166,840			$	238,343
Raw materials			125,084				146,353
Work-in-process — used			62,672				61,663
Work-in-process — new			1,239				2,414
Subtotal			355,835				448,773
Inventory allowance			(32,731	)			(22,102	)
Inventories, net		$	323,104			$	426,671

6. Satellites

We currently utilize twelve satellites in geostationary orbit approximately 22,300 miles above the equator, five of which are owned by us. Each of the owned satellites had an original estimated minimum useful life of at least 12 years. We currently lease capacity on five satellites from EchoStar with terms of up to two years and 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 pursuant to Statement of Financial Accounting Standards No. 13, “Accounting for Leases” (“SFAS 13”). The capital leases 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 or commercial operation. There can be no assurance that future anomalies will not cause further losses, which could further impact the remaining life or 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.

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

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 October 2008, the satellite was fully depreciated. In late July 2009, 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 August 3, 2009. The retirement of this satellite is not expected to have a material impact on the DISH Network service.

As a result of the retirement of EchoStar V, we currently do not have any satellites positioned at the 148 degree orbital location. While we are exploring alternatives for the continued use of this orbital location, there can be no assurance that the FCC will determine that our future use of this orbital location complies fully with all licensing requirements. If the FCC decides to revoke this license, we may be required to write-off its $68 million carrying value.

Leased Satellites

EchoStar XII. Prior to 2009, EchoStar XII experienced anomalies resulting in the loss of electrical power available from its solar arrays. During March and May 2009, EchoStar XII experienced more of these anomalies, which further reduced the electrical power available to operate EchoStar XII. We currently operate EchoStar XII in full continental United States (“CONUS”)/spot beam hybrid mode. If we continue to operate the satellite in this mode, as a result of this loss of electrical power, we would be unable to use the full complement of its available transponders for the 12-year design life of the satellite. However, since the number of useable transponders on EchoStar XII depends on, among other things, whether EchoStar XII is operated in CONUS, spot beam, or hybrid CONUS/spot beam mode, we are unable to determine at this time the actual number of transponders that will be available at any given time or how many transponders can be used during the remaining estimated life of the satellite.

Long-Lived Satellite Assets

We account for impairments of long-lived satellite assets in accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). SFAS 144 requires a long-lived asset or asset group to be tested for recoverability whenever events or changes in circumstance indicate that its carrying amount may not be recoverable. Based on the guidance under SFAS 144, we evaluate our satellite fleet for recoverability as one asset group. While certain of the anomalies discussed above, and previously disclosed, may be considered to represent a significant adverse change in the physical condition of an individual satellite, based on the redundancy designed within each satellite and considering the asset grouping, these anomalies (none of which caused a loss of service to subscribers for an extended period) are not considered to be significant events that would require evaluation for impairment recognition pursuant to the guidance under SFAS 144. Unless and until a specific satellite is abandoned or otherwise determined to have no service potential, the net carrying amount related to the satellite would not be written off.

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

7. Long-Term Debt

Fair Value of our Long-Term Debt

The following table summarizes the carrying value and fair values of our debt facilities as of June 30, 2009 and December 31, 2008:

		As of
		June 30, 2009								December 31, 2008
		Carrying								Carrying
		Value				Fair Value				Value				Fair Value
						(In thousands)
3% Convertible Subordinated Note due 2011		$	25,000			$	24,805			$	25,000			$	23,768
6 3/8% Senior Notes due 2011			1,000,000				975,000				1,000,000				899,000
7% Senior Notes due 2013			500,000				476,250				500,000				419,000
6 5/8% Senior Notes due 2014			1,000,000				922,500				1,000,000				840,300
7 3/4% Senior Notes due 2015			750,000				718,125				750,000				600,000
7 1/8% Senior Notes due 2016			1,500,000				1,403,445				1,500,000				1,246,890
Mortgages and other notes payable			44,429				44,429				46,211				46,211
Subtotal		$	4,819,429			$	4,564,554			$	4,821,211			$	4,075,169
Capital lease obligations (1)			307,227				N/A				186,545				N/A
Total long-term debt (including current portion)		$	5,126,656			$	4,564,554			$	5,007,756			$	4,075,169

Capital Lease Obligations

Ciel II, a Canadian DBS satellite, was launched in December 2008 and commenced commercial operation at the 129 degree orbital location in February 2009. We have leased 100% of the capacity on the satellite for an initial term of ten years. Prior to the launch, we pre-paid $131 million to SES Americom in connection with the lease agreement and we capitalized $16 million of interest related to this satellite. In accordance with Statement of Financial Accounting Standards No. 13, “Accounting for Leases” (“SFAS 13”), we have accounted for this agreement as a capital lease asset by recording $277 million as the estimated fair value of the satellite and recording a capital lease obligation in the amount of $130 million.

As of June 30, 2009 and December 31, 2008, we had $500 million and $223 million, respectively, capitalized for satellites acquired under capital leases included in “Property and equipment, net” with related accumulated depreciation of $45 million and $26 million, respectively. This increase during the six months ended June 30, 2009 related to the Ciel II satellite discussed above.

In our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), we recognized depreciation expense on satellites acquired under capital lease agreements as follows:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2009				2008				2009				2008
						(In thousands)
Depreciation expense — capital leases		$	10,632			$	3,724			$	18,964			$	7,447

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

Future minimum lease payments under our capital lease obligations, together with the present value of the net minimum lease payments as of June 30, 2009, are as follows (in thousands):

For the Years Ended December 31,
2009 (remaining six months)		$	38,396
2010			76,496
2011			75,970
2012			75,970
2013			75,970
Thereafter			542,177
Total minimum lease payments			884,979
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			(408,474	)
Net minimum lease payments			476,505
Less: Amount representing interest			(169,278	)
Present value of net minimum lease payments			307,227
Less: Current portion			(18,710	)
Long-term portion of capital lease obligations		$	288,517

8. Stockholders’ Equity (Deficit)

Common Stock Repurchase Program

Our board of directors previously authorized stock repurchases of up to $1.0 billion of our Class A common stock. During the six months ended June 30, 2009, we repurchased 1.9 million shares of our common stock for $19 million. As of June 30, 2009, we may repurchase up to $981 million under this plan.

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 June 30, 2009, we had outstanding under these plans stock options to acquire 22.6 million shares of our Class A common stock and 0.9 million restricted stock units. Stock options granted through June 30, 2009 were granted with exercise prices equal to or greater than the market value of our Class A 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,

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

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 June 30, 2009, we had 80.0 million 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 May 11, 2009, allows us to grant new stock awards following the expiration of our 1999 Stock Incentive Plan on April 16, 2009.

As of June 30, 2009, the following stock awards were outstanding:

As of June 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

19,087,050

467,735

1,533,770

77,366

Held by EchoStar employees

3,534,866

410,374

N/A

N/A

Total

22,621,916

878,109

1,533,770

77,366

We are responsible for fulfilling all stock awards related to DISH Network common stock and EchoStar is responsible for fulfilling all stock awards related to EchoStar common stock, regardless of whether such stock awards are held by our or EchoStar’s employees. Notwithstanding the foregoing, based on the requirements of Statement of Financial Accounting Standards No. 123R, “Share Based Payments” (“SFAS 123R”), our stock-based compensation expense, resulting from stock awards outstanding at the Spin-off date, is based on the stock awards held by our employees regardless of whether such stock awards were issued by DISH Network or EchoStar. Accordingly, stock-based compensation that we expense with respect to EchoStar stock awards is included in “Additional paid-in capital” on our Condensed Consolidated Balance Sheets.

Stock Award Activity

Our stock option activity for the six months ended June 30, 2009 was as follows:

		For the Six Months
		Ended June 30, 2009
						Weighted-
						Average
		Options				Exercise Price
Total options outstanding, beginning of period			21,835,687			$	22.50
Granted			2,118,500				13.55
Exercised			(130,287	)			6.05
Forfeited and cancelled			(1,201,984	)			23.76
Total options outstanding, end of period			22,621,916				21.69
Performance based options outstanding, end of period (1)			10,299,750				16.74
Exercisable at end of period			7,422,672				29.22

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

We realized tax benefits from stock awards exercised during the three and six months ended June 30, 2009 and 2008 as follows:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2009				2008				2009				2008
						(In thousands)
Tax benefit from stock awards exercised		$	15			$	2,090			$	15			$	2,246

Based on the closing market price of our Class A common stock on June 30, 2009, the aggregate intrinsic value of our stock options was as follows:

		As of June 30, 2009
		Options Outstanding				Options Exercisable
		(In thousands)
Aggregate intrinsic value		$	41,199			$	1,085

Our restricted stock unit activity for the six months ended June 30, 2009 was as follows:

		For the Six Months
		Ended June 30, 2009
						Weighted-
		Restricted				Average
		Stock				Grant Date
		Units				Fair Value
Total restricted stock units outstanding, beginning of period			1,452,734			$	27.87
Granted			6,666				11.11
Exercised			(20,000	)			25.07
Forfeited and cancelled			(561,291	)			30.58
Total restricted stock units outstanding, end of period			878,109				26.09
Restricted performance units outstanding, end of period (1)			602,734				24.08

Long-Term Performance-Based Plans

2005 LTIP. In 2005, we adopted a long-term, performance-based stock incentive plan (the “2005 LTIP”) within the terms of our 1999 Stock Incentive Plan. The 2005 LTIP provides stock options and restricted stock units, either alone or in combination, which vest over seven years at the rate of 10% per year during the first four years, and at the rate of 20% per year thereafter. Exercise of the stock awards is subject to a performance condition that a company-specific subscriber goal is achieved prior to March 31, 2015.

Contingent compensation related to the 2005 LTIP will not be recorded in our financial statements unless and until management concludes achievement of the performance condition is probable. Given the competitive nature of our business, small variations in subscriber churn, gross subscriber addition rates and certain other factors can significantly impact subscriber growth. Consequently, while it was determined that achievement of the goal was not probable as of June 30, 2009, that assessment could change at any time.

DISH NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Unaudited)

In accordance with SFAS 123R, if all of the stock awards under the 2005 LTIP were vested and the goal had been met or if we had determined that achievement of the goal was probable during the six months ended June 30, 2009, we would have recorded total non-cash, stock-based compensation expense for our employees as indicated in the table below. If the goal is met and there are unvested stock awards at that time, the vested amounts would be expensed immediately on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), with the unvested portion recognized ratably over the remaining vesting period.

		2005 LTIP
						Vested
		Total				Portion
		(In thousands)
DISH Network awards held by DISH Network employees		$	43,650			$	13,459
EchoStar awards held by DISH Network employees			8,863				2,733
Total		$	52,513			$	16,192

2008 LTIP. In December 2008, we adopted a long-term, performance-based stock incentive plan (the “2008 LTIP”) within the terms of our 1999 Stock Incentive Plan. Since our 1999 Stock Incentive Plan has expired, stock awards issued under our 2008 LTIP after March 31, 2009 will be granted within the terms of the 2009 Stock Incentive Plan. The 2008 LTIP provides stock options and restricted stock units, either alone or in combination, which vest based on company-specific subscriber and financial metrics. Exercise of the stock awards is contingent on achieving these goals prior to December 31, 2015.

In accordance with SFAS 123R, management has determined it is probable that a portion of the 2008 LTIP stock awards will vest and as a result, we have recorded non-cash, stock-based compensation expense for the six months ended June 30, 2009 as indicated in the table below. Additional compensation related to the 2008 LTIP will be recorded based on management’s assessment of the probability of meeting the remaining performance conditions. If the remaining goals are achieved and the remaining 2008 LTIP stock awards vest, we will recognize the additional non-cash, stock-based compensation expense on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) over the term of this stock incentive plan as follows.

		Non-Cash
		Stock-Based
		Compensation
2008 LTIP		Expense
		(In thousands)
Total expense		$	27,458
Less:
Expense recognized during the six months ended June 30, 2009			(1,357	)
Remaining expense expected to be recognized during 2009			(1,389	)
Remaining expense over the term of the plan		$	24,712