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 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008.

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM_______________ TO_______________.

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		(I.R.S. Employer Identification No.)
incorporation or organization)
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

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 May 1, 2008, the registrant’s outstanding common stock consisted of 210,818,875 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 — March 31, 2008 and December 31, 2007 (Unaudited)			1
		Condensed Consolidated Statements of Operations For the Three Months Ended March 31, 2008 and 2007 (Unaudited)			2
		Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2008 and 2007 (Unaudited)			3
		Notes to Condensed Consolidated Financial Statements (Unaudited)			4
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			47
Item 4.		Controls and Procedures			49
PART II — OTHER INFORMATION
Item 1.		Legal Proceedings			50
Item 1A.		Risk Factors			54
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			56
Item 3.		Defaults Upon Senior Securities		None
Item 4.		Submission of Matters to a Vote of Security Holders		None
Item 5.		Other Information		None
Item 6.		Exhibits			57
		Signatures			58

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:

	•		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 and make substantial investments in our infrastructure. For example, the increase in demand for high definition (“HD”) programming requires not only upgrades to customer premises equipment but also substantial increases in satellite capacity. We may not be able to pass on to our customers the entire cost of these upgrades and there can be no assurance that we will be able to effectively compete with the HD programming offerings of our competitors.
	•		We rely on EchoStar Corporation (“EchoStar”), which was owned by us prior to its January 1, 2008 separation from us (the “Spin-off”), to design and develop set-top boxes and to provide transponder leasing, digital broadcast operations and other services for us. EchoStar is our sole supplier of digital set-top boxes and digital broadcast operations. Equipment, transponder leasing and digital broadcast operations costs may increase beyond our current expectations; we may be unable to renew agreements on acceptable terms or at all; EchoStar’s inability to develop and produce, or our inability to obtain, equipment with the latest technology, or our inability to obtain transponder leasing and digital broadcast operations and other services from third parties, could affect our subscriber acquisition and churn and cause related revenue to decline.
	•		DISH Network® subscriber growth may continue to decrease and subscriber turnover may increase due to a variety of factors, including several, such as increasing competition and worsening economic conditions, that are outside of our control and others, such as our own operational inefficiencies and customer satisfaction with our products and services, that will require us to make significant investments and expenditures, which may have a material adverse effect on our results of operations.
	•		Subscriber acquisition and retention costs may increase; the competitive environment may require us to increase promotional and retention spending or accept lower subscriber acquisitions and higher subscriber churn; we may also have difficulty controlling other costs of continuing to maintain and grow our subscriber base.
	•		Satellite programming signals are subject to theft and we are vulnerable to subscriber fraud; theft of service will continue and could increase in the future, causing us to lose subscribers and revenue and to incur higher costs.
	•		We depend on others to produce the programming we distribute to our subscribers; programming costs may increase beyond our current expectations and 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 and the Telecommunications Act of 1996 as Amended to secure nondiscriminatory access to programming produced by others, neither of which ensure 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.
	•		We have made significant commitments to acquire 700 MHz wireless licenses and will be required to make significant additional investments to commercialize these licenses.
	•		We may be required to raise and refinance indebtedness during unfavorable market conditions. Recent developments in the financial markets have made it more difficult for issuers of high yield indebtedness such as us to access capital markets at reasonable rates. We cannot predict with any certainty whether or not we will be impacted in the future by the current conditions, which may adversely affect our ability to refinance our indebtedness, including our indebtedness that is subject to repayment or repurchase in 2008, or to secure additional financing to support our growth initiatives.
	•		A portion of our investment portfolio is invested in auction rate securities and mortgage backed securities. The markets associated with these investments have experienced zero or greatly reduced liquidity in recent months. Should the credit ratings of these securities deteriorate or the lack of liquidity in the marketplace become prolonged, we may deem any declines in fair value to be other than temporary and would then record them as impairment charges.
	•		If we are unsuccessful in subsequent appeals in the Tivo case or in defending against claims that our alternate technology infringes Tivo’s patent, we could be prohibited from distributing DVRs or be required to modify or eliminate certain user-friendly DVR features that we currently offer to consumers. The adverse affect on our business could be material. We could also have to pay substantial additional damages.
	•		Our gross subscriber additions and several other key operating and financial performance metrics could be adversely affected if AT&T were to discontinue selling our services or reduce their marketing of our services.
	•		If our EchoStar X satellite experienced a significant failure, we could lose the ability to deliver local network channels in many markets; if any of our other owned or leased satellites experienced a significant failure, we could lose the ability to provide other critical programming to the continental United States.
	•		Our satellite launches may be delayed or fail, or our owned or leased 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 or lease.
	•		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 depend heavily 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 may face actual or perceived conflicts of interest with EchoStar in a number of areas relating to our past and ongoing relationships, including: (i) cross officerships, directorships and stock ownership, (ii) intercompany transactions, (iii) intercompany agreements, including those that were entered into in connection with the Spin-off and (iv) future business opportunities.
	•		We rely on key personnel including Charles W. Ergen, our chairman and chief executive officer, and other executives, certain of whom will for some period also have responsibilities with EchoStar through their positions at EchoStar or our management services agreement with EchoStar.
	•		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.
	•		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. A number of these resellers are not exclusive to us and also offer competitors’ products and services. 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.
	•		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 and increasing oil prices, may impact some of our markets.
	•		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, 2007, 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.
	•		We may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange Commission (“SEC”).

All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. In this connection, 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

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

		As of
		March 31,				December 31,
		2008				2007
Assets
Current Assets:
Cash and cash equivalents		$	989,678			$	1,180,818
Marketable investment securities			578,968				1,607,378
Trade accounts receivable — other, net of allowance for uncollectible accounts of $12,456 and $14,019, respectively			667,649				699,101
Trade accounts receivable — EchoStar			280,735				—
Inventories, net			319,622				306,915
Current deferred tax assets			86,871				342,813
Other current assets (Note 7)			200,493				108,113
Other current assets — EchoStar			6,306				—
Total current assets			3,130,322				4,245,138
Restricted cash and marketable investment securities			171,082				172,520
Property and equipment, net of accumulated depreciation of $2,441,604 and $3,591,594, respectively			2,534,973				4,058,189
FCC authorizations			679,570				845,564
Intangible assets, net			—				218,875
Goodwill			—				256,917
Long-term deferred tax assets			7,400				—
Marketable investment securities			155,182				—
Other noncurrent assets, net (Note 5)			186,909				289,326
Total assets		$	6,865,438			$	10,086,529
Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities:
Trade accounts payable — other		$	259,409			$	314,825
Trade accounts payable — EchoStar			478,299				—
Deferred revenue and other			870,643				857,846
Accrued programming			1,020,509				914,074
Other accrued expenses			591,932				587,942
Current portion of capital lease obligations, mortgages and other notes payable			10,070				50,454
3% Convertible Subordinated Notes due 2010			500,000				500,000
5 3/4% Senior Notes due 2008			1,000,000				1,000,000
Total current liabilities			4,730,862				4,225,141
Long-term obligations, net of current portion:
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			206,238				550,250
Deferred tax liabilities			—				386,493
Long-term deferred revenue, distribution and carriage payments and other long-term liabilities			341,102				259,656
Total long-term obligations, net of current portion			4,572,340				5,221,399
Total liabilities			9,303,202				9,446,540
Commitments and Contingencies (Note 9)
Stockholders’ Equity (Deficit):
Class A common stock, $.01 par value, 1,600,000,000 shares authorized, 255,810,986 and 255,138,160 shares issued, 210,798,186 and 210,125,360 shares outstanding, respectively			2,558				2,551
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			2,057,924				2,033,865
Accumulated other comprehensive income (loss)			(26,408	)			46,698
Accumulated earnings (deficit)			(3,113,169	)			(84,456	)
Treasury stock, at cost			(1,361,053	)			(1,361,053	)
Total stockholders’ equity (deficit)			(2,437,764	)			639,989
Total liabilities and stockholders’ equity (deficit)		$	6,865,438			$	10,086,529

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

DISH NETWORK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share amounts)
(Unaudited)

		For the Three Months
		Ended March 31,
		2008				2007
Revenue:
Subscriber-related revenue		$	2,810,426			$	2,552,063
Equipment sales and other revenue			25,052				92,922
Equipment sales — EchoStar			2,638				—
Transitional services and other revenue — EchoStar			6,278				—
Total revenue			2,844,394				2,644,985
Costs and Expenses:
Subscriber-related expenses (exclusive of depreciation shown below — Note 10)			1,444,641				1,328,621
Satellite and transmission expenses (exclusive of depreciation shown below — Note 10):
EchoStar			78,253				—
Other			7,664				34,919
Equipment, transitional services and other cost of sales			31,814				62,756
Subscriber acquisition costs:
Cost of sales — subscriber promotion subsidies — EchoStar (exclusive of depreciation shown below — Note 10)			30,787				27,974
Other subscriber promotion subsidies			280,197				322,732
Subscriber acquisition advertising			63,972				50,379
Total subscriber acquisition costs			374,956				401,085
General and administrative — EchoStar			13,770				—
General and administrative			115,760				157,287
Depreciation and amortization (Note 10)			272,368				320,119
Total costs and expenses			2,339,226				2,304,787
Operating income (loss)			505,168				340,198
Other Income (Expense):
Interest income			14,101				33,432
Interest expense, net of amounts capitalized			(89,812	)			(119,500	)
Other			(7,028	)			(1,836	)
Total other income (expense)			(82,739	)			(87,904	)
Income (loss) before income taxes			422,429				252,294
Income tax (provision) benefit, net			(163,846	)			(95,154	)
Net income (loss)		$	258,583			$	157,140
Denominator for basic and diluted net income (loss) per share — Class A and B common stock:
Denominator for basic net income (loss) per share — weighted-average common shares outstanding			448,803				446,278
Denominator for diluted net income (loss) per share — weighted-average common shares outstanding			460,218				455,208
Net income (loss) per share — Class A and B common stock:
Basic net income (loss)		$	0.58			$	0.35
Diluted net income (loss)		$	0.57			$	0.35

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

DISH NETWORK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)

		For the Three Months
		Ended March 31,
		2008				2007
Cash Flows From Operating Activities:
Net income (loss)		$	258,583			$	157,140
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization.			272,368				320,119
Equity in losses (earnings) of affiliates			2,318				155
Realized and unrealized losses (gains) on investments			2,357				775
Non-cash, stock-based compensation recognized			3,559				5,533
Deferred tax expense (benefit)			14,520				74,925
Other, net			1,472				1,670
Change in noncurrent assets			1,664				3,366
Change in long-term deferred revenue, distribution and carriage payments and other long-term liabilities			81,446				(8,532	)
Changes in current assets and current liabilities, net			267,450				(50,682	)
Net cash flows from operating activities			905,737				504,469
Cash Flows From Investing Activities:
Purchases of marketable investment securities			(237,356	)			(955,578	)
Sales and maturities of marketable investment securities			217,064				865,819
Purchases of property and equipment			(266,771	)			(330,784	)
Change in restricted cash and marketable investment securities			(77	)			2,390
Purchase of strategic investments included in noncurrent assets and other			(115,253	)			(41,775	)
Other			(2,569	)			127
Net cash flows from investing activities			(404,962	)			(459,801	)
Cash Flows From Financing Activities:
Distribution of cash and cash equivalents to EchoStar in connection with the Spin-off (Note 1)			(690,866	)			—
Redemption of 5 3/4% Convertible Subordinated Notes due 2008			—				(999,985	)
Repayment of capital lease obligations, mortgages and other notes payable			(1,979	)			(9,346	)
Net proceeds from Class A common stock options exercised and Class A common stock issued under the Employee Stock Purchase Plan			930				6,025
Excess tax benefits recognized on stock option exercises			—				730
Net cash flows from financing activities			(691,915	)			(1,002,576	)
Net increase (decrease) in cash and cash equivalents			(191,140	)			(957,908	)
Cash and cash equivalents, beginning of period			1,180,818				1,923,105
Cash and cash equivalents, end of period		$	989,678			$	965,197
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest		$	57,221			$	76,739
Capitalized interest		$	3,848			$	4,679
Cash received for interest		$	12,976			$	23,826
Cash paid for income taxes		$	17,393			$	38,880
Employee benefits paid in Class A common stock		$	19,374			$	17,674
Net assets contributed in connection with the Spin-off, excluding cash and cash equivalents		$	2,635,680			$	—

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

DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business Activities

Principal Business

DISH Network Corporation, formerly known as EchoStar Communications 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^® which provides a direct broadcast satellite (“DBS”) subscription television service in the United States and had 13.815 million subscribers as of March 31, 2008.

We have deployed substantial resources to develop the “DISH Network DBS System.” The DISH Network DBS System consists of our owned and leased Federal Communications Commission (“FCC”) authorized DBS and Fixed Satellite Service (“FSS”) spectrum, our owned and leased satellites, receiver systems, digital broadcast operations, customer service facilities, in-home service and call center operations and certain other assets utilized in our operations. Our principal business strategy is to continue developing our subscription television service in the United States to provide consumers with a fully competitive alternative to others in the multi-channel video programming distribution (“MVPD”) industry.

Spin-off of EchoStar Corporation and 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 independently, and neither entity has any ownership interest in the other. However, both companies are under the common control of Charles W. Ergen, our Chief Executive Officer and Chairman of our Board of Directors. The two entities consist of the following:

	•		DISH Network Corporation — which retains its subscription television business, the DISH Network®, 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 fixed satellite services to DISH Network and other customers.

The cash flows related to, among others things, purchases of set-top boxes, transponder leasing and digital broadcasting services that we continue to purchase from EchoStar have not been eliminated from our ongoing operations.

Our shareholders of record on December 27, 2007 received one share of EchoStar common stock for every five shares of each class of Dish Network common stock they held as of the record date.

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

The table below summarizes the assets and liabilities that were distributed to EchoStar in connection with the Spin-off. The distribution was accounted for at historical cost given the nature of the distribution.

		January 1,
		2008
		(In thousands)
Assets
Current Assets:
Cash and cash equivalents		$	690,866
Marketable investment securities			841,401
Trade accounts receivable, net			38,054
Inventories, net			31,000
Current deferred tax assets			8,459
Other current assets			32,351
Total current assets			1,642,131
Restricted cash and marketable investment securities			3,150
Property and equipment, net			1,516,604
FCC authorizations			165,994
Intangible assets, net			214,544
Goodwill			256,917
Other noncurrent assets, net			93,707
Total assets		$	3,893,047
Liabilities
Current Liabilities:
Trade accounts payable		$	5,825
Deferred revenue and other accrued expenses			38,460
Current portion of capital lease obligations, mortgages and other notes payable			40,533
Total current liabilities			84,818
Long-term obligations, net of current portion:
Capital lease obligations, mortgages and other notes payable, net of current portion			341,886
Deferred tax liabilities			139,797
Total long-term obligations, net of current portion			481,683
Total liabilities			566,501
Net assets distributed		$	3,326,546

2. 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. Certain prior year amounts have been reclassified to conform to the current year presentation. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. For further information, refer to the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K/A for the year ended December 31, 2007 (“2007 10-K/A”).

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

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 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 revenues and expenses for each reporting period. Estimates are used in accounting for, among other things, allowances for uncollectible accounts, inventory allowances, self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair values of financial instruments, fair value of options granted under our stock-based compensation plans, fair value of assets and liabilities acquired in business combinations, capital leases, asset impairments, useful lives of property, equipment and intangible assets, retailer commissions, programming expenses, subscriber lives and royalty obligations. 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.

Comprehensive Income (Loss)

The components of comprehensive income (loss) are as follows:

		For the Three Months
		Ended March 31,
		2008				2007
		(In thousands)
Net income (loss)		$	258,583			$	157,140
Foreign currency translation adjustments			(1,664	)			604
Unrealized holding gains (losses) on available-for-sale securities			(48,891	)			5,611
Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income (loss)			(4,523	)			(4,050	)
Deferred income tax (expense) benefit attributable to unrealized holding gains (losses) on available-for-sale securities			21,223				(792	)
Comprehensive income (loss)		$	224,728			$	158,513

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

“Accumulated other comprehensive income (loss)” presented on the accompanying Condensed Consolidated Balance Sheets and below consists of the accumulated net unrealized gains (losses) on available-for-sale securities and foreign currency translation adjustments, net of deferred taxes.

		Accumulated
		Other
		Comprehensive
		Income
		(In thousands)
Balance, December 31, 2007		$	46,698
Distribution of accumulated other comprehensive income to EchoStar, net of tax (Note 1)			(39,251	)
Foreign currency translation			(1,664	)
Change in unrealized holding gains (losses) on available-for-sale securities			(53,414	)
Deferred income tax (expense) benefit attributable to unrealized holding gains (losses) on available-for-sale securities			21,223
Balance, March 31, 2008		$	(26,408	)

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 options 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 options exercisable into common stock 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
		Ended March 31,
		2008				2007
		(In thousands)
Numerator:
Numerator for basic net income (loss) per share — Net income (loss).		$	258,583			$	157,140
Interest on subordinated notes convertible into common shares, net of related tax effect			2,461				2,447
Numerator for diluted net income (loss) per common share		$	261,044			$	159,587
Denominator:
Denominator for basic net income (loss) per common share — weighted-average common shares outstanding			448,803				446,278
Dilutive impact of options outstanding			2,634				1,665
Dilutive impact of subordinated notes convertible into common shares			8,781				7,265
Denominator for diluted net income (loss) per share — weighted-average diluted common shares outstanding			460,218				455,208
Net income (loss) per share — Class A and B common stock:
Basic net income (loss)		$	0.58			$	0.35
Diluted net income (loss)		$	0.57			$	0.35
Shares of Class A common stock issuable upon conversion of:
3% Convertible Subordinated Note due 2010 (Note 8)			8,299				6,866
3% Convertible Subordinated Note due 2011 (Note 8)			482				399

As of March 31, 2008 and 2007, there were options to purchase 3.4 million and 2.8 million shares of Class A common stock outstanding, respectively, not included in the above denominator as their effect is antidilutive.

Vesting of options and rights to acquire shares of our Class A common stock 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:

		For the Three Months
		Ended March 31,
		2008				2007
		(In thousands)
Performance-based options			9,721				10,471
Restricted performance units			590				754
Total			10,311				11,225

Fair Value Measurements

Effective January 1, 2008, we adopted Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”), for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. SFAS 157 establishes a new framework for measuring fair value 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 participants. SFAS 157 establishes 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.

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

	•		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.

Investments in debt and equity securities

We have invested in auction rate securities (“ARS”) and mortgage backed securities (“MBS”), which are classified as available-for-sale securities and reported at fair value. Due to recent events in credit markets, however, the auctions for the ARS investments have failed. Additionally, the recent events in the credit markets have reduced or eliminated current liquidity for certain of our MBS investments. The fair values of these securities are estimated utilizing a combination of comparable instruments and liquidity assumptions. These analyses consider, among other items, the collateral underlying the investments, credit ratings, and liquidity. These securities were also compared, when possible, to other observable market data with similar characteristics.

As a result of the temporary declines in fair value for our ARS investments, which we attribute primarily to the liquidity of the securities rather than the credit risk associated with the underlying collateral, we have recorded an unrealized loss of $15 million, net of tax, to “Accumulated other comprehensive income (loss)” on our Condensed Consolidated Balance Sheet. As of March 31, 2008, we reclassified $143 million of these investments to non-current assets to reflect a longer expected holding period for these assets that results from the current and possible continued illiquidity. The ARS investments held by us at March 31, 2008 are primarily collateralized by high credit quality assets.

As a result of the temporary declines in fair value for our MBS investments, which we attribute primarily to the liquidity of the securities, we have recorded an unrealized loss of $11 million, net of tax, to “Accumulated other comprehensive income (loss)” on our Condensed Consolidated Balance Sheet. As of March 31, 2008, we reclassified $12 million of these investments to non-current assets to reflect a longer expected holding period for these assets that results from the current and possible continued illiquidity.

Any future change in fair value related to our ARS and MBS investments that we deem to be temporary would be recorded to “Accumulated other comprehensive income (loss).” If we determine that any declines below our reported cost basis are other than temporary, we would record a charge to earnings, as appropriate.

Our assets measured at fair value on a recurring basis were as follows (in thousands):

		Fair Value
		As of
Assets		March 31, 2008				Level 1				Level 2				Level 3
Marketable investment securities		$	790,939			$	538,930			$	92,019			$	159,990
Other investment securities			6,772				—				—				6,772
Total assets at fair value		$	797,711			$	538,930			$	92,019			$	166,762

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

Changes in Level 3 instruments are as follows (in thousands):

										Net
						Net				realized/unrealized
						realized/unrealized				gains/(losses)				Purchases,
						gains/(losses)				included in Other				issuances
		Balance at				included in				comprehensive				and				Balance at
Assets		January 1, 2008				earnings				income				settlements				March 31, 2008
Marketable investment securities		$	200,595			$	—			$	(39,530	)		$	(1,075	)		$	159,990
Other investment securities.			11,404				(4,632	)			—				—				6,772
Total assets at fair value		$	211,999			$	(4,632	)		$	(39,530	)		$	(1,075	)		$	166,762

Accounting for Uncertainty in Income Taxes

In addition to filing federal income tax returns, we and our subsidiaries, file income tax returns in all states that impose an income tax and in a small number of foreign jurisdictions where we have insignificant operations. We are subject to U.S. federal, state and local income tax examinations by tax authorities for the years beginning in 1996 due to the carryover of previously incurred net operating losses. As of March 31, 2008, no taxing authority has proposed any significant adjustments to our tax positions. We have no significant current tax examinations in process.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance as of January 1, 2008		$	20,160
Additions based on tax positions related to the current year			46,178
Additions for tax positions of prior years			105,883
Balance as of March 31, 2008		$	172,221

Accrued interest on tax positions is recorded as a component of interest expense and penalties in “Other income (expense)” on our Condensed Consolidated Balance Sheet. During the three months ended March 31, 2008, we recorded $5 million in interest and penalty expense to earnings. Accrued interest and penalties was $8 million at March 31, 2008.

We have $167 million in unrecognized tax benefits that, if recognized, could affect the effective tax rate. It is reasonably possible that $103 million of our unrecognized tax benefits will be reduced within the next twelve months as a result of filing a change in tax accounting method, and we expect that the reduction will not affect our effective tax rate.

New Accounting Pronouncements

Revised Business Combinations

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R replaces SFAS 141 and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, including goodwill, the liabilities assumed and any non-controlling interest in the acquiree. SFAS 141R also establishes disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement is effective for fiscal years beginning after December 15, 2008. We do not expect the adoption of SFAS 141R to have a material impact on our financial position or results of operations.

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

Noncontrolling Interests in Consolidated Financial Statements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This standard is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact the adoption of SFAS 160 will have on our financial position and results of operations.

3. Stock-Based Compensation

Stock Incentive Plans

In connection with the Spin-off, as provided in our existing stock incentive plans and consistent with the Spin-off exchange ratio, each DISH Network stock option was converted into two 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. Awards under these plans include both performance and non-performance based equity incentives. As of March 31, 2008, we had outstanding under these plans options to acquire 21.3 million shares of our Class A common stock and 1.7 million restricted stock awards. In general, stock options granted through March 31, 2008 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 options subject to vesting, typically at the rate of 20% per year, some options have been granted with immediate vesting. As of March 31, 2008, we had 64.1 million shares of our Class A common stock available for future grant under our stock incentive plans.

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

As of March 31, 2008, the following DISH Network stock incentive awards were outstanding:

		As of
		March 31, 2008
						DISH
						Network
		DISH Network				Restricted
Stock Awards Outstanding		Stock Options				Stock Units
Held by DISH Network employees			15,565,051				512,079
Held by EchoStar employees			5,776,239				1,178,332
Total			21,341,290				1,690,411

In addition, as of March 31, 2008 the following outstanding EchoStar stock incentive awards were held by our employees:

		As of
		March 31, 2008
						EchoStar
		EchoStar Stock				Restricted
Stock Awards Outstanding		Options				Stock Units
Held by DISH Network employees			3,475,665				101,047

We are responsible for fulfilling all stock incentive awards related to DISH Network common stock and EchoStar is responsible for fulfilling all stock incentive awards related to EchoStar common stock, regardless of whether such stock incentive awards are held by our or EchoStar’s employees. Notwithstanding the foregoing, based on the requirements of SFAS 123R, our stock-based compensation expense, resulting from awards outstanding at the Spin-off date, is based on the stock incentive awards held by our employees regardless of whether such awards were issued by DISH Network or EchoStar. Accordingly, stock-based compensation that we expense with respect to EchoStar stock incentive awards is included in “Additional paid-in capital” on our Condensed Consolidated Balance Sheet.

Stock Award Activity

Our stock option activity (including performance and non-performance based options) for the three months ended March 31, 2008 was as follows:

		For the Three Months
		Ended March 31, 2008
						Weighted-
						Average
		Options				Exercise Price
Total options outstanding, beginning of period			20,938,403			$	22.61
Granted			1,059,000				28.73
Exercised			(43,692	)			9.17
Forfeited and cancelled			(612,421	)			29.57
Total options outstanding, end of period			21,341,290				22.75
Performance based options outstanding, end of period *			9,720,750				16.46
Exercisable at end of period			6,451,117				28.68

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

We realized less than $1 million and $1 million of tax benefits from stock options exercised during the three months ended March 31, 2008 and 2007, respectively. Based on the closing market price of our Class A common stock on March 31, 2008, the aggregate intrinsic value of our outstanding stock options was $165 million. Of that amount, options with an aggregate intrinsic value of $26 million were exercisable at the end of the period.

Our restricted stock award activity (including performance and non-performance based options) for the three months ended March 31, 2008 was as follows:

		For the Three Months
		Ended March 31, 2008
						Weighted-
		Restricted				Average
		Stock				Grant Date
		Awards				Fair Value
Total restricted stock awards outstanding, beginning of period			1,717,078			$	29.24
Granted			—				—
Exercised			—				—
Forfeited and cancelled			(26,667	)			35.36
Total restricted stock awards outstanding, end of period			1,690,411				29.15
Restricted performance units outstanding, end of period *			590,411				25.94

Long-Term Performance-Based Plans

In February 1999, we adopted a long-term, performance-based stock incentive plan (the “1999 LTIP”) within the terms of our 1995 Stock Incentive Plan. The 1999 LTIP provided stock options to key employees which vest over five years at the rate of 20% per year. Exercise of the options is also contingent on the Company achieving a company specific goal in relation to an industry-related metric prior to December 31, 2008.

In January 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 performance 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 options is also subject to a performance condition that a Company-specific subscriber goal is achieved prior to March 31, 2015.

Contingent compensation related to the 1999 LTIP and 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 we did not believe that achievement of either of the goals was probable as of March 31, 2008, that assessment could change with respect to either goal at any time. In accordance with SFAS 123R, if all of the awards under each plan were vested and each goal had been met during the three months ended March 31, 2008, we would have recorded total non-cash, stock-based compensation expense for our employees as follows:

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

		For the Three Months
		Ended March 31, 2008
Total Contingent Compensation		1999 LTIP				2005 LTIP
DISH Network awards held by DISH Network employees		$	22,910			$	51,764
EchoStar awards held by DISH Network employees			4,652				10,511
Total		$	27,562			$	62,275

If the goals are met and there are unvested options at that time, the vested amounts would be expensed immediately in our Condensed Consolidated Statements of Operations, with the unvested portion recognized ratably over the remaining vesting period. During the three months ended March 31, 2008, if we had determined each goal was probable, we would have recorded total non-cash, stock-based compensation expense for our employees as follows:

		For the Three Months
Contingent Compensation -		Ended March 31, 2008
Vested Portion at March 31, 2008		1999 LTIP				2005 LTIP
DISH Network awards held by DISH Network employees		$	20,155			$	10,738
EchoStar awards held by DISH Network employees			4,093				2,180
Total		$	24,248			$	12,918

Of the 21.3 million options outstanding under our stock incentive plans as of March 31, 2008, the following options were outstanding pursuant to the 1999 LTIP and the 2005 LTIP:

		As of
		March 31, 2008
						Weighted-
						Average
		Stock				Exercise
Long-Term Performance-Based Plans		Options				Price
1999 LTIP			5,194,000			$	8.83
2005 LTIP			4,526,750			$	25.22

Further, pursuant to the 2005 LTIP, there were also 590,411 outstanding restricted performance units as of March 31, 2008 with a weighted-average grant date fair value of $25.94. No awards were granted under the 1999 LTIP or 2005 LTIP during the three months ended March 31, 2008.

Stock-Based Compensation

Total non-cash, stock-based compensation expense, net of related tax effects, for all of our employees is shown in the following table for the three months ended March 31, 2008 and 2007 and was allocated to the same expense categories as the base compensation for such employees:

		For the Three Months
		Ended March 31,
		2008				2007
		(In thousands)
Subscriber-related		$	169			$	175
Satellite and transmission			—				126
General and administrative			2,055				3,137
Total non-cash, stock-based compensation		$	2,224			$	3,438

As of March 31, 2008, our total unrecognized compensation cost related to our non-performance based unvested stock options was $32 million and includes compensation expense that we will recognize for EchoStar stock options

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

held by our employees as a result of the Spin-off. This cost is based on an estimated future forfeiture rate of approximately 6.5% per year and will be recognized over a weighted-average period of approximately three years. Share-based compensation expense is recognized based on awards ultimately expected to vest and is reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Changes in the estimated forfeiture rate can have a significant effect on share-based compensation expense since the effect of adjusting the rate is recognized in the period the forfeiture estimate is changed.

The fair value of each award for the three months ended March 31, 2008 and 2007 was estimated at the date of the grant using a Black-Scholes option pricing model with the following assumptions:

		For the Three Months
		Ended March 31,
		2008				2007
Risk-free interest rate			2.74	%		4.46% - 4.65%
Volatility factor			19.98	%		20.42%
Expected term of options in years			6.1			6.0 - 10.0
Weighted-average fair value of options granted		$	7.64			$11.39 - $15.85

We do not currently plan to pay additional dividends on our common stock, and therefore the dividend yield percentage is set at zero for all periods. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. Consequently, our estimate of fair value may differ from other valuation models. Further, the Black-Scholes model requires the input of highly subjective assumptions. Changes in the subjective input assumptions can materially affect the fair value estimate. Therefore, we do not believe that the existing models provide as reliable a single measure of the fair value of stock-based compensation awards as a market-based model would.

We will continue to evaluate the assumptions used to derive the estimated fair value of options for our stock as new events or changes in circumstances become known.

4. Inventories

Inventories consist of the following:

		As of
		March 31,				December 31,
		2008				2007
		(In thousands)
Finished goods — DBS		$	166,773			$	170,463
Raw materials			88,066				70,103
Work-in-process — used			80,700				67,542
Work-in-process — new			2,375				13,546
Subtotal			337,914				321,654
Inventory allowance			(18,292	)			(14,739	)
Inventories, net		$	319,622			$	306,915

5. Investment Securities

Marketable Investment Securities

We currently classify all marketable investment securities as available-for-sale. We adjust the carrying value of our available-for-sale securities to fair value and report the related temporary unrealized gains and losses as a separate component of “Accumulated other comprehensive income (loss)” within “Total stockholders’ equity (deficit),” net of

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

related deferred income tax. Declines in the fair value of a marketable investment security which are estimated to be “other than temporary” are recognized in the Condensed Consolidated Statements of Operations, thus establishing a new cost basis for such investment. We evaluate our marketable investment securities portfolio on a quarterly basis to determine whether declines in the fair value of these securities are other than temporary. This quarterly evaluation consists of reviewing, among other things, the fair value of our marketable investment securities compared to the carrying amount, the historical volatility of the price of each security and any market and company specific factors related to each security. Generally, absent specific factors to the contrary, declines in the fair value of investments below cost basis for a continuous period of less than six months are considered to be temporary. Declines in the fair value of investments for a continuous period of six to nine months are evaluated on a case by case basis to determine whether any company or market-specific factors exist which would indicate that such declines are other than temporary. Declines in the fair value of investments below cost basis for a continuous period greater than nine months are considered other than temporary and are recorded as charges to earnings, absent specific factors to the contrary.

As of March 31, 2008 and December 31, 2007, the fair values of our marketable investment securities and strategic marketable investment securities were as follows:

		As of
		March 31,				December 31,
		2008				2007
Marketable investment securities		(In thousands)
Marketable investment securities		$	518,224			$	1,030,565
Marketable investment securities — strategic			60,744				576,813
Current marketable investment securities			578,968				1,607,378
Long-term marketable investment securities			155,182				—
Total marketable investment securities		$	734,150			$	1,607,378

The decline in our marketable investment securities from December 31, 2007 was primarily due to the distribution of marketable investment securities to EchoStar in connection with the Spin-off (see Note 1).

Our strategic marketable investment securities are highly speculative and have experienced and continue to experience volatility. If the fair value of our strategic marketable investment securities portfolio does not remain above cost basis or if we become aware of any market or company specific factors that indicate that the carrying value of certain of our securities is impaired, we may be required to record charges to earnings in future periods equal to the amount of the decline in fair value.

As of March 31, 2008 and December 31, 2007, we had accumulated unrealized gains (losses) net of related tax effect of $42 million in losses and a $30 million gain, respectively, as a part of “Accumulated other comprehensive income (loss)” within “Total stockholders’ equity (deficit).” During the three months ended March 31, 2008 and 2007, we did not record any charge to earnings for other than temporary declines in the fair value of our marketable investment securities. In addition, during the three months ended March 31, 2008 and 2007, we recognized realized and unrealized net gains on marketable investment securities of $2 million and $3 million, respectively.

Marketable Investment Securities in a Loss Position. The following table reflects the length of time that the individual securities have been in an unrealized loss position, aggregated by investment category. The unrealized losses on our investment in corporate securities represent investments in the common stock of a company in the communications industry. At March 31, 2008, the losses on our investments in bonds primarily represent investments in auction rate, mortgage and asset-backed securities. We are not aware of any specific factors which indicate the unrealized loss in these investments is due to anything other than temporary market fluctuations or liquidity concerns. In addition, we have the ability and intent to hold our investments in these bonds until maturity when the issuers are required to redeem them at their full face value.

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

						As of March 31, 2008
		Primary		Maturity		Less than Six Months								Six to Nine Months								Nine Months or More
Investment		Reason for		in		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
Category		Unrealized Loss		Years		Value				Loss				Value				Loss				Value				Loss
						(In thousands)
Corporate bonds		Temporary market fluctuations		1-15		$	628,540			$	(49,112	)		$	69,838			$	(5,457	)		$	—			$	—
Corporate equity securities		Temporary market fluctuations		N/A			60,744				(13,130	)			—				—				—				—
Total						$	689,284			$	(62,242	)		$	69,838			$	(5,457	)		$	—			$	—

						As of December 31, 2007
						(In thousands)
Government and corporate bonds		Temporary market fluctuations		1-2		$	361,347			$	(7,168	)		$	163,230			$	(1,909	)		$—		$—
Corporate equity securities		Temporary market fluctuations		N/A			186,352				(16,192	)			2,124				(1,027	)		—		—
Total						$	547,699			$	(23,360	)		$	165,354			$	(2,936	)		$—		$—

Other Investment Securities

We also have several strategic investments in certain equity securities which are included in “Other noncurrent assets, net” on our Condensed Consolidated Balance Sheets. Our other investment securities consist of the following:

		As of
		March 31,				December 31,
Other Investment Securities		2008				2007
		(In thousands)
Cost method		$	68,391			$	108,355
Equity method			47,717				68,127
Fair value method			6,772				11,404
Total		$	122,880			$	187,886

Generally, we account for our unconsolidated equity investments under either the equity method or cost method of accounting. Because these equity securities are generally not publicly traded, it is not practical to regularly estimate the fair value of the investments; however, these investments are subject to an evaluation for other than temporary impairment on a quarterly basis. This quarterly evaluation consists of reviewing, among other things, company business plans and current financial statements, if available, for factors that may indicate an impairment of our investment. Such factors may include, but are not limited to, cash flow concerns, material litigation, violations of debt covenants and changes in business strategy. The fair value of these equity investments is not estimated unless there are identified changes in circumstances that may indicate an impairment exists and these changes are likely to have a significant adverse effect on the fair value of the investment.

We also have a strategic investment in non-public preferred stock, public common stock and convertible debt of a foreign public company. The debt, which is convertible into the issuer’s publicly traded common shares, is accounted for under the fair value method with changes in fair value reported each period as unrealized gains or losses in “Other” income or expense in our Condensed Consolidated Statements of Operations. We estimate the fair value of the convertible debt using certain assumptions and judgments in applying a discounted cash flow analysis and the Black-Scholes option pricing model including the fair market value of the underlying common stock price as of that date. During 2006, we converted a portion of the convertible debt to public common shares and determined that we have the ability to significantly influence the operating decisions of the issuer. Consequently, we account for the common share component of this investment under the equity method of accounting. As a result of our change to equity method accounting, we evaluate the common share component of this investment on a quarterly basis to determine whether there has been a decline in the value that is other than temporary. Because the shares are

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publicly traded, this quarterly evaluation considers the fair market value of the common shares in addition to the other factors described above for equity and cost method investments. When impairments occur related to our foreign investments, any “Cumulative translation adjustment” associated with these investments will remain in “Accumulated other comprehensive income (loss)” within “Total stockholders’ equity (deficit)” on our Condensed Consolidated Balance Sheets until the investments are sold or otherwise liquidated; at which time, they will be released into our Condensed Consolidated Statement of Operations.

The changes in the fair value and impairments of our other investment securities consist of the following:

		For the Three Months
		Ended March 31,
Other Investment Securities		2008				2007
		(In thousands)
Unrealized gains (losses), net		$	(4,632	)		$	(3,167	)
Impairments			—				—
Total		$	(4,632	)		$	(3,167	)

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.

Restricted Cash and Marketable Investment Securities

As of March 31, 2008 and December 31, 2007, restricted cash and marketable investment securities included amounts required as collateral for our letters of credit. Additionally, restricted cash and marketable investment securities as of March 31, 2008 and December 31, 2007 included $104 million and $101 million in escrow related to our litigation with Tivo, respectively.

6. Satellites

We presently utilize twelve satellites in geostationary orbit approximately 22,300 miles above the equator. Of these twelve satellites, five are owned by us and we lease six from EchoStar as a result of the Spin-off. We account for the satellites leased from EchoStar as operating leases with terms of up to two years. (See Note 13 for further discussion of our satellite leases with EchoStar.) Each of the owned satellites had an original minimum useful life of at least 12 years. We also lease one satellite from a third party, which is accounted for as a capital lease pursuant to Statement of Financial Accounting Standards No. 13, “Accounting for Leases” (“SFAS 13”). The capital lease is depreciated over the fifteen year term of the satellite service agreement.

Operation of our subscription television 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 launching more HD local markets 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 have a material adverse effect on our business, financial condition and results of operations.

While we believe that overall our satellite fleet is generally in good condition, during 2008 and prior periods, certain satellites in our fleet have experienced anomalies, some of which have had a significant adverse impact on their commercial operation. Recent developments with respect to our satellites are discussed below.

EchoStar V. EchoStar V was originally designed with a minimum 12-year design life. Momentum wheel failures

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in prior years, together with relocation of the satellite between orbital locations, resulted in increased fuel consumption, as previously disclosed. These issues have not impacted commercial operation of the satellite. However, as a result of these anomalies and the relocation of the satellite, during 2005, we reduced the remaining estimated useful life of this satellite. Prior to 2008, EchoStar V also experienced anomalies resulting in the loss of ten solar array strings. During first quarter 2008, the satellite lost two additional solar array strings. The solar array anomalies have not impacted commercial operation of the satellite to date. Since EchoStar V will be fully depreciated in October 2008, the solar array failures (which will result in a reduction in the number of transponders to which power can be provided in later years), have not reduced the remaining useful life of the satellite. However, there can be no assurance that future anomalies will not cause further losses which could impact commercial operation, or the remaining life, of the satellite. See discussion of evaluation of impairment in “Long-Lived Satellite Assets” below.

AMC-14. In connection with the Spin-off, we distributed our AMC-14 satellite lease agreement with SES Americom (“SES”) to EchoStar with the intent to lease the entire capacity of the satellite from EchoStar. On March 14, 2008, a Proton launch vehicle carrying the SES AMC-14 satellite experienced an anomaly which left the satellite in a lower orbit than planned. On April 11, 2008, SES announced that it has declared to insurers that the AMC-14 satellite is now considered a total loss, due to a lack of viable options to reposition the satellite to its proper geostationary orbit. We do not expect to incur any financial liability as a result of the AMC-14 satellite being declared a total loss.

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 owned and capital leased satellites 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.

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7. Intangible Assets

As of March 31, 2008 and December 31, 2007, our identifiable intangibles subject to amortization consisted of the following:

		As of
		March 31, 2008								December 31, 2007
		Intangible				Accumulated				Intangible				Accumulated
		Assets				Amortization				Assets				Amortization
		(In thousands)
Contract-based		$	—			$	—			$	192,845			$	(60,754	)
Customer and reseller relationships			—				—				96,898				(70,433	)
Technology-based			—				—				69,797				(9,478	)
Total		$	—			$	—			$	359,540			$	(140,665	)

As of January 1, 2008, intangible assets with a net book value of $215 million were distributed to EchoStar in connection with the Spin-off (see Note 1). The intangible assets remaining, which were fully amortized and are no longer in service, were written-off as of March 31, 2008. Amortization of these intangible assets was $4 million and $9 million for the three months ended March 31, 2008 and 2007, respectively.

One of our wholly-owned subsidiaries participated in the auction of 700 MHz wireless spectrum designated by the FCC as Auction 73 (the “Auction”). On March 20, 2008, the FCC disclosed that the subsidiary was the provisional winning bidder of 168 E Block licenses in the Auction totaling $712 million and representing coverage of 76% of the U.S. population. As part of the Auction, we made a deposit of $115 million during the three months ended March 31, 2008, which is included in “Other current assets” in our Condensed Consolidated Balance Sheets, and the remaining balance of $597 million was paid in April 2008. While the bidding in the Auction has ended, the FCC has not yet awarded any of the licenses to winning bidders nor is there any prescribed timeframe for the FCC to review the qualifications of the various winning bidders and award licenses.

8. Long-Term Debt

3% Convertible Subordinated Note due 2010

Our 3% Convertible Subordinated Note due 2010, which was sold to AT&T in a privately negotiated transaction, has an aggregate principal amount of $500 million and is convertible into 8,298,775 shares of our Class A common stock at the option of AT&T (an effective conversion price of $60.25 per share). The number of shares was adjusted from 6,866,245 shares of our Class A common stock during the first quarter 2008 in connection with the Spin-off and as required by the terms of the Note. Commencing July 21, 2008, we may redeem, and AT&T may require us to repurchase, all or a portion of the note at its principal amount, without premium.

3% Convertible Subordinated Note due 2011

Our 3% Convertible Subordinated Note due 2011, which was sold to CenturyTel Service Group, LLC (“CTL”) in a privately negotiated transaction, is convertible into 481,881 shares of our Class A common stock at the option of CTL (an effective conversion price of $51.88 per share). The number of shares was adjusted from 398,724 shares of our Class A common stock during the first quarter 2008 in connection with the Spin-off and as required by the terms of the Note.

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Capital Lease Obligations

Future minimum lease payments under our capital lease obligations remaining after the Spin-off, together with the present value of the net minimum lease payments as of March 31, 2008, are as follows:

For the Years Ended December 31,
2008 (remaining nine months)		$	36,000
2009			48,000
2010			48,000
2011			48,000
2012			48,000
2013			48,000
Thereafter			400,000
Total minimum lease payments			676,000
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			(366,222	)
Net minimum lease payments			309,778
Less: Amount representing interest			(118,377	)
Present value of net minimum lease payments			191,401
Less: Current portion			(7,987	)
Long-term portion of capital lease obligations		$	183,414

9. Commitments and Contingencies

Commitments

Future maturities of our contractual obligations as of March 31, 2008 are summarized as follows:

		Payments due by period
		Total				2008				2009				2010				2011				2012				2013				Thereafter
		(In thousands)
Long-term debt obligations		$	5,525,000			$	1,500,000			$	—			$	—			$	1,025,000			$	—			$	500,000			$	2,500,000
Satellite-related obligations*			1,753,695				949,951				124,344				52,044				52,044				52,044				52,044				471,224
Capital lease obligations			191,401				5,934				8,445				9,097				9,800				10,556				11,371				136,198
Operating lease obligations			93,542				30,943				34,127				14,320				8,214				3,101				1,485				1,352
Purchase obligations			1,267,231				942,151				251,123				40,247				11,000				11,000				11,000				710
Mortgages and other notes payable			24,907				2,010				2,194				2,058				2,206				2,366				2,537				11,536
Total		$	8,855,776			$	3,430,989			$	420,233			$	117,766			$	1,108,264			$	79,067			$	578,437			$	3,121,020

*Includes the $597 million balance payment made in April 2008 for the 700 MHz wireless spectrum (See Note 7).

In certain circumstances the dates on which we are obligated to make these payments could be delayed. These amounts will increase to the extent we procure insurance for our satellites or contract for the construction, launch or lease of additional satellites.

Guarantees

In connection with the Spin-off, we distributed satellite lease agreements to EchoStar. We remain the guarantor under those capital leases for payments totaling approximately $578 million over the next eight years. In addition, during the first quarter of 2008, EchoStar entered into a satellite transponder service agreement with a third party for $543 million in payments through 2024, which we subleased from EchoStar and have also guaranteed. As of March 31, 2008 we have not recorded a liability on the balance sheet for any of these guarantees.

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Separation Agreement

In connection with the Spin-off, we have entered into a separation agreement with EchoStar, which provides for, among other things, the division of liability resulting from litigation. Under the terms of the separation agreement, EchoStar has assumed liability for any acts or omissions that relate to its business whether such acts or omissions occurred before or after the Spin-off. Certain exceptions are provided, including for intellectual property related claims generally, whereby EchoStar will only be liable for its acts or omissions that occurred following the Spin-off. Therefore, we have indemnified EchoStar for any potential liability or damages resulting from intellectual property claims relating to the period prior to the effective date of the Spin-off.

Contingencies

Acacia

During 2004, Acacia Media Technologies (“Acacia”) filed a lawsuit against us in the United States District Court for the Northern District of California. The suit also named DirecTV, Comcast, Charter, Cox and a number of smaller cable companies as defendants. Acacia is an intellectual property holding company which seeks to license the patent portfolio that it has acquired. The suit alleges infringement of United States Patent Nos. 5,132,992 (the ‘992 patent), 5,253,275 (the ‘275 patent), 5,550,863 (the ‘863 patent), 6,002,720 (the ‘720 patent) and 6,144,702 (the ‘702 patent). The ‘992, ‘863, ‘720 and ‘702 patents have been asserted against us.

The patents relate to various systems and methods related to the transmission of digital data. The ‘992 and ‘702 patents have also been asserted against several Internet content providers in the United States District Court for the Central District of California. During 2004 and 2005, the Court issued Markman rulings which found that the ‘992 and ‘702 patents were not as broad as Acacia had contended, and that certain terms in the ‘702 patent were indefinite. The Court issued additional claim construction rulings on December 14, 2006, March 2, 2007, October 19, 2007, and February 13, 2008. On March 12, 2008, the Court issued an order outlining a schedule for filing dispositive invalidity motions based on its claim constructions. Acacia has agreed to stipulate that all claims in the suit are invalid according to various of the Court’s claim constructions and argues that the case should proceed immediately to the Federal Circuit. The Court has set a hearing for May 6, 2008, at which time it will determine whether the parties will proceed with additional invalidity motions or enter final judgment based on Acacia’s agreement that all asserted claims are invalid.

Acacia’s various patent infringement cases have been consolidated for pre-trial purposes in the United States District Court for the Northern District of California. We intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Broadcast Innovation, L.L.C.

In 2001, Broadcast Innovation, L.L.C. (“Broadcast Innovation”) filed a lawsuit against us, DirecTV, Thomson Consumer Electronics and others in Federal District Court in Denver, Colorado. The suit alleges infringement of United States Patent Nos. 6,076,094 (the ‘094 patent) and 4,992,066 (the ‘066 patent). The ‘094 patent relates to certain methods and devices for transmitting and receiving data along with specific formatting information for the data. The ‘066 patent relates to certain methods and devices for providing the scrambling circuitry for a pay television system on removable cards. We examined these patents and believe that they are not infringed by any of our products or services. Subsequently, DirecTV and Thomson settled with Broadcast Innovation leaving us as the only defendant.

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During 2004, the judge issued an order finding the ‘066 patent invalid. Also in 2004, the Court ruled the ‘094 patent invalid in a parallel case filed by Broadcast Innovation against Charter and Comcast. In 2005, the United States Court of Appeals for the Federal Circuit overturned the ‘094 patent finding of invalidity and remanded the case back to the District Court. During June 2006, Charter filed a reexamination request with the United States Patent and Trademark Office. The Court has stayed the case pending reexamination. Our case remains stayed pending resolution of the Charter case.

We intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe any of the patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Channel Bundling Class Action

On September 21, 2007, a purported class of cable and satellite subscribers filed an antitrust action against us in the United States District Court for the Central District of California. The suit also names as defendants DirecTV, Comcast, Cablevision, Cox, Charter, Time Warner, Inc., Time Warner Cable, NBC Universal, Viacom, Fox Entertainment Group, and Walt Disney Company. The suit alleges, among other things, that the defendants engaged in a conspiracy to provide customers with access only to bundled channel offerings as opposed to giving customers the ability to purchase channels on an “a la carte” basis. We filed a motion to dismiss, which the court granted with leave for plaintiffs to amend their complaint. We intend to vigorously defend this case. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Datasec

During April 2008, Datasec Corporation (“Datasec”) sued us and DirecTV Corporation in the United States District Court for the Central District of California, alleging infringement of U.S. Patent No. 6,075,969 (the ’969 patent). The ‘969 patent was issued in 2000 to inventor Bruce Lusignan, and is entitled “Method for Receiving Signals from a Constellation of Satellites in Close Geosynchronous Orbit.”

We intend to vigorously defend this case. In the event that a court ultimately determines that we infringe any of the asserted patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to modify our system architecture. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Distant Network Litigation

During October 2006, a District Court in Florida entered a permanent nationwide injunction prohibiting us from offering distant network channels to consumers effective December 1, 2006. Distant networks are ABC, NBC, CBS and Fox network channels which originate outside the community where the consumer who wants to view them, lives. We have turned off all of our distant network channels and are no longer in the distant network business. Termination of these channels resulted in, among other things, a small reduction in average monthly revenue per subscriber and free cash flow, and a temporary increase in subscriber churn. The plaintiffs in that litigation allege that we are in violation of the Court’s injunction and have appealed a District Court decision finding that we are not in violation. We intend to vigorously defend this case. We cannot predict with any degree of certainty the outcome of the appeal or determine the extent of any potential liability or damages.

Enron Commercial Paper Investment

During October 2001, we received approximately $40 million from the sale of Enron commercial paper to a third party broker. That commercial paper was ultimately purchased by Enron. During November 2003, an action was

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commenced in the United States Bankruptcy Court for the Southern District of New York against approximately 100 defendants, including us, who invested in Enron’s commercial paper. The complaint alleges that Enron’s October 2001 purchase of its commercial paper was a fraudulent conveyance and voidable preference under bankruptcy laws. We dispute these allegations. We typically invest in commercial paper and notes which are rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations. At the time of our investment in Enron commercial paper, it was considered to be high quality and low risk. We intend to vigorously defend this case. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Finisar Corporation

Finisar Corporation (“Finisar”) obtained a $100 million verdict in the United States District Court for the Eastern District of Texas against DirecTV for patent infringement. Finisar alleged that DirecTV’s electronic program guide and other elements of its system infringe United States Patent No. 5,404,505 (the ‘505 patent).

In July 2006, we, together with NagraStar LLC, filed a Complaint for Declaratory Judgment in the United States District Court for the District of Delaware against Finisar that asks the Court to declare that they and we do not infringe, and have not infringed, any valid claim of the ‘505 patent. Trial is not currently scheduled. The District Court has stayed our action until the Federal Circuit has resolved DirecTV’s appeal. During April 2008, the Federal Circuit reversed the judgment against DirecTV and ordered a new trial. We are evaluating the Federal Circuit’s decision to determine the impact on our action.

We intend to vigorously prosecute this case. In the event that a Court ultimately determines that we infringe this patent, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to modify our system architecture. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Global Communications

On April 19, 2007, Global Communications, Inc. (“Global”) filed a patent infringement action against us in the United States District Court for the Eastern District of Texas. The suit alleges infringement of United States Patent No. 6,947,702 (the ‘702 patent). This patent, which involves satellite reception, was issued in September 2005. On October 24, 2007, the United States Patent and Trademark Office granted our request for reexamination of the ‘702 patent and issued an Office Action finding that all of the claims of the ‘702 patent were invalid. Based on the PTO’s decision, we have asked the District Court to stay the litigation until the reexamination proceeding is concluded. We intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe the ‘702 patent, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Katz Communications

On June 21, 2007, Ronald A. Katz Technology Licensing, L.P. (“Katz”) filed a patent infringement action against us in the United States District Court for the Northern District of California. The suit alleges infringement of 19 patents owned by Katz. The patents relate to interactive voice response, or IVR, technology. We intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe any of the asserted patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

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Personalized Media Communications

In February 2008, Personalized Media Communications, Inc. filed suit against us, EchoStar and Motorola, Inc. in the United States District Court for the Eastern District of Texas alleging infringement of United States Patent Nos. 4,694,490 (the ‘490 patent), 5,109,414 (the ‘414 patent), 4,965,825 (the ‘825 patent), 5,233,654 (the ‘654 patent), 5,335,277 (the ‘277 patent), and 5,887,243 (the ‘243 patent), all of which were issued to John Harvey and James Cuddihy as named inventors. The ‘490 patent, the ‘414 patent, the ‘825 patent, the ‘654 patent and the ‘277 patent are defined as the Harvey Patents. The Harvey Patents are entitled “Signal Processing Apparatus and Methods.” The lawsuit alleges, among other things, that our DBS system receives program content at broadcast reception and satellite uplinking facilities and transmits such program content, via satellite, to remote satellite receivers. The lawsuit further alleges that we infringe the Harvey Patents by transmitting and using a DBS signal specifically encoded to enable the subject receivers to function in a manner that infringes the Harvey Patents, and by selling services via DBS transmission processes which infringe the Harvey Patents.

We intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe any of the asserted patents, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Retailer Class Actions

During 2000, lawsuits were filed by retailers in Colorado state and federal court attempting to certify nationwide classes on behalf of certain of our retailers. The plaintiffs are requesting the Courts declare certain provisions of, and changes to, alleged agreements between us and the retailers invalid and unenforceable, and to award damages for lost incentives and payments, charge backs, and other compensation. We are vigorously defending against the suits and have asserted a variety of counterclaims. The federal court action has been stayed during the pendency of the state court action. We filed a motion for summary judgment on all counts and against all plaintiffs. The plaintiffs filed a motion for additional time to conduct discovery to enable them to respond to our motion. The Court granted limited discovery which ended during 2004. The plaintiffs claimed we did not provide adequate disclosure during the discovery process. The Court agreed, and denied our motion for summary judgment as a result. The final impact of the Court’s ruling cannot be fully assessed at this time. During April 2008, the Court granted plaintiff’s class certification motion. Trial has been set for August 2008. We intend to vigorously defend this case. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Superguide

During 2000, Superguide Corp. (“Superguide”) filed suit against us, DirecTV, Thomson and others in the United States District Court for the Western District of North Carolina, Asheville Division, alleging infringement of United States Patent Nos. 5,038,211 (the ‘211 patent), 5,293,357 (the ‘357 patent) and 4,751,578 (the ‘578 patent) which relate to certain electronic program guide functions, including the use of electronic program guides to control VCRs. Superguide sought injunctive and declaratory relief and damages in an unspecified amount.

On summary judgment, the District Court ruled that none of the asserted patents were infringed by us. These rulings were appealed to the United States Court of Appeals for the Federal Circuit. During 2004, the Federal Circuit affirmed in part and reversed in part the District Court’s findings and remanded the case back to the District Court for further proceedings. In 2005, Superguide indicated that it would no longer pursue infringement allegations with respect to the ‘211 and ‘357 patents and those patents have now been dismissed from the suit. The District Court subsequently entered judgment of non-infringement in favor of all defendants as to the ‘211 and ‘357 patents and ordered briefing on Thomson’s license defense as to the ‘578 patent. During December 2006, the District Court found that there were disputed issues of fact regarding Thomson’s license defense, and ordered a trial solely

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addressed to that issue. That trial took place in March 2007. In July 2007, the District Court ruled in favor of Superguide. As a result, Superguide will be able to proceed with its infringement action against us, DirecTV and Thomson.

We intend to vigorously defend this case. In the event that a Court ultimately determines that we infringe the ‘578 patent, we may be subject to substantial damages, which may include treble damages and/or an injunction that could require us to materially modify certain user-friendly electronic programming guide and related features that we currently offer to consumers. We cannot predict with any degree of certainty the outcome of the suit or determine the extent of any potential liability or damages.

Tivo Inc.

On January 31, 2008, the U.S. Court of Appeals for the Federal Circuit affirmed in part and reversed in part the April 2006 jury verdict concluding that certain of our digital video recorders, or DVRs, infringed a patent held by Tivo. In its decision, the Federal Circuit affirmed the jury’s verdict of infringement on Tivo’s “software claims,” upheld the award of damages from the district court, and ordered that the stay of the district court’s injunction against us, which was issued pending appeal, will dissolve when the appeal becomes final. The Federal Circuit, however, found that we did not literally infringe Tivo’s “hardware claims,” and remanded such claims back to the district court for further proceedings. We are appealing the Federal Circuit’s ruling to the United States Supreme Court.

In addition, we have developed and deployed ‘next-generation’ DVR software to our customers’ DVRs. This improved software is fully operational and has been automatically downloaded to current customers (the “Design-Around”). We have formal legal opinions from outside counsel that conclude that our Design-Around does not infringe, literally or under the doctrine of equivalents, either the hardware or software claims of Tivo’s patent.

In accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” (“SFAS 5”), we recorded a total reserve of $129 million on our Condensed Consolidated Balance Sheets to reflect the jury verdict, supplemental damages and pre-judgment interest awarded by the Texas court. This amount also includes the estimated cost of any software infringement prior to the Design-Around, plus interest subsequent to the jury verdict.

If the Federal Circuit’s decision is upheld and Tivo decides to challenge the Design-Around, we will mount a vigorous defense. If we are unsuccessful in subsequent appeals or in defending against claims that the Design-Around infringes Tivo’s patent, we could be prohibited from distributing DVRs, or be required to modify or eliminate certain user-friendly DVR features that we currently offer to consumers. In that event we would be at a significant disadvantage to our competitors who could offer this functionality and, while we would attempt to provide that functionality through other manufacturers, the adverse affect on our business could be material. We could also have to pay substantial additional damages.

Other

In addition to the above actions, we are subject to various other legal proceedings and claims which arise in the ordinary course of business. In our opinion, the amount of ultimate liability with respect to any of these actions is unlikely to materially affect our financial position, results of operations or liquidity.

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10. Depreciation and Amortization Expense

Depreciation and amortization expense consists of the following:

		For the Three Months
		Ended March 31,
		2008				2007
		(In thousands)
Equipment leased to customers		$	212,279			$	206,679
Satellites*			26,451				59,044
Furniture, fixtures, equipment and other*			28,237				42,838
Identifiable intangible assets subject to amortization*			4,331				9,137
Buildings and improvements*			1,070				2,421
Total depreciation and amortization		$	272,368			$	320,119

*The period-over-period decreases in depreciation and amortization expense are primarily a result of the distribution of depreciable assets to EchoStar in connection with the Spin-off (see Note 1).

Cost of sales and operating expense categories included in our accompanying Condensed Consolidated Statements of Operations do not include depreciation expense related to satellites or equipment leased to customers.

11. Segment Reporting

Statement of Financial Accounting Standards No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS 131”) establishes standards for reporting information about operating segments in annual financial statements of public business enterprises and requires that those enterprises report selected information about operating segments in interim financial reports issued to stockholders. Operating segments are components of an enterprise about which separate financial information is available and regularly evaluated by the chief operating decision maker(s) of an enterprise. Total assets by segment have not been specified because the information is not available to the chief operating decision-maker. The “All Other” category consists of revenue and net income (loss) from other operating segments for which the disclosure requirements of SFAS 131 do not apply. Based on the standards set forth in SFAS 131, following the January 1, 2008 Spin-off discussed in Note 1, we operate in only one reportable segment, the DISH Network segment, which provides a DBS subscription television service in the United States.

		For the Three Months
		Ended March 31,
		2008				2007
		(In thousands)
Revenue:
DISH Network		$	2,844,394			$	2,583,788
ETC			—				35,574
All other			—				34,640
Eliminations			—				(9,017	)
Total revenue		$	2,844,394			$	2,644,985
Net income (loss):
DISH Network		$	258,583			$	157,404
ETC			—				(5,665	)
All other			—				5,401
Total net income (loss)		$	258,583			$	157,140

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

Geographic Information

		United
		States				International				Total
		(In thousands)
Long-lived assets, including FCC authorizations
March 31, 2008		$	3,214,543			$	—			$	3,214,543
December 31, 2007		$	5,182,587			$	196,958			$	5,379,545
Revenue
March 31, 2008		$	2,844,394			$	—			$	2,844,394
March 31, 2007		$	2,625,924			$	19,061			$	2,644,985