DISH Network Corp. (DISH) declared solid financial results for the fourth quarter of 2011. Most importantly, the company generated net subscriber addition in the previous quarter, reversing the trend of the prior two successive quarters. In the fourth quarter of 2011, DISH Network gained 22,000 net subscribers compared with an enormous loss of 156,000 subscribers in the year-ago quarter. At the end of 2011, DISH Network had approximately 13.967 million subscribers.

Last week, DISH Network’s biggest competitor DIRECTV (DTV) also reported strong fourth-quarter 2011 financial results, outshining the Zacks Consensus Estimates. DIRECTV added a net 125,000 subscribers in the previous quarter.

Quarterly GAAP net income was $312.7 million or 70 cents per share compared with $251.8 million or 56 cents per share in the year-ago quarter. Fourth-quarter 2011 EPS of 70 cents was miles ahead of the Zacks Consensus Estimate of 61 cents.

Quarterly total revenue increased 13% to $3,631.5 million from $3,206.6 million in the year-ago quarter. This was mainly due to an increase in subscriber related revenue and contribution from Blockbuster. The fourth-quarter 2011 revenue also surpassed the Zacks Consensus Estimate of $3,622 million.

Segment wise, in fiscal 2011, Subscriber related revenue was $12,976 million, up 3.4% year over year. Equipment and merchandise sales & other revenue were $1,035.9 million, up 1,633.2% year over year. Equipment sales, services, and other revenues from EchoStar were $36.5 million, down 1.9% year over year.

Average monthly subscriber churn rate in 2011 was 1.63% compared with 1.76% in 2010. Average revenue per user in 2011 was $76.93 compared with $73.32 in 2010. Average subscriber acquisition cost in 2011 was $771 compared with $776 in 2010.

In fiscal 2011, Subscriber-related expenses inched up 2.5% year over year to $6,845.6 million, driven by higher programming content costs and expenses related to call center operations. Subscriber acquisition cost decreased by 9% year over year to $1,505.2 million. Depreciation and amortization expenses were $922.1 million, down 6.3% year over year.

General and administrative expenses grew 105.2% year over year to $1,187.1 million on higher personnel costs and professional fees to support the network. Full year 2011 operating income increased by 50.9% to $2,928 million, while operating margin rose to 20.8% from the year-ago level of 15.4%. Accordingly, EBITDA was over $3,856.5 million in fiscal 2011 compared with $2,955.8 million in fiscal 2010.

During 2011, DISH Network generated $2,573.9 million of cash from operations compared with $2,139.8 million in 2010. Free cash flow (cash flow from operations less capital expenditures) in 2011 was $1,795 million compared with $1,026.6 million in 2010.

At the end of 2011, DISH Network had $2,040.9 million of cash and marketable securities and $7,493.8 million of outstanding debt on its balance sheet compared with $3,062.3 million of cash and marketable securities and $6,486.1 million of outstanding debt on its balance sheet at the end of 2010.

Recommendation

We maintain our long-term Neutral recommendation on DISH Network. Currently, it has a short-term Zacks #3 Rank (Hold) on the stock.

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