DIRECTV 2002 Annual Report Download - page 36

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HUGHES ELECTRONICS CORPORATION
recorded a $95 million gain, net of legal costs, as an offset to “Selling, general and administrative
expenses” in the first quarter of 2002.
***
With respect to the previously reported dispute between General Electric Capital Corporation
(“GECC”) and DIRECTV arising out of a contract entered into between the parties on July 31, 1995,
the parties executed an agreement on June 4, 2002 to settle the matter for $180 million. The
settlement resulted in DIRECTV recording a second quarter 2002 pre-tax charge of $47 million to
“Interest expense.” In the first quarter of 2002, DIRECTV increased its provision for loss related to this
matter by $83 million, of which $56 million was recorded as a charge to “Selling, general and
administrative expenses” and $27 million was recorded as a charge to “Interest expense.” Previously,
DIRECTV had accrued $50 million as of December 31, 1999 associated with the expected settlement
of this claim. The $180 million settlement was paid to GECC in June 2002.
***
As previously reported, following the discontinuation of DIRECTV Japan’s operations in
September 2000, Global Japan, Inc. (“Global”) commenced an action in the New York Supreme Court
on October 5, 2000 against Hughes, DIRECTV Japan Management Company, Inc., DIRECTV
International, Inc., DIRECTV, Inc. and the Hughes-appointed directors of DIRECTV Japan for alleged
breach of contract and fiduciary duty, fraudulent conveyance and tortious interference in connection
with the termination of two direct broadcast satellite distribution agreements between Global and
DIRECTV Japan. Global sought, among other things, damages of approximately $100 million. On
July 8, 2002, Hughes and Global executed an agreement to settle the matter for approximately
$20 million. The settlement amount was charged against an existing accrual related to this matter.
Payment for the approximate $20 million settlement was made to Global in July 2002.
***
On October 10, 2002, the Federal Communications Commission (“FCC”) announced that it
declined to approve the transfer of the licenses necessary to allow the completion of the Hughes/
EchoStar merger and designated the transfer for hearing by an administrative law judge. On October
31, 2002, the United States Department of Justice (“DOJ”), twenty-three states, the District of
Columbia and Puerto Rico filed a complaint for permanent injunctive relief in the United States District
Court for the District of Columbia against EchoStar, GM, Hughes and DIRECTV Enterprises LLC. As
previously disclosed, Hughes and EchoStar terminated the merger agreement on December 9, 2002.
In December 2002 and January 2003, the DOJ and the state actions were dismissed and the FCC
released its order terminating the administrative hearing proceeding and any other proceedings related
to the applications for FCC approval of the transfer of licenses.
***
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted.
26