DIRECTV 2002 Annual Report Download - page 60

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HUGHES ELECTRONICS CORPORATION
LIBOR plus 3.5%. The revolving credit facility and Tranche A Term Loan interest rates may be
increased or decreased based upon changes in PanAmSat’s total leverage ratio, as defined by the
credit agreement. The revolving credit facility and the Tranche A Term Loan terminate in 2007 and the
Tranche B Term Loan matures in 2008. Principal payments under the Tranche A Term Loan are due in
varying amounts from 2004 to 2007. Principal payments under the Tranche B Term Loan are due
primarily at maturity. The facilities are secured ratably by substantially all of PanAmSat’s operating
assets, including its satellites. PanAmSat repaid a $1,725 million intercompany loan from Hughes in
February 2002, using proceeds from the bank facility and notes payable described above, as well as
existing cash balances.
On October 1, 2001, Hughes entered into a $2.0 billion revolving credit facility with GMAC. The
facility was subsequently amended in February and November 2002. The most recent amendment
reduced the size of the facility to $1,500 million and provided for a commitment through August 31,
2003. The facility is comprised of a $1,500 million tranche secured by a $1,500 million Hughes cash
deposit. Borrowings under the facility bear interest at GMAC’s cost of funds plus 0.125%. The
$1,500 million cash deposit earns interest at a rate equivalent to GMAC’s cost of funds. Hughes has
the legal right of setoff with respect to the $1,500 million GMAC cash deposit, and accordingly offsets it
against amounts borrowed from GMAC under the $1,500 million tranche in the consolidated statement
of financial position. The facility was fully drawn as of December 31, 2002.
On January 5, 2001, DLA entered into a $450.0 million revolving credit facility. The obligations
under the DLA facility were assigned to Hughes in February 2002. In addition, the obligations under
SurFin’s unsecured revolving credit facilities of $400.0 million and $212.5 million were assigned to
Hughes in February 2002.
Other. $61.5 million in other short-term and long-term debt, related primarily to DLA and HNS’
international subsidiaries, was outstanding at December 31, 2002, bearing fixed and floating rates of
interest of 4.30% to 16.00%. Principal on these borrowings is due in varying amounts through 2007.
Acquisitions and Divestitures. DIRECTV Broadband. On April 3, 2001, Hughes acquired Telocity,
a company that provided land-based DSL services, through the completion of a tender offer and
merger. Telocity was operated as DIRECTV Broadband and is included as part of the Direct-To-Home
Broadcast segment. The purchase price was $197.8 million and was paid in cash.
On December 13, 2002, Hughes announced that DIRECTV Broadband would close its high-speed
Internet service business in the first quarter of 2003 and transition its existing customers to alternative
service providers. As a result, in December 2002, Hughes notified approximately half of DIRECTV
Broadband’s 400 employees of a layoff, with a minimum of 60 days notice during which time they were
paid, followed by receipt of a severance package. The remaining employees worked with customers
during the transition and assisted with the closure of the business, which occurred on February 28,
2003. As a result, Hughes recorded a fourth quarter 2002 charge of $92.8 million related to accruals for
employee severance benefits, contract termination payments and write-off of customer premise
equipment. This charge was recorded in “Selling, general and administrative expenses” in the
Consolidated Statements of Operations and Available Separate Consolidated Net Income (Loss).
Included in the $92.8 million charge were accruals for employee severance benefits of $21.3 million
and contract termination payments of $18.6 million. No amounts were paid as of December 31, 2002.
The financial information included herein reflects the acquisition discussed above from its date of
acquisition. The acquisition was accounted for by the purchase method of accounting and, accordingly,
the purchase price has been allocated to the assets acquired and the liabilities assumed based on their
estimated fair values at the date of acquisition.
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