DIRECTV 2002 Annual Report Download - page 84

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HUGHES ELECTRONICS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Net cash provided by operating activities includes cash payments made for interest of
$398.0 million, $268.4 million and $312.9 million in 2002, 2001 and 2000, respectively and net cash
refunds received for prior year income taxes of $354.5 million, $310.7 million and $290.5 million in
2002, 2001 and 2000, respectively.
Contracts in Process
Contracts in process are stated at costs incurred plus estimated profit, less amounts billed to
customers and advances and progress payments applied. Engineering, tooling, manufacturing, and
applicable overhead costs, including administrative, research and development and selling expenses,
are charged to costs and expenses when incurred. Advances offset against contract related
receivables amounted to $38.2 million and $37.6 million at December 31, 2002 and 2001, respectively.
Inventories
Inventories are stated at the lower of cost or market principally using the average cost method.
Major Classes of Inventories 2002 2001
(Dollars in Millions)
Productive material and supplies ................................... $ 34.7 $ 58.3
Work in process ................................................. 111.2 145.7
Finished goods .................................................. 118.9 183.2
Provision for excess or obsolete inventory ............................ (34.5) (27.1)
Total....................................................... $230.3 $360.1
Property, Satellites and Depreciation
Property and satellites are carried at cost. Satellite costs include construction costs, launch costs,
launch insurance, incentive obligations, direct development costs and capitalized interest. Capitalized
satellite costs represent satellites under construction and the costs of successful satellite launches.
The proportionate cost of a satellite, net of accumulated depreciation and insurance proceeds, is
written-off in the period a full or partial loss of the satellite occurs. Capitalized customer leased set-top
box costs include the cost of hardware and installation. Depreciation is computed generally using the
straight-line method over the estimated useful lives of the assets. Leasehold improvements are
amortized over the lesser of the life of the asset or term of the lease.
Intangible Assets
As discussed below in Note 3, with the adoption of SFAS No. 142, “Goodwill and Other Intangible
Assets” on January 1, 2002, Hughes ceased amortization of goodwill and intangible assets with
indefinite lives. Goodwill and intangible assets with indefinite lives are subject to write-down, as
needed, based upon an impairment analysis that must occur at least annually, or sooner if an event
occurs or circumstances change that would more likely than not result in an impairment loss. Prior to
January 1, 2002, goodwill, which represents the excess of the cost over the net tangible and
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