DIRECTV 2003 Annual Report Download - page 110

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
deemed appropriate, through the use of derivative financial instruments. The Company enters into derivative
instruments only to the extent considered necessary to meet its risk management objectives, and does not enter
into derivative contracts for speculative purposes.
The Company generally conducts its business in U.S. dollars with some business conducted in a variety of
foreign currencies and therefore is exposed to fluctuations in foreign currency exchange rates. The Company’s
objective in managing its exposure to foreign currency changes is to reduce earnings and cash flow volatility
associated with foreign exchange rate fluctuations. Accordingly, the Company enters into foreign exchange
contracts to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and
anticipated foreign currency transactions. By policy, the Company maintains coverage between minimum and
maximum percentages of its anticipated foreign exchange exposures. The gains and losses on derivative foreign
exchange contracts offset changes in value of the related exposures.
The Company is exposed to interest rate changes from its outstanding fixed rate and floating rate
borrowings. The Company manages its fixed to floating rate debt mix to mitigate the impact of adverse changes
in interest rates on earnings and cash flows and on the market value of its borrowings. In accordance with policy,
from time to time the Company may enter into interest rate hedging contracts which effectively convert floating
rate borrowings to fixed rate borrowings, or fixed rate borrowings to floating rate borrowings.
The Company is exposed to credit risk in the event of non-performance by the counterparties to its
derivative financial instrument contracts. While the Company believes this risk is remote, credit risk is managed
through the periodic monitoring and approval of financially sound counterparties.
Note 19: Segment Reporting
The Company’s segments, which are differentiated by their products and services, include Direct-To-Home
Broadcast, Satellite Services and Network Systems. Direct-To-Home Broadcast is engaged in acquiring,
promoting, selling and/or distributing digital entertainment programming via satellite to residential and
commercial customers. Satellite Services is engaged in the selling, leasing and operating of satellite transponders
and providing services for cable television systems, news companies, Internet service providers and private
business networks. The Network Systems segment is a provider of satellite-based private business networks and
broadband Internet access, and a supplier of DIRECTV receiving equipment (set-top receivers and dishes). Other
includes the corporate office and other entities.
Beginning in 2003, the Company no longer allocates general corporate expenses to its subsidiaries. Prior
period segment information has been reclassified to conform to the current period presentation.
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