DIRECTV 2003 Annual Report Download - page 52

THE DIRECTV GROUP, INC.
In 2003, we generated $646.3 million of positive cash flow (defined as net cash provided by operating
activities plus net cash used in investing activities). In 2004, we also expect to generate positive cash flow,
although below the 2003 amount. The additional operating cash flows resulting from an anticipated improvement
in operating profits will be offset in part by cash requirements for the NFL SUNDAY TICKET contract at
DIRECTV U.S. and payments resulting from the DLA bankruptcy proceedings. We anticipate using more cash
for investing activities related to capital expenditures at DIRECTV U.S. for satellites and broadcast equipment
used in the launch of new local channels and at HNS related to a shift in SPACEWAY capital expenditures from
2003 to 2004. These increases in cash used in investing activities will be partially offset by proceeds from
insurance claims of $260 million at PanAmSat and the cash proceeds from the sale of a portion of our interest in
XM Satellite Radio Holdings, Inc. for $254.4 million in January 2004. In addition, as part of our financing
activities during 2004, DIRECTV U.S. could be required to make a prepayment under its senior secured credit
facility, as discussed in more detail below.
Beyond 2004, capital expenditures could continue to increase, depending on the development of plans to
provide additional content such as HDTV and interactive services. The financing transactions completed in 2003,
as described in more detail below, were designed to provide liquidity to fund our existing business plan. As a
result, we expect to fund our existing business plan from a combination of existing cash balances, cash provided
from operations and amounts available under existing credit facilities. We currently do not anticipate borrowing
additional funds in 2004.
Notes Payable and Credit Facilities
At December 31, 2003, we had $4,361 million in total borrowings, bearing a weighted average interest rate
of 6.57%. Our outstanding borrowings primarily consist of notes payable and amounts borrowed under credit
facilities as more fully described below.
Notes Payable
On February 28, 2003, DIRECTV U.S., which we refer to in this “Notes Payable and Credit Facilities”
section as DIRECTV, issued $1,400.0 million in senior notes due in 2013 in a private placement transaction. The
ten-year senior notes bear interest at 8.375%. Principal on the senior notes is payable upon maturity, while
interest is payable semi-annually beginning September 15, 2003. The senior notes have been fully and
unconditionally guaranteed, jointly and severally, by each of DIRECTV’s domestic subsidiaries on a senior
unsecured basis. These senior notes were exchanged for registered notes with substantially identical terms in
September 2003.
In February 2002, PanAmSat completed an $800.0 million private placement notes offering, which notes
were exchanged for registered notes with substantially identical terms in November 2002. These unsecured notes
bear interest at an annual rate of 8.5%. Interest is payable semi-annually and the unsecured notes mature in 2012.
PanAmSat issued five, seven, ten and thirty-year fixed rate notes totaling $750.0 million in January 1998.
The $200.0 million five-year notes were repaid in January 2003. The outstanding principal balances and interest
rates as of December 31, 2003 were $275.0 million at 6.125% due in 2005, $150.0 million at 6.375% due in 2008
and $125.0 million at 6.875% due in 2028. Principal is payable at maturity, while interest is payable semi-
annually. In connection with a secured bank facility entered into by PanAmSat in February 2002, described
below, these notes were ratably secured with the bank facility by substantially all of PanAmSat’s assets,
including its satellites.
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