DIRECTV 2003 Annual Report Download - page 60

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THE DIRECTV GROUP, INC.
During 2003, PanAmSat launched its Galaxy 12 and Galaxy 13/Horizons 1 satellites. PanAmSat expects to
launch up to three satellites by the end of 2006, including Galaxy 14 that is currently scheduled to launch in the
third quarter of 2004 to replace Galaxy 5 at 125 WL; Galaxy 15 which PanAmSat currently plans to launch in the
first quarter of 2005 to replace Galaxy 1R at 133 WL; and Galaxy 16 which PanAmSat currently plans to launch
in 2006 to replace Galaxy 4R at 99 WL prior to the end of its useful life. PanAmSat is currently negotiating
definitive terms for the acquisition of the Galaxy 16 satellite. In addition, in the second half of 2004, PanAmSat
expects to commence construction of Galaxy 17, an on-ground spare for Galaxy 11, which will also serve as a
spare to protect against launch failure of Galaxy 16. No commitment has been made for the procurement of the
Galaxy 17 satellite at this time.
HNS is currently developing SPACEWAY, a more advanced satellite broadband communications platform.
SPACEWAY will eventually include three satellites, which are currently under construction. HNS expects to
launch the first SPACEWAY satellite in North America in 2004 and expects to introduce service in 2005.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
News Corporation and Affiliates. Beginning on December 23, 2003, with the completion of the News
Corporation transactions, News Corporation and its affiliated companies are considered related parties of The
DIRECTV Group, Inc. and our affiliated companies. As of December 31, 2003, the Company and our
subsidiaries had contractual arrangements to: purchase programming, products and advertising from News
Corporation entities; license certain intellectual property, including patents from News Corporation entities; sell
advertising space; and lease satellite transponder capacity to News Corporation entities. All of the contractual
arrangements in existence at December 31, 2003 were entered into prior to the date that News Corporation was
considered a related party. The settlement of litigation between NDS, a News Corporation affiliate, and
DIRECTV U.S. became effective upon the completion of the News Corporation transactions. See Item 3. Legal
Proceedings for further information.
In January 2004, Fox and PanAmSat signed a multi-year, multi-satellite agreement, the terms of which
provide that Fox will consolidate its entire suite of U.S. cable and broadcast programming onto PanAmSat’s
global fleet for 15 years and move a significant portion of its international traffic onto the fleet for the next
decade. Fox will now be one of PanAmSat’s largest media customers and one of its top five global customers.
USE OF ESTIMATES IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL
STATEMENTS
The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates, judgments and assumptions
that affect amounts reported. Management bases its estimates, judgments and assumptions on historical
experience and on various other factors that are believed to be reasonable under the circumstances. Due to the
inherent uncertainty involved in making estimates, actual results reported for future periods may be affected by
changes in those estimates. The following represent what we believe are the critical accounting policies that may
involve a higher degree of estimation, judgment and complexity.
Valuation and Depreciation of Long-Lived Assets. We evaluate the carrying value of long-lived assets to
be held and used, other than goodwill and intangible assets with indefinite lives, when events and circumstances
warrant such a review. Our long-lived assets primarily include satellites and property. The carrying value of a
long-lived asset is considered impaired when the anticipated undiscounted future cash flow from such asset is
separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount
by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily
using the estimated future cash flows associated with the asset under review, discounted at a rate commensurate
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