DIRECTV 2003 Annual Report Download - page 65

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THE DIRECTV GROUP, INC.
Investments
We maintain investments in publicly-traded common stock of unaffiliated companies and are therefore
subject to equity price risk. These investments are classified as available-for-sale and, consequently, are reflected
in our Consolidated Balance Sheets at fair value with unrealized gains or losses, net of taxes, recorded as part of
OCI, a separate component of stockholders’ equity. Declines in market value that are judged to be other-than-
temporary are charged to “Other, net” in the Consolidated Statements of Income. The fair value of the
investments in such common stock was $486.9 million at December 31, 2003 based on closing market prices. A
10% decline in the market price of these investments would cause the fair value of the investments in common
stock to decrease by $48.7 million at December 31, 2003. No actions have been taken by us to hedge this market
risk exposure.
Interest Rate Risk
We are subject to fluctuating interest rates, which may adversely impact our consolidated results of
operations and cash flows. We had outstanding debt of $4.4 billion at December 31, 2003 which consisted of
PanAmSat’s fixed rate borrowings of $1,350 million and variable rate borrowings of $350 million, DIRECTV’s
fixed rate borrowings of $1,400 million and variable rate borrowings of $1,225 million, and various other
floating and fixed rate borrowings. As of December 31, 2003, the hypothetical impact of a one percentage point
increase in interest rates related to our outstanding variable rate debt would be to increase annual interest expense
by approximately $16 million.
Credit Risk
We are exposed to credit risk in the event of non-performance by the counterparties to our derivative
financial instrument contracts. While we believe this risk is remote, credit risk is managed through the periodic
monitoring and approval of financially sound counterparties.
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