DIRECTV 2004 Annual Report Download - page 104

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
period subsequent to the completion of the transactions. As a result of these items and the strategic transactions described above
and in Note 3, we recognized $169.5 million in charges for retention benefits, severance and related costs under our pension
benefit plans during 2004 in “General and administrative expenses” in the Consolidated Financial Statements.
In 2004, the $113.0 million of charges recorded at Corporate and Other included $36.2 million for retention benefits resulting
from the News Corporation transactions that were paid in 2004, $20.4 million for severance which was paid in 2004, and $56.4
million in pension costs. At HNS, we accrued $25.6 million in severance costs as a result of the lay-offs following the
announcement of the Thomson and SkyTerra transactions and paid out to employees $15.9 million in benefits during 2004. At
DTVLA, we recorded $20.9 million in severance and retention charges, including $6.3 million related to the ongoing shut-down
of operations at DIRECTV Mexico, and headcount reductions following the emergence from bankruptcy. DTVLA paid out to
employees $7.4 million in benefits during 2004.
Note 17: Related-Party Transactions
In the ordinary course of our operations, we enter into transactions with related parties to purchase and/or sell
telecommunication services, advertising, broadcast programming, equipment and inventory. As a result of the completion of the
News Corporation transactions, beginning on December 23, 2003, News Corporation and its affiliates are considered related
parties. As of December 31, 2004, we had the following types of contractual arrangements with related parties: purchase of
programming, products and advertising from News Corporation entities; license of certain intellectual property, including
patents, from News Corporation entities; purchase of system access products and support services; and sale of advertising space.
Transactions entered into with GM and its affiliates prior to December 23, 2003 were considered related party transactions.
Other related parties include DTVLA’s Puerto Rican, Venezuelan and Argentine LOCs until their respective dates of
consolidation with us and HTIL until we sold it on December 6, 2002 (see Note 3).
The following table summarizes sales and purchase transactions with related parties:
2004
2003
2002
(Dollars in Millions)
Sales
$
10.1
$
99.5
$
211.1
Purchases
476.7
69.7
117.9
The following table sets forth the amount of assets and liabilities resulting from transactions with related parties as of December
31:
2004
2003
(Dollars in Millions)
Accounts receivable
$
4.6
$
0.5
Accounts payable
101.3
75.1
The accounts receivable and accounts payable balances as of December 31, 2004 and 2003 are primarily related to affiliates of
News Corporation.
In addition to the items described above, we have agreed to purchase News Corporation’s interests in the Sky Latin America
businesses for cash payments totaling $500.5 million, of which we paid $342.5 million during the fourth quarter of 2004.
During 2004, we have also recorded stock-based compensation cost associated with former employees of News Corporation
who became our employees and retained their News Corporation stock options.
95