DIRECTV 2004 Annual Report Download - page 105

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note 18. DLA LLC Reorganization
On March 18, 2003, DLA LLC filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
the U.S. Bankruptcy Court for the District of Delaware, or Bankruptcy Court. On February 13, 2004, the Bankruptcy Court
confirmed DLA LLC’s Plan of Reorganization, or the Reorganization Plan, which became effective on February 24, 2004.
Also, effective February 24, 2004, we made a contribution of certain claims, loans, equity and other interests in LOCs selling
the DIRECTV service in Latin America, and converted certain debt into equity, which increased our equity interest in the
restructured DLA LLC from 74.7% to approximately 85.9%. Darlene, which also contributed its equity and other interests in
various LOCs, holds the remaining approximately 14.1% equity interest in the restructured DLA LLC. The restructuring in
bankruptcy and the contributions by us and Darlene provided DLA LLC with direct control of the most significant LOCs and
assets. The net result of these transactions was an increase in minority interests of $47.3 million.
As of December 31, 2003, DLA LLC had approximately $784.8 million in assets, consisting principally of accounts receivable
of $728.7 million principally from LOCs, net fixed assets of $40.4 million and cash of $4.4 million. Liabilities subject to
compromise are DLA LLC’s unsecured liabilities incurred prior to the filing for reorganization under Chapter 11 of the
Bankruptcy Code. As of December 31, 2003, DLA LLC liabilities subject to compromise totaled $1.6 billion, which includes
$1.4 billion of unsecured debt obligations owed to the Company.
Our Consolidated Balance Sheet as of December 31, 2003 includes liabilities subject to compromise of DLA LLC of
approximately $206.7 million.
Reorganization income was $43.0 million in 2004 compared to reorganization expense of $212.3 million in 2003. The
reorganization income in 2004 includes a $62.6 million gain as a result of the settlement of certain obligations in connection
with the confirmation of the Reorganization Plan, partially offset by costs incurred to file the bankruptcy petition, legal and
consulting costs and other charges related to the DLA LLC reorganization. Reorganization expense of $212.3 million in 2003
includes the costs incurred to file the bankruptcy petition, ongoing related legal and consulting costs, costs related to settlement
agreements reached with creditors, the write-off of intangible assets and other charges related to the reorganization. Also
included in reorganization expense are accruals for any claims allowed in the Chapter 11 proceeding for amounts not previously
recognized as liabilities subject to compromise.
The DLA LLC Second Amended and Restated Limited Liability Company Agreement, as amended in February 2004, or the
DLA LLC Agreement, provides Darlene the right, under certain circumstances, to require us to purchase all of Darlene’s equity
interests in DLA LLC for $200.0 million (plus the amount of any outstanding debt of DLA LLC owed to Darlene). The DLA
LLC Agreement also provides that we have the right, under certain circumstances, to require Darlene to sell all of its equity
interests in DLA LLC to us for $400.0 million (plus the amount of any outstanding debt of DLA LLC owed to Darlene). Such
events are triggered if certain conditions are satisfied, including there is a combination of the business or operations of DLA
LLC with substantially all of the DTH satellite business or operations of Sky Latin America, an affiliate of News Corporation,
or other events as described in the DLA LLC Agreement, or a Sky Deal. We do not believe the conditions necessary to trigger
these events have been satisfied. In addition, under the terms of the DLA LLC Agreement, from February 24, 2005 through
February 24, 2010, either we or Darlene may provide notice to the other that the notifying party wishes to attempt a sale of DLA
LLC or an initial public offering of the equity of DLA LLC. The delivery of such notices starts a process which, among other
things, may trigger certain call rights by the non-notifying party. If such a notice were delivered by Darlene within the period
provided, and
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