DIRECTV 2004 Annual Report Download - page 55

THE DIRECTV GROUP, INC.
XM Satellite Radio shares; $250.0 million for the execution of the supply and development contract and sale of HNS’ set-top
receiver manufacturing operations to Thomson and $226.5 million for the sale of HSS. These sources of cash were partially
offset by: $1.02 billion of cash used for capital expenditures primarily at DIRECTV U.S., $960.2 million in payments for the
purchase of Pegasus and NRTC subscribers, $398.0 million in payments for the News Corporation and Liberty Media equity
stakes in the Sky Latin America platforms, and $213.2 million for required repayments by DIRECTV U.S. on its term loan
facility.
As a measure of liquidity, the current ratio (ratio of current assets to current liabilities) at December 31, 2004 and 2003 was 1.77
and 1.77, respectively. Working capital decreased by $2,439.7 million to $2,076.6 million at December 31, 2004 from working
capital of $4,516.3 million at December 31, 2003. The change was principally due to the sale of PanAmSat, partially offset by
the increase in cash discussed above.
As of December 31, 2004, DIRECTV U.S. has the ability to borrow up to $250 million under existing credit facilities. The
DIRECTV U.S. credit facilities are available until 2008. DIRECTV U.S. is subject to restrictive covenants under its credit
facilities. These covenants limit the ability of DIRECTV U.S. and its respective subsidiaries to, among other things, make
restricted payments, including dividends, loans or advances to us.
In 2004, we generated $1,261.7 million of positive cash flow (defined as net cash provided by operating activities plus net cash
provided by investing activities). In 2005, we expect to be about cash flow break-even. The additional operating cash flows
resulting from an anticipated improvement in operating profits, the $251.0 million in expected proceeds from the SkyTerra
transaction and the proceeds from the sale of our investment in Tata Teleservices Limited’s redeemable preference shares in
2005 will be offset in part by cash requirements for investing activities related to the remaining cash payments at completion of
the Sky Transactions. During 2005 and 2006, we anticipate that the amount of capital expenditures will be generally consistent
with 2004 due to capital expenditures at DIRECTV U.S. for satellites and broadcast equipment used in the launch of local
HDTV channels.
The financing transactions completed in 2003, as described in Note 9 of the Notes to the Consolidated Financial Statements in
Item 8, Part II, 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 are currently considering refinancing opportunities or otherwise modifying the maturity, amount and covenants of
our outstanding indebtedness, through amendments, restatements or otherwise depending on market conditions.
Notes Payable and Credit Facilities
At December 31, 2004, we had $2,429.3 million in total outstanding borrowings, bearing a weighted average interest rate of
6.71%. Our outstanding borrowings primarily consist of notes payable and amounts borrowed under credit facilities as more
fully described in Note 9 of the Notes to the Consolidated Financial Statements in Item 8, Part II of this Form 10-K, which we
incorporate herein by reference.
Our short-term borrowings, notes payable, credit facilities and other borrowings mature as follows: $19.8 million in 2005; $15.2
million in 2006; $11.4 million in 2007; $254.6 million in 2008; $485.4 million in 2009; and $1,642.9 million thereafter.
However, these amounts do not reflect potential prepayments that may be required under DIRECTV U.S.’ senior secured credit
facilities.
Dividend Policy and Stockholders’ Equity
Dividends may be paid on our common stock only when, as, and if declared by our Board of Directors in its sole discretion.
Except for the $275 million special cash dividend paid to GM in connection with the split-off, our Board of Directors has not
declared dividends on our common stock for more than five years. We have no current plans to pay any dividends on our
common stock. We currently expect to retain our future earnings, if any, for the development of our business or other corporate
purposes.
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