DIRECTV 2004 Annual Report Download - page 69

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
would close its high-speed Internet service business. Revenues, operating costs and expenses, and other non-operating results
for the discontinued operations of PanAmSat, which formerly comprised the Satellite Services segment, HSS, which was a
component of the Network Systems segment, and DIRECTV Broadband have been excluded from our results from continuing
operations for all periods presented herein. Consequently, the financial results of PanAmSat, HSS and DIRECTV Broadband
are presented in our Consolidated Statements of Operations in a single line item entitled “Income (loss) from discontinued
operations, net of taxes.” The related assets and liabilities of PanAmSat and HSS are presented in the Consolidated Balance
Sheets in line items entitled “Assets of businesses held for sale” and “Liabilities of businesses held for sale” as of December 31,
2003. “Assets of businesses held for sale” and “Liabilities of businesses held for sale” in the Consolidated Balance Sheets as of
December 31, 2004 include substantially all of the remaining assets and liabilities of HNS.
News Corporation Transactions
On December 22, 2003, we, General Motors Corporation, or GM, and News Corporation completed a series of transactions that
resulted in the split-off of the Company from GM and the simultaneous sale of GM’s 19.8% interest in us to News Corporation.
GM received approximately $3.1 billion in cash and 28.6 million News Corporation Preferred American Depository Shares, or
ADSs, in these transactions. GM split-off the Company by distributing the Company’s common stock to the holders of the GM
Class H common stock in exchange for their GM Class H common shares on a one-for-one basis. Immediately after the split-
off, News Corporation acquired an additional 14.2% of our outstanding common stock from the former GM Class H common
stockholders, which provided News Corporation with a total of 34% of our outstanding common stock. GM Class H common
stockholders received about 0.8232 shares of our common stock and about 0.09207 News Corporation Preferred ADSs for each
share of GM Class H common stock held immediately prior to the closing of the transactions. In addition, we paid to GM a
special cash dividend of $275 million in connection with the transactions. Upon completing these transactions, News
Corporation transferred its 34% interest in us to its 82% owned subsidiary, Fox Entertainment Group, Inc.
For us, the transactions represented an exchange of equity interests by investors. As such, we continue to account for our assets
and liabilities at historical cost and did not apply purchase accounting. We recorded the $275 million special cash dividend
payment to GM as a reduction to additional paid-in capital. We also recorded a $25.1 million decrease to additional paid-in
capital representing the difference between our consolidated tax receivable from GM as determined on a separate return basis
and the receivable determined pursuant to the amended income tax allocation agreement between GM and us. See Note 10 for
additional discussion regarding the amended income tax allocation agreement.
Upon completion of the transactions in 2003, we expensed related costs of about $132 million that primarily included
investment advisor fees of about $49 million, retention benefits of about $65 million and severance benefits of about $15
million. In addition, certain of our employees earned about $36 million in additional retention benefits during 2004 subsequent
to the completion of the News Corporation transactions. See Note 16 for more information about retention benefits.
Note 2: Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying financial statements are presented on a consolidated basis and include our accounts and those of our
domestic and foreign subsidiaries that we own more than 50% or otherwise control after elimination of intercompany accounts
and transactions. We allocate earnings and losses to minority interests only to the extent of a minority investor’s investment in a
subsidiary.
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