DIRECTV 2005 Annual Report Download - page 115

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
pension benefit plans during 2004 in ‘‘General and administrative expenses’’ in the Consolidated
Statements of Operations.
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. At DTVLA, we recorded $20.9 million in severance and retention
charges, including $6.3 million related to the shut-down of operations at DIRECTV Mexico, and
headcount reductions following the emergence from bankruptcy. All severance and retention benefits
were paid to employees during 2005 and 2004.
Note 17: Related-Party Transactions
In the ordinary course of our operations, we enter into transactions with related parties. News
Corporation and its affiliates are considered related parties because, as of December 31, 2005, it owned
approximately 34% of our outstanding common stock. Additionally, as an equity method investee, HNS
LLC is considered a related party. As of December 31, 2005, we had the following types of contractual
arrangements with News Corporation entities: purchase of programming, products and advertising;
license of certain intellectual property, including patents; purchase of system access products, set-top
receiver software and support services; sale of advertising space; purchase of employee services; and
sublease of facilities. Transactions with GM and its affiliates prior to December 23, 2003 were also
considered related party transactions.
The following table summarizes sales and purchase transactions with related parties:
2005 2004 2003
(Dollars in Millions)
Sales ............................................... $ 17.9 $ 10.1 $99.5
Purchases ........................................... 707.0 476.7 69.7
The following table sets forth the amount of assets and liabilities resulting from transactions with
related parties as of December 31:
2005 2004
(Dollars in
Millions)
Accounts receivable .......................................... $ 8.2 $ 12.3
Accounts payable ........................................... 154.0 113.5
The accounts receivable and accounts payable balances as of December 31, 2005 and 2004 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 2005 and 2004, we also recorded stock-based
compensation cost associated with former employees of News Corporation who became our employees
and retained their News Corporation stock options.
102