DIRECTV 2005 Annual Report Download - page 122

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
$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 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 that at
December 31, 2005, the conditions necessary to trigger these events had 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 independent third party appraisal of
DLA LLC indicated a valuation in excess of approximately $1.6 billion, then we could be obligated to
cooperate with attempts by Darlene to sell all of DLA LLC, conduct an initial public offering of the
equity of DLA LLC or exercise our call rights, which would cost approximately $400 million. These
rights are subject to many conditions and requirements, which are described in more detail in the DLA
LLC Agreement. As discussed above, in a lawsuit filed in October 2004 by Darlene against us and
others, Darlene asserts, among other claims, that it was fraudulently induced to enter into the DLA
LLC Agreement and that the Sky Deal is prohibited by the DLA LLC Agreement.
Note 22: Subsequent Events
In January 2006, we completed the sale of our remaining 50% interest in HNS LLC to SkyTerra.
In exchange for our remaining 50% interest and resolution of a working capital adjustment from the
April 22, 2005 transaction we received cash proceeds of $110 million. As a result of the transaction, in
the first quarter of 2006, we will record a net gain and equity earnings of $24.8 million to ‘‘Other, net’’
in the Consolidated Statements of Operations.
On February 7, 2006, our Board of Directors authorized a share repurchase program. Under the
repurchase program, we are authorized to spend up to $3.0 billion to repurchase outstanding shares of
our common stock. The source of funds for the proposed purchases is from our existing cash on hand
and cash from operations. We implemented the repurchase program on February 10, 2006. There is no
fixed termination date for the repurchase program and purchases may be made in the open market,
through block trades and other negotiated transactions. The program may be suspended, discontinued
or accelerated at any time. Repurchased shares will cease to be issued and outstanding but remain
authorized for registration and issuance in the future. Through March 7, 2006, we have repurchased
approximately 110.3 million shares for $1.7 billion, at an average price of $15.50 per share, which
includes 100 million shares of our common stock purchased from General Motors employee pension
and benefit trusts.
On February 16, 2006, we completed the acquisition of a 47% equity interest in Sky Mexico. The
47% equity interest includes a 12% interest issued by Sky Mexico that we acquired by exchanging the
Sky Mexico note receivable that we received from the migration of our DIRECTV Mexico subscribers
to Sky Mexico, and a 35% interest acquired from News Corporation and Liberty for $373.0 million in
cash. As a result of the completion of this transaction, we will report a gain of approximately
$58 million related to the exchange of the note receivable for the higher value 12% equity interest
during the first quarter of 2006. Additionally, Televisa has the right to acquire a portion of our equity
interest in Sky Mexico for $58.7 million upon receipt of regulatory approval. If Televisa elects to
acquire this interest then our equity interest will be reduced to approximately 41%. We will account for
our investment in Sky Mexico under the equity method of accounting.
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