DIRECTV 2005 Annual Report Download - page 52

THE DIRECTV GROUP, INC.
subscribers activate the DIRECTV service. See ‘‘Accounting Changes’’ in Note 2 of the Notes to the
Consolidated Financial Statements in Part II, Item 8 of this Annual Report for additional information.
DIRECTV Latin America
Sky Transactions. As part of the Sky Transactions, during the year ended December 31, 2004,
DTVLA recorded $8.5 million of severance and other costs related to the ongoing shut-down of
DIRECTV Mexico.
Reorganization. On March 18, 2003, DLA LLC filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. In February 2004, DLA LLC announced the confirmation of
its Plan of Reorganization by the U.S. Bankruptcy Court and its emergence from Chapter 11. As a
result of the bankruptcy proceedings described in more detail in Note 18 of the Notes to the
Consolidated Financial Statements in Item 8, Part II, DTVLA experienced reduced programming costs
in 2005 and 2004 due to more favorable programming contracts subsequent to the emergence from
bankruptcy.
Accounting Change. On July 1, 2003, as more fully discussed in Note 2 of the Notes to the
Consolidated Financial Statements in Item 8, Part II of this Annual Report, DTVLA began
consolidating the Venezuelan and Puerto Rican LOCs with the adoption of Financial Accounting
Standards Board, or FASB, Interpretation No. 46 (revised December 2003), ‘‘Consolidation of Variable
Interest Entities—an interpretation of ARB No. 51,’’ or FIN 46. Prior to July 1, 2003, DTVLA
accounted for its investments in the Venezuelan and Puerto Rican LOCs under the equity method of
accounting and reflected approximately 75.0% of their net income or loss in ‘‘Other, net’’ in the
Consolidated Statements of Operations. We recorded an after-tax charge of $64.6 million to
‘‘Cumulative effect of accounting changes, net of taxes’’ in the Consolidated Statements of Operations
during 2003 resulting from the adoption of FIN 46.
Other. DTVLA’s 2003 operating results were adversely affected by the economic and political
instability throughout Latin America. In particular, revenues and operating profit were significantly
affected by a loss in net subscribers and the ongoing devaluation of certain local currencies.
Eliminations and Other
Other. During December 2003, upon completion of the News Corporation transactions, we
expensed related costs of about $132 million that primarily included investment advisory fees of about
$49 million, retention benefits of about $65 million and severance benefits of about $15 million to
‘‘General and administrative expenses’’ in the Consolidated Statements of Operations. See Note 1 of
the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for
additional information regarding the News Corporation transactions.
Reporting Change
Beginning in 2005, we report our investments in auction rate securities as ‘‘Short-term
investments’’ rather than our previous practice of reporting these investments as part of ‘‘Cash and cash
equivalents’’ in our Consolidated Balance Sheets. As a result, we reclassified $522.6 million from ‘‘Cash
and cash equivalents’’ to ‘‘Short-term investments’’ in our Consolidated Balance Sheets at
December 31, 2004. Also, our cash flows from investing activities now include purchases and sales of
auction rate securities. This reclassification has no effect on our previously reported total current assets,
total assets, working capital or results of operations and does not affect our previously reported cash
flows from operating or financing activities.
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