DIRECTV 2005 Annual Report Download - page 80

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Description of Business
We are a leading provider of digital television entertainment in the United States and Latin
America. On March 16, 2004, we changed our corporate name from Hughes Electronics Corporation to
The DIRECTV Group, Inc. Our two continuing business segments, DIRECTV U.S. and DIRECTV
Latin America, which are differentiated by their geographic location, are engaged in acquiring,
promoting, selling and/or distributing digital entertainment programming via satellite to residential and
commercial subscribers. Through April 22, 2005 we also operated the Network Systems segment, which
was a provider of satellite-based private business networks and consumer broadband Internet access.
Subsequent to the April 22, 2005 sale of a 50% interest in the HNS Business to SkyTerra
Communications, Inc., or SkyTerra, we accounted for our investment in HNS under the equity method
of accounting. ‘‘Assets of business held for sale’’ and ‘‘Liabilities of businesss held for sale’’ in the
Consolidated Balance Sheets as of December 31, 2004 include substantially all of the then remaining
assets and liabilities of HNS. Please refer to Note 3 for more information regarding the sales of HNS’
businesses and assets.
•DIRECTV U.S. DIRECTV Holdings LLC and its subsidiaries, referred to as DIRECTV U.S., is
the largest provider of direct-to-home, or DTH, digital television services and the second largest
provider in the multi-channel video programming distribution industry in the United States.
•DIRECTV Latin America. DIRECTV Latin America, or DTVLA, which is comprised of a group
of companies that primarily includes our approximately 86% owned subsidiary, DIRECTV Latin
America, LLC, or DLA LLC, and its consolidated local operating companies, or LOCs, is a
leading provider of DTH digital television services throughout Latin America. On October 8,
2004, we entered into a series of transactions with News Corporation, Grupo Televisa, S.A., or
Televisa, Globo Comunicacoes e Participacoes S.A., or Globo, and Liberty Media
International, Inc., or Liberty, which we refer to as the Sky Transactions. The Sky Transactions
are designed to strengthen the operating and financial performance of DTVLA by consolidating
the DTH platforms of DTVLA and Sky Latin America into a single platform in each of the
major territories served in the region. See Note 3 for more information related to these
transactions.
Discontinued Operations
During 2004, we completed the sale of our approximately 80.4% interest in PanAmSat
Corporation, or PanAmSat, and a 55% interest in Hughes Software Systems, or HSS. Revenues,
operating costs and expenses, and other non-operating results for the discontinued operations of
PanAmSat, which formerly comprised the Satellite Services segment, and HSS, which was a component
of the Network Systems segment, have been excluded from our results from continuing operations for
all periods presented herein. Consequently, the financial results of PanAmSat and HSS are presented in
our Consolidated Statements of Operations in a single line item entitled ‘‘Income (loss) from
discontinued operations, net of taxes.’’ See Note 3 for additional information regarding these
divestitures.
News Corporation Transactions
On December 22, 2003, we, General Motors, or GM, and News Corporation completed a series of
transactions that resulted in our split-off from GM and the simultaneous sale of GM’s 19.8% interest in
us to News Corporation. GM split us off by distributing our 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
67