DIRECTV 2006 Annual Report Download - page 113

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
The accounts receivable and accounts payable balances as of December 31, 2006 and 2005 are
primarily related to affiliates of News Corporation.
In connection with our purchase of News Corporation’s interests as part of the Sky Transactions,
we made cash payments to News Corporation of $315.0 million in 2006 and $342.5 million during the
fourth quarter of 2004. We received $127.0 million in cash from News Corporation in August 2006 for
the repayment of a note receivable for the assumption of certain liabilities as part of the Sky
Transactions.
Note 17: DLA LLC Reorganization
On March 18, 2003, DLA LLC filed a voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. On February 13,
2004, the Bankruptcy Court confirmed DLA LLC’s Plan of Reorganization, which became effective on
February 24, 2004.
Also, effective February 24, 2004, we made a contribution of certain claims, loans, equity and other
interests in local operating companies selling the DIRECTV service in Latin America, and converted
certain debt into equity, which increased our equity interest in the restructured DLA LLC from 74.7%
to approximately 86%. Darlene, which also contributed its equity and other interests in various local
operating companies, held the remaining approximately 14% equity interest in the restructured DLA
LLC, which we subsequently repurchased from Darlene. See Note 20 below for additional information.
The restructuring in bankruptcy and the contributions by us and Darlene provided DLA LLC with
direct control of the most significant local operating companies and assets. The net result of these
transactions was an increase in minority interests of $47.3 million.
Reorganization income was $43.0 million in 2004, which includes a $62.6 million gain that resulted
from the settlement of certain obligations in connection with the confirmation of the Reorganization
Plan, partially offset by costs incurred to file the bankruptcy petition, legal and consulting costs and
other charges related to the DLA LLC reorganization.
Note 18: Derivative Financial Instruments and Risk Management
Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency
exchange rates, interest rates and changes in the market value of our equity investments. We manage
our exposure to these market risks through internally established policies and procedures and, when
deemed appropriate, through the use of derivative financial instruments. We enter into derivative
instruments only to the extent considered necessary to meet our risk management objectives, and do
not enter into derivative contracts for speculative purposes. As of December 31, 2006 and
December 31, 2005, we had no significant foreign currency or interest related derivative financial
instruments outstanding.
Note 19: Segment Reporting
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, a provider of satellite-based
private business networks and broadband Internet access. As a result of the SkyTerra transactions
described in Note 3, after April 22, 2005, we no longer consolidate HNS, which formerly comprised the
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