DIRECTV 2006 Annual Report Download - page 91

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
over the term of the Agreement, as described below. As part of the Agreement, as amended,
DIRECTV U.S. can earn a $57.0 million rebate from Thomson if Thomson’s aggregate sales of
DIRECTV U.S.’ set-top receivers equal at least $4.0 billion over the initial five year contract term plus
an optional one year extension period, or the Contract Term. Also as part of the Agreement, as
amended, DIRECTV U.S. can earn, on a pro rata basis, an additional $63.0 million rebate from
Thomson if Thomson’s aggregate sales of DIRECTV U.S.’ set-top receivers are in excess of $4.0 billion
and up to $5.7 billion during the Contract Term. The approximate $200 million of deferred proceeds
have been recorded in ‘‘Unearned subscriber revenue and deferred credits’’ and ‘‘Other Liabilities and
Deferred Credits’’ in our Consolidated Balance Sheets and is recognized as a pro-rata reduction to the
cost of set-top receivers purchased from Thomson. DIRECTV U.S. has determined that, based upon
projected set-top receiver requirements, it is probable and reasonably estimable that the minimum
purchase requirement will be met for the $57.0 million rebate during the Contract Term. DIRECTV
U.S. records a proportionate amount of the $57.0 million rebate as a pro-rata reduction to the cost of
set-top receivers purchased with a corresponding entry to ‘‘Accounts and notes receivable, net’’ in our
Consolidated Balance Sheets. DIRECTV U.S. recognized $46.7 million in 2006, $46.3 million in 2005
and $21.4 million in 2004 of the deferral and the $57.0 million rebate. As of December 31, 2006, the
accrued rebate receivable from Thomson amounted to $24.7 million.
We included the approximately $200 million in cash received from Thomson in cash flows from
operating activities in the Consolidated Statements of Cash Flows for the year ended December 31,
2004.
HNS’ operating results are included in continuing operations in our Consolidated Statements of
Operations through April 22, 2005. The following table sets forth our pro forma revenues and
operating profit (loss) excluding the HNS operations that were contributed as part of the SkyTerra
transaction and HNS’ set-top receiver manufacturing operations that were sold in June 2004:
Years Ended
December 31,
2005 2004
(Dollars in Millions)
Revenues ............................................. $12,956.7 $10,437.9
Operating Profit (Loss) ................................... 693.4 (340.9)
PanAmSat
In 2004, we sold our approximately 80.4% interest in PanAmSat for approximately $2.64 billion in
cash. The total loss on the sale of PanAmSat of $723.7 million, net of taxes, for the year ended
December 31, 2004 includes direct costs associated with the transaction and our retention of certain tax
liabilities of PanAmSat.
Operating results of the discontinued operations of PanAmSat were as follows:
Year Ended
December 31,
2004
(Dollars in
Millions)
Revenues .................................................... $518.9
Income before income taxes ....................................... $ 65.3
Income tax expense ............................................. (3.6)
Minority interests and other ....................................... (13.6)
Net income from discontinued operations, net of taxes ................... $ 48.1
80