DIRECTV 2007 Annual Report Download - page 105

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THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
Note 15: Related-Party Transactions
In the ordinary course of our operations, we enter into transactions with related parties. News
Corporation and its affiliates are considered related parties because News Corporation owns
approximately 41% of our outstanding common stock. Companies in which we hold equity method
investments are also considered related parties, which include Sky Mexico from the acquisition on
February 16, 2006. We have the following types of contractual arrangements with our related parties:
purchase of programming, products and advertising; license of certain intellectual property, including
patents; purchase of system access products, set-top receiver software and support services; sale of
advertising space; purchase of employee services; and use of facilities. The majority of payments under
contractual arrangements with News Corporation entities relate to multi-year programming contracts.
Payments under these contracts are typically subject to annual rate increases and are based on the
number of subscribers receiving the related programming.
The following table summarizes sales and purchase transactions with related parties:
2007 2006 2005
(Dollars in Millions)
Sales ................................................ $ 24 $ 32 $ 18
Purchases ............................................. 1,124 832 707
The following table sets forth the amount of assets and liabilities resulting from transactions with
related parties as of December 31:
2007 2006
(Dollars in
Millions)
Accounts receivable ............................................ $ 22 $ 11
Accounts payable .............................................. 285 206
The accounts receivable and accounts payable balances as of December 31, 2007 and 2006 are
primarily related to affiliates of News Corporation. Accounts receivable as of December 31, 2007
includes $11 million for costs incurred on behalf of a News Corporation entity, which will be
reimbursed pursuant to a reimbursement agreement.
In addition to the transactions described above, 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 million in 2006. We received $127 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
described in Note 3.
Note 16: 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, 2007 and
December 31, 2006, we had no significant foreign currency or interest related derivative financial
instruments outstanding.
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