DIRECTV 2007 Annual Report Download - page 50

THE DIRECTV GROUP, INC.
SIGNIFICANT EVENTS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS
Acquisitions
Darlene Transaction. On January 30, 2007, we acquired Darlene’s 14% equity interest in
DLA LLC for $325 million in cash and resolved all outstanding disputes with Darlene. We accounted
for this acquisition using the purchase method of accounting.
Sky Transactions. During 2006, we completed the last in a series of transactions that were agreed
in October 2004 with News Corporation, Televisa, Globo and Liberty Media International, which we
refer to as the Sky Transactions. These transactions were completed as follows:
• On August 23, 2006, we completed the merger of our Brazil business, Galaxy Brasil Ltda., or
GLB, with Sky Brazil and completed the purchase of News Corporation’s and Liberty Media
International’s interests in Sky Brazil. We accounted for the Sky Brazil acquisition using the
purchase method of accounting, and began consolidating the results of Sky Brazil from the date
of acquisition. We also accounted for the reduction of our interest in GLB resulting from the
merger as a partial sale which resulted in us recording a one-time pre-tax gain during the year
ended December 31, 2006 of approximately $61 million in ‘‘Gain from disposition of businesses,
net’’ in the Consolidated Statements of Operations.
• On February 16, 2006, we completed the acquisition of our equity interest in Sky Mexico, which
included the acquisition of an equity interest in Sky Mexico in exchange for the sale of our
DIRECTV Mexico subscribers to Sky Mexico and the acquisition of News Corporation’s and
Liberty Media International’s equity interests in Sky Mexico for $373 million in cash. As a result
of this transaction, we recorded gains of $57 million during the year ended December 31, 2006
and $70 million during the year ended December 31, 2005 to ‘‘Gain from disposition of
businesses, net ‘‘in the Consolidated Statements of Operations. DIRECTV Mexico ceased
operations in 2005 upon completion of the migration of its subscribers to Sky Mexico.
As a result of the Darlene and Sky transactions, we own 100% of PanAmericana, 74% of Sky
Brazil, and 41% of Sky Mexico. Globo owns the other 26% of Sky Brazil and Televisa owns the other
59% of Sky Mexico. The results of PanAmericana and Sky Brazil are consolidated in our results. We
account for our 41% interest in Sky Mexico under the equity method of accounting.
Divestiture
HNS—SkyTerra. On April 22, 2005, we completed the sale of a 50% interest in Hughes Network
Systems LLC, or HNS LLC, which owned substantially all of the net assets formerly held by HNS, to
SkyTerra Communications, Inc. As a result of this transaction, we recorded pre-tax impairment charges
of $25 million during the year ended December 31, 2005 to ‘‘Gain from disposition of businesses, net
‘‘in the Consolidated Statements of Operations to reduce the carrying value of HNS’ assets to fair
value. As a result of the SkyTerra transaction, subsequent to April 22, 2005, we accounted for our
investment in HNS under the equity method of accounting, and accordingly, recorded our interest in
HNS’ net income in ‘‘Other, net’’ in our Consolidated Statements of Operations until the sale of the
remaining interest in January 2006.
See Note 3 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual
Report for further information regarding acquisitions and divestitures.
41