DIRECTV 2007 Annual Report Download - page 51

THE DIRECTV GROUP, INC.
Other Developments
In addition to the items described above, the following items had a significant effect on the
comparability of our operating results for the years ended December 31, 2007, 2006 and 2005:
Lease Program. On March 1, 2006, DIRECTV U.S. introduced a new set-top receiver lease
program. Prior to March 1, 2006, we expensed most set-top receivers provided to new and existing
DIRECTV U.S. subscribers upon activation as a subscriber acquisition or upgrade and retention cost in
the Consolidated Statements of Operations. Subsequent to the introduction of our lease program, we
lease most set-top receivers provided to new and existing subscribers, and therefore capitalize the
set-top receivers in ‘‘Property and equipment, net’’ in the Consolidated Balance Sheets.
The following table sets forth the amount of DIRECTV U.S. set-top receivers we capitalized, and
depreciation expense we recorded, under the lease program for the years presented:
December 31,
Capitalized subscriber leased equipment: 2007 2006
(Dollars in
Millions)
Subscriber leased equipment—subscriber acquisitions ........................ $ 762 $ 599
Subscriber leased equipment—upgrade and retention ........................ 774 473
Total subscriber leased equipment capitalized .............................. $1,536 $1,072
Depreciation expense—subscriber leased equipment ......................... $ 645 $ 147
Share Repurchase Program. During 2006 and 2007 our Board of Directors approved multiple
authorizations for the repurchase of a total of $5 billion of our common stock, the most recent of
which was a $1 billion authorization in August 2007 that was completed in December 2007. Subsequent
to December 31, 2007, our Board of Directors authorized the repurchase of an additional $1 billion of
our common stock. In 2007 we repurchased 86 million shares for $2,025 million at an average price of
$23.48 per share and in 2006 we repurchased 184 million shares for $2,977 million at an average price
of $16.16 per share.
KEY TERMINOLOGY USED IN MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Revenues. We earn revenues mostly from monthly fees we charge subscribers for subscriptions to
basic and premium channel programming, HD programming and access fees, pay-per-view
programming, and seasonal and live sporting events. We also earn revenues from monthly fees that we
charge subscribers with multiple non-leased set-top receivers (which we refer to as mirroring fees),
monthly fees we charge subscribers for leased set-top receivers, monthly fees we charge subscribers for
DVR service, hardware revenues from subscribers who lease or purchase set-top receivers from us, our
published programming guide, warranty service fees and advertising services.
Broadcast Programming and Other. These costs primarily include license fees for subscription
service programming, pay-per-view programming, live sports and other events. Other costs include
expenses associated with the publication and distribution of our programming guide, continuing service
fees paid to third parties for active subscribers, warranty service costs and production costs for on-air
advertisements we sell to third parties.
Subscriber Service Expenses. Subscriber service expenses include the costs of customer call centers,
billing, remittance processing and certain home services expenses, such as in-home repair costs.
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