Use these links to rapidly review the document
DIRECTV TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
|
(Mark One)
|
|
|
ý
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended March 31, 2012
|
OR
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period
from to
|
Commission file number 1-34554
DIRECTV
(Exact name of registrant as specified in its charter)
|
|
|
DELAWARE
(State or other jurisdiction of
incorporation or organization)
|
|
26-4772533
(I.R.S. Employer Identification No.)
|
2230 East Imperial Highway
El Segundo, California
(Address of principal executive offices)
|
|
90245
(Zip Code)
|
(310) 964-5000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
ý
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
ý
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
|
|
|
|
|
|
|
Large accelerated filer
ý
|
|
Accelerated filer
o
|
|
Non-accelerated filer
o
(Do not check if a
smaller reporting company)
|
|
Smaller reporting company
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
o
No
ý
As of May 3, 2012, the registrant had outstanding 654,998,605 shares of common stock.
Table of Contents
DIRECTV
TABLE OF CONTENTS
1
Table of Contents
DIRECTV
PART IFINANCIAL INFORMATION (UNAUDITED)
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions,
Except Per Share Amounts)
|
|
Revenues
|
|
$
|
7,046
|
|
$
|
6,319
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
2,964
|
|
|
2,593
|
|
Subscriber service expenses
|
|
|
499
|
|
|
449
|
|
Broadcast operations expenses
|
|
|
104
|
|
|
94
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
816
|
|
|
796
|
|
Upgrade and retention costs
|
|
|
343
|
|
|
281
|
|
General and administrative expenses
|
|
|
417
|
|
|
340
|
|
Depreciation and amortization expense
|
|
|
595
|
|
|
611
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
5,738
|
|
|
5,164
|
|
Operating profit
|
|
|
1,308
|
|
|
1,155
|
|
Interest income
|
|
|
12
|
|
|
7
|
|
Interest expense
|
|
|
(204
|
)
|
|
(172
|
)
|
Other, net
|
|
|
41
|
|
|
42
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,157
|
|
|
1,032
|
|
Income tax expense
|
|
|
(416
|
)
|
|
(349
|
)
|
|
|
|
|
|
|
Net income
|
|
|
741
|
|
|
683
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
(10
|
)
|
|
(9
|
)
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
731
|
|
$
|
674
|
|
|
|
|
|
|
|
Basic earnings attributable to DIRECTV per common share
|
|
$
|
1.08
|
|
$
|
0.85
|
|
Diluted earnings attributable to DIRECTV per common share
|
|
$
|
1.07
|
|
$
|
0.85
|
|
Weighted average number of common shares outstanding (in millions):
|
|
|
|
|
|
|
|
Basic
|
|
|
678
|
|
|
793
|
|
Diluted
|
|
|
681
|
|
|
797
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
2
Table of Contents
DIRECTV
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
741
|
|
$
|
683
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
20
|
|
|
16
|
|
Unrealized losses on securities
|
|
|
(1
|
)
|
|
(3
|
)
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
19
|
|
|
13
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
760
|
|
|
696
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
(12
|
)
|
|
(10
|
)
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
748
|
|
$
|
686
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
3
Table of Contents
DIRECTV
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
March 31,
2012
|
|
December 31,
2011
|
|
|
|
(Dollars in Millions,
Except Share Data)
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,526
|
|
$
|
873
|
|
Accounts receivable, net of allowances of $83 and $79
|
|
|
2,197
|
|
|
2,474
|
|
Inventories
|
|
|
285
|
|
|
280
|
|
Deferred income taxes
|
|
|
71
|
|
|
62
|
|
Prepaid expenses and other
|
|
|
368
|
|
|
552
|
|
|
|
|
|
|
|
Total current assets
|
|
|
7,447
|
|
|
4,241
|
|
Satellites, net
|
|
|
2,225
|
|
|
2,215
|
|
Property and equipment, net
|
|
|
5,493
|
|
|
5,223
|
|
Goodwill
|
|
|
4,109
|
|
|
4,097
|
|
Intangible assets, net
|
|
|
889
|
|
|
909
|
|
Investments and other assets
|
|
|
1,749
|
|
|
1,738
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
21,912
|
|
$
|
18,423
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
4,188
|
|
$
|
4,210
|
|
Unearned subscriber revenues and deferred credits
|
|
|
549
|
|
|
533
|
|
Current portion of long-term debt
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
6,237
|
|
|
4,743
|
|
Long-term debt
|
|
|
15,961
|
|
|
13,464
|
|
Deferred income taxes
|
|
|
1,796
|
|
|
1,771
|
|
Other liabilities and deferred credits
|
|
|
1,295
|
|
|
1,287
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
265
|
|
|
265
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
Common stock and additional paid-in capital$0.01 par value, 3,947,000,000 shares authorized, 664,796,472 and 691,306,695 shares issued and
outstanding of Class A common stock at March 31, 2012 and December 31, 2011, respectively
|
|
|
4,617
|
|
|
4,799
|
|
Accumulated deficit
|
|
|
(8,122
|
)
|
|
(7,750
|
)
|
Accumulated other comprehensive loss
|
|
|
(137
|
)
|
|
(156
|
)
|
|
|
|
|
|
|
Total stockholders' deficit
|
|
|
(3,642
|
)
|
|
(3,107
|
)
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
21,912
|
|
$
|
18,423
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
4
Table of Contents
DIRECTV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
741
|
|
$
|
683
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
595
|
|
|
611
|
|
Amortization of deferred revenues and deferred credits
|
|
|
(12
|
)
|
|
(8
|
)
|
Share-based compensation expense
|
|
|
27
|
|
|
22
|
|
Equity in earnings from unconsolidated affiliates
|
|
|
(33
|
)
|
|
(25
|
)
|
Net foreign currency transaction gain
|
|
|
(13
|
)
|
|
(8
|
)
|
Dividends received
|
|
|
|
|
|
45
|
|
Gain on sale of investments
|
|
|
|
|
|
(26
|
)
|
Deferred income taxes
|
|
|
58
|
|
|
115
|
|
Excess tax benefit from share-based compensation
|
|
|
(28
|
)
|
|
(24
|
)
|
Other
|
|
|
22
|
|
|
14
|
|
Change in other operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
312
|
|
|
87
|
|
Inventories
|
|
|
(5
|
)
|
|
(65
|
)
|
Prepaid expenses and other
|
|
|
161
|
|
|
53
|
|
Accounts payable and accrued liabilities
|
|
|
(77
|
)
|
|
(142
|
)
|
Unearned subscriber revenue and deferred credits
|
|
|
16
|
|
|
(5
|
)
|
Other, net
|
|
|
(1
|
)
|
|
(18
|
)
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,763
|
|
|
1,309
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
(753
|
)
|
|
(613
|
)
|
Cash paid for satellites
|
|
|
(58
|
)
|
|
(31
|
)
|
Proceeds from sale of investments
|
|
|
|
|
|
61
|
|
Other, net
|
|
|
25
|
|
|
39
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(786
|
)
|
|
(544
|
)
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
Cash proceeds from debt issuance
|
|
|
3,996
|
|
|
3,990
|
|
Debt issuance costs
|
|
|
(23
|
)
|
|
(28
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
(341
|
)
|
Proceeds from borrowings under revolving credit facility
|
|
|
400
|
|
|
|
|
Repayment of borrowings under revolving credit facility
|
|
|
(400
|
)
|
|
|
|
Repayment of short-term borrowings
|
|
|
|
|
|
(39
|
)
|
Repayment of other long-term obligations
|
|
|
(13
|
)
|
|
(120
|
)
|
Common shares repurchased and retired
|
|
|
(1,260
|
)
|
|
(1,405
|
)
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
(52
|
)
|
|
(53
|
)
|
Excess tax benefit from share-based compensation
|
|
|
28
|
|
|
24
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
2,676
|
|
|
2,028
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
3,653
|
|
|
2,793
|
|
Cash and cash equivalents at beginning of the period
|
|
|
873
|
|
|
1,502
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
$
|
4,526
|
|
$
|
4,295
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
255
|
|
$
|
164
|
|
Cash paid for income taxes
|
|
|
113
|
|
|
77
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
5
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Description of Business and Basis of Presentation
DIRECTV, which we sometimes refer to as the company, we, or us, is a leading provider of digital television entertainment in the United
States and Latin America. We operate two direct-to-home, or DTH, business units: DIRECTV U.S. and DIRECTV Latin America, which are differentiated by their geographic locations
and are engaged in acquiring, promoting, selling and distributing digital entertainment programming primarily via satellite to residential and commercial subscribers. In addition, we own and operate
three regional sports networks and own a 60% interest in Game Show Network, LLC, or GSN, a television network dedicated to game-related programming and Internet interactive game
playing. We account for our investment in GSN using the equity method of accounting.
-
-
DIRECTV
U.S.
DIRECTV Holdings LLC and its subsidiaries, which we refer to as DIRECTV U.S., is the largest provider of DTH digital
television services and the second largest provider in the multi-channel video programming distribution industry in the United States.
-
-
DIRECTV Latin
America.
DIRECTV Latin America Holdings, Inc. and its subsidiaries, or DIRECTV Latin America, is a leading provider of DTH
digital television services throughout Latin America. DIRECTV Latin America is comprised of: PanAmericana, which provides services in Argentina, Chile, Colombia, Ecuador, Puerto Rico, Venezuela and
certain other countries in the region, and Sky Brasil Servicos Ltda., which we refer to as Sky Brasil, which is a 93% owned subsidiary. DIRECTV Latin America also includes our 41% equity method
investment in Innova, S. de R.L. de C.V., or Sky Mexico, which we include in the PanAmericana segment.
-
-
DIRECTV Sports
Networks.
DIRECTV Sports Networks LLC and its subsidiaries, or DSN, is comprised primarily of three regional sports networks
based in Seattle, Washington; Denver, Colorado and Pittsburgh, Pennsylvania, each of which operates under the brand name ROOT Sports. The operating results of DSN are reported as part of the "Sports
Networks, Eliminations and Other" reporting segment.
During
the first quarter of 2012, we revised our reportable segments. As further discussed in Note 10, our DIRECTV Latin America business unit, which was previously reported as a
single segment, will now be reported as two segments, Sky Brasil and PanAmericana. We have restated certain prior period amounts to conform to the current year presentation of reporting segments.
We
have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, for
interim financial reporting. In the opinion of management, all adjustments (consisting only of normal recurring items) that are necessary for a fair presentation have been included. The results for
interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 23, 2012, and all of
our other filings, including Current Reports on Form 8-K, filed with the SEC after such date and through the date of this report.
We
prepare our consolidated financial statements in conformity with GAAP, which requires us to make estimates and assumptions that affect amounts reported herein. We base our estimates
and assumptions on historical experience and on various other factors that we believe to be reasonable
6
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
under
the circumstances. Due to the inherent uncertainty involved in making estimates, our actual results reported in future periods may be affected by changes in those estimates.
Note 2: Divestiture
Due to certain governance arrangements which limit DIRECTV's ability to control GSN, we account for GSN as an equity method investment.
In March 2011, we sold a 5% ownership interest in GSN for $60 million in cash to our equity partner, reducing our ownership interest to 60%. We recognized a $25 million gain,
$16 million after tax, on the sale in "Other, net" in the Consolidated Statements of Operations, which represents the difference between the selling price and the carrying amount of the portion
of our equity method investment sold. Additionally, we entered into an agreement with our equity partner in GSN under which we have the right to require them to purchase an additional 18% interest in
GSN during specified windows in each of 2012, 2013 and 2014, and in 2014, if we have not exercised that right, our equity partner in GSN has the right to require us to sell such 18% interest to them,
in each case for an exercise price which exceeds our carrying value for that portion of the investment. Such exercise price is calculated using a formula based on an agreed upon multiple of the
earnings of GSN with a minimum price of $234 million and a maximum price of $288 million. As of March 31, 2012, the book value of our 60% interest in GSN was $431 million.
Note 3: Change in Accounting Estimate
We currently lease most set-top receivers provided to new and existing subscribers and therefore capitalize the cost of
those set-top receivers. We depreciate capitalized set-top receivers over the estimated useful life of the equipment. As a result of the completion of an extensive evaluation
of the estimated useful life of the set-top receivers in the third quarter of 2011, including consideration of historical write-offs, improved efficiencies in our refurbishment
program, improved set-top receiver failure rates over time and management's judgment of the risk of technological obsolescence, we determined that the estimated useful life of
high-definition, or HD, set-top receivers used in our DIRECTV U.S. business has increased to four years, from three years as previously estimated. We will continue to
depreciate standard-definition set-top receivers at DIRECTV U.S. over a three-year estimated useful life. We have accounted for this change in the useful life of the HD
set-top receivers at DIRECTV U.S. as a change in an accounting estimate beginning July 1, 2011. This change had the effect of reducing depreciation and amortization expense
and increasing both net income attributable to DIRECTV and earnings per share in our consolidated results of operations as follows:
|
|
|
|
|
|
|
Three Months Ended
March 31, 2012
|
|
|
|
(Dollars in Millions,
Except Per Share Amounts)
|
|
Depreciation and amortization expense
|
|
$
|
(55
|
)
|
Net income attributable to DIRECTV
|
|
|
33
|
|
Basic and diluted earnings attributable to DIRECTV per common share
|
|
$
|
0.05
|
|
7
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Note 4: Goodwill and Intangible Assets
As discussed in Note 10, during the first quarter of 2012, we revised our reportable segments and now report DIRECTV Latin
America as two reportable segments, Sky Brasil and PanAmericana. Accordingly, goodwill historically assigned to the DIRECTV Latin America segment has been restated to reflect the amounts attributable
to each of these new reporting segments.
The
changes in the carrying amounts of goodwill at each of our reporting segments for the three months ended March 31, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
|
|
|
DIRECTV
U.S.
|
|
Sky Brasil
|
|
PanAmericana
|
|
Sports
Networks,
Eliminations
and Other
|
|
Total
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2012
|
|
$
|
3,177
|
|
$
|
414
|
|
$
|
211
|
|
$
|
295
|
|
$
|
4,097
|
|
Sky Brasil foreign currency translation adjustment
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2012
|
|
$
|
3,177
|
|
$
|
426
|
|
$
|
211
|
|
$
|
295
|
|
$
|
4,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 5: Debt
The following table sets forth our outstanding debt:
|
|
|
|
|
|
|
|
|
|
March 31,
2012
|
|
December 31,
2011
|
|
|
|
(Dollars in Millions)
|
|
Senior notes
|
|
$
|
17,461
|
|
$
|
13,464
|
|
Less: Current portion of long-term debt
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
15,961
|
|
$
|
13,464
|
|
|
|
|
|
|
|
As
of March 31, 2012, DIRECTV U.S. had the ability to borrow up to an additional $2 billion under its revolving credit facility as discussed in further detail below.
In January 2012, DIRECTV U.S. borrowed $400 million under its revolving credit facility, which was repaid in March 2012.
8
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
On
March 8, 2012, DIRECTV U.S. issued the following senior notes in private placement transactions:
|
|
|
|
|
|
|
|
|
|
Principal
|
|
Proceeds, net
of discount
|
|
|
|
(Dollars in Millions)
|
|
2.400% senior notes due in 2017
|
|
$
|
1,250
|
|
$
|
1,249
|
|
3.800% senior notes due in 2022
|
|
|
1,500
|
|
|
1,499
|
|
5.150% senior notes due in 2042
|
|
|
1,250
|
|
|
1,248
|
|
|
|
|
|
|
|
|
|
$
|
4,000
|
|
$
|
3,996
|
|
|
|
|
|
|
|
We
incurred $26 million of debt issuance costs in connection with this transaction.
Pursuant
to a registration rights agreement with the initial purchasers of the senior notes, DIRECTV U.S. has caused a registration statement to become effective, whereby all holders of
the original notes can elect to exchange their existing notes for registered notes with identical terms, except that the registered notes are registered under the Securities Act of 1933, as amended,
and will not bear the legends restricting their transfer. We expect that the exchange offer of these senior notes will be completed during the second quarter of 2012.
On
April 13, 2012, DIRECTV U.S. announced that, pursuant to the terms of its indenture, it will redeem for cash all of its then outstanding $1,500 million of 7.625% senior
notes due in 2016 on May 15, 2012, at a price of 103.813%, together with accrued and unpaid interest to the redemption date. As of March 31, 2012 we have recorded the outstanding balance
in "Current portion of long-term debt" in the Consolidated Balance Sheets. Upon the completion of the redemption, we expect to make a cash payment of $1,614 million and recognize a
pre-tax charge of $64 million, $39 million after tax, of which $57 million will result from the premium paid for the redemption and $7 million will result from
the write-off of deferred debt issuance and other transaction costs.
On March 10, 2011, DIRECTV U.S. issued the following senior notes:
|
|
|
|
|
|
|
|
|
|
Principal
|
|
Proceeds, net
of discount
|
|
|
|
(Dollars in Millions)
|
|
3.500% senior notes due 2016
|
|
$
|
1,500
|
|
$
|
1,497
|
|
5.000% senior notes due 2021
|
|
|
1,500
|
|
|
1,493
|
|
6.375% senior notes due 2041
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
$
|
4,000
|
|
$
|
3,990
|
|
|
|
|
|
|
|
We
incurred $24 million of debt issuance costs in connection with this transaction.
On
March 17, 2011, DIRECTV U.S. purchased, pursuant to a tender offer, $341 million of its then outstanding $1,002 million of 6.375% senior notes due in 2015 at a
price of 103.313%, plus accrued and unpaid interest, for a total of $358 million. The redemption of the 6.375% senior notes resulted in a first quarter of 2011 pre-tax charge of
$11 million, $7 million after tax, primarily for the premium paid for the redemption. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.
9
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The following table sets forth our outstanding senior notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount
|
|
Carrying value, net of unamortized original
issue discounts or including premium
|
|
|
|
March 31,
2012
|
|
March 31,
2012
|
|
December 31,
2011
|
|
|
|
(Dollars in Millions)
|
|
4.750% senior notes due 2014
|
|
$
|
1,000
|
|
$
|
999
|
|
$
|
999
|
|
3.550% senior notes due 2015
|
|
|
1,200
|
|
|
1,199
|
|
|
1,199
|
|
3.125% senior notes due 2016
|
|
|
750
|
|
|
750
|
|
|
750
|
|
3.500% senior notes due 2016
|
|
|
1,500
|
|
|
1,498
|
|
|
1,498
|
|
7.625% senior notes due 2016
|
|
|
1,500
|
|
|
1,500
|
|
|
1,500
|
|
2.400% senior notes due 2017
|
|
|
1,250
|
|
|
1,249
|
|
|
|
|
5.875% senior notes due 2019
|
|
|
1,000
|
|
|
994
|
|
|
994
|
|
5.200% senior notes due 2020
|
|
|
1,300
|
|
|
1,298
|
|
|
1,298
|
|
4.600% senior notes due 2021
|
|
|
1,000
|
|
|
999
|
|
|
999
|
|
5.000% senior notes due 2021
|
|
|
1,500
|
|
|
1,494
|
|
|
1,494
|
|
3.800% senior notes due 2022
|
|
|
1,500
|
|
|
1,499
|
|
|
|
|
6.350% senior notes due 2040
|
|
|
500
|
|
|
500
|
|
|
499
|
|
6.000% senior notes due 2040
|
|
|
1,250
|
|
|
1,234
|
|
|
1,234
|
|
6.375% senior notes due 2041
|
|
|
1,000
|
|
|
1,000
|
|
|
1,000
|
|
5.150% senior notes due 2042
|
|
|
1,250
|
|
|
1,248
|
|
|
|
|
|
|
|
|
|
|
|
|
Total senior notes
|
|
$
|
17,500
|
|
$
|
17,461
|
|
$
|
13,464
|
|
|
|
|
|
|
|
|
|
The
fair value of our senior notes was approximately $18,555 million at March 31, 2012 and $14,512 million at December 31, 2011. We calculated the fair values
based on quoted market prices of our senior notes, which is a Level 1 input under accounting guidance for fair value measurements of assets and liabilities.
All
of our senior notes were issued by DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., or the Co-Issuers, and have been registered under the
Securities Act of 1933, as amended. On November 14, 2011, we entered into a series of Supplemental Indentures whereby DIRECTV agreed to fully guarantee all of the senior notes, jointly and
severally with substantially all of DIRECTV Holdings LLC's domestic subsidiaries. The Supplemental Indentures provide that DIRECTV unconditionally guarantees that the principal and interest on
the respective senior notes will be paid in full when due and that the obligations of the Co-Issuers to the holders of the outstanding senior notes will be performed. All of the senior
notes issued since November 14, 2011 are also similarly fully guaranteed by DIRECTV.
As
a result of the guarantees, holders of the senior notes have the benefit of DIRECTV's interests in the assets and related earnings of our operations that are not held through DIRECTV
Holdings LLC and its subsidiaries. Those operations are primarily our DTH digital television services throughout Latin America which are held by DIRECTV Latin America Holdings, Inc. and
its subsidiaries and DIRECTV Sports Networks LLC and its subsidiaries. However, the subsidiaries that own and operate DIRECTV Latin America Holdings and DIRECTV Sports Networks LLC have
not guaranteed the senior notes.
10
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
guarantees are unsecured senior obligations of DIRECTV and rank equally in right of payment with all of DIRECTV's existing and future senior debt and rank senior in right of payment
to all of DIRECTV's future subordinated debt, if any. The guarantees are effectively subordinated to all existing and future secured obligations, if any, of DIRECTV to the extent of the value of the
assets securing the obligations. DIRECTV will not be subject to the covenants contained in each indenture of the senior notes and our guarantees will terminate and be released on the terms set forth
in each of the indentures.
Our
senior notes payable mature as follows: $1,500 million in 2012, $1,000 million in 2014, $1,200 million in 2015, $2,250 million in 2016 and
$11,550 million in 2017 and thereafter. The amount of interest accrued related to our outstanding debt was $146 million at March 31, 2012 and $201 million at
December 31, 2011.
In February 2011, DIRECTV U.S.' $500 million, six-year senior secured credit facility was terminated and replaced
with a five-year, $2 billion revolving credit facility. We pay a commitment fee of 0.30% per year for the unused commitment under the revolving credit facility, and borrowings bear
interest at an annual rate of (i) the London interbank offer rate (LIBOR) (or for Euro advances the EURIBOR rate) plus 1.50% or at our option (ii) the higher of the prime rate plus 0.50%
or the Fed Funds Rate plus 1.00%. The commitment fee and the annual interest rate may be increased or decreased under certain conditions, which include changes in DIRECTV U.S.' long-term,
unsecured debt ratings. The revolving credit facility has been fully and unconditionally guaranteed, jointly and severally, by substantially all of DIRECTV U.S.' domestic subsidiaries on a senior
unsecured basis.
The revolving credit facility requires DIRECTV U.S. to maintain at the end of each fiscal quarter a specified ratio of indebtedness to
adjusted net income. The revolving credit facility also includes covenants that restrict DIRECTV U.S.' ability to, among other things, (i) incur additional subsidiary indebtedness,
(ii) incur liens, (iii) enter into certain transactions with affiliates, (iv) merge or consolidate with another entity, (v) sell, assign, lease or otherwise dispose of all
or substantially all of its assets, and (vi) change its lines of business. Additionally, the senior notes contain restrictive covenants that are similar. Should DIRECTV U.S. fail to comply with
these covenants, all or a portion of its borrowings under the senior notes could become immediately payable and its revolving credit facility could be terminated. At March 31, 2012, management
believes DIRECTV U.S. was in compliance with all such covenants. The senior notes and revolving credit facility also provide that the borrowings may be required to be prepaid if certain
change-in-control events occur.
Restricted Cash.
Restricted cash of $6 million as of March 31, 2012 and $30 million as of December 31, 2011 was
included
as part of "Prepaid expenses and other" in our Consolidated Balance Sheets. These amounts secure our letter of credit obligations. The restrictions on the cash will be removed as the letters of credit
expire.
11
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Note 6: Contingencies
In connection with our acquisition of Sky Brasil in 2006, our partner who holds the remaining 7% interest, Globo
Comunicações e Participações S.A., or Globo, was granted the right, until January 2014, to require us to purchase all, but not less
than all, of its shares in Sky Brasil. Upon exercising this right, the fair value of Sky Brasil shares will be determined by mutual agreement or by an outside valuation expert, and we have the option
to elect to pay for the Sky Brasil shares in cash, shares of our common stock or a combination of both. As of March 31, 2012 and December 31, 2011, we estimated that Globo's remaining 7%
equity interest in Sky Brasil had a fair value of approximately $265 million. Adjustments to the carrying amount of the redeemable noncontrolling interest are recorded to additional
paid-in-capital. We determined the fair values using significant unobservable inputs, which are Level 3 inputs under accounting guidance for measuring fair value.
Companies operating in Venezuela are required to obtain Venezuelan government approval to exchange Venezuelan bolivars into U.S.
dollars at the official rate of 4.3 bolivars per U.S. dollar. Our ability to pay U.S. dollar denominated obligations and repatriate cash generated in Venezuela in excess of local operating
requirements is limited, resulting in an increase in the cash balance at our Venezuelan subsidiary. At such time that exchange controls are eased, accumulated cash balances may ultimately be
repatriated at less than their currently reported value, as the official exchange rate has not changed despite continuing high inflation in Venezuela. In addition, in the event of a significant
devaluation of the bolivar, we may recognize a charge to earnings based on
the amount of bolivar denominated net monetary assets (monetary assets net of monetary liabilities) held at the time of such devaluation and this may affect the growth of our Venezuelan business.
We
use the official 4.3 bolivars per U.S. dollar exchange rate to translate the financial statements of our Venezuelan subsidiary. As of March 31, 2012, our Venezuelan subsidiary
had Venezuelan bolivar denominated net monetary assets of $312 million, including cash of $396 million.
Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal
actions, claims and proceedings are pending against us arising in the ordinary course of business. We have established loss provisions for matters in which losses are probable and can be reasonably
estimated. Some of the matters may involve compensatory, punitive, or treble damage claims, or demands that, if granted, could require us to pay damages or make other expenditures in amounts that
could not be estimated at March 31, 2012. After discussion with counsel representing us in those actions, it is the opinion of management that such litigation is not expected to have a material
effect on our consolidated financial statements. We expense legal costs as incurred.
Pegasus Development Corporation and Personalized Media Communications L.L.C.
In December, 2000, Pegasus Development Corporation and
Personalized
Media Communications L.L.C. filed suit in the United States District Court for the District of Delaware against DIRECTV, Inc., Hughes Electronics Corporation, Thomson Consumer
Electronics, Inc., and Philips Electronics North America Corporation. The suit alleged infringement of certain claims of seven United States patents and sought an injunction and a monetary
award including damages for infringement, interest, costs, and attorneys'
12
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
fees.
Trial is presently scheduled for November, 2013. The suit now involves claims of four of the seven patents originally asserted, all of which have expired, and the validity and infringement of
which are disputed by DIRECTV.
Other Intellectual Property Litigation.
We are a defendant in several unrelated lawsuits claiming infringement of various patents
relating to various
aspects of our businesses. In certain of these cases other industry participants are also defendants, and also in certain of these cases we expect that at least some potential liability would be the
responsibility of our equipment vendors pursuant to applicable contractual indemnification provisions. To the extent that the allegations in these lawsuits can be analyzed by us at this stage of their
proceedings, we believe the claims are without merit and intend to defend the actions vigorously. We have determined that the likelihood of a material liability in such matters is remote or have made
appropriate accruals and the final disposition of these claims is not expected to have a material effect on our consolidated financial position. However, if an adverse ruling is made in a lawsuit
involving key intellectual property, such ruling could result in a loss that would be material to our consolidated results of operations of any one period. No assurance can be given that any adverse
outcome would not be material to our consolidated financial position.
Early Cancellation Fees.
In 2008, a number of plaintiffs filed putative class action lawsuits in state and federal courts challenging
the early
cancellation fees we assess our customers when they do not fulfill their programming commitments. Several of these lawsuits are pending, some in California state court purporting to represent
statewide classes, and some in federal courts purporting to represent nationwide classes. The lawsuits seek both monetary and injunctive relief. While the theories of liability vary, the lawsuits
generally challenge these fees under state consumer protection laws as both unfair and inadequately disclosed to customers. Our motions to compel arbitration have been granted in all of the federal
cases, except as to claims seeking injunctive relief under California statutes. The denial of our motion as to those claims is currently on appeal. We believe that our early cancellation fees are
adequately disclosed, and represent reasonable estimates of the costs we incur when customers cancel service before fulfilling their programming commitments.
ECAD.
Sky Brasil, along with other video distributors in Brazil, is disputing charges assessed by Escritorio Central de Arrecadacao, or
ECAD, the
organization responsible for collecting performance rights fees under Brazilian law. Sky Brasil has been withholding payments to ECAD since 2004, and has accrued amounts both we and Sky Brasil believe
are adequate to satisfy amounts owed to ECAD. In order to continue its opposition to ECAD's claims, in October 2011, Sky Brasil was required to provide a letter of credit in the amount of
approximately $85 million which represents the contested fees plus accrued interest and penalties, for the period from January 2004 to September 2009, plus an additional 30% required by
Brazilian law. Sky Brasil's dispute with ECAD is currently pending in the Superior Justice Tribunal, and there are other claims by the Brazilian pay television association, known as ABTA, against ECAD
before the Brazilian antitrust board, or CADE, which may affect ECAD or the rights fees it is attempting to collect.
From
time to time, we receive investigative inquiries or subpoenas from state and federal authorities with respect to alleged violations of state and federal statutes. These inquiries
may lead to legal proceedings in some cases. DIRECTV U.S. has received a request for information from the Federal Trade Commission, or FTC, on issues similar to those resolved in 2010 with a
multistate group of state attorneys general. We are cooperating with the FTC by providing information about our sales and marketing practices and customer complaints.
13
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
We have received tax assessments from certain foreign jurisdictions and have agreed to indemnify previously divested businesses for
certain tax assessments relating to periods prior to their respective divestitures. These assessments are in various stages of the administrative process or litigation, and we believe we have
adequately provided for any related liability.
While
the outcome of these assessments and other tax issues cannot be predicted with certainty, we believe that the ultimate outcome will not have a material effect on our consolidated
financial statements.
We may purchase in-orbit and launch insurance to mitigate the potential financial impact of satellite launch and
in-orbit failures if the premium costs are considered economic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites.
We do not insure against lost revenues in the event of a total or partial loss of the capacity of a satellite. We generally rely on in-orbit spare satellites and excess transponder
capacity at key orbital slots to mitigate the impact a satellite failure could have on our ability to provide service. At March 31, 2012, the net book value of in-orbit satellites
was $1,860 million, all of which was uninsured.
We are contingently liable under standby letters of credit and bonds in the aggregate amount of $143 million at March 31,
2012, primarily related to a judicial deposit in Brazil for the ECAD matter discussed above.
Note 7: Related Party Transactions
In the ordinary course of our operations, we enter into transactions with related parties as discussed below. Related parties include
Globo, which provides programming and advertising to Sky Brasil, and companies in which we hold equity method investments, including Sky Mexico and GSN.
The
majority of payments under contractual arrangements with related parties are pursuant 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:
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Sales
|
|
$
|
1
|
|
$
|
2
|
|
Purchases
|
|
|
237
|
|
|
187
|
|
14
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
following table sets forth the amount of accounts receivable from and accounts payable to related parties as of:
|
|
|
|
|
|
|
|
|
|
March 31,
2012
|
|
December 31,
2011
|
|
|
|
(Dollars in Millions)
|
|
Accounts receivable
|
|
$
|
1
|
|
$
|
1
|
|
Accounts payable
|
|
|
112
|
|
|
96
|
|
Note 8: Stockholders' Deficit
Since 2006 our Board of Directors has approved multiple authorizations for the repurchase of our common stock, the most recent of which
was announced in the first quarter of 2012, authorizing share repurchases of up to an additional $6 billion. As of March 31, 2012, we had approximately $5,566 million remaining
under this authorization. The authorizations allow us to repurchase our common stock from time to time through open market purchases and negotiated transactions, or otherwise. The timing, nature and
amount of such transactions will depend on a variety of factors, including market conditions, and the program may be suspended, discontinued or accelerated at any time. The sources of funds for the
purchases under the remaining authorizations are our existing cash on hand, cash from operations and potential additional borrowings. Purchases are made in the open market, through block trades and
other negotiated transactions. Repurchased shares are retired, but remain authorized for registration and issuance in the future.
The
following table sets forth information regarding shares repurchased and retired during the periods presented:
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Amounts in Millions,
Except Per Share Amounts)
|
|
Total cost of repurchased shares
|
|
$
|
1,300
|
|
$
|
1,406
|
|
Average price per share
|
|
$
|
45.65
|
|
$
|
43.88
|
|
Number of shares repurchased and retired
|
|
|
28
|
|
|
32
|
|
Of
the $1,300 million in repurchases during the three months ended March 31, 2012, $67 million were paid for in April 2012. Of the $1,406 million in
repurchases during the three months ended March 31, 2011, $69 million were paid for in April 2011. Amounts repurchased but settled subsequent to the end of such periods are considered
non-cash financing activities and excluded from the Consolidated Statements of Cash Flows.
15
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
following tables set forth a reconciliation of stockholders' deficit and redeemable noncontrolling interest for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
Class A
Common
Shares
|
|
Common
Stock and
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Deficit
|
|
Redeemable
Noncontrolling
Interest
|
|
Net
Income
|
|
|
|
(Amounts in Millions, Except Share Data)
|
|
Balance as of January 1, 2012
|
|
|
691,306,695
|
|
$
|
4,799
|
|
$
|
(7,750
|
)
|
$
|
(156
|
)
|
$
|
(3,107
|
)
|
$
|
265
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
731
|
|
|
|
|
|
731
|
|
|
10
|
|
$
|
741
|
|
Stock repurchased and retired
|
|
|
(28,468,900
|
)
|
|
(197
|
)
|
|
(1,103
|
)
|
|
|
|
|
(1,300
|
)
|
|
|
|
|
|
|
Stock options exercised and restricted stock units vested and distributed
|
|
|
1,958,677
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
(52
|
)
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
Tax benefit from share-based compensation
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
Adjustment to the fair value of redeemable noncontrolling interest
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
12
|
|
|
(12
|
)
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
19
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2012
|
|
|
664,796,472
|
|
$
|
4,617
|
|
$
|
(8,122
|
)
|
$
|
(137
|
)
|
$
|
(3,642
|
)
|
$
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
Class A
Common
Shares
|
|
Common
Stock and
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Deficit
|
|
Redeemable
Noncontrolling
Interest
|
|
Net
Income
|
|
|
|
(Amounts in Millions, Except Share Data)
|
|
Balance as of January 1, 2011
|
|
|
808,447,044
|
|
$
|
5,563
|
|
$
|
(5,730
|
)
|
$
|
(27
|
)
|
$
|
(194
|
)
|
$
|
224
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
674
|
|
|
|
|
|
674
|
|
|
9
|
|
$
|
683
|
|
Stock repurchased and retired
|
|
|
(32,036,462
|
)
|
|
(226
|
)
|
|
(1,180
|
)
|
|
|
|
|
(1,406
|
)
|
|
|
|
|
|
|
Stock options exercised and restricted stock units vested and distributed
|
|
|
1,900,775
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
Tax benefit from share-based compensation
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
Adjustment to the fair value of redeemable noncontrolling interest
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
10
|
|
|
(10
|
)
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
13
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2011
|
|
|
778,311,357
|
|
$
|
5,348
|
|
$
|
(6,236
|
)
|
$
|
(14
|
)
|
$
|
(902
|
)
|
$
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following represents the components of other comprehensive income for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
Pre-Tax
|
|
Tax Benefit
(Expense)
|
|
Net of Tax
|
|
Pre-Tax
|
|
Tax Benefit
(Expense)
|
|
Net of Tax
|
|
|
|
(Dollars in Millions)
|
|
Foreign currency translation adjustments
|
|
$
|
33
|
|
$
|
(13
|
)
|
$
|
20
|
|
$
|
26
|
|
$
|
(10
|
)
|
$
|
16
|
|
Unrealized losses on securities
|
|
|
(2
|
)
|
|
1
|
|
|
(1
|
)
|
|
(5
|
)
|
|
2
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
$
|
31
|
|
$
|
(12
|
)
|
$
|
19
|
|
$
|
21
|
|
$
|
(8
|
)
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The changes in accumulated other comprehensive loss for the three months ended March 31, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit
Plans
|
|
Foreign
Currency Items
|
|
Unrealized
Losses on
Securities
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2012
|
|
$
|
(151
|
)
|
$
|
(8
|
)
|
$
|
3
|
|
$
|
(156
|
)
|
Other comprehensive income
|
|
|
|
|
|
20
|
|
|
(1
|
)
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2012
|
|
$
|
(151
|
)
|
$
|
12
|
|
$
|
2
|
|
$
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
Note 9: Earnings Per Common Share
We compute basic earnings per common share, or EPS, by dividing net income attributable to DIRECTV by the weighted average number of
common shares outstanding for the period.
Diluted
EPS considers the effect of common equivalent shares, which consist entirely of common stock options and unvested restricted stock units issued to employees. In the computation
of diluted EPS under the treasury stock method, the amount of assumed proceeds from restricted stock units and common stock options includes the amount of compensation cost attributable to future
services not yet recognized, proceeds from the exercise of the options and the incremental income tax benefit or liability as if the awards were exercised or distributed during the period. We exclude
common equivalent shares from the computation in loss periods as their effect would be antidilutive and we exclude common stock options from the computation of diluted EPS when their exercise price is
greater than the average market price of our common stock. For the three months ended March 31, 2012 and 2011 we excluded no common stock options from the computation of diluted EPS, because
all options' exercise prices were less than the average market price of our common stock during the periods presented.
18
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
reconciliation of the amounts used in the basic and diluted EPS computation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
Shares
|
|
Per Share
Amounts
|
|
|
|
(Dollars and Shares in Millions,
Except Per Share Amounts)
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
731
|
|
|
678
|
|
$
|
1.08
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
3
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV
|
|
$
|
731
|
|
|
681
|
|
$
|
1.07
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
674
|
|
|
793
|
|
$
|
0.85
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV
|
|
$
|
674
|
|
|
797
|
|
$
|
0.85
|
|
|
|
|
|
|
|
|
|
Note 10: Segment Reporting
Our reportable segments, which are differentiated by their products and services as well as geographic location, are DIRECTV U.S., Sky
Brasil and PanAmericana, which are engaged in acquiring, promoting, selling and distributing digital entertainment programming primarily via satellite to residential and commercial subscribers, and
the Sports Networks, Eliminations and Other segment, which includes our three regional sports networks that provide programming devoted to local professional sports teams and college sporting events
and locally produce their own programming. Sports Networks, Eliminations and Other also includes the corporate office, eliminations and other entities.
We
revised our reportable segments in the first quarter of 2012 and now report Sky Brasil and PanAmericana as segments. We previously reported these segments as the DIRECTV Latin America
segment. As discussed above in Note 1, the Sky Brasil segment includes our 93% owned subsidiary Sky Brasil Servicos, Ltda. The PanAmericana segment includes the results of our wholly
owned subsidiaries that provide services in Argentina, Chile, Colombia, Ecuador, Puerto Rico, Venezuela and certain other countries in the region. Sky Brasil and PanAmericana are now reported as
separate segments due to Sky Brasil's growing significance to DIRECTV's consolidated results of operations and these segments are reflective of how our Chief Executive Officer currently reviews our
operating results.
19
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Selected
information for our operating segments is reported as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
Revenues
|
|
Intersegment
Revenues
|
|
Total
Revenues
|
|
Operating
Profit
|
|
Depreciation
and
amortization
expense
|
|
Operating profit
before
depreciation and
amortization(1)
|
|
|
|
(Dollars in Millions)
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
5,497
|
|
$
|
2
|
|
$
|
5,499
|
|
$
|
1,038
|
|
$
|
372
|
|
$
|
1,410
|
|
Sky Brasil
|
|
|
881
|
|
|
|
|
|
881
|
|
|
151
|
|
|
136
|
|
|
287
|
|
PanAmericana
|
|
|
604
|
|
|
|
|
|
604
|
|
|
98
|
|
|
83
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
1,485
|
|
|
|
|
|
1,485
|
|
|
249
|
|
|
219
|
|
|
468
|
|
Sports Networks, Eliminations and Other
|
|
|
64
|
|
|
(2
|
)
|
|
62
|
|
|
21
|
|
|
4
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,046
|
|
$
|
|
|
$
|
7,046
|
|
$
|
1,308
|
|
$
|
595
|
|
$
|
1,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
5,143
|
|
$
|
2
|
|
$
|
5,145
|
|
$
|
921
|
|
$
|
442
|
|
$
|
1,363
|
|
Sky Brasil
|
|
|
654
|
|
|
|
|
|
654
|
|
|
133
|
|
|
95
|
|
|
228
|
|
PanAmericana
|
|
|
460
|
|
|
|
|
|
460
|
|
|
86
|
|
|
70
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
1,114
|
|
|
|
|
|
1,114
|
|
|
219
|
|
|
165
|
|
|
384
|
|
Sports Networks, Eliminations and Other
|
|
|
62
|
|
|
(2
|
)
|
|
60
|
|
|
15
|
|
|
4
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,319
|
|
$
|
|
|
$
|
6,319
|
|
$
|
1,155
|
|
$
|
611
|
|
$
|
1,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Operating
profit before depreciation and amortization, which is a financial measure that is not determined in accordance with GAAP can be calculated by
adding amounts under the caption "Depreciation and amortization expense" to "Operating profit." This measure should be used in conjunction with GAAP financial measures and is not presented as an
alternative measure of operating results, as determined in accordance with GAAP. Our management and Board of Directors use operating profit before depreciation and amortization to evaluate the
operating performance of our company and our business segments and to allocate resources and capital to business segments. This metric is also used as a measure of performance for incentive
compensation purposes and to measure income generated from operations that could be used to fund capital expenditures, service debt or pay taxes. Depreciation and amortization expense primarily
represents an allocation to current expense of the cost of historical capital expenditures and for intangible assets resulting from prior business acquisitions. To compensate for the exclusion of
depreciation and amortization expense from operating profit, our management and Board of Directors separately measure and budget for capital expenditures and business acquisitions.
We
believe this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net income), to compare our operating performance to other communications,
entertainment and media service providers. We believe that investors use current and projected operating profit before depreciation and amortization and similar measures to estimate our current
20
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
or
prospective enterprise value and make investment decisions. This metric provides investors with a means to compare operating results exclusive of depreciation and amortization. Our management
believes this is useful given the significant variation in depreciation and amortization expense that can result from the timing of capital expenditures, the capitalization of intangible assets,
potential variations in expected useful lives when compared to other companies and periodic changes to estimated useful lives.
The
following represents a reconciliation of operating profit before depreciation and amortization to reported net income on the Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Operating profit before depreciation and amortization
|
|
$
|
1,903
|
|
$
|
1,766
|
|
Depreciation and amortization
|
|
|
(595
|
)
|
|
(611
|
)
|
|
|
|
|
|
|
Operating profit
|
|
|
1,308
|
|
|
1,155
|
|
Interest income
|
|
|
12
|
|
|
7
|
|
Interest expense
|
|
|
(204
|
)
|
|
(172
|
)
|
Other, net
|
|
|
41
|
|
|
42
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,157
|
|
|
1,032
|
|
Income tax expense
|
|
|
(416
|
)
|
|
(349
|
)
|
|
|
|
|
|
|
Net income
|
|
|
741
|
|
|
683
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
(10
|
)
|
|
(9
|
)
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
731
|
|
$
|
674
|
|
|
|
|
|
|
|
21
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Note 11: Condensed Consolidating Financial Statements
As discussed above in Note 5, on November 14, 2011, DIRECTV provided a guarantee of all the outstanding senior notes of
DIRECTV Holdings LLC and DIRECTV Financing Co., Inc, or the Co-issuers, and is a guarantor for the March 2012 Notes as well.
The
following condensed consolidating financial statements of DIRECTV and subsidiaries have been prepared pursuant to rules regarding the preparation of consolidating financial
statements of Regulation S-X. For the periods prior to November 14, 2011, the condensed consolidating financial statements have been prepared as if the DIRECTV guarantee had
been in place during that period.
These
condensed consolidating financial statements present the condensed consolidating statements of operations and condensed consolidating statements of cash flows for the three months
ended March 31, 2012 and 2011, and the condensed consolidating balance sheets as of March 31, 2012 and December 31, 2011.
The
condensed consolidating financial statements are comprised of DIRECTV, or the Parent Guarantor, its indirect wholly owned subsidiaries, DIRECTV Holdings, DIRECTV Financing and each
of DIRECTV Holdings' material subsidiaries (other than DIRECTV Financing), or the Guarantor Subsidiaries, as well as other subsidiaries who are not guarantors of the senior notes, or the
Non-Guarantor Subsidiaries, and the eliminations necessary to present DIRECTV's financial statements on a consolidated basis. The Non-Guarantor Subsidiaries consist primarily
of DIRECTV's direct-to-home digital television services throughout Latin America which are held by DIRECTV Latin America Holdings, Inc. and its subsidiaries, and DIRECTV
Sports Networks LLC and its subsidiaries which are comprised primarily of three regional sports networks.
The
accompanying condensed consolidating financial statements are presented based on the equity method of accounting for all periods presented. Under this method, investments in
subsidiaries are recorded at cost and adjusted for the subsidiaries' cumulative results of operations, capital contributions and distributions, and other changes in equity. Elimination entries include
consolidating and eliminating entries for investments in subsidiaries, intercompany activity and balances, and income taxes.
22
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
59
|
|
$
|
5,499
|
|
$
|
1,568
|
|
$
|
(80
|
)
|
$
|
7,046
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
2,441
|
|
|
542
|
|
|
(19
|
)
|
|
2,964
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
349
|
|
|
150
|
|
|
|
|
|
499
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
78
|
|
|
28
|
|
|
(2
|
)
|
|
104
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
646
|
|
|
170
|
|
|
|
|
|
816
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
305
|
|
|
38
|
|
|
|
|
|
343
|
|
General and administrative expenses
|
|
|
6
|
|
|
|
|
|
329
|
|
|
141
|
|
|
(59
|
)
|
|
417
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
372
|
|
|
223
|
|
|
|
|
|
595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
6
|
|
|
|
|
|
4,520
|
|
|
1,292
|
|
|
(80
|
)
|
|
5,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(6
|
)
|
|
59
|
|
|
979
|
|
|
276
|
|
|
|
|
|
1,308
|
|
Equity in income of consolidated subsidiaries
|
|
|
738
|
|
|
623
|
|
|
|
|
|
|
|
|
(1,361
|
)
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
(3
|
)
|
|
12
|
|
Interest expense
|
|
|
|
|
|
(188
|
)
|
|
|
|
|
(19
|
)
|
|
3
|
|
|
(204
|
)
|
Other, net
|
|
|
(4
|
)
|
|
|
|
|
1
|
|
|
44
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
728
|
|
|
494
|
|
|
980
|
|
|
316
|
|
|
(1,361
|
)
|
|
1,157
|
|
Income tax benefit (expense)
|
|
|
3
|
|
|
47
|
|
|
(357
|
)
|
|
(109
|
)
|
|
|
|
|
(416
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
731
|
|
|
541
|
|
|
623
|
|
|
207
|
|
|
(1,361
|
)
|
|
741
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
731
|
|
$
|
541
|
|
$
|
623
|
|
$
|
197
|
|
$
|
(1,361
|
)
|
$
|
731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
143
|
|
$
|
5,145
|
|
$
|
1,189
|
|
$
|
(158
|
)
|
$
|
6,319
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
2,200
|
|
|
406
|
|
|
(13
|
)
|
|
2,593
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
351
|
|
|
98
|
|
|
|
|
|
449
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
74
|
|
|
22
|
|
|
(2
|
)
|
|
94
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
682
|
|
|
114
|
|
|
|
|
|
796
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
259
|
|
|
22
|
|
|
|
|
|
281
|
|
General and administrative expenses
|
|
|
5
|
|
|
|
|
|
359
|
|
|
119
|
|
|
(143
|
)
|
|
340
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
442
|
|
|
169
|
|
|
|
|
|
611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
5
|
|
|
|
|
|
4,367
|
|
|
950
|
|
|
(158
|
)
|
|
5,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(5
|
)
|
|
143
|
|
|
778
|
|
|
239
|
|
|
|
|
|
1,155
|
|
Equity in income of consolidated subsidiaries
|
|
|
681
|
|
|
499
|
|
|
|
|
|
|
|
|
(1,180
|
)
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
(3
|
)
|
|
7
|
|
Interest expense
|
|
|
|
|
|
(155
|
)
|
|
(1
|
)
|
|
(19
|
)
|
|
3
|
|
|
(172
|
)
|
Other, net
|
|
|
(5
|
)
|
|
(11
|
)
|
|
5
|
|
|
53
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
671
|
|
|
476
|
|
|
782
|
|
|
283
|
|
|
(1,180
|
)
|
|
1,032
|
|
Income tax benefit (expense)
|
|
|
3
|
|
|
8
|
|
|
(283
|
)
|
|
(77
|
)
|
|
|
|
|
(349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
674
|
|
|
484
|
|
|
499
|
|
|
206
|
|
|
(1,180
|
)
|
|
683
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
674
|
|
$
|
484
|
|
$
|
499
|
|
$
|
197
|
|
$
|
(1,180
|
)
|
$
|
674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
731
|
|
$
|
541
|
|
$
|
623
|
|
$
|
207
|
|
$
|
(1,361
|
)
|
$
|
741
|
|
Other comprehensive income, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
20
|
|
Unrealized losses on securities
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
731
|
|
|
541
|
|
|
623
|
|
|
226
|
|
|
(1,361
|
)
|
|
760
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
731
|
|
$
|
541
|
|
$
|
623
|
|
$
|
214
|
|
$
|
(1,361
|
)
|
$
|
748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
674
|
|
$
|
484
|
|
$
|
499
|
|
$
|
206
|
|
$
|
(1,180
|
)
|
$
|
683
|
|
Other comprehensive income, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
16
|
|
Unrealized losses on securities
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
674
|
|
|
484
|
|
|
499
|
|
|
219
|
|
|
(1,180
|
)
|
|
696
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
674
|
|
$
|
484
|
|
$
|
499
|
|
$
|
209
|
|
$
|
(1,180
|
)
|
$
|
686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
1,322
|
|
$
|
3,208
|
|
$
|
2,228
|
|
$
|
1,408
|
|
$
|
(719
|
)
|
$
|
7,447
|
|
Satellites, net
|
|
|
|
|
|
|
|
|
1,714
|
|
|
511
|
|
|
|
|
|
2,225
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
3,117
|
|
|
2,376
|
|
|
|
|
|
5,493
|
|
Goodwill
|
|
|
|
|
|
1,828
|
|
|
1,349
|
|
|
932
|
|
|
|
|
|
4,109
|
|
Intangible assets, net
|
|
|
|
|
|
|
|
|
460
|
|
|
429
|
|
|
|
|
|
889
|
|
Intercompany assets
|
|
|
(3,355
|
)
|
|
17,097
|
|
|
13,368
|
|
|
(4,140
|
)
|
|
(22,970
|
)
|
|
|
|
Other assets
|
|
|
75
|
|
|
85
|
|
|
218
|
|
|
1,458
|
|
|
(87
|
)
|
|
1,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
(1,958
|
)
|
$
|
22,218
|
|
$
|
22,454
|
|
$
|
2,974
|
|
$
|
(23,776
|
)
|
$
|
21,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
190
|
|
$
|
1,694
|
|
$
|
3,666
|
|
$
|
1,476
|
|
$
|
(789
|
)
|
$
|
6,237
|
|
Long-term debt
|
|
|
|
|
|
15,961
|
|
|
|
|
|
|
|
|
|
|
|
15,961
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
1,334
|
|
|
540
|
|
|
(78
|
)
|
|
1,796
|
|
Intercompany liabilities
|
|
|
926
|
|
|
13,170
|
|
|
4,552
|
|
|
6,225
|
|
|
(24,873
|
)
|
|
|
|
Other liabilities and deferred credits
|
|
|
568
|
|
|
84
|
|
|
165
|
|
|
485
|
|
|
(7
|
)
|
|
1,295
|
|
Redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
265
|
|
|
|
|
|
265
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock and additional paid-in capital
|
|
|
4,617
|
|
|
30
|
|
|
4,735
|
|
|
(2,965
|
)
|
|
(1,800
|
)
|
|
4,617
|
|
Retained earnings (accumulated deficit)
|
|
|
(8,122
|
)
|
|
(8,721
|
)
|
|
8,002
|
|
|
(3,059
|
)
|
|
3,778
|
|
|
(8,122
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
7
|
|
|
(7
|
)
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity (deficit)
|
|
|
(3,642
|
)
|
|
(8,691
|
)
|
|
12,737
|
|
|
(6,017
|
)
|
|
1,971
|
|
|
(3,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
(1,958
|
)
|
$
|
22,218
|
|
$
|
22,454
|
|
$
|
2,974
|
|
$
|
(23,776
|
)
|
$
|
21,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
404
|
|
$
|
533
|
|
$
|
2,514
|
|
$
|
1,360
|
|
$
|
(570
|
)
|
$
|
4,241
|
|
Satellites, net
|
|
|
|
|
|
|
|
|
1,724
|
|
|
497
|
|
|
(6
|
)
|
|
2,215
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
3,084
|
|
|
2,139
|
|
|
|
|
|
5,223
|
|
Goodwill
|
|
|
|
|
|
1,828
|
|
|
1,349
|
|
|
920
|
|
|
|
|
|
4,097
|
|
Intangible assets, net
|
|
|
|
|
|
|
|
|
461
|
|
|
448
|
|
|
|
|
|
909
|
|
Intercompany assets
|
|
|
(1,764
|
)
|
|
16,068
|
|
|
11,427
|
|
|
(4,490
|
)
|
|
(21,241
|
)
|
|
|
|
Other assets
|
|
|
74
|
|
|
64
|
|
|
256
|
|
|
1,424
|
|
|
(80
|
)
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
(1,286
|
)
|
$
|
18,493
|
|
$
|
20,815
|
|
$
|
2,298
|
|
$
|
(21,897
|
)
|
$
|
18,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
68
|
|
$
|
204
|
|
$
|
3,413
|
|
$
|
1,347
|
|
$
|
(289
|
)
|
$
|
4,743
|
|
Long-term debt
|
|
|
|
|
|
13,464
|
|
|
|
|
|
|
|
|
|
|
|
13,464
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
1,321
|
|
|
531
|
|
|
(81
|
)
|
|
1,771
|
|
Intercompany liabilities
|
|
|
1,202
|
|
|
11,582
|
|
|
3,865
|
|
|
5,938
|
|
|
(22,587
|
)
|
|
|
|
Other liabilities and deferred credits
|
|
|
551
|
|
|
82
|
|
|
159
|
|
|
495
|
|
|
|
|
|
1,287
|
|
Redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
265
|
|
|
|
|
|
265
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock and additional paid-in capital
|
|
|
4,799
|
|
|
11
|
|
|
4,684
|
|
|
(561
|
)
|
|
(4,134
|
)
|
|
4,799
|
|
Retained earnings (accumulated deficit)
|
|
|
(7,750
|
)
|
|
(6,850
|
)
|
|
7,373
|
|
|
(5,703
|
)
|
|
5,180
|
|
|
(7,750
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
(14
|
)
|
|
14
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity (deficit)
|
|
|
(3,107
|
)
|
|
(6,839
|
)
|
|
12,057
|
|
|
(6,278
|
)
|
|
1,060
|
|
|
(3,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
(1,286
|
)
|
$
|
18,493
|
|
$
|
20,815
|
|
$
|
2,298
|
|
$
|
(21,897
|
)
|
$
|
18,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
319
|
|
$
|
986
|
|
$
|
429
|
|
$
|
576
|
|
$
|
(547
|
)
|
$
|
1,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
|
|
|
|
|
|
(354
|
)
|
|
(399
|
)
|
|
|
|
|
(753
|
)
|
Cash paid for satellites
|
|
|
(2
|
)
|
|
|
|
|
(34
|
)
|
|
(22
|
)
|
|
|
|
|
(58
|
)
|
Return of capital from subsidiary
|
|
|
1,903
|
|
|
|
|
|
|
|
|
|
|
|
(1,903
|
)
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
1,901
|
|
|
|
|
|
(388
|
)
|
|
(396
|
)
|
|
(1,903
|
)
|
|
(786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from debt issuance
|
|
|
|
|
|
3,996
|
|
|
|
|
|
|
|
|
|
|
|
3,996
|
|
Debt issuance costs
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
Proceeds from borrowings under revolving credit facility
|
|
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
Repayment of borrowings under revolving credit facility
|
|
|
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
|
|
(400
|
)
|
Repayment of other long-term obligations
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
(8
|
)
|
|
|
|
|
(13
|
)
|
Common shares repurchased and retired
|
|
|
(1,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,260
|
)
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
(9
|
)
|
|
|
|
|
(52
|
)
|
Excess tax benefit from share-based compensation
|
|
|
|
|
|
|
|
|
23
|
|
|
5
|
|
|
|
|
|
28
|
|
Intercompany payments (funding)
|
|
|
158
|
|
|
|
|
|
(13
|
)
|
|
(145
|
)
|
|
|
|
|
|
|
Cash dividend to Parent
|
|
|
|
|
|
(2,450
|
)
|
|
|
|
|
|
|
|
2,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(1,102
|
)
|
|
1,523
|
|
|
(38
|
)
|
|
(157
|
)
|
|
2,450
|
|
|
2,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
1,118
|
|
|
2,509
|
|
|
3
|
|
|
23
|
|
|
|
|
|
3,653
|
|
Cash and cash equivalents at beginning of the period
|
|
|
129
|
|
|
228
|
|
|
4
|
|
|
512
|
|
|
|
|
|
873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
1,247
|
|
$
|
2,737
|
|
$
|
7
|
|
$
|
535
|
|
$
|
|
|
$
|
4,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(concluded)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
492
|
|
$
|
623
|
|
$
|
374
|
|
$
|
342
|
|
$
|
(522
|
)
|
$
|
1,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
|
|
|
|
|
|
(345
|
)
|
|
(268
|
)
|
|
|
|
|
(613
|
)
|
Cash paid for satellites
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
|
|
|
|
|
(31
|
)
|
Proceeds from sale of investments
|
|
|
|
|
|
|
|
|
|
|
|
61
|
|
|
|
|
|
61
|
|
Return of capital from subsidiary
|
|
|
2,728
|
|
|
|
|
|
|
|
|
|
|
|
(2,728
|
)
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
2,728
|
|
|
|
|
|
(376
|
)
|
|
(168
|
)
|
|
(2,728
|
)
|
|
(544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from debt issuance
|
|
|
|
|
|
3,990
|
|
|
|
|
|
|
|
|
|
|
|
3,990
|
|
Debt issuance costs
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
(341
|
)
|
|
|
|
|
|
|
|
|
|
|
(341
|
)
|
Repayment of short-term borrowings
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
(39
|
)
|
Repayment of other long-term obligations
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
(94
|
)
|
|
|
|
|
(120
|
)
|
Common shares repurchased and retired
|
|
|
(1,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,405
|
)
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
(2
|
)
|
|
|
|
|
(43
|
)
|
|
(8
|
)
|
|
|
|
|
(53
|
)
|
Excess tax benefit from share-based compensation
|
|
|
|
|
|
|
|
|
20
|
|
|
4
|
|
|
|
|
|
24
|
|
Intercompany payments (funding)
|
|
|
38
|
|
|
|
|
|
50
|
|
|
(88
|
)
|
|
|
|
|
|
|
Cash dividend to Parent
|
|
|
|
|
|
(3,250
|
)
|
|
|
|
|
|
|
|
3,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(1,369
|
)
|
|
371
|
|
|
1
|
|
|
(225
|
)
|
|
3,250
|
|
|
2,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
1,851
|
|
|
994
|
|
|
(1
|
)
|
|
(51
|
)
|
|
|
|
|
2,793
|
|
Cash and cash equivalents at beginning of the period
|
|
|
447
|
|
|
683
|
|
|
4
|
|
|
368
|
|
|
|
|
|
1,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
2,298
|
|
$
|
1,677
|
|
$
|
3
|
|
$
|
317
|
|
$
|
|
|
$
|
4,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
***
30
Table of Contents
DIRECTV
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis should be read in conjunction with our management's discussion and analysis of
financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 23, 2012,
and all of our other filings, including Current Reports on Form 8-K, filed with the SEC after such date and through the date of this report.
This
Quarterly Report on Form 10-Q may contain certain statements that we believe are, or may be considered to be, "forward-looking statements" within the meaning of
various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by the use of statements that include phrases
such as we "believe", "expect", "anticipate", "intend", "plan", "foresee", "project" or other similar references to future periods. Examples of forward-looking statements include, but are not limited
to, statements we make regarding our outlook for 2012 financial results, liquidity and capital resources.
Forward-looking
statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements
relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by
the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of
future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include economic, business, competitive, national or global
political, market and regulatory conditions and the following, each of which is described in more detail in our Annual Report on Form 10-K for the year ended December 31,
2011 or in Part II, Item 1A of this Quarterly Report on Form 10-Q:
-
-
Levels of competition are increasing.
-
-
We depend on others to produce programming and programming costs are increasing.
-
-
Increased subscriber churn or subscriber upgrade and retention costs could materially adversely affect our financial
performance.
-
-
Our subscriber acquisition costs could materially increase.
-
-
DIRECTV Latin America is subject to various additional risks associated with doing business internationally, which include
political and economic instability and foreign currency exchange rate volatility and controls.
-
-
Our ability to keep pace with technological developments is uncertain.
-
-
Our business relies on intellectual property, some of which is owned by third parties, and we may inadvertently infringe
patents and proprietary rights of others.
-
-
Construction or launch delays on satellites could materially adversely affect our revenues and earnings.
-
-
Our satellites are subject to significant launch and operational risks.
-
-
The loss of a satellite, none of which is currently insured, could materially adversely affect our business and earnings.
31
Table of Contents
DIRECTV
-
-
Satellite programming signals have been stolen and may be stolen in the future, which could result in lost revenues and
would cause us to incur incremental operating costs that do not result in subscriber acquisition.
-
-
The ability to maintain FCC licenses and other regulatory approvals is critical to our business.
-
-
We may have an indemnity obligation to Liberty Media, which is not limited in amount or subject to any cap, that could be
triggered if parts of the Liberty Transaction or Liberty's 2008 Transaction with News Corporation are treated as a taxable transaction.
-
-
We face risks arising from the outcome of various legal proceedings.
-
-
We face risks related to our reliance on network information systems and other technology.
-
-
Our strategic initiatives may not be successfully implemented, may not elicit the expected customer response in the market
and may result in competitive reactions.
-
-
Those and the other factors that are described in more detail in our Annual Report on Form 10-K for the
year ended December 31, 2011.
Any
forward-looking statement made by us in this Quarterly Report on Form 10-Q speaks only as of the date on which it is made. Factors or events that could cause our
actual results to differ may occur and it is not possible for us to predict them all. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new
information, future development or otherwise, except as required by law.
CONTENTS
The following is a discussion of our results of operations and financial condition. This discussion should be read in conjunction with
the consolidated financial statements and related notes included elsewhere in this Quarterly Report. Information in this section is organized as
follows:
-
-
Summary Data
-
-
Business Overview
-
-
Significant Events Affecting the Comparability of the Results of Operations
-
-
Key Terminology
-
-
Results of Operations
-
-
Liquidity and Capital Resources
-
-
Contractual Obligations
-
-
Contingencies
-
-
Certain Relationships and Related-Party Transactions
-
-
Critical Accounting Estimates
-
-
Accounting Changes
32
Table of Contents
DIRECTV
SUMMARY DATA
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions,
Except Per Share
Amounts)
|
|
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
7,046
|
|
$
|
6,319
|
|
Total operating costs and expenses
|
|
|
5,738
|
|
|
5,164
|
|
|
|
|
|
|
|
Operating profit
|
|
|
1,308
|
|
|
1,155
|
|
Interest income
|
|
|
12
|
|
|
7
|
|
Interest expense
|
|
|
(204
|
)
|
|
(172
|
)
|
Other, net
|
|
|
41
|
|
|
42
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,157
|
|
|
1,032
|
|
Income tax expense
|
|
|
(416
|
)
|
|
(349
|
)
|
|
|
|
|
|
|
Net income
|
|
|
741
|
|
|
683
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
(10
|
)
|
|
(9
|
)
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
731
|
|
$
|
674
|
|
|
|
|
|
|
|
Basic earnings attributable to DIRECTV per common share
|
|
$
|
1.08
|
|
$
|
0.85
|
|
Diluted earnings attributable to DIRECTV per common share
|
|
$
|
1.07
|
|
$
|
0.85
|
|
Weighted average number of total common shares outstanding (in millions)
|
|
|
|
|
|
|
|
Basic
|
|
|
678
|
|
|
793
|
|
Diluted
|
|
|
681
|
|
|
797
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2012
|
|
December 31,
2011
|
|
|
|
(Dollars in Millions)
|
|
Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,526
|
|
$
|
873
|
|
Total current assets
|
|
|
7,447
|
|
|
4,241
|
|
Total assets
|
|
|
21,912
|
|
|
18,423
|
|
Total current liabilities
|
|
|
6,237
|
|
|
4,743
|
|
Long-term debt
|
|
|
15,961
|
|
|
13,464
|
|
Redeemable noncontrolling interest
|
|
|
265
|
|
|
265
|
|
Total stockholders' deficit
|
|
|
(3,642
|
)
|
|
(3,107
|
)
|
Reference
should be made to the Notes to the Consolidated Financial Statements.
33
Table of Contents
DIRECTV
SUMMARY DATA(concluded)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Other Data:
|
|
|
|
|
|
|
|
Operating profit before depreciation and amortization(1)
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
1,308
|
|
$
|
1,155
|
|
Add: Depreciation and amortization expense
|
|
|
595
|
|
|
611
|
|
|
|
|
|
|
|
Operating profit before depreciation and amortization
|
|
$
|
1,903
|
|
$
|
1,766
|
|
|
|
|
|
|
|
Operating profit before depreciation and amortization margin
|
|
|
27.0
|
%
|
|
27.9
|
%
|
Cash flow information
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
1,763
|
|
$
|
1,309
|
|
Net cash used in investing activities
|
|
|
(786
|
)
|
|
(544
|
)
|
Net cash provided by financing activities
|
|
|
2,676
|
|
|
2,028
|
|
Free cash flow(2)
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
1,763
|
|
|
1,309
|
|
Less: Cash paid for property and equipment
|
|
|
(753
|
)
|
|
(613
|
)
|
Less: Cash paid for satellites
|
|
|
(58
|
)
|
|
(31
|
)
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
952
|
|
$
|
665
|
|
|
|
|
|
|
|
34
Table of Contents
DIRECTV
Selected Segment Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
Percentage of
total
revenues
|
|
Operating
profit
|
|
Depreciation and
amortization
expense
|
|
Operating profit
before
depreciation and
amortization(1)
|
|
|
|
(Dollars in Millions)
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
5,499
|
|
|
78.0
|
%
|
$
|
1,038
|
|
$
|
372
|
|
$
|
1,410
|
|
Sky Brasil
|
|
|
881
|
|
|
12.5
|
%
|
|
151
|
|
|
136
|
|
|
287
|
|
PanAmericana
|
|
|
604
|
|
|
8.6
|
%
|
|
98
|
|
|
83
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
1,485
|
|
|
21.1
|
%
|
|
249
|
|
|
219
|
|
|
468
|
|
Sports Networks, Eliminations and Other
|
|
|
62
|
|
|
0.9
|
%
|
|
21
|
|
|
4
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,046
|
|
|
100.0
|
%
|
$
|
1,308
|
|
$
|
595
|
|
$
|
1,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
5,145
|
|
|
81.4
|
%
|
$
|
921
|
|
$
|
442
|
|
$
|
1,363
|
|
Sky Brasil
|
|
|
654
|
|
|
10.3
|
%
|
|
133
|
|
|
95
|
|
|
228
|
|
PanAmericana
|
|
|
460
|
|
|
7.3
|
%
|
|
86
|
|
|
70
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
1,114
|
|
|
17.6
|
%
|
|
219
|
|
|
165
|
|
|
384
|
|
Sports Networks, Eliminations and Other
|
|
|
60
|
|
|
1.0
|
%
|
|
15
|
|
|
4
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,319
|
|
|
100.0
|
%
|
$
|
1,155
|
|
$
|
611
|
|
$
|
1,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Operating
profit before depreciation and amortization, which is a financial measure that is not determined in accordance with accounting principles
generally accepted in the United States of America, or GAAP, can be calculated by adding amounts under the caption "Depreciation and amortization expense" to "Operating profit." This measure should be
used in conjunction with GAAP financial measures and is not presented as an alternative measure of operating results, as determined in accordance with GAAP. Our management and our Board of Directors
use operating profit before depreciation and amortization to evaluate the operating performance of our company and our business segments and to allocate resources and capital to business segments.
This metric is also used as a measure of performance for incentive compensation purposes and to measure income generated from operations that could be used to fund capital expenditures, service debt
or pay taxes. Depreciation and amortization expense primarily represents an allocation to current expense of the cost of historical capital expenditures and for acquired intangible assets resulting
from prior business acquisitions. To compensate for the exclusion of depreciation and amortization expense from operating profit, our management and our Board of Directors separately measure and
budget for capital expenditures and business acquisitions.
We
believe this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net income), to compare our operating performance to other
communications, entertainment and media service providers. We believe that investors use current and projected operating profit before depreciation and amortization and similar measures to estimate
our current or prospective enterprise value and make investment decisions. This metric provides investors with a means to compare operating results exclusive of depreciation and
amortization expense. Our management believes this is useful given the significant variation in depreciation and amortization expense that can result from the timing of capital expenditures, the
capitalization of intangible assets, potential variations in expected useful lives when compared to other companies and periodic changes to estimated useful lives.
Operating
profit before depreciation and amortization margin is calculated by dividing Operating profit before depreciation and amortization by Revenues.
35
Table of Contents
-
(2)
-
Free
cash flow, which is a financial measure that is not determined in accordance with GAAP, can be calculated by deducting amounts under the captions "Cash
paid for property and equipment" and "Cash paid for satellites" from "Net cash provided by operating activities" from the Consolidated Statements of Cash Flows. This financial measure should be used
in conjunction with other GAAP financial measures and is not presented as an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. Our management and our
Board of Directors use free cash flow to evaluate the cash generated by our current subscriber base, net of capital expenditures, for the purpose of allocating resources to activities such as adding
new subscribers, retaining and upgrading existing subscribers, for additional capital expenditures and other capital investments or transactions and as a measure of performance for incentive
compensation purposes. We believe this measure is useful to investors, along with other GAAP measures (such as cash flows from operating and investing activities), to compare our operating performance
to other communications, entertainment and media companies. We believe that investors also use current and projected free cash flow to determine the ability of revenues from our current and projected
subscriber base to fund required and discretionary spending and to help determine our financial value.
36
Table of Contents
DIRECTV
BUSINESS OVERVIEW
DIRECTV, which we sometimes refer to as the company, we, or us, is a leading provider of digital television entertainment in the United
States and Latin America. We operate two direct-to-home, or DTH, business units: DIRECTV U.S. and DIRECTV Latin America, which are differentiated by their geographic location
and are engaged in acquiring, promoting, selling and distributing digital entertainment programming primarily via satellite to residential and commercial subscribers. In addition, we own and operate
three regional sports networks and own a 60% interest in Game Show Network, LLC, or GSN, a television network dedicated to game-related programming and Internet interactive game
playing. We account for our investment in GSN using the equity method of accounting.
-
-
DIRECTV
U.S.
DIRECTV Holdings LLC and its subsidiaries, which we refer to as DIRECTV U.S., is the largest provider of DTH digital
television services and the second largest provider in the multi-channel video programming distribution industry in the United States. As of March 31, 2012, DIRECTV U.S. had slightly less than
20.0 million subscribers.
-
-
DIRECTV Latin
America.
DIRECTV Latin America Holdings, Inc. and its subsidiaries, or DIRECTV Latin America, is a leading provider of DTH
digital television services throughout Latin America. DIRECTV Latin America is comprised of: PanAmericana, which provides services in Argentina, Chile, Colombia, Ecuador, Puerto Rico, Venezuela and
certain other countries in the region, and Sky Brasil Servicos Ltda., which we refer to as Sky Brasil, which is a 93% owned subsidiary. DIRECTV Latin America also includes our 41% equity method
investment in Innova, S. de R.L. de C.V., or Sky Mexico. As of March 31, 2012, PanAmericana had approximately 4.3 million subscribers, Sky Brasil had approximately 4.2 million
subscribers and Sky Mexico had approximately 4.3 million subscribers.
-
-
DIRECTV Sports
Networks.
DIRECTV Sports Networks LLC and its subsidiaries, or DSN, is comprised primarily of three regional sports networks
based in Seattle, Washington; Denver, Colorado and Pittsburgh, Pennsylvania, each of which operates under the brand name ROOT Sports. The operating results of DSN are reported as part of the "Sports
Networks, Eliminations and Other" operating segment.
37
Table of Contents
DIRECTV
SIGNIFICANT EVENTS AFFECTING THE COMPARABILITY OF THE RESULTS OF OPERATIONS
Change in Accounting Estimate
We currently lease most set-top receivers provided to new and existing subscribers and therefore capitalize the cost of
those set-top receivers. We depreciate capitalized set-top receivers over the estimated useful life of the equipment. As a result of the completion of an extensive evaluation
of the estimated useful life of the set-top receivers in the third quarter of 2011, including consideration of historical write-offs, improved efficiencies in our refurbishment
program, improved set-top receiver failure rates over time and management's judgment of the risk of technological obsolescence, we determined that the estimated useful life of HD
set-top receivers used in our DIRECTV U.S. business has increased to four years, from three years as previously estimated. We will continue to depreciate standard-definition
set-top receivers at DIRECTV U.S. over a three-year estimated useful life. We have accounted for this change in the useful life of the HD set-top receivers at
DIRECTV U.S. as a change in an accounting estimate beginning July 1, 2011. This change had the effect of reducing depreciation and amortization expense and increasing both net income
attributable to DIRECTV and earnings per share in our consolidated results of operations as follows:
|
|
|
|
|
|
|
Three Months Ended
March 31, 2012
|
|
|
|
(Dollars in Millions,
Except Per Share Amounts)
|
|
Depreciation and amortization expense
|
|
$
|
(55
|
)
|
Net income attributable to DIRECTV
|
|
|
33
|
|
Basic and diluted earnings attributable to DIRECTV per common share
|
|
$
|
0.05
|
|
Divestitures
In March 2011, we sold a 5% ownership interest in GSN for $60 million in cash, reducing our ownership interest to 60%. We
recognized a $25 million, $16 million after tax, on the sale in "Other, net" in the Consolidated Statements of Operations, which represents the difference between the selling price and
the carrying amount of the portion of our equity method investment sold. For additional information regarding the GSN sale, refer to Note 2 of the Notes to the Consolidated Financial
Statements.
Financing Transactions
In the first quarter of 2012, DIRECTV U.S. borrowed and repaid $400 million under its revolving credit facility. In March 2012,
DIRECTV U.S. issued $4 billion of senior notes resulting in $3,996 million of proceeds, net of discount.
In March 2011, DIRECTV U.S. issued $4 billion of senior notes resulting in $3,990 million of proceeds, net of discount.
In March 2011, DIRECTV U.S. purchased, pursuant to a tender offer, $341 million of its then outstanding $1,002 million of 6.375% senior notes, resulting in a pre-tax charge
of $11 million, $7 million after tax, primarily for the premiums paid. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.
38
Table of Contents
DIRECTV
KEY TERMINOLOGY
The following key terminology is 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,
pay-per-view programming and seasonal 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 advanced
receiver services (which includes access to HD and DVR services), hardware revenues from subscribers who lease or purchase set-top receivers from us,
warranty service fees and advertising services. Revenues are reported net of customer credits and discounted promotions.
Broadcast Programming and Other.
These costs primarily include license fees for basic and premium channel programming,
pay-per-view programming and seasonal live sporting events. Other costs include continuing service fees paid to third parties for active subscribers and warranty service costs.
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.
Broadcast Operations Expenses.
These expenses include broadcast center operating costs, signal transmission expenses (including costs of
collecting
signals for our local channel offerings), and costs of monitoring, maintaining and insuring our satellites. Also included are engineering expenses associated with deterring theft of our signal.
Subscriber Acquisition Costs.
These costs include the cost of set-top receivers and other equipment, commissions we pay to national
retailers, independent satellite television retailers, dealers and telcos, and the cost of installation, advertising, marketing and customer call center expenses associated with the acquisition of new
subscribers. Set-top receivers leased to new subscribers are capitalized in "Property and equipment, net" in the Consolidated Balance Sheets and depreciated over their useful lives. In
certain countries in Latin America, where our customer agreements provide for the lease of the entire DIRECTV or SKY System, we also capitalize the costs of the other customer premises equipment and
related installation costs. The amount of set-top receivers capitalized each period for subscriber acquisitions is included in "Cash paid for property and equipment" in the Consolidated
Statements of Cash Flows.
Upgrade and Retention Costs.
Upgrade and retention costs are associated with upgrade efforts for existing subscribers that we believe
will result in
higher average monthly revenue per subscriber, or ARPU, and lower churn. Our upgrade efforts include subscriber equipment upgrade programs for DVR, HD and HD DVR receivers and local channels and
similar initiatives. Retention costs also include the costs of installing and providing hardware under our movers program for subscribers relocating to a new residence. Set-top receivers
leased to existing subscribers under
upgrade and retention programs are capitalized in "Property and equipment, net" in the Consolidated Balance Sheets and depreciated over their useful lives. The amount of set-top receivers
capitalized each period for upgrade and retention programs is included in "Cash paid for property and equipment" in the Consolidated Statements of Cash Flows.
General and Administrative Expenses.
General and administrative expenses include departmental costs for legal, administrative services,
finance,
marketing and information technology. These costs also
39
Table of Contents
DIRECTV
include
expenses for bad debt and other operating expenses, such as legal settlements, and gains or losses from the sale or disposal of fixed assets.
Average Monthly Revenue Per Subscriber.
We calculate ARPU by dividing average monthly revenues for the period (total revenues during
the period
divided by the number of months in the period) by average subscribers for the period. We calculate average subscribers for the period by adding the number of subscribers as of the beginning of the
period and for each quarter end in the current year or period and dividing by the sum of the number of quarters in the period plus one.
Average Monthly Subscriber Churn.
Average monthly subscriber churn represents the number of subscribers whose service is disconnected,
expressed as a
percentage of the average total number of subscribers. We calculate average monthly subscriber churn by dividing the average monthly number of disconnected subscribers for the period (total
subscribers disconnected, net of reconnects, during the period divided by the number of months in the period) by average subscribers for the period.
Subscriber Count.
The total number of subscribers represents the total number of subscribers actively subscribing to our service,
including
subscribers who have suspended their account for a particular season of the year because they are temporarily away from their primary residence and subscribers who are in the process of relocating and
commercial equivalent viewing units.
SAC.
We calculate SAC, which represents total subscriber acquisition costs stated on a per subscriber basis, by dividing total
subscriber acquisition
costs for the period by the number of gross new subscribers acquired during the period. We calculate total subscriber acquisition costs for the period by adding together "Subscriber acquisition costs"
expensed during the period and the amount of cash paid for equipment leased to new subscribers during the period.
40
Table of Contents
DIRECTV
RESULTS OF OPERATIONS
Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011
DIRECTV U.S. Results of Operations
The following table provides operating results and a summary of key subscriber data for the DIRECTV U.S. segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
and As of March 31,
|
|
Change
|
|
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
|
|
(Dollars in Millions, Except Per Subscriber Amounts)
|
|
|
|
Revenues
|
|
$
|
5,499
|
|
$
|
5,145
|
|
$
|
354
|
|
|
6.9
|
%
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
2,441
|
|
|
2,200
|
|
|
241
|
|
|
11.0
|
%
|
Subscriber service expenses
|
|
|
349
|
|
|
351
|
|
|
(2
|
)
|
|
(0.6
|
)%
|
Broadcast operations expenses
|
|
|
78
|
|
|
74
|
|
|
4
|
|
|
5.4
|
%
|
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
646
|
|
|
682
|
|
|
(36
|
)
|
|
(5.3
|
)%
|
Upgrade and retention costs
|
|
|
305
|
|
|
259
|
|
|
46
|
|
|
17.8
|
%
|
General and administrative expenses
|
|
|
270
|
|
|
216
|
|
|
54
|
|
|
25.0
|
%
|
Depreciation and amortization expense
|
|
|
372
|
|
|
442
|
|
|
(70
|
)
|
|
(15.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
4,461
|
|
|
4,224
|
|
|
237
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
$
|
1,038
|
|
$
|
921
|
|
$
|
117
|
|
|
12.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit margin
|
|
|
18.9
|
%
|
|
17.9
|
%
|
|
|
|
|
|
|
Other data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before depreciation and amortization
|
|
$
|
1,410
|
|
$
|
1,363
|
|
$
|
47
|
|
|
3.4
|
%
|
Operating profit before depreciation and amortization margin
|
|
|
25.6
|
%
|
|
26.5
|
%
|
|
|
|
|
|
|
Total number of subscribers (in thousands)
|
|
|
19,966
|
|
|
19,407
|
|
|
559
|
|
|
2.9
|
%
|
ARPU
|
|
$
|
91.99
|
|
$
|
88.79
|
|
$
|
3.20
|
|
|
3.6
|
%
|
Average monthly subscriber churn %
|
|
|
1.44
|
%
|
|
1.50
|
%
|
|
|
|
|
(4.0
|
)%
|
Gross subscriber additions (in thousands)
|
|
|
941
|
|
|
1,052
|
|
|
(111
|
)
|
|
(10.6
|
)%
|
Subscriber disconnections (in thousands)
|
|
|
860
|
|
|
868
|
|
|
(8
|
)
|
|
(0.9
|
)%
|
Net subscriber additions (in thousands)
|
|
|
81
|
|
|
184
|
|
|
(103
|
)
|
|
(56.0
|
)%
|
Average subscriber acquisition costsper subscriber (SAC)
|
|
$
|
857
|
|
$
|
814
|
|
$
|
43
|
|
|
5.3
|
%
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
109
|
|
|
102
|
|
|
7
|
|
|
6.9
|
%
|
Subscriber leased equipmentsubscriber acquisitions
|
|
|
160
|
|
|
174
|
|
|
(14
|
)
|
|
(8.0
|
)%
|
Subscriber leased equipmentupgrade and retention
|
|
|
85
|
|
|
69
|
|
|
16
|
|
|
23.2
|
%
|
Satellites
|
|
|
34
|
|
|
31
|
|
|
3
|
|
|
9.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$
|
388
|
|
$
|
376
|
|
$
|
12
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Subscribers.
In the first quarter of 2012, net subscriber additions decreased due to lower gross additions primarily resulting from
stricter credit
policies, partially offset by a lower churn rate resulting from a higher number of subscribers on commitments or auto-bill pay arrangements, as well as an increase in upgrade and retention
offers to existing subscribers.
41
Table of Contents
DIRECTV
Revenues.
DIRECTV U.S. revenues increased in the first quarter of 2012 as a result of higher ARPU and a larger subscriber base. The
increase in ARPU
resulted primarily from price increases on programming packages and set-top receiver lease fees, as well as higher advanced receiver service fees and an increase in subscriber purchases of
premium channels, partially offset by increased promotional offers to new and existing subscribers.
Operating profit before depreciation and amortization.
Operating profit before depreciation and amortization increased in the first
quarter of 2012
as compared to the first quarter of 2011, as higher revenues and lower subscriber acquisition costs were partially offset by higher broadcast programming costs, increased general and administrative
expenses and higher upgrade and retention costs. The operating profit before depreciation and amortization margin decreased in the first quarter of 2012 as compared to the first quarter of 2011 as the
revenue growth was more than offset by higher relative growth in broadcast programming and other costs.
Broadcast
programming and other costs increased primarily due to annual program supplier rate increases and the larger number of subscribers.
Subscriber
acquisition costs decreased primarily due to lower gross subscriber additions. SAC, which includes the cost of capitalized set-top receivers, increased primarily
due to higher marketing costs per subscriber added and an increase in subscriber demand for advanced products.
Upgrade
and retention costs increased in the first quarter of 2012 due to higher installation costs associated with greater advanced equipment upgrades.
General
and administrative expenses increased in the first quarter of 2012 primarily due to the benefit from a property tax adjustment recorded during the first quarter of 2011, as well
as higher labor costs in 2012.
Operating profit.
Operating profit and operating profit margin increased in the first quarter of 2012 compared to the first quarter of
2011. The
increase in operating profit margin was primarily due to lower depreciation and amortization expense in the first quarter of 2012 resulting from the change in the HD set-top receiver
estimated depreciable life from three to four years and the completion of the amortization of a contract rights intangible asset, partially offset by lower operating profit before depreciation and
amortization margin.
42
Table of Contents
DIRECTV
DIRECTV Latin America Results of Operations
The following table provides operating results and a summary of key subscriber data for consolidated DIRECTV Latin America operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended and As of
March 31,
|
|
Change
|
|
|
|
2012
|
|
2011
|
|
$
|
|
%
|
|
|
|
(Dollars in Millions, Except Per Subscriber Amounts)
|
|
|
|
Revenues
|
|
$
|
1,485
|
|
$
|
1,114
|
|
$
|
371
|
|
|
33.3
|
%
|
Operating profit before depreciation and amortization
|
|
|
468
|
|
|
384
|
|
|
84
|
|
|
21.9
|
%
|
Operating profit before depreciation and amortization margin
|
|
|
31.5
|
%
|
|
34.5
|
%
|
|
|
|
|
|
|
Operating profit
|
|
$
|
249
|
|
$
|
219
|
|
$
|
30
|
|
|
13.7
|
%
|
Operating profit margin
|
|
|
16.8
|
%
|
|
19.7
|
%
|
|
|
|
|
|
|
Other data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARPU
|
|
$
|
60.59
|
|
$
|
61.69
|
|
$
|
(1.10
|
)
|
|
(1.8
|
)%
|
Average monthly total subscriber churn %
|
|
|
1.80
|
%
|
|
1.87
|
%
|
|
|
|
|
(3.7
|
)%
|
Average monthly post paid subscriber churn %
|
|
|
1.47
|
%
|
|
1.43
|
%
|
|
|
|
|
2.8
|
%
|
Total number of subscribers (in thousands)
|
|
|
8,464
|
|
|
6,235
|
|
|
2,229
|
|
|
35.7
|
%
|
Gross subscriber additions (in thousands)
|
|
|
1,034
|
|
|
765
|
|
|
269
|
|
|
35.2
|
%
|
Net subscriber additions (in thousands)
|
|
|
593
|
|
|
427
|
|
|
166
|
|
|
38.9
|
%
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
44
|
|
|
11
|
|
|
33
|
|
|
300.0
|
%
|
Subscriber leased equipmentsubscriber acquisitions
|
|
|
252
|
|
|
171
|
|
|
81
|
|
|
47.4
|
%
|
Subscriber leased equipmentupgrade and retention
|
|
|
103
|
|
|
84
|
|
|
19
|
|
|
22.6
|
%
|
Satellites
|
|
|
22
|
|
|
|
|
|
22
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$
|
421
|
|
$
|
266
|
|
$
|
155
|
|
|
58.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
DIRECTV
Latin America subscriber data exclude subscribers of the Sky Mexico platform.
Subscribers.
The increase in gross subscriber additions in the first quarter of 2012 was primarily due to greater middle market demand
primarily in
Brazil, Argentina and Colombia. Net subscribers additions increased in the first quarter of 2012 due to higher gross subscriber additions and lower total average churn due to higher prepaid
re-connections in PanAmericana, which was partially offset by an increase in post paid churn, primarily in Brazil.
Revenues.
Revenues increased in the first quarter of 2012 primarily due to strong subscriber growth partially offset by a decrease in
ARPU. The
decrease in ARPU was primarily due to unfavorable exchange rates in Brazil and Argentina, as well as the effect of increased penetration in the middle market partially offset by price increases on
programming packages and higher penetration of advanced products.
Operating profit before depreciation and amortization.
Operating profit before depreciation and amortization increased in the first
quarter of 2012
as compared to the first quarter of 2011, primarily due to the increased gross profit generated from the higher revenues, partially offset by higher subscriber acquisition costs due to the higher
number of gross subscriber additions, increased subscriber service expenses due to a larger subscriber base and higher upgrade and retention costs resulting from the increased demand for advanced
products. The operating profit before depreciation and amortization margin decreased in the first quarter of 2012 as compared to the first quarter of 2011 as
43
Table of Contents
DIRECTV
the
revenue growth was more than offset by higher relative growth in subscriber acquisition and upgrade and retention costs, as well as increased subscriber service expenses.
Operating profit.
Operating profit increased in the first quarter of 2012 as compared to the first quarter of 2011, primarily due to
higher operating
profit before depreciation and amortization discussed above, partially offset by higher depreciation and amortization expense resulting from an increase in basic and advanced set-top
receivers capitalized due to the higher gross subscriber additions attained in the last year. The operating profit margin decline was due to the lower operating profit before depreciation and
amortization margin discussed above and higher depreciation and amortization expense.
DIRECTV Other Income and Income Taxes
Interest income.
Interest income was $12 million in the first quarter of 2012 and $7 million in the first quarter of 2011.
Interest expense.
The increase in interest expense to $204 million in the first quarter of 2012 from $172 million in the
first quarter
of 2011 was due to an increase in the average debt balance, partially offset by a decrease in weighted average interest rates.
Other, net.
The significant components of "Other, net" were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
Change
|
|
Other, net:
|
|
2012
|
|
2011
|
|
$
|
|
|
|
(Dollars in Millions)
|
|
Equity in earnings of unconsolidated subsidiaries
|
|
$
|
33
|
|
$
|
25
|
|
$
|
8
|
|
Gain on sale of investments
|
|
|
|
|
|
26
|
|
|
(26
|
)
|
Fair-value loss on non-employee stock options
|
|
|
(4
|
)
|
|
(5
|
)
|
|
1
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
(11
|
)
|
|
11
|
|
Net foreign currency transaction gain
|
|
|
13
|
|
|
8
|
|
|
5
|
|
Other
|
|
|
(1
|
)
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41
|
|
$
|
42
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
Income Tax Expense.
We recognized income tax expense of $416 million for the first quarter of 2012 compared to income tax expense
of
$349 million for the first quarter of 2011. The effective tax rate for the first quarter of 2012 was 36.0% compared to 33.8% for the first quarter of 2011, primarily due to a benefit recorded
for previously unrecognized foreign tax credits in the first quarter of 2011 .
44
Table of Contents
DIRECTV
Earnings Per Share
Earnings per share and weighted average shares outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Shares in Millions)
|
|
Basic earnings attributable to DIRECTV per common share
|
|
$
|
1.08
|
|
$
|
0.85
|
|
Diluted earnings attributable to DIRECTV per common share
|
|
|
1.07
|
|
|
0.85
|
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
|
|
678
|
|
|
793
|
|
Diluted
|
|
|
681
|
|
|
797
|
|
The
increases in basic and diluted earnings per share were due to higher net income attributable to DIRECTV and a reduction in weighted average shares outstanding resulting from our
share repurchase program.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2012, our cash and cash equivalents totaled $4,526 million compared to $873 million at
December 31, 2011. The $3,653 million increase resulted primarily from $1,763 million of cash provided by operating activities and approximately $3,996 million of cash
proceeds
from the issuance of senior notes, partially offset by $1,260 million in cash used for the repurchase of shares and $811 million of cash paid for the acquisition of satellites, property
and equipment.
As
of March 31, 2012, DIRECTV U.S. had the ability to borrow up to $2 billion under a revolving credit facility, which is available until February 2016. DIRECTV U.S. is
subject to certain restrictive covenants under its credit facility.
As
a measure of liquidity, the current ratio (ratio of current assets to current liabilities) was 1.19 at March 31, 2012 and 0.89 at December 31, 2011.
Since
2006 our Board of Directors has approved multiple authorizations for the repurchase of our common stock, the most recent of which was announced in the first quarter of 2012,
authorizing share repurchases of up to an additional $6 billion. As of March 31, 2012, we had approximately $5,566 million remaining under this authorization. During the three
months ended March 31, 2012, we repurchased and retired 28 million common shares for $1,300 million, at an average price of $45.65. The authorizations allow us to repurchase our
common stock from time to time through open market purchases and negotiated transactions, or otherwise. The timing, nature and amount of such transactions will depend on a variety of factors,
including market conditions, and the program may be suspended, discontinued or accelerated at any time. The sources of funds for the purchases under the remaining authorizations are our existing cash
on hand, cash from operations and potential additional borrowings.
We
expect to fund our cash requirements and our existing business plan using our available cash balances and cash provided by operations. Additional borrowings, which may include
borrowings under the $2 billion DIRECTV U.S. revolving credit facility, may be required to fund strategic investment opportunities should they arise. We may also borrow additional amounts in
the future in order to maintain our target of outstanding long-term debt of 2.5 times our annual operating profit before depreciation and amortization of DIRECTV on a consolidated basis;
however, we will evaluate our optimal leverage target on an ongoing basis.
45
Table of Contents
DIRECTV
Several
factors may affect our ability to fund our operations and commitments that we discuss in "Contractual Obligations" and "Contingencies" below. In addition, our future cash flows
may be reduced if we experience, among other things, significantly higher subscriber additions than planned, increased subscriber churn or upgrade and retention costs, higher than planned capital
expenditures for satellites and broadcast equipment, satellite anomalies or signal theft. Additionally, DIRECTV U.S.' ability to borrow under the revolving credit facility is contingent upon DIRECTV
U.S. meeting financial and other covenants associated with its facility as more fully described below.
Borrowings
At March 31, 2012, we had $17,461 million in total outstanding borrowings, bearing a weighted average interest rate of
4.9%. Our outstanding borrowings consist of senior notes issued by DIRECTV U.S. as more fully described in Note 5 of the Notes to the Consolidated Financial Statements in Item 1,
Part I of this Quarterly Report and in Note 10 to the Notes to the Consolidated Financial Statements in Item 8, Part II of our 2011 Form 10-K.
On
May 15, 2012, DIRECTV U.S. will redeem for cash of all of its then outstanding $1,500 million of 7.625% senior notes, resulting in a cash payment of
$1,614 million and pre-tax charge of $64 million, $39 million after tax, of which $57 million will result from the premium paid for the redemption and
$7 million will result from the write-off of deferred debt issuance and other transaction costs.
Our
senior notes payable mature as follows: $1,500 million in 2012, $1,000 million in 2014, $1,200 million in 2015, $2,250 million in 2016 and
$11,550 million in 2017 and thereafter.
All
of our senior notes were issued by DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., or the Co-Issuers, and have been registered under the
Securities Act of 1933, as amended. On November 14, 2011, we entered into a series of Supplemental Indentures whereby DIRECTV agreed to fully guarantee all of the senior notes, jointly and
severally with substantially all of DIRECTV Holdings LLC's domestic subsidiaries. The Supplemental Indentures provide that DIRECTV unconditionally guarantees that the principal and interest on
the respective senior notes will be paid in full when due and that the obligations of the Co-Issuers to the holders of the outstanding senior notes will be performed. All of the senior
notes issued since November 14, 2011 are also similarly fully guaranteed by DIRECTV.
As
a result of the guarantees, holders of the senior notes have the benefit of DIRECTV's interests in the assets and related earnings of our operations that are not held through DIRECTV
Holdings LLC and its subsidiaries. Those operations are primarily our DTH digital television services throughout Latin America which are held by DIRECTV Latin America Holdings, Inc. and
its subsidiaries and DIRECTV Sports Networks LLC and its subsidiaries which are comprised primarily of three regional sports television networks based in Seattle, Washington; Denver, Colorado
and Pittsburgh, Pennsylvania. However, the subsidiaries that own and operate DIRECTV Latin America Holdings and DIRECTV Sports Networks LLC have not guaranteed the senior notes.
The
guarantees are unsecured senior obligations of DIRECTV and rank equally in right of payment with all of DIRECTV's existing and future senior debt and rank senior in right of payment
to all of
DIRECTV's future subordinated debt, if any. The guarantees are effectively subordinated to all existing and future secured obligations, if any, of DIRECTV to the extent of the value of the assets
securing the obligations. DIRECTV will not be subject to the covenants contained in each indenture of the senior notes and our guarantees will terminate and be released on the terms set forth in each
of the indentures.
46
Table of Contents
DIRECTV
Revolving Credit Facility
In February 2011, DIRECTV U.S.' $500 million, six-year senior secured credit facility was terminated and replaced
with a five-year, $2 billion revolving credit facility. We pay a commitment fee of 0.30% per year for the unused commitment under the revolving credit facility, and borrowings bear
interest at an annual rate of (i) the London interbank offer rate (LIBOR) (or for Euro advances the EURIBOR rate) plus 1.50% or at our option (ii) the higher of the prime rate plus 0.50%
or the Fed Funds Rate plus 1.00%. The commitment fee and the annual interest rate may be increased or decreased under certain conditions, which include changes in DIRECTV U.S.' long-term,
unsecured debt ratings. The revolving credit facility has been fully and unconditionally guaranteed, jointly and severally, by substantially all of DIRECTV U.S.' domestic subsidiaries on a senior
unsecured basis.
Covenants and Restrictions
The revolving credit facility requires DIRECTV U.S. to maintain at the end of each fiscal quarter a specified ratio of indebtedness to
adjusted net income. The revolving credit facility also includes covenants that restrict DIRECTV U.S.' ability to, among other things, (i) incur additional subsidiary indebtedness,
(ii) incur liens, (iii) enter into certain transactions with affiliates, (iv) merge or consolidate with another entity, (v) sell, assign, lease or otherwise dispose of all
or substantially all of its assets, and (vi) change its lines of business. Additionally, the senior notes contain restrictive covenants that are similar. Should DIRECTV U.S. fail to comply with
these covenants, all or a portion of its borrowings under the senior notes could become immediately payable and its revolving credit facility could be terminated. At March 31, 2012, management
believes DIRECTV U.S. was in compliance with all such covenants. The senior notes and revolving credit facility also provide that the borrowings may be required to be prepaid if certain
change-in-control events occur.
Contingencies
Venezuela Foreign Currency Exchange Controls
Companies operating in Venezuela are required to obtain Venezuelan government approval to exchange Venezuelan bolivars into U.S.
dollars at the official rate of 4.3 bolivars per U.S. dollar. Our ability to pay U.S. dollar denominated obligations and repatriate cash generated in Venezuela in excess of local operating
requirements is limited, resulting in an increase in the cash balance at our Venezuelan subsidiary. At such time that exchange controls are eased, accumulated cash balances may ultimately be
repatriated at less than their currently reported value, as the official exchange rate has not changed despite continuing high inflation in Venezuela. In addition, in the event of a significant
devaluation of the bolivar, we may recognize a charge to earnings based on the amount of bolivar denominated net monetary assets (monetary assets net of monetary liabilities) held at the time of such
devaluation and this may affect the growth of our Venezuelan business.
We
use the official 4.3 bolivars per U.S. dollar exchange rate to translate the financial statements of our Venezuelan subsidiary. As of March 31, 2012, our Venezuelan subsidiary
had Venezuelan bolivar denominated net monetary assets of $312 million, including cash of $396 million.
Redeemable Noncontrolling Interest.
As discussed in Note 6 of the Notes to the Consolidated Financial Statements in Part 1,
Item 1 of this Quarterly Report, Globo has the right to exchange Sky Brasil shares for cash or our common shares. If Globo exercises this right, we have the option to elect to pay the
consideration in cash, shares of our common stock, or a combination of both.
47
Table of Contents
DIRECTV
Dividend Policy
Dividends may be paid on our common stock only when, as, and if declared by our Board of Directors in its sole discretion. We have no
current plans to pay any dividends on our common stock. We currently expect to use our future earnings for the development of our businesses or other corporate purposes, which may include share
repurchases.
CONTRACTUAL OBLIGATIONS
The following table sets forth our contractual obligations as of March 31, 2012, including the future periods in which payments
are expected. Additional details regarding these obligations are provided in the Notes to the Consolidated Financial Statements in Part I, Item 1 referenced in the table below and the
Notes to the Consolidated Financial Statements in Part II, Item 8 in our Form 10-K for the year ended December 31, 2011. The contractual obligations below do
not include payments that could be made related to our net unrecognized tax benefits liability, which amounted to $397 million as of March 31, 2012. The timing and amount of any future
payments is not reasonably estimable, as such payments are dependent on the completion and resolution of examinations with tax authorities. We do not expect a significant payment related to these
obligations within the next twelve months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period
|
|
Contractual Obligations
|
|
Total
|
|
2012
|
|
2013-2014
|
|
2015-2016
|
|
2017 and
thereafter
|
|
|
|
(Dollars in Millions)
|
|
Long-term debt obligations (Note 5)(a)
|
|
$
|
27,739
|
|
$
|
1,987
|
|
$
|
2,482
|
|
$
|
4,731
|
|
$
|
18,539
|
|
Purchase obligations(b)
|
|
|
8,224
|
|
|
1,870
|
|
|
3,805
|
|
|
1,330
|
|
|
1,219
|
|
Operating lease obligations(c)
|
|
|
848
|
|
|
63
|
|
|
156
|
|
|
141
|
|
|
488
|
|
Capital lease obligations(d)
|
|
|
1,526
|
|
|
71
|
|
|
182
|
|
|
254
|
|
|
1,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
38,337
|
|
$
|
3,991
|
|
$
|
6,625
|
|
$
|
6,456
|
|
$
|
21,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Long-term
debt obligations include interest calculated based on the rates in effect at March 31, 2012, however, the obligations do not
reflect potential prepayments required under indentures.
-
(b)
-
Purchase
obligations consist primarily of broadcast programming commitments, regional professional team rights agreements, service contract commitments and
satellite construction and launch contracts. Broadcast programming commitments include guaranteed minimum contractual commitments that are typically based on a flat fee or a minimum number of required
subscribers subscribing to the related programming. Actual payments may exceed the minimum payment requirements if the actual number of subscribers subscribing to the related programming exceeds the
minimum amounts. Service contract commitments include minimum commitments for the purchase of services that have been outsourced to third parties, such as billing services, telemetry, tracking and
control services and broadcast center services. In most cases, actual payments, which are typically based on volume, usually exceed these minimum amounts.
-
(c)
-
Certain
of the operating leases contain variable escalation clauses and renewal or purchase options, which we do not consider in the amounts disclosed.
-
(d)
-
Capital
lease obligations include prepayments related to a satellite lease contract which we expect to account for as a capital lease upon commencement.
48
Table of Contents
DIRECTV
CONTINGENCIES
For a discussion of "Contingencies," see Part I, Item 1, and Note 6 of the Notes to the Consolidated Financial
Statements of this Quarterly Report, which we incorporate herein by reference.
CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
For a discussion of "Certain Relationships and Related-Party Transactions," see Part I, Item 1, Note 7 of the
Notes to the Consolidated Financial Statements of this Quarterly Report, which we incorporate herein by reference.
CRITICAL ACCOUNTING ESTIMATES
For a discussion of changes to our "Critical Accounting Estimates," see Part I, Item 1, Note 3 of the Notes to the
Consolidated Financial Statements of this Quarterly Report, which we incorporate herein by reference. For additional information, see Item 7. Critical Accounting Estimates in Part II of
our Annual Report on Form 10-K for the year ended December 31, 2011.
ACCOUNTING CHANGES
For a discussion of "Accounting Changes," see Part I, Item 1, Note 3 of the Notes to the Consolidated Financial
Statements of this Quarterly Report, which we incorporate herein by reference.
* * *
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our market risk during the three months ended March 31, 2012. For additional information,
see Item 7A. Quantitative and Qualitative Disclosures About Market Risk in Part II of our Annual Report on Form 10-K for the year ended December 31, 2011.
* * *
ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q under the
supervision and with the participation of management, including our principal executive officer and our principal financial officer, of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange
Act). Based on the evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2012.
There
has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during our fiscal quarter ended March 31, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
* * *
49
Table of Contents
DIRECTV
PART IIOTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) Material
pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we became or were a party during the quarter ended
March 31, 2012 or subsequent thereto, but before the filing of the report, are summarized below:
Dealer Arbitration.
In February, 2012, Consolidated Smart Broadband Systems, LLC, one of our multi-dwelling unit (MDU) dealers,
filed a demand
for arbitration in Los Angeles, California against DIRECTV, LLC. Consolidated is asserting claims for damages of approximately $70 million, alleging breach of contract and tortious
interference with prospective economic advantage. The arbitration commenced on April 26, 2012. We believe their claims are without merit and we are defending the action. This proceeding
resulted, in part, from recently adopted amendments to some of our policies related to our MDU and other retail dealers. Various other current or former dealers have asserted claims against us
relating to such amendments or other matters, and we believe such claims are generally without merit. We have determined the likelihood of a material liability in such matters is remote or have made
appropriate accruals, and the final disposition of these claims is not expected to have a material effect on our consolidated financial position or results of operation. However, no assurance can be
given that any adverse outcome would not be material to our results of operation of any one period.
Other.
We are subject to other legal proceedings and claims that arise in the ordinary course of our business. The amount of ultimate
liability with
respect to such actions is not expected to materially affect our financial position, results of operations or liquidity.
(b) No
previously reported legal proceedings were terminated during the first quarter ended March 31, 2012.
ITEM 1A. RISK FACTORS
The risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2011 have not
materially changed. See Part I Item 2 of this Quarterly Report related to "forward-looking statements" which we incorporate by reference.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Since 2006 our Board of Directors has approved multiple authorizations for the repurchase of our common stock, the most recent of which
was announced in the first quarter of 2012, authorizing share repurchases of up to an additional $6 billion. The authorizations allow us to repurchase our common stock from time to time through
open market purchases and negotiated transactions, or otherwise. The timing, nature and amount of such transactions will depend on a variety of factors, including market conditions, and the program
may be suspended, discontinued or accelerated at any time. The sources of funds for the purchases under the remaining authorizations are our existing cash on hand, cash from operations and potential
additional borrowings. Purchases are made in the open market, through block trades and other negotiated transactions. Repurchased shares are retired, but remain authorized for registration and
issuance in the future.
50
Table of Contents
DIRECTV
A
summary of the repurchase activity for the three months ended March 31, 2012 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid Per Share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
|
Maximum Dollar
Value that May
Yet Be Purchased
Under the Plans
or Programs
|
|
|
|
(Amounts in Millions, Except Per Share Amounts)
|
|
January 131, 2012
|
|
|
9
|
|
$
|
43.76
|
|
|
9
|
|
$
|
455
|
|
February 129, 2012
|
|
|
9
|
|
|
45.52
|
|
|
9
|
|
|
6,038
|
|
March 131, 2012
|
|
|
10
|
|
|
47.56
|
|
|
10
|
|
|
5,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28
|
|
|
45.65
|
|
|
28
|
|
|
5,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
Table of Contents
DIRECTV
ITEM 6. EXHIBITS
|
|
|
|
Exhibit
Number
|
|
Exhibit Name
|
|
3.1
|
|
Limited Liability Company Articles of Organization of DIRECTV, LLC dated as of July 19, 2002, as amended on October 28, 2002, October 17, 2002 and January 1, 2012 (incorporated by reference to
Exhibit 3.7 of the Form S-4 of DIRECTV and DIRECTV Holdings LLC filed on March 26, 2012 (SEC File No. 333-180335)).
|
|
4.1
|
|
Indenture, dated as of March 8, 2012, by and among DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors signatory thereto and The Bank of New York Mellon Trust Company, N.A., as
trustee (incorporated by reference to Exhibit 4.1 of the Form 8-K of DIRECTV filed on March 14, 2012 (SEC File No. 1-34554)).
|
|
4.2
|
|
Form of 2.400% Notes due 2017 (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.2 of the Form 8-K of DIRECTV filed on March 14, 2012 (SEC File No. 1-34554)).
|
|
4.3
|
|
Form of 3.800% Notes due 2021 (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.3 of the Form 8-K of DIRECTV filed on March 14, 2012 (SEC File No. 1-34554)).
|
|
4.4
|
|
Form of 5.150% Notes due 2042 (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.4 of the Form 8-K of DIRECTV filed on March 14, 2012 (SEC File No. 1-34554)).
|
|
10.1
|
|
DIRECTV Executive Severance Plan Document and Summary Plan Description (incorporated by reference to Exhibit 10.1 of the Form 8-K of DIRECTV filed on January 27, 2012 (SEC File No. 1-34554)).
|
|
10.2
|
|
Summary Terms2012 Restricted Stock Unit Grants (incorporated by reference to Exhibit 10.1 of the Form 8-K of DIRECTV filed on February 15, 2012 (SEC File No. 1-34554)).
|
|
10.3
|
|
Summary Terms2012 Cash Bonus (incorporated by reference to Exhibit 10.2 of the Form 8-K of DIRECTV filed on February 15, 2012 (SEC File No. 1-34554)).
|
|
10.4
|
|
Summary Terms2012 Stock Option Grant (incorporated by reference to Exhibit 10.3 of the Form 8-K of DIRECTV filed on February 15, 2012 (SEC File No. 1-34554)).
|
|
10.5
|
|
Amended and Restated DIRECTV Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.5 of the Form 10-K of DIRECTV filed on February 23, 2012 (SEC File No. 1-34554)).
|
|
10.6
|
|
Registration Rights Agreement, dated as of March 8, 2012, by and among DIRECTV Holdings LLC, DIRECTV Financing Co., Inc., the Guarantors signatory thereto and the Initial Purchasers named therein
(incorporated by reference to Exhibit 10.1 of the Form 8-K of DIRECTV filed on March 14, 2012 (SEC File No. 1-34554)).
|
|
*31.1
|
|
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
*31.2
|
|
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
*32.1
|
|
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
52
Table of Contents
DIRECTV
|
|
|
|
Exhibit
Number
|
|
Exhibit Name
|
|
*32.2
|
|
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS
|
|
XBRL Instance Document
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
-
*
-
Furnished,
not filed.
-
-
Management
contract or compensatory plan arrangement.
* * *
53
Table of Contents
DIRECTV
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
DIRECTV
(Registrant)
|
Date: May 8, 2012
|
|
By:
|
|
/s/ PATRICK T. DOYLE
Patrick T. Doyle
(Duly Authorized Officer and Executive Vice President,
Treasurer and Chief Financial Officer)
|
54
Table of Contents
DIRECTV
EXHIBIT INDEX
|
|
|
|
Exhibit
Number
|
|
Exhibit Name
|
|
31.1
|
|
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2
|
|
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32.1
|
|
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32.2
|
|
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS
|
|
XBRL Instance Document
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
DTE Energy (NYSE:DTV)
Historical Stock Chart
From Jun 2024 to Jul 2024
DTE Energy (NYSE:DTV)
Historical Stock Chart
From Jul 2023 to Jul 2024