NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Description of Business
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 42% 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 20, our DIRECTV Latin America business unit, which was previously reported as a
single segment, is now being 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.
Note 2: Basis of Presentation and Summary of Significant Accounting Policies
Principles of Consolidation
We present our accompanying financial statements on a consolidated basis and include our accounts and those of our domestic and foreign
subsidiaries that we control through equity ownership or for which we are deemed to be the primary beneficiary, after elimination of intercompany accounts and transactions.
Use of Estimates in the Preparation of the Consolidated Financial Statements
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America, 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 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.
Revenue Recognition
We enter into multiple-deliverable revenue arrangements with our subscribers under which we provide DIRECTV receiving equipment,
services and programming during their contract period, of up to two years. We allocate consideration to each deliverable in the arrangement based on its relative selling price. We determine the
selling price of the DIRECTV receiving equipment using our best estimate. We determine the selling price for services based on prices charged by third parties. We determine the selling price of the
programming using our standard programming rates. The DIRECTV receiving equipment, services and programming are each considered separate units of accounting.
We
recognize subscription and pay-per-view revenues when programming is broadcast to subscribers. We recognize subscriber fees for multiple set-top
receivers and warranty services as revenue, as earned. We recognize advertising revenues when
67
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
the
related services are performed. We defer programming payments received from subscribers in advance of the broadcast as "Unearned subscriber revenues and deferred credits" in the Consolidated
Balance Sheets until earned. We recognize revenues to be received under contractual commitments on a straight line basis over the minimum contractual period. We report revenues net of customer credits
and discounted promotions.
Broadcast Programming and Other
We recognize the costs of television programming distribution rights when we distribute the related programming. We recognize the costs
of television programming rights to distribute live sporting events for a season or tournament to expense using the straight-line method over the course of the season or tournament.
We
defer advance payments in the form of cash and equity instruments from programming content providers for carriage of their signal and recognize them as a reduction of "Broadcast
programming and other" in the Consolidated Statements of Operations on a straight-line basis over the related contract term. We record equity instruments at fair value based on quoted
market prices or values determined by management.
Subscriber Acquisition Costs
Subscriber acquisition costs consist of costs we incur to acquire new subscribers. We include the cost of set-top receivers
and other equipment, commissions we pay to national retailers, independent satellite television retailers, dealers and regional telephone companies, which we refer to as telcos, and the cost of
installation, advertising, marketing and customer call center expenses associated with the acquisition of new subscribers in subscriber acquisition costs. We expense these costs as incurred, or when
subscribers activate the DIRECTV® service, as appropriate, except for the cost of set-top receivers leased to new subscribers, which we capitalize in "Property and equipment,
net" in the Consolidated Balance Sheets and depreciate over their estimated 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 in "Property and equipment, net" in the Consolidated Balance Sheets. Although paid in advance, the retailer or dealer earns substantially all commissions paid for customer
acquisitions over 12 months from the date of subscriber activation. Should the subscriber cancel our service during such 12 month service period, we are reimbursed for the unearned
portion of the commission by the retailer or dealer and record a decrease to subscriber acquisition costs. We include the amount of our set-top receivers capitalized each period for
subscriber acquisition activities in the Consolidated Statements of Cash Flows under the caption "Cash paid for property and equipment." See Note 6 for additional information.
Upgrade and Retention Costs
Upgrade and retention costs consist primarily of costs we incur for upgrade efforts for existing subscribers. We include the costs of
subscriber equipment upgrade programs for digital video recorder, or DVR, high-definition, or HD, and HD DVR receivers and local channels, our multiple set-top receiver offers
and other similar initiatives. Retention costs also include the costs of installing and providing hardware under our movers program for subscribers relocating to a new residence. We expense these
costs as incurred, except for the cost of set-top receivers leased to existing subscribers, which we capitalize in "Property and equipment, net" in the Consolidated Balance Sheets. We
include the amount of our set-top receivers capitalized each period for upgrade and retention activities in the Consolidated Statements of Cash Flows under the caption "Cash paid for
property and equipment." See Note 6 for additional information.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on deposit and highly liquid investments we purchase with original maturities of three months
or less.
Inventories
We state inventories at the lower of average cost or market. Inventories consist of finished goods for DIRECTV System equipment and
DIRECTV System access cards.
68
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Property and Equipment, Satellites and Depreciation
We carry property and equipment, and satellites, at cost, net of accumulated depreciation. The amounts we capitalize for satellites
currently being constructed and those that have been successfully launched include the costs of construction, launch, launch insurance, incentive obligations and capitalized interest. We generally
compute depreciation using the
straight-line method over the estimated useful lives of the assets. We amortize leasehold improvements over the lesser of the life of the asset or term of the lease.
Capitalized Software Costs
We capitalize certain software costs incurred, either from internal or external sources, as part of "Property and equipment, net" in
the Consolidated Balance Sheets and depreciate these costs on a straight-line basis over the useful life of the software. We recognize planning, training, support and maintenance costs
incurred either prior to or following the implementation phase as expense in the Consolidated Statements of Operations in the period in which they occur. We had unamortized capitalized software costs
of $492 million as of December 31, 2012 and $551 million as of December 31, 2011. We recorded depreciation of these costs of $292 million in 2012,
$234 million in 2011 and $218 million in 2010 in "Depreciation and amortization expense" in the Consolidated Statements of Operations.
Goodwill and Intangible Assets
Goodwill and intangible assets with indefinite lives are carried at historical cost and are subject to write-down, as
needed, based upon an impairment analysis that we must perform at least annually, or sooner if an event occurs or circumstances change that would more likely than not result in an impairment loss. We
perform our annual impairment analysis in the fourth quarter of each year. We use estimates of fair value to determine the amount of impairment, if any, of goodwill and intangibles assets with
indefinite lives. The goodwill evaluation requires the estimation of the fair value of reporting units where we record goodwill. We determine fair values primarily using estimated cash flows
discounted at a rate commensurate with the risk involved, when appropriate. If an impairment loss results from the annual impairment test, we would record the loss as a pre-tax charge to
operating income.
We
amortize other intangible assets using the straight-line method over their estimated useful lives, which range from 5 to 20 years.
Valuation of Long-Lived Assets
We evaluate the carrying value of long-lived assets to be held and used, other than goodwill and intangible assets with
indefinite lives, when events and circumstances warrant such a review. We consider the carrying value of a long-lived asset impaired when the anticipated undiscounted future cash flow from
such asset is separately identifiable and is less than its carrying value. In that event, we would recognize a loss based on the amount by which the carrying value exceeds the fair value of the
long-lived asset. We determine fair value primarily using estimated future cash flows associated with the asset under review, discounted at a rate commensurate with the risk involved, or
other valuation techniques. We determine losses on long-lived assets to be disposed of in a similar manner, except that we reduce the fair value for the cost of disposal.
Foreign Currency
The U.S. dollar is the functional currency for most of our foreign operations. We recognize gains and losses resulting from
remeasurement of these operations' foreign currency denominated assets, liabilities and transactions into the U.S. dollar in the Consolidated Statements of Operations.
We
also have foreign operations where the local currency is their functional currency. Accordingly, these foreign entities translate assets and liabilities from their local currencies to
U.S. dollars using year-end exchange rates while income and expense accounts are translated at the average rates in effect during the year. We record the resulting translation adjustment
as part of "Accumulated other comprehensive loss," a separate component of stockholders' deficit in the Consolidated Balance Sheets.
69
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Investments
We maintain investments in equity securities of unaffiliated companies. We carry non-marketable equity securities at cost.
We consider marketable equity securities available-for-sale and they are carried at current fair value based on quoted market prices with unrealized gains or losses (excluding
other-than-temporary losses), net of taxes, reported as part of "Accumulated other comprehensive loss" in the Consolidated Balance Sheets. We regularly review our investments
to determine whether a decline in fair value below the cost basis is "other-than-temporary." We consider, among other factors: the magnitude and duration of the decline; the
financial health and business outlook of the investee, including industry and sector performance, changes in technology, and operational and financing cash flow factors; and our intent and ability to
hold the investment. If we judge the decline in fair value to be other-than-temporary, we write-down the cost basis of the security to fair value and recognize the
amount in the Consolidated Statements of Operations as part of "Other, net" and record it as a reclassification adjustment from "Accumulated other comprehensive loss" in the Consolidated Balance
Sheets.
We
account for investments in which we own at least 20% of the voting securities or have significant influence under the equity method of accounting. We record equity method investments
at cost and adjust for the appropriate share of the net earnings or losses of the investee. We record investee losses up to the amount of the investment plus advances and loans made to the investee,
and financial guarantees made on behalf of the investee.
Derivative Financial Instruments
We have designated our cross-currency swaps as cash flow hedges, and accordingly, we record the effective portion of the unrealized
gains and losses on the cross-currency swaps in "Accumulated other comprehensive loss" in the Consolidated Balance Sheets and reclassify those amounts to earnings in the same periods during which the
hedged debt affects earnings. We record the ineffective portion of the unrealized gains and losses on these cross-currency swaps, if any, immediately in earnings.
Debt Issuance Costs
We defer costs we incur to issue debt and amortize these costs to interest expense using the straight-line method over the
term of the respective obligation.
Share-Based Payment
We grant restricted stock units and common stock options to certain employees and shares of stock to our directors as part of their
annual compensation for Board services.
We
record compensation expense equal to the fair value of stock-based awards at the grant date on a straight-line basis over the requisite service period of up to three
years, reduced for estimated forfeitures and adjusted for anticipated payout percentages related to the achievement of performance targets.
Sales Taxes
Sales taxes collected and remitted to state and local authorities are recorded on a net basis.
Income Taxes
We determine deferred tax assets and liabilities based on the difference between the financial statement and tax basis of assets and
liabilities, using enacted tax rates in effect for the year in which we expect the differences to reverse. We must make certain estimates and judgments in determining income tax provisions, assessing
the likelihood of recovering our deferred tax assets, and evaluating tax positions.
We
recognize a benefit in "Income tax expense" in the Consolidated Statements of Operations for uncertain tax positions that are more-likely-than-not
to be sustained upon examination, measured at the largest amount that has a greater than 50% likelihood of being realized upon settlement. Unrecognized tax benefits represent tax benefits taken or
expected to be taken in income tax returns, for which the benefit has not yet been recognized in "Income tax expense" in the Consolidated Statements of Operations due to the uncertainty of whether
such benefits will be ultimately realized. We recognize interest and penalties accrued related to unrecognized tax benefits in "Income tax expense" in the Consolidated
70
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Statements
of Operations. Unrecognized tax benefits are recorded in "Income tax expense" in the Consolidated Statements of Operations at such time that the benefit is effectively settled.
Advertising Costs
We expense advertising costs primarily in "Subscriber acquisition costs" in the Consolidated Statements of Operations as incurred.
Advertising costs for print and media related to national advertising campaigns, net of payments received from programming content providers for marketing support, were $514 million in 2012,
$464 million in 2011 and $396 million in 2010.
Market Concentrations and Credit Risk
We sell programming services and extend credit, in amounts generally not exceeding $200 each, to a large number of individual
residential subscribers throughout the United States and most of Latin America. As applicable, we maintain allowances for anticipated losses.
Fair Value Measurement
We determine the fair value measurements of assets and liabilities based on the three level valuation hierarchy established for
classification of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to
the assumptions that market participants would use in pricing an asset or liability and may be observable or unobservable. The three level hierarchy of inputs is as follows:
Level 1:
Valuation is based on quoted market prices in active markets for identical assets or liabilities.
Level 2:
Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable, for substantially the full term of the asset or
liability.
Level 3:
Valuation is based upon other unobservable inputs that are not corroborated by market data.
The
carrying value of cash and cash equivalents, accounts receivable, investments and other assets, accounts payable, short-term borrowings and amounts included in accrued
liabilities and other meeting the definition of a financial instrument approximated their fair values at December 31, 2012 and 2011.
Note 3: Change in Accounting Estimate
Depreciable Lives of Leased Set-Top Receivers.
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 continue to depreciate standard-definition, or SD, set-top receivers at DIRECTV U.S. over a three-year estimated useful life. We 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:
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions,
Except Per Share Amounts)
|
|
Depreciation and amortization expense
|
|
$
|
(176
|
)
|
$
|
(141
|
)
|
Net income attributable to DIRECTV
|
|
|
109
|
|
|
86
|
|
Basic earnings attributable to DIRECTV common stockholders per common share
|
|
$
|
0.17
|
|
$
|
0.12
|
|
Diluted earnings attributable to DIRECTV common stockholders per common share
|
|
$
|
0.17
|
|
$
|
0.11
|
|
71
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Note 4: Acquisition
Globo Transaction
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 or a portion
(but not less than half) of its 25.9% interest in Sky Brasil. Upon the exercise of this right in the fourth quarter of 2010, we paid $605 million in cash, which was the fair value of the
approximate 19% interest
purchased, and recorded a reduction to "Redeemable noncontrolling interest" in the Consolidated Balance Sheets. In addition, we recorded $79 million of net deferred tax assets related to the
acquisition of this interest as an offset to "Common stock and additional paid-in capital" in the Consolidated Balance Sheets. We and our subsidiaries now own 93% of Sky Brasil and Globo
owns the remaining 7%.
In
accordance with our agreement, Globo will have the right to exchange all (but not less than all) of its remaining equity interest in Sky Brasil until January 2014.
Note 5: Accounts Receivable, Net
The following table sets forth the amounts recorded for "Accounts receivable, net" in our Consolidated Balance Sheets as of
December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Subscriber
|
|
$
|
1,804
|
|
$
|
1,639
|
|
Telco
|
|
|
459
|
|
|
512
|
|
Trade and other
|
|
|
514
|
|
|
402
|
|
|
|
|
|
|
|
Total
|
|
|
2,777
|
|
|
2,553
|
|
Less: Allowance for doubtful accounts
|
|
|
(81
|
)
|
|
(79
|
)
|
|
|
|
|
|
|
Accounts receivable, net
|
|
$
|
2,696
|
|
$
|
2,474
|
|
|
|
|
|
|
|
Note 6: Satellites, Net and Property and Equipment, Net
The following table sets forth the amounts recorded for "Satellites, net" and "Property and equipment, net" in our Consolidated Balance
Sheets as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Useful Lives
(years)
|
|
2012
|
|
2011
|
|
|
|
|
|
(Dollars in Millions)
|
|
Satellites
|
|
|
10-16
|
|
$
|
3,188
|
|
$
|
3,206
|
|
Satellites under construction
|
|
|
|
|
|
693
|
|
|
302
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
3,881
|
|
|
3,508
|
|
Less: Accumulated depreciation
|
|
|
|
|
|
(1,524
|
)
|
|
(1,293
|
)
|
|
|
|
|
|
|
|
|
|
Satellites, net
|
|
|
|
|
$
|
2,357
|
|
$
|
2,215
|
|
|
|
|
|
|
|
|
|
|
Land and improvements
|
|
|
9-30
|
|
$
|
44
|
|
$
|
44
|
|
Buildings and leasehold improvements
|
|
|
2-40
|
|
|
441
|
|
|
406
|
|
Machinery and equipment
|
|
|
2-23
|
|
|
1,988
|
|
|
1,947
|
|
Capitalized software
|
|
|
3
|
|
|
2,392
|
|
|
2,198
|
|
Subscriber leased set-top equipment
|
|
|
3-7
|
|
|
9,053
|
|
|
8,105
|
|
Construction in-progress
|
|
|
|
|
|
750
|
|
|
418
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
14,668
|
|
|
13,118
|
|
Less: Accumulated depreciation
|
|
|
|
|
|
(8,630
|
)
|
|
(7,895
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
$
|
6,038
|
|
$
|
5,223
|
|
|
|
|
|
|
|
|
|
|
We
capitalized interest costs of $24 million in 2012, $13 million in 2011 and $6 million in 2010 as part of the cost of our property and satellites under
construction. Depreciation expense, including amortization of property and equipment and satellites held under capital leases, was $2,342 million in 2012, $2,213 million in 2011 and
$2,292 million in 2010.
72
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
The
following table sets forth property and equipment leased to our subscribers as of December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Subscriber leased set-top equipment
|
|
$
|
9,053
|
|
$
|
8,105
|
|
Less: Accumulated depreciation of subscriber leased equipment
|
|
|
(5,040
|
)
|
|
(4,618
|
)
|
|
|
|
|
|
|
Subscriber leased set-top equipment, net
|
|
$
|
4,013
|
|
$
|
3,487
|
|
|
|
|
|
|
|
As
discussed above in Note 3, effective July 1, 2011, we began depreciating capitalized HD set-top receivers at DIRECTV U.S. over a four-year
estimated useful life. Previously, we depreciated HD set-top receivers at DIRECTV U.S. over a three-year estimated useful life. We continue to depreciate SD set-top
receivers at DIRECTV U.S. over a three-year useful life. At DIRECTV Latin America, we depreciate capitalized subscriber leased equipment, which includes the cost of the set-top
receiver, installation and the dish. HD set-top-receivers have a three-year estimated useful life and SD set-top receivers have a seven-year
estimated useful life. The useful life used to depreciate capitalized set-top receivers is based on, among other things, management's judgment of the risk of technological obsolescence.
Changes in the estimated useful lives of set-top receivers capitalized could result in significant changes to the amounts recorded as depreciation expense. We regularly evaluate the
estimate useful life of our capitalized set-top receivers.
Note 7: Goodwill and Intangible Assets, Net
The following table sets forth the changes in the carrying amounts of "Goodwill" in the Consolidated Balance Sheets by segment for the
years ended December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
Sports
Networks,
Eliminations
and Other
|
|
|
|
|
|
DIRECTV
U.S.
|
|
Sky Brasil
|
|
PanAmericana
|
|
Total
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2011
|
|
$
|
3,176
|
|
$
|
466
|
|
$
|
211
|
|
$
|
295
|
|
$
|
4,148
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
(52
|
)
|
Acquisition accounting adjustments
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2011
|
|
|
3,177
|
|
|
414
|
|
|
211
|
|
|
295
|
|
|
4,097
|
|
Foreign currency translation adjustment
|
|
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2012
|
|
$
|
3,177
|
|
$
|
380
|
|
$
|
211
|
|
$
|
295
|
|
$
|
4,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
The following table sets forth the components for "Intangible assets, net" in the Consolidated Balance Sheets as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
December 31, 2011
|
|
|
|
Estimated
Useful
Lives
(years)
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Amount
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Amount
|
|
|
|
|
|
(Dollars in Millions)
|
|
Orbital slots
|
|
|
Indefinite
|
|
$
|
432
|
|
$
|
|
|
$
|
432
|
|
$
|
432
|
|
$
|
|
|
$
|
432
|
|
Satellite rights
|
|
|
15
|
|
|
101
|
|
|
19
|
|
|
82
|
|
|
110
|
|
|
12
|
|
|
98
|
|
Subscriber related
|
|
|
5-10
|
|
|
383
|
|
|
371
|
|
|
12
|
|
|
402
|
|
|
353
|
|
|
49
|
|
Dealer network
|
|
|
15
|
|
|
130
|
|
|
117
|
|
|
13
|
|
|
130
|
|
|
108
|
|
|
22
|
|
Trade name and other
|
|
|
5-20
|
|
|
174
|
|
|
46
|
|
|
128
|
|
|
159
|
|
|
37
|
|
|
122
|
|
Distribution agreements
|
|
|
6-20
|
|
|
208
|
|
|
43
|
|
|
165
|
|
|
208
|
|
|
22
|
|
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
|
|
$
|
1,428
|
|
$
|
596
|
|
$
|
832
|
|
$
|
1,441
|
|
$
|
532
|
|
$
|
909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense of intangible assets was $95 million in 2012, $136 million in 2011 and $190 million in 2010.
Estimated
amortization expense for intangible assets in each of the next five years and thereafter is as follows: $58 million in 2013, $50 million in 2014,
$45 million in 2015, $24 million in 2016, $24 million in 2017 and $199 million thereafter.
We
performed our annual impairment tests for goodwill and orbital slots in the fourth quarters of 2012, 2011 and 2010. The estimated fair values for each
reporting unit and the orbital slots exceeded our carrying values, and accordingly, no impairment losses were recorded during 2012, 2011 or 2010. Additionally, there are no accumulated impairment
losses as of December 31, 2012 and 2011.
Satellite Rights
Sky Brasil has an agreement for the right to use a satellite should its existing leased satellite suffer a significant failure and
replacement capacity is needed. During the first quarter of 2010, the satellite was launched and successfully placed into its assigned orbit, and we recorded the total obligation for the right to use
the satellite of $116 million in "Intangible assets, net" in the Consolidated Balance Sheets. We made a $29 million payment during 2010 and we made the remaining $87 million
payment during 2011. The intangible asset is being amortized on a straight line basis over the 15-year term of the agreement.
Note 8: Investments
Equity Method Investments
Sky Mexico.
DIRECTV accounts for the excess of the carrying value for its investment in Sky Mexico over DIRECTV's share of Sky Mexico's
equity in
memo accounts allocated to goodwill and definite lived intangibles attributable to affiliate and advertising relationships. We recognized $4 million in 2012, $25 million in 2011 and
$25 million in 2010 of amortization on definite lived intangibles in equity earnings of Sky Mexico related to these assets.
Game Show Network.
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 to our equity partner for $60 million in cash, reducing our ownership interest to 60%. We recognized a pre-tax gain
of $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.
In
December 2012, we sold an 18% interest in GSN for $234 million to our equity partner, which reduced our ownership interest from 60% to 42%. We recognized a pre-tax
gain of $111 million ($68 million after tax) on the sale in "Other, net" in the Consolidated Statement of Operations, which represents the difference between the selling price and the
carrying amount of the portion of our equity method investment sold. Under the terms of the purchase and sale agreement, our equity partner has the option to pay the $234 million selling price
either in full in April 2013, or in two equal installments of $117 million each: one in April 2013 and the second in April 2014. All unpaid amounts will accrue interest payable to us at a rate
of 10% per year. This sale was considered a non-cash investing activity for purposes of the Consolidated Statements of Cash Flows for the year ended December 31, 2012.
DIRECTV
accounts for the excess of the carrying value for its investment in GSN over DIRECTV's share of GSN's equity in memo accounts allocated to
74
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
goodwill
and definite lived intangibles attributable to affiliate and advertising relationships. We recognized $10 million in 2012, $10 million in 2011 and $12 million in 2010 of
amortization on definite lived intangibles in equity earnings of GSN related to these assets.
Other.
In April 2011, we sold an equity method investment for $55 million in cash. As a result of this sale, we recognized a
pre-tax gain of $37 million ($23 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 equity method investment sold.
The
following table sets forth the carrying value of our investments which we account for under the equity method of accounting as of December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Sky Mexico
|
|
$
|
510
|
|
$
|
490
|
|
GSN
|
|
|
291
|
|
|
420
|
|
Other equity method investments
|
|
|
149
|
|
|
131
|
|
|
|
|
|
|
|
Total investments accounted for under the equity method of accounting
|
|
$
|
950
|
|
$
|
1,041
|
|
|
|
|
|
|
|
The
following table sets forth equity in earnings and losses of our investments accounted for under the equity method of accounting for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
Sky Mexico
|
|
$
|
62
|
|
$
|
52
|
|
$
|
33
|
|
GSN
|
|
|
42
|
|
|
29
|
|
|
33
|
|
Other
|
|
|
27
|
|
|
28
|
|
|
24
|
|
|
|
|
|
|
|
|
|
Total net equity earnings for investments accounted for under the equity method of accounting
|
|
$
|
131
|
|
$
|
109
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
We
received cash dividends of $79 million in 2012, $104 million in 2011 and $78 million in 2010 from companies that we account for under the equity method.
Undistributed earnings from equity method investments were $302 million as of December 31, 2012 and $256 million as of December 31, 2011.
Equity Securities
We had investments in non-marketable equity securities of $68 million as of December 31, 2012 and
$56 million as of December 31, 2011, which were stated at cost. We also had investments in marketable equity securities of $11 million as of December 31, 2012 and
$17 million as of December 31, 2011, which were carried at fair market value.
Note 9: Accounts Payable and Accrued Liabilities
The following table sets forth the significant components of "Accounts payable and accrued liabilities" in our Consolidated Balance
Sheets as of December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Programming costs
|
|
$
|
2,194
|
|
$
|
2,006
|
|
Accounts payable
|
|
|
1,208
|
|
|
1,195
|
|
Payroll and employee benefits
|
|
|
347
|
|
|
307
|
|
Other
|
|
|
869
|
|
|
702
|
|
|
|
|
|
|
|
Total accounts payable and accrued liabilities
|
|
$
|
4,618
|
|
$
|
4,210
|
|
|
|
|
|
|
|
As
of December 31, 2012, there were $104 million of amounts payable to vendors for property and equipment and $5 million of amounts payable for satellites in
"Accounts payable and accrued liabilities" in the Consolidated Balance Sheets, which is considered a non-cash investing activity for purposes of the Consolidated Statements of Cash Flows
for the year ended December 31, 2012. As of December 31, 2011 there were $68 million of amounts payable to vendors for property and equipment and $3 million of amounts
payable for satellites in "Accounts payable and accrued liabilities" in the Consolidated Balance Sheets, which is considered a non-cash investing activity for purposes of the Consolidated
Statements of Cash Flows for the year ended December 31, 2011.
75
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Note 10: Debt
The following table sets forth our outstanding debt as of December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Long-term debt
|
|
|
|
|
|
|
|
Senior notes
|
|
$
|
17,170
|
|
$
|
13,464
|
|
Short-term borrowings
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
17,528
|
|
$
|
13,464
|
|
|
|
|
|
|
|
2012 Financing Transactions
In the first quarter of 2012, DIRECTV U.S. borrowed and repaid $400 million under its $2 billion revolving credit
facility, which was terminated on September 28, 2012, and replaced with a three and one-half year, $1 billion revolving credit facility and a five year, $1.5 billion
revolving credit facility.
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 $25 million of debt issuance costs in connection with this transaction.
On
May 15, 2012, DIRECTV U.S. redeemed, pursuant to the terms of its indenture, all of its then outstanding $1,500 million of 7.625% senior notes due in 2016, at a price of
103.813%, plus accrued and unpaid interest, for a total of $1,614 million. We recorded a pre-tax charge of $64 million ($40 million after tax) during the second
quarter of 2012, of which $57 million resulted from the premium paid for the redemption and $7 million resulted from the write-off of deferred debt issuance and other
transaction costs. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.
On
September 11, 2012, DIRECTV U.S. issued, pursuant to a registration statement, £750 million ($1,208 million) in aggregate principal of 4.375% senior
notes due in 2029 resulting in proceeds, net of an original issue discount, of £742 million ($1,194 million). The U.S. dollar amounts reflect the conversion of the
£750 million aggregate principal and the £742 million proceeds, net of discount, to U.S. dollars based on the exchange rate of £1.00/ $1.61 at
September 11, 2012. In connection with the issuance of these senior notes, DIRECTV U.S. entered into cross-currency swaps to effectively convert its fixed-rate British pound
sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt, as further discussed in Note 11.
We incurred $9 million of debt issuance costs in connection with this transaction.
On
November 27, 2012, DIRECTV U.S. established a $2.5 billion commercial paper program backed by its revolving credit facilities, as discussed in further detail below. For
the year ended December 31, 2012, borrowings under the commercial paper program, net of repayments, were $358 million.
2011 Financing Transactions
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 in 2016
|
|
$
|
1,500
|
|
$
|
1,497
|
|
5.000% senior notes due in 2021
|
|
|
1,500
|
|
|
1,493
|
|
6.375% senior notes due in 2041
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
$
|
4,000
|
|
$
|
3,990
|
|
|
|
|
|
|
|
We
incurred $24 million of debt issuance costs in connection with this transaction.
76
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
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. On June 15, 2011, DIRECTV U.S. redeemed, pursuant to the terms of its indenture, the remaining
$659 million of its outstanding 6.375% senior notes due 2015, at a price of 102.125%, plus accrued and unpaid interest, for a total of $694 million. The redemption of the 6.375% senior
notes resulted in a 2011 pre-tax charge of $25 million, $16 million after tax, primarily for the premiums paid. The charge was recorded in "Other, net" in our Consolidated
Statements of Operations.
2010 Financing Transactions
On March 11, 2010, DIRECTV U.S. issued the following senior notes:
|
|
|
|
|
|
|
|
|
|
Principal
|
|
Proceeds, net
of discount
|
|
|
|
(Dollars in Millions)
|
|
3.550% senior notes due in 2015
|
|
$
|
1,200
|
|
$
|
1,199
|
|
5.200% senior notes due in 2020
|
|
|
1,300
|
|
|
1,298
|
|
6.350% senior notes due in 2040
|
|
|
500
|
|
|
499
|
|
|
|
|
|
|
|
|
|
$
|
3,000
|
|
$
|
2,996
|
|
|
|
|
|
|
|
We
incurred $17 million of debt issuance costs in connection with these transactions.
On
March 16, 2010, DIRECTV U.S. repaid the $985 million of remaining principal on Term Loan C of its senior secured credit facility. The repayment of Term Loan C resulted
in a 2010 pre-tax charge of $9 million ($6 million after tax), of which $6 million resulted from the write-off of unamortized discount and
$3 million resulted from the write-off of deferred debt issuance and other transaction costs. The charge was recorded in "Other, net" in our Consolidated Statements of Operations.
On
August 17, 2010, pursuant to a registration statement, DIRECTV U.S. issued the following senior notes:
|
|
|
|
|
|
|
|
|
|
Principal
|
|
Proceeds, net
of discount
|
|
|
|
(Dollars in Millions)
|
|
3.125% senior notes due in 2016
|
|
$
|
750
|
|
$
|
750
|
|
4.600% senior notes due in 2021
|
|
|
1,000
|
|
|
999
|
|
6.000% senior notes due in 2040
|
|
|
1,250
|
|
|
1,233
|
|
|
|
|
|
|
|
|
|
$
|
3,000
|
|
$
|
2,982
|
|
|
|
|
|
|
|
We
incurred $19 million of debt issuance costs in connection with these transactions.
On
August 20, 2010, DIRECTV U.S. repaid the $1,220 million of remaining principal on Term Loans A and B of its senior secured credit facility. The repayment of Term Loans A
and B resulted in a 2010 pre-tax charge of $7 million ($4 million after tax) resulting from the write-off of deferred debt issuance and other transaction costs.
The charge was recorded in "Other, net" in our Consolidated Statements of Operations.
77
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Senior Notes
The following table sets forth our outstanding senior notes balance as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount
|
|
Carrying value, net of
unamortized original
issue discounts or
including premiums
|
|
|
|
2012
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
4.750% senior notes due in 2014
|
|
$
|
1,000
|
|
$
|
999
|
|
$
|
999
|
|
3.550% senior notes due in 2015
|
|
|
1,200
|
|
|
1,200
|
|
|
1,199
|
|
3.125% senior notes due in 2016
|
|
|
750
|
|
|
750
|
|
|
750
|
|
3.500% senior notes due in 2016
|
|
|
1,500
|
|
|
1,498
|
|
|
1,498
|
|
7.625% senior notes due in 2016
|
|
|
|
|
|
|
|
|
1,500
|
|
2.400% senior notes due in 2017
|
|
|
1,250
|
|
|
1,249
|
|
|
|
|
5.875% senior notes due in 2019
|
|
|
1,000
|
|
|
995
|
|
|
994
|
|
5.200% senior notes due in 2020
|
|
|
1,300
|
|
|
1,298
|
|
|
1,298
|
|
4.600% senior notes due in 2021
|
|
|
1,000
|
|
|
999
|
|
|
999
|
|
5.000% senior notes due in 2021
|
|
|
1,500
|
|
|
1,495
|
|
|
1,494
|
|
3.800% senior notes due in 2022
|
|
|
1,500
|
|
|
1,499
|
|
|
|
|
4.375% senior notes due in 2029 (1)
|
|
|
1,219
|
|
|
1,206
|
|
|
|
|
6.350% senior notes due in 2040
|
|
|
500
|
|
|
500
|
|
|
499
|
|
6.000% senior notes due in 2040
|
|
|
1,250
|
|
|
1,234
|
|
|
1,234
|
|
6.375% senior notes due in 2041
|
|
|
1,000
|
|
|
1,000
|
|
|
1,000
|
|
5.150% senior notes due in 2042
|
|
|
1,250
|
|
|
1,248
|
|
|
|
|
|
|
|
|
|
|
|
|
Total senior notes
|
|
$
|
17,219
|
|
$
|
17,170
|
|
$
|
13,464
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
amounts for the 4.375% senior notes due in 2029 reflect the remeasurement of £750 million aggregate principal and
£742 million carrying value to U.S. dollars based on the exchange rate of £1.00/$1.63 at December 31, 2012.
The
fair value of our senior notes was approximately $18,598 million at December 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 the 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.
Our
senior notes payable mature as follows: $1,000 million in 2014, $1,200 million in 2015, $2,250 million in 2016, $1,250 million in 2017 and
$11,519 million thereafter. The amount of interest accrued related to our outstanding debt was $246 million at December 31, 2012 and $201 million at December 31,
2011.
Collar Loan
On November 19, 2009, The DIRECTV Group, Inc., now a wholly owned subsidiary of DIRECTV, and Liberty Media Corporation
completed a series of transactions, which we refer to collectively as the Liberty Transaction. As part of the Liberty Transaction, we assumed a credit facility and related equity collars, which we
refer to as the Collar Loan. During the first quarter of 2010, we paid $1,537 million to repay the remaining principal balance and accrued interest on the credit facility, and to settle the
equity collars. As a result, we recorded a gain of $67 million in "Liberty transaction and related gain" in the Consolidated Statements of Operations in the first quarter of 2010 related to the
Collar Loan.
Commercial Paper
On November 27, 2012, DIRECTV U.S. established a commercial paper program backed by its revolving credit facilities, which
provides for the issuance of short-term commercial paper in the United States up to a maximum aggregate principal of $2.5 billion. As of December 31, 2012, we had
$358 million of short-term commercial paper outstanding, with a weighted average maturity of 90 days, at a weighted average yield of 0.54%, which may be refinanced on a periodic
basis as borrowings mature. Aggregate amounts outstanding under the revolving credit facilities and commercial paper program are limited to $2.5 billion.
78
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Revolving Credit Facilities
On September 28, 2012, DIRECTV U.S.' five year, $2.0 billion revolving credit facility dated February 7, 2011 was
terminated and replaced with a three and one-half year, $1.0 billion revolving credit facility and a five year, $1.5 billion revolving credit facility. We pay a commitment
fee of 0.15% per year for the unused commitment under the revolving credit facilities. Borrowings currently bear interest at a rate equal to the London Interbank Offer Rate (LIBOR) plus 1.25%. Both
the commitment fee and the annual interest rate may increase or decrease under certain conditions due to changes in DIRECTV U.S.' long-term, unsecured debt ratings. Under certain
conditions, DIRECTV U.S. may increase the borrowing capacity of the revolving credit facilities by an aggregate amount of up to $500 million. Aggregate amounts outstanding under the revolving
credit facilities and the commercial paper program are limited to $2.5 billion. As of December 31, 2012, there were no borrowings under the new revolving credit facilities.
Borrowings
under the revolving credit facilities are unsecured senior obligations of DIRECTV U.S. and will rank equally in right of payment with all of DIRECTV U.S.' existing and future
senior debt and will rank senior in right of payment to all of DIRECTV U.S.' future subordinated debt, if any.
Covenants and Restrictions
The revolving credit facilities require DIRECTV U.S. to maintain at the end of each fiscal quarter a specified ratio of indebtedness to
earnings before interest, taxes and depreciation and amortization. The revolving credit facilities also include 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 facilities could
be terminated. At December 31, 2012, management believes DIRECTV U.S. was in compliance with all such covenants. The senior notes and revolving credit facilities also provide that the
borrowings may be required to be prepaid if certain change-in-control events, coupled with a ratings decline, occur.
DIRECTV Guarantors.
On November 14, 2011, we entered into a series of Supplemental Indentures whereby DIRECTV agreed to fully
guarantee all of
the senior notes then outstanding, 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, the revolving credit facilities and the commercial paper program are also similarly fully guaranteed by DIRECTV.
As
a result of the guarantees, holders of the senior notes, the revolving credit debt and the commercial paper 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 our regional sports networks which are held by DIRECTV Sports Networks LLC and its subsidiaries.
However, the subsidiaries that own and operate the DIRECTV Latin America business and the regional sports networks have not guaranteed the senior notes, the revolving credit facilities and the
commercial paper.
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.
Restricted Cash
Restricted cash of $6 million as of December 31, 2012 and $30 million as of December 31, 2011 was included
as part of "Prepaid expenses and other" in our
79
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Consolidated
Balance Sheets. These amounts secure our letter of credit obligations and restrictions on the cash will be removed as the letters of credit expire.
Note 11: Derivative Financial Instruments
Cross-Currency Swaps
In connection with the issuance of the £750 million of 4.375% senior notes due in 2029 discussed in Note 10,
DIRECTV U.S. entered into cross-currency swap agreements to manage the related foreign exchange risk by effectively converting all of the fixed-rate British pound sterling denominated
debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. These cross-currency swaps are designated and qualify as cash
flow hedges. The terms of the cross-currency swap agreements correspond to the related hedged senior notes and the cross-currency swaps have maturities extending through September 2029.
We
record unrealized gains on cross-currency swaps at fair value as assets and unrealized losses on cross-currency swaps at fair value as liabilities. As of December 31, 2012, we
recorded the fair value of unrealized losses on cross-currency swaps in the amount of $17 million in "Other liabilities and deferred credits" in the Consolidated Balance Sheets. We calculated
the fair value of the cross-currency swap contracts using an income-approach model (discounted cash flow analysis), the use of which is considered a Level 2 valuation technique, using
observable inputs, such as foreign currency exchange rates, swap rates, cross-currency basis swap spreads and incorporating counterparty credit risk. These cross-currency swaps have been designated as
cash flow hedges, and accordingly, the effective portion of the unrealized gains and losses on the cross-currency swaps is reported in "Accumulated other comprehensive loss" in the Consolidated
Balance Sheets and reclassified to
earnings in the same periods during which the hedged debt affects earnings. The ineffective portion of the unrealized gains and losses on these cross-currency swaps, if any, is recorded immediately in
earnings. During the year ended December 31, 2012, DIRECTV U.S. reclassified $11 million ($7 million after tax) from "Accumulated other comprehensive loss" in the Consolidated
Balance Sheets, into "Other, net" in the Consolidated Statements of Operations, to offset $11 million of remeasurement loss on the British pound sterling denominated debt. We evaluate the
effectiveness of our cross-currency swaps on a quarterly basis. We measured no ineffectiveness for the year ended December 31, 2012.
Collateral Arrangements.
We have agreements with our cross-currency swap counterparties that include collateral provisions which
require a party with
an unrealized loss position in excess of certain thresholds to post cash collateral for the amount in excess of the threshold. The threshold levels in our collateral agreements are based on each
party's credit ratings. As of December 31, 2012, neither we nor any of our counterparties were required to post collateral under the terms of the cross-currency swap agreements. We do not
offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable), against the fair value of the derivative
instruments.
Note 12: Income Taxes
We base our income tax expense or benefit on reported "Income before income taxes." Deferred income tax assets and liabilities reflect
the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, as measured by applying
currently enacted tax laws.
80
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
"Income tax expense" in the Consolidated Statements of Operations consisted of the following for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
Current tax expense:
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
980
|
|
$
|
631
|
|
$
|
391
|
|
Foreign
|
|
|
309
|
|
|
253
|
|
|
227
|
|
State and local
|
|
|
113
|
|
|
107
|
|
|
20
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,402
|
|
|
991
|
|
|
638
|
|
|
|
|
|
|
|
|
|
Deferred tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(25
|
)
|
|
284
|
|
|
596
|
|
Foreign
|
|
|
63
|
|
|
59
|
|
|
(118
|
)
|
State and local
|
|
|
25
|
|
|
14
|
|
|
86
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
63
|
|
|
357
|
|
|
564
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
1,465
|
|
$
|
1,348
|
|
$
|
1,202
|
|
|
|
|
|
|
|
|
|
"Income
before income taxes" in the Consolidated Statements of Operations included the following components for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
U.S. income
|
|
$
|
3,442
|
|
$
|
3,044
|
|
$
|
2,809
|
|
Foreign income
|
|
|
1,000
|
|
|
940
|
|
|
705
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,442
|
|
$
|
3,984
|
|
$
|
3,514
|
|
|
|
|
|
|
|
|
|
Our
income tax expense was different than the amount computed using the U.S. federal statutory income tax rate for the reasons set forth in the following table for the years ended
December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
Expected expense at U.S. federal statutory income tax rate
|
|
$
|
1,555
|
|
$
|
1,394
|
|
$
|
1,230
|
|
U.S. state and local income tax expense, net of federal benefit
|
|
|
87
|
|
|
75
|
|
|
106
|
|
Liberty Transaction charges not recoverable
|
|
|
1
|
|
|
1
|
|
|
4
|
|
Change in unrecognized tax benefits
|
|
|
(154
|
)
|
|
40
|
|
|
(40
|
)
|
Noncontrolling interests in partnership earnings and taxes
|
|
|
|
|
|
2
|
|
|
(44
|
)
|
Foreign taxes, net of federal tax benefits
|
|
|
(3
|
)
|
|
(82
|
)
|
|
9
|
|
Change in valuation allowance
|
|
|
3
|
|
|
(40
|
)
|
|
(32
|
)
|
Multistate tax planning
|
|
|
|
|
|
|
|
|
(20
|
)
|
Tax credits
|
|
|
(30
|
)
|
|
(47
|
)
|
|
(7
|
)
|
Other
|
|
|
6
|
|
|
5
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
1,465
|
|
$
|
1,348
|
|
$
|
1,202
|
|
|
|
|
|
|
|
|
|
81
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Temporary
differences and carryforwards that gave rise to deferred tax assets and liabilities at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
Deferred
Tax
Assets
|
|
Deferred
Tax
Liabilities
|
|
Deferred
Tax
Assets
|
|
Deferred
Tax
Liabilities
|
|
|
|
(Dollars in Millions)
|
|
Accruals and advances
|
|
$
|
466
|
|
$
|
273
|
|
$
|
418
|
|
$
|
268
|
|
Prepaid expenses
|
|
|
|
|
|
32
|
|
|
|
|
|
34
|
|
State taxes
|
|
|
74
|
|
|
|
|
|
73
|
|
|
|
|
Depreciation, amortization and asset impairment charges
|
|
|
|
|
|
1,406
|
|
|
|
|
|
1,155
|
|
Net operating loss and tax credit carryforwards
|
|
|
626
|
|
|
|
|
|
610
|
|
|
|
|
Programming contract liabilities
|
|
|
46
|
|
|
|
|
|
48
|
|
|
|
|
Unrealized foreign exchange gains or losses
|
|
|
|
|
|
79
|
|
|
|
|
|
105
|
|
Tax basis differences in investments and affiliates
|
|
|
261
|
|
|
824
|
|
|
91
|
|
|
804
|
|
Other
|
|
|
|
|
|
|
|
|
6
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
1,473
|
|
|
2,614
|
|
|
1,246
|
|
|
2,371
|
|
Valuation allowance
|
|
|
(432
|
)
|
|
|
|
|
(466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes
|
|
$
|
1,041
|
|
$
|
2,614
|
|
$
|
780
|
|
$
|
2,371
|
|
|
|
|
|
|
|
|
|
|
|
Included
in "Investments and other assets" in the Consolidated Balance Sheets are $116 million at December 31, 2012 and $210 million at December 31, 2011 of
noncurrent deferred tax assets. Also included in "Accounts payable and accrued liabilities" in the Consolidated Balance Sheets are $90 million at December 31, 2012 and $92 million
at December 31, 2011 of current deferred tax liabilities.
We
assessed the deferred tax assets for the respective periods for recoverability and, where applicable, we recorded a valuation allowance to reduce the total deferred tax assets to an
amount that will, more likely than not, be realized in the future.
The
valuation allowance balances of $432 million at December 31, 2012 and $466 million at December 31, 2011, are primarily attributable to unused foreign
operating losses and unused capital losses, both of which are available for carry forward. For the year ended December 31, 2012, the decrease in the valuation allowance was primarily
attributable to a reduction in the deferred tax asset on capital loss carryforwards.
Although
realization is not assured, we have concluded that it is more likely than not that our unreserved deferred tax assets will be realized in the ordinary course of operations based
on available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The underlying assumptions we use in forecasting future
taxable income require significant judgment and take into account our recent performance.
As
of December 31, 2012, we have $17 million of federal net operating loss carryforward which expires between 2027 and 2028. The utilization of the federal net operating
loss carryforward is subject to an annual limitation under Section 382 of the Internal Revenue Code, however we believe that we will have sufficient taxable income during the limitation period
to utilize all of the carryforward. We also have foreign tax credit carryovers of $133 million which expire between 2020 and 2022, state net operating loss carryforwards of $30 million
which expire between 2029 and 2030, and approximately $2 billion of foreign net operating losses that are primarily attributable to operations in Brazil with varying expiration dates.
As
a result of the currency exchange process in Venezuela since 2010, exclusive of the payment of some intercompany obligations, we have been unable to repatriate excess cash balances.
As of December 31, 2012, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $536 million. Should these earnings be distributed in the
form of dividends, the distributions would be subject to U.S. federal income tax at the statutory rate of 35 percent, less foreign tax credits available to offset such distributions. Because
the time or manner of repatriation is uncertain, we cannot determine the impact of local taxes, withholding taxes and foreign tax credits associated with the future repatriation of such earnings and
therefore cannot quantify the potential tax liability.
82
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
No
income tax provision has been made for the portion of undistributed earnings of foreign subsidiaries, excluding Venezuela, deemed permanently reinvested that amounted to approximately
$11 million in 2012. It is not practicable to determine the amount of the unrecognized deferred tax liability related to the investments in these foreign subsidiaries.
A
reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
Gross Unrecognized
Tax Benefits
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2010
|
|
$
|
527
|
|
Increases in tax positions for prior years
|
|
|
7
|
|
Decreases in tax positions for prior years
|
|
|
(207
|
)
|
Increases in tax positions for the current year
|
|
|
35
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
362
|
|
Increases in tax positions for prior years
|
|
|
17
|
|
Decreases in tax positions for prior years
|
|
|
(4
|
)
|
Increases in tax positions for the current year
|
|
|
15
|
|
|
|
|
|
Balance as of December 31, 2011
|
|
|
390
|
|
Decreases in tax positions for prior years
|
|
|
(6
|
)
|
Increases in tax positions for the current year
|
|
|
35
|
|
Expiration of the statute of limitations
|
|
|
(141
|
)
|
|
|
|
|
Balance as of December 31, 2012
|
|
$
|
278
|
|
|
|
|
|
As
of December 31, 2012, our unrecognized tax benefits totaled $278 million, including $227 million of tax positions the recognition of which would affect the annual
effective income tax rate. The decrease in the unrecognized tax benefits is primarily attributable to the expiration of the statute of limitations in federal and foreign tax jurisdictions.
We
recorded interest and penalties accrued related to unrecognized tax benefits of $12 million in 2012, $16 million in 2011 and $21 million in 2010 in "Income tax
expense" in the Consolidated Statements of Operations. We have accrued, as part of our liability for unrecognized tax benefits, interest and penalties of $32 million as of December 31,
2012, and $67 million as of December 31, 2011.
We
file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. For U.S. federal tax purposes, the tax years
2010 and 2011 remain open for examination. The California tax years 2001 through 2011 remain open to examination and the income tax returns in the other state and foreign tax jurisdictions in which we
have operations are generally subject to examination for a period of three to five years after filing of the respective return.
We
engage in continuous discussions and negotiations with federal, state, and foreign taxing authorities and reevaluate our uncertain tax positions, and, while it is often difficult to
predict the final outcome or the timing of resolution of any particular tax matter or tax position, we believe that it is reasonably possible that our unrecognized tax benefits could decrease by up to
approximately $40 million during the next twelve months.
Note 13: Capital Lease Obligations
We include the current and noncurrent portions of the present value of the net minimum lease payments under capital leases for
satellites and vehicles in "Accounts payable and accrued liabilities" and "Other liabilities and deferred credits" in the Consolidated Balance Sheets. The following table sets forth the present value
of the net minimum lease payments under capital leases for satellites
83
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
and
vehicles as of December 31, 2012, along with total minimum lease payments for the each of the years ending December 31:
|
|
|
|
|
|
|
Minimum Lease Payments
|
|
|
|
(Dollars in Millions)
|
|
2013
|
|
$
|
100
|
|
2014
|
|
|
96
|
|
2015
|
|
|
90
|
|
2016
|
|
|
84
|
|
2017
|
|
|
79
|
|
Thereafter
|
|
|
289
|
|
|
|
|
|
Total minimum lease payments
|
|
|
738
|
|
Less: Amount representing interest
|
|
|
(210
|
)
|
|
|
|
|
Present value of net minimum lease payments
|
|
$
|
528
|
|
|
|
|
|
Excluded
from the table above are future payments under the contract for the lease of the ISDLA-1 and ISDLA-2 satellites currently under construction for DIRECTV
Latin America, which we expect to account for as a capital lease at the time the satellites are placed into service. See Note 21 for further discussion.
We
include assets held under capitalized leases in "Satellites, net" and "Property and Equipment, net" in our Consolidated Balance Sheets. The following table sets forth assets held
under capital leases as of December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Satellites under capital leases
|
|
$
|
509
|
|
$
|
527
|
|
Less: Accumulated amortization
|
|
|
(190
|
)
|
|
(140
|
)
|
|
|
|
|
|
|
Satellites, net under capital leases
|
|
$
|
319
|
|
$
|
387
|
|
|
|
|
|
|
|
Property and equipment under capital leases
|
|
$
|
129
|
|
$
|
104
|
|
Less: Accumulated amortization
|
|
|
(47
|
)
|
|
(38
|
)
|
|
|
|
|
|
|
Property and equipment, net under capital leases
|
|
$
|
82
|
|
$
|
66
|
|
|
|
|
|
|
|
We
paid interest for capital leases of $47 million in 2012, $51 million in 2011 and $55 million in 2010.
Note 14: Pension and Other Postretirement Benefit Plans
Most of our employees are eligible to participate in our funded non-contributory defined benefit pension plan, which
provides defined benefits based on either years of service and final average salary, or eligible compensation while employed by us. Additionally, we maintain a funded contributory defined benefit plan
for employees who elected to participate prior to 1991, and an unfunded, nonqualified pension plan for certain eligible employees. For participants in the contributory pension plan, we also maintain a
postretirement benefit plan for those retirees eligible to participate in health care and life insurance benefits generally until they reach age 65. Participants may become eligible for these health
care and life insurance benefits if they retire from our company between the ages of 55 and 65. The health care plan is contributory with participants' contributions subject to adjustment annually;
the life insurance plan is non-contributory.
84
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
The components of the pension benefit obligation and the other postretirement benefit obligation, including amounts recognized in the Consolidated Balance Sheets,
are shown below for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
Other
Postretirement
Benefits
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Change in Net Benefit Obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net benefit obligation at beginning of year
|
|
$
|
583
|
|
$
|
521
|
|
$
|
23
|
|
$
|
21
|
|
Service cost
|
|
|
32
|
|
|
25
|
|
|
1
|
|
|
1
|
|
Interest cost
|
|
|
30
|
|
|
29
|
|
|
1
|
|
|
1
|
|
Plan participants' contributions
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
Actuarial (gain) loss
|
|
|
91
|
|
|
43
|
|
|
(3
|
)
|
|
1
|
|
Benefits paid
|
|
|
(37
|
)
|
|
(36
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Settlements
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net benefit obligation at end of year
|
|
|
664
|
|
|
583
|
|
|
21
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
|
448
|
|
|
429
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
49
|
|
|
14
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
70
|
|
|
40
|
|
|
1
|
|
|
1
|
|
Plan participants' contributions
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(37
|
)
|
|
(36
|
)
|
|
(1
|
)
|
|
(1
|
)
|
Settlements
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
|
495
|
|
|
448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status at end of year
|
|
$
|
(169
|
)
|
$
|
(135
|
)
|
$
|
(21
|
)
|
$
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
(6
|
)
|
$
|
(6
|
)
|
$
|
(2
|
)
|
$
|
(2
|
)
|
Other liabilities and deferred credits
|
|
|
(163
|
)
|
|
(129
|
)
|
|
(19
|
)
|
|
(21
|
)
|
Deferred tax assets
|
|
|
115
|
|
|
94
|
|
|
|
|
|
1
|
|
Accumulated other comprehensive loss
|
|
|
184
|
|
|
149
|
|
|
|
|
|
2
|
|
Amounts recognized in the accumulated other comprehensive loss consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized net amount resulting from changes in defined benefit plan experience and actuarial assumptions, net of taxes
|
|
|
182
|
|
|
147
|
|
|
|
|
|
2
|
|
Unamortized amount resulting from changes in defined benefit plan provisions, net of taxes
|
|
|
2
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
184
|
|
$
|
149
|
|
$
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
We estimate that the following amounts will be amortized from "Accumulated other comprehensive loss" in the Consolidated Balance Sheets into net
periodic benefit cost during the year ending December 31, 2013:
|
|
|
|
|
|
|
Pension
Benefits
|
|
|
|
(Dollars in Millions)
|
|
Expense resulting from changes in plan experience and actuarial assumptions
|
|
$
|
27
|
|
Expense resulting from changes in plan provisions
|
|
|
1
|
|
The
accumulated benefit obligation for all pension plans was $583 million at December 31, 2012 and $531 million as of December 31, 2011.
Information
for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Accumulated benefit obligation
|
|
$
|
93
|
|
$
|
531
|
|
Fair value of plan assets
|
|
|
|
|
|
448
|
|
Information
for pension plans with a projected benefit obligation in excess of plan assets as of December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Projected benefit obligation
|
|
$
|
664
|
|
$
|
583
|
|
Fair value of plan assets
|
|
|
495
|
|
|
448
|
|
85
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Components
of net periodic benefit cost for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
Other
Postretirement
Benefits
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits earned during the year
|
|
$
|
32
|
|
$
|
25
|
|
$
|
19
|
|
$
|
1
|
|
$
|
1
|
|
$
|
1
|
|
Interest accrued on benefits earned in prior years
|
|
|
30
|
|
|
29
|
|
|
28
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Expected return on plan assets
|
|
|
(34
|
)
|
|
(34
|
)
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
Amortization components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount resulting from changes in plan provisions
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
(1
|
)
|
Net amount resulting from changes in plan experience and actuarial assumptions
|
|
|
19
|
|
|
14
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
48
|
|
$
|
35
|
|
$
|
30
|
|
$
|
2
|
|
$
|
2
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions
Weighted-average assumptions used to determine benefit obligations at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
Discount rateQualified Plans
|
|
|
3.92
|
%
|
|
4.99
|
%
|
|
3.47
|
%
|
|
4.48
|
%
|
Discount rateNon-Qualified Plans
|
|
|
3.91
|
%
|
|
4.92
|
%
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
Weighted-average
assumptions used to determine net periodic benefit cost for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
Other
Postretirement
Benefits
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
|
Discount rateQualified Plan
|
|
|
4.99
|
%
|
|
5.59
|
%
|
|
5.64
|
%
|
|
4.48
|
%
|
|
4.99
|
%
|
|
5.21
|
%
|
Discount rateNon-Qualified Plans
|
|
|
4.92
|
%
|
|
5.54
|
%
|
|
5.63
|
%
|
|
|
|
|
|
|
|
|
|
Expected long-term return on plan assets
|
|
|
7.75
|
%
|
|
8.00
|
%
|
|
8.25
|
%
|
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
We
base our expected long-term return on plan assets assumption on a periodic review and modeling of the plans' asset allocation and liability structure over a
long-term horizon. Expectations of returns for each asset class are the most important of the assumptions used in the review and modeling and are based on the forward looking expectations
for asset class returns, historical data and economic/financial market theory.
The
following table provides assumed health care costs trend rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
Health care cost trend rate
|
|
|
8.00
|
%
|
|
8.00
|
%
|
|
8.00
|
%
|
Rate to which the cost trend rate is assumed to decline (ultimate trend rate)
|
|
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
Year that trend rate reaches the ultimate trend rate
|
|
|
2017
|
|
|
2017
|
|
|
2017
|
|
Plan Assets
Our investment policy includes various guidelines and procedures designed to ensure we invest assets in a manner necessary to meet
expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges by major asset categories.
The policy range for plan assets are 20% to 60% equity securities, 30% to 50% debt securities, 0% to 40% alternatives and other types of investments.
86
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
The
objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed
the plans' actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.
The
investment policy is periodically reviewed by us and a designated third-party fiduciary for investment matters. We establish and administer the policy in a manner so as to comply at
all times with applicable government regulations.
The
fair value measurements of the plan assets as of December 31, 2012 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2012
|
|
|
|
Total
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Percentage of
Plan Assets
as of
December 31,
2012
|
|
|
|
(Dollars in millions)
|
|
Asset Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common collective trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4
|
|
$
|
|
|
$
|
4
|
|
$
|
|
|
|
1
|
%
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. large-cap
|
|
|
87
|
|
|
|
|
|
87
|
|
|
|
|
|
18
|
%
|
U.S. mid-cap growth
|
|
|
19
|
|
|
|
|
|
19
|
|
|
|
|
|
4
|
%
|
International large-cap value
|
|
|
94
|
|
|
|
|
|
94
|
|
|
|
|
|
19
|
%
|
Emerging markets growth
|
|
|
6
|
|
|
|
|
|
6
|
|
|
|
|
|
1
|
%
|
Domestic real estate
|
|
|
26
|
|
|
|
|
|
26
|
|
|
|
|
|
5
|
%
|
Fixed income
|
|
|
182
|
|
|
|
|
|
182
|
|
|
|
|
|
37
|
%
|
Partnership and joint venture interests
|
|
|
31
|
|
|
|
|
|
|
|
|
31
|
|
|
6
|
%
|
Insurance contracts at contract value
|
|
|
2
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
Hedge funds
|
|
|
44
|
|
|
|
|
|
|
|
|
44
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
495
|
|
$
|
|
|
$
|
420
|
|
$
|
75
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value measurements of the plan assets as of December 31, 2011 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2011
|
|
|
|
Total
|
|
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Percentage of
Plan Assets
as of
December 31,
2011
|
|
|
|
(Dollars in millions)
|
|
Asset Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common collective trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3
|
|
$
|
|
|
$
|
3
|
|
$
|
|
|
|
1
|
%
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. large-cap
|
|
|
75
|
|
|
|
|
|
75
|
|
|
|
|
|
17
|
%
|
U.S. mid-cap growth
|
|
|
17
|
|
|
|
|
|
17
|
|
|
|
|
|
3
|
%
|
International large-cap value
|
|
|
92
|
|
|
|
|
|
92
|
|
|
|
|
|
21
|
%
|
Domestic real estate
|
|
|
23
|
|
|
|
|
|
23
|
|
|
|
|
|
5
|
%
|
Fixed income
|
|
|
165
|
|
|
|
|
|
165
|
|
|
|
|
|
37
|
%
|
Partnership and joint venture interests
|
|
|
30
|
|
|
|
|
|
|
|
|
30
|
|
|
7
|
%
|
Insurance contracts at contract value
|
|
|
2
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
Hedge funds
|
|
|
41
|
|
|
|
|
|
|
|
|
41
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
448
|
|
$
|
|
|
$
|
377
|
|
$
|
71
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no shares of our common stock included in plan assets as of December 31, 2012 and 2011.
87
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
The
fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2011 and 2012 due to the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnerships
and Joint
Venture
Interests
|
|
Hedge Funds
|
|
Total
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2011
|
|
$
|
28
|
|
$
|
|
|
$
|
28
|
|
Realized losses
|
|
|
(1
|
)
|
|
|
|
|
(1
|
)
|
Unrealized gains
|
|
|
5
|
|
|
(3
|
)
|
|
2
|
|
Purchases and sales
|
|
|
(2
|
)
|
|
44
|
|
|
42
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2011
|
|
|
30
|
|
|
41
|
|
|
71
|
|
Unrealized gains
|
|
|
1
|
|
|
3
|
|
|
4
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2012
|
|
$
|
31
|
|
$
|
44
|
|
$
|
75
|
|
|
|
|
|
|
|
|
|
Cash Flows
We expect to contribute approximately $15 million to our qualified pension plans and make payments of $6 million to our
nonqualified pension plan participants in 2013.
We expect the following benefit payments, which reflect expected future service, as appropriate, to be paid by the plans during the
years ending December 31:
|
|
|
|
|
|
|
|
|
|
Estimated Future Benefit
Payments
|
|
|
|
Pension
Benefits
|
|
Other
Postretirement
Benefits
|
|
|
|
(Dollars in Millions)
|
|
2013
|
|
$
|
41
|
|
$
|
2
|
|
2014
|
|
|
41
|
|
|
2
|
|
2015
|
|
|
42
|
|
|
2
|
|
2016
|
|
|
42
|
|
|
2
|
|
2017
|
|
|
41
|
|
|
2
|
|
2018-2022
|
|
|
218
|
|
|
10
|
|
We
maintain 401(k) plans for qualified employees. We match a portion of our employee contributions and our match amounted to $30 million in 2012, $28 million in 2011 and
$23 million in 2010.
We
have disclosed certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "other postretirement benefit
obligation." Notwithstanding the recording of such amounts and the use of these terms, we do not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of our
company (other than pensions) represent legally enforceable liabilities of us.
Note 15: Stockholders' Deficit
Capital Stock and Additional Paid-In Capital
Following completion of the Liberty Transaction in November 2009, DIRECTV had two classes of common stock outstanding: Class A
common stock, par value $0.01 per share, and Class B common stock, par value $0.01 per share. There have been no Class B shares outstanding since the completion of the Malone Transaction
on June 16, 2010, as discussed below. The DIRECTV Class A common stock was entitled to one vote per share and traded on the NASDAQ
88
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
under
the ticker "DTV" until it was reclassified as common stock pursuant to the amendment in August 2012. The DIRECTV Class B common stock was entitled to fifteen votes per common share and
was not listed on any stock exchange or automated dealer quotation system.
On
August 27, 2012, our certificate of incorporation was amended to reclassify all issued and outstanding shares of Class A common stock and Class B common stock
into a single class of common stock. Pursuant to this amendment, our certificate of
incorporation provides for the following capital stock: common stock, par value $0.01 per share, 3,950,000,000 shares authorized, and preferred stock, par value $0.01 per share, 50,000,000 shares
authorized. The DIRECTV common stock is entitled to one vote per share and trades on the NASDAQ, under the ticker "DTV". As of December 31, 2012, there were no outstanding shares of preferred
stock.
Malone Transaction
In April 2010, we entered into an agreement with Dr. John C. Malone and his family, or the Malones, under which they exchanged
21.8 million shares of high-vote Class B common stock, which was all of the outstanding Class B shares, for 26.5 million shares of Class A common stock,
resulting in the reduction of the Malones' voting interest in DIRECTV from approximately 24% to approximately 3% on June 16, 2010. The number of Class A shares issued was determined as
follows: one share of Class A common stock for each share of Class B common stock held, plus an additional number of Class A shares with a fair value of $160 million based
on the then current market price of the Class A common stock at the time of the agreement on April 6, 2010. See Note 16 for additional information regarding the Malone
Transaction.
Share Repurchase Program
Since 2006 our Board of Directors has approved multiple authorizations for the repurchase of our common stock. As of
December 31, 2012, we had approximately $1,719 million remaining under the authorization given by the Board of Directors in 2012. In February 2013 our Board of Directors terminated the
remaining balance available under the 2012 authorization and authorized up to an additional $4 billion for repurchases of our common stock. 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 for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Amounts in Millions,
Except Per Share Amounts)
|
|
Total cost of repurchased and retired shares
|
|
$
|
5,148
|
|
$
|
5,455
|
|
$
|
5,179
|
|
Average price per share
|
|
$
|
48.24
|
|
$
|
45.78
|
|
$
|
38.20
|
|
Number of shares repurchased and retired
|
|
|
107
|
|
|
119
|
|
|
136
|
|
Of
the $5,455 million in repurchases during the year ended December 31, 2011, $27 million were paid for in January 2012. Amounts repurchased but settled subsequent
to the end of such periods are considered non-cash financing activities and are excluded from the Consolidated Statements of Cash Flows.
89
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Other Comprehensive Income (Loss)
The following table sets forth the components of "Other comprehensive income (loss)" in the Consolidated Statements of Comprehensive
Income for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
Pre-tax
Amount
|
|
Tax
(Benefit)
Expense
|
|
Net
Amount
|
|
Pre-tax
Amount
|
|
Tax
(Benefit)
Expense
|
|
Net
Amount
|
|
Pre-tax
Amount
|
|
Tax
(Benefit)
Expense
|
|
Net
Amount
|
|
|
|
(Dollars in Millions)
|
|
Defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses related to changes in plan experience and actuarial assumptions arising during the period
|
|
$
|
(73
|
)
|
$
|
(28
|
)
|
$
|
(45
|
)
|
$
|
(64
|
)
|
$
|
(25
|
)
|
$
|
(39
|
)
|
$
|
|
|
$
|
|
|
$
|
|
|
Amortization of amounts resulting from changes in plan experience and actuarial assumptions recognized as periodic benefit cost
|
|
|
19
|
|
|
7
|
|
|
12
|
|
|
15
|
|
|
6
|
|
|
9
|
|
|
13
|
|
|
5
|
|
|
8
|
|
Amortization of amounts resulting from changes in plan provisions recognized as periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses arising during the period
|
|
|
(16
|
)
|
|
(6
|
)
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustments included in net income
|
|
|
(11
|
)
|
|
(4
|
)
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(53
|
)
|
|
(21
|
)
|
|
(32
|
)
|
|
(153
|
)
|
|
(59
|
)
|
|
(94
|
)
|
|
32
|
|
|
12
|
|
|
20
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on securities
|
|
|
(7
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
(10
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|
6
|
|
|
2
|
|
|
4
|
|
Reclassification adjustment for net gains recognized during period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
$
|
(141
|
)
|
$
|
(55
|
)
|
$
|
(86
|
)
|
$
|
(210
|
)
|
$
|
(81
|
)
|
$
|
(129
|
)
|
$
|
46
|
|
$
|
17
|
|
$
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Accumulated Other Comprehensive Loss
The following represents the changes in the components of "Accumulated other comprehensive loss" in the Consolidated Balance Sheets for
each of the years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
Benefit Plans
|
|
Cross-
Currency
Swaps
|
|
Foreign
Currency
Items
|
|
Unrealized
Gains
(Losses) on
Securities
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2010
|
|
$
|
(130
|
)
|
$
|
|
|
$
|
66
|
|
$
|
8
|
|
$
|
(56
|
)
|
Other comprehensive income
|
|
|
8
|
|
|
|
|
|
20
|
|
|
1
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
(122
|
)
|
|
|
|
|
86
|
|
|
9
|
|
|
(27
|
)
|
Other comprehensive loss
|
|
|
(29
|
)
|
|
|
|
|
(94
|
)
|
|
(6
|
)
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2011
|
|
|
(151
|
)
|
|
|
|
|
(8
|
)
|
|
3
|
|
|
(156
|
)
|
Other comprehensive loss
|
|
|
(33
|
)
|
|
(17
|
)
|
|
(32
|
)
|
|
(4
|
)
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2012
|
|
$
|
(184
|
)
|
$
|
(17
|
)
|
$
|
(40
|
)
|
$
|
(1
|
)
|
$
|
(242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 16: Earnings Per Common Share
We compute basic earnings per common share, or EPS, by dividing net income 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. During the year
ended December 31, 2012, we excluded 1.0 million common stock options from the computation of diluted EPS because the inclusion of the potential common shares would have had an
antidilutive effect. We did not exclude any common stock options from the computation of diluted EPS during 2011 or 2010.
Malone Transaction
From January 1, 2010 to June 16, 2010, we allocated "Net income attributable to DIRECTV" in the Consolidated Statements
of Operations to the Class A and Class B common stockholders based on the weighted average shares outstanding for each class through the close of the Malone Transaction on
June 16, 2010. At the close of the transaction, we exchanged 21.8 million shares of Class B common stock, which represented all of the issued and outstanding Class B common
stock, for 26.5 million shares of Class A common stock. We accounted for this exchange of DIRECTV Class B common stock into DIRECTV Class A common stock pursuant to
accounting standards for induced conversions, whereby the $160 million in incremental DIRECTV Class A common stock issued to the former DIRECTV Class B stockholders has been
deducted from earnings attributable to DIRECTV Class A stockholders for purposes of calculating earnings per share in the Consolidated Statements of Operations. We included the
$160 million in income attributable to Class B common stockholders. This adjustment had the effect of reducing diluted earnings per DIRECTV Class A common share by $0.18 for the
year ended December 31, 2010. After the close of the Malone Transaction we allocate all net income attributable to DIRECTV to the Class A stockholders. For the years ended
December 31, 2012, 2011 and 2010, there were no dilutive securities outstanding for the Class B common stock. See Note 15 for additional information regarding the Malone
Transaction.
91
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
The
reconciliation of the amounts used in the basic and diluted EPS computation was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
Shares
|
|
Per Share
Amounts
|
|
|
|
(Dollars and Shares in Millions,
Except Per Share Amounts)
|
|
Year Ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV common stockholders
|
|
$
|
2,949
|
|
|
638
|
|
$
|
4.62
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
6
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV common stockholders
|
|
$
|
2,949
|
|
|
644
|
|
$
|
4.58
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV common stockholders
|
|
$
|
2,609
|
|
|
747
|
|
$
|
3.49
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
5
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV common stockholders
|
|
$
|
2,609
|
|
|
752
|
|
$
|
3.47
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Class A common stock:
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV Class A common stockholders
|
|
$
|
2,014
|
|
|
870
|
|
$
|
2.31
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
6
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV Class A common stockholders
|
|
$
|
2,014
|
|
|
876
|
|
$
|
2.30
|
|
|
|
|
|
|
|
|
|
Class B common stock:
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV Class B common stockholders, including $160 million exchange inducement value for the Malone
Transaction
|
|
$
|
184
|
|
|
22
|
|
$
|
8.44
|
|
|
|
|
|
|
|
|
|
Note 17: Share-Based Compensation
Under the DIRECTV 2010 Stock Plan, or the DIRECTV Plan, as approved by DIRECTV stockholders on June 3, 2010, shares, rights or
options to acquire up to 20 million shares of common stock plus the number of shares that were authorized but not granted under former plans and shares granted under those plans which, after
June 3, 2010, are forfeited, expire or are canceled without the delivery of shares of common stock or otherwise result in the return of such shares to us, were authorized for grant through
June 2, 2020, subject to the approval of the Compensation Committee of our Board of Directors. Under the DIRECTV Plan, we issue new shares of our common stock when restricted stock units are
distributed and when stock options are exercised.
The
following table presents amounts recorded related to share-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
December 31,
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
Share-based compensation expense recognized
|
|
$
|
109
|
|
$
|
103
|
|
$
|
82
|
|
Tax benefits associated with share-based compensation expense
|
|
|
41
|
|
|
40
|
|
|
31
|
|
Actual tax benefits realized for the deduction of share-based compensation expense
|
|
|
60
|
|
|
54
|
|
|
60
|
|
As
of December 31, 2012, there was $107 million of total unrecognized compensation expense related to unvested restricted stock units and stock options that we expect to
recognize as follows: $66 million in 2013, $37 million in 2014 and $4 million in 2015.
Restricted Stock Units
The Compensation Committee has granted restricted stock units under our stock plan to certain of our employees and executives. Annual
awards are mostly performance based, generally vest over three years and provide for final payments in shares of our common stock. Final payment can be increased or decreased from the target award
amounts based on our performance over a three-year performance period in comparison with pre-established targets. We determine the fair value of restricted stock units based on
the closing stock price of our common shares on the date of grant.
92
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Changes in the status of outstanding restricted stock units were as follows:
|
|
|
|
|
|
|
|
|
|
Stock Units
|
|
Weighted-Average
Grant-Date
Fair Value
|
|
Nonvested at January 1, 2012
|
|
|
7,595,892
|
|
$
|
31.35
|
|
Granted
|
|
|
2,847,076
|
|
|
41.72
|
|
Vested and distributed
|
|
|
(3,122,772
|
)
|
|
21.78
|
|
Forfeited
|
|
|
(247,450
|
)
|
|
40.38
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2012
|
|
|
7,072,746
|
|
$
|
39.50
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2012
|
|
|
6,819,177
|
|
$
|
39.26
|
|
|
|
|
|
|
|
|
The
weighted-average grant-date fair value of restricted stock units granted during the year ended December 31, 2011 was $41.14. The weighted-average
grant-date fair value of restricted stock units granted during the year ended December 31, 2010 was $30.83.
The
total fair value of restricted stock units vested and distributed was $139 million during the year ended December 31, 2012, $125 million during the year ended
December 31, 2011 and $81 million during the year ended December 31, 2010.
Stock Options
The Compensation Committee has also granted stock options to acquire our common stock under our stock plan to certain of our
executives. The exercise price of options granted is equal to the per share closing price of the common stock on the date the options were granted. These nonqualified options generally vest over one
to three years, expire ten years from date of grant and are subject to earlier termination under certain conditions.
Changes
in the status of outstanding options were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Under
Option
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
(in years)
|
|
(in millions)
|
|
Outstanding at January 1, 2012
|
|
|
3,364,510
|
|
$
|
23.21
|
|
|
|
|
|
|
|
Granted
|
|
|
995,964
|
|
|
48.18
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,260,629
|
)
|
|
30.62
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(4,000
|
)
|
|
16.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2012
|
|
|
3,095,845
|
|
$
|
28.24
|
|
|
4.6
|
|
$
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at December 31, 2012
|
|
|
3,095,845
|
|
$
|
28.24
|
|
|
4.6
|
|
$
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2012
|
|
|
2,196,293
|
|
$
|
19.93
|
|
|
2.5
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
total intrinsic value of options exercised was $26 million during the year ended December 31, 2012, $24 million during the year ended December 31, 2011
and $221 million during the year ended December 31, 2010, based on the intrinsic value of individual awards on the date of exercise.
The
following table presents the estimated weighted-average grant-date fair value for the stock options granted during the years ended December 31, 2012 and
December 31, 2010 under the DIRECTV Plan using the Black-Scholes valuation model along with the weighted-average assumptions used in the fair value calculations. Expected stock volatility is
based primarily on the historical volatility of our common stock. The risk-free rate for periods within the contractual life of
93
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
the
option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected option life is based on historical exercise behavior and other factors.
|
|
|
|
|
|
|
|
|
2012
|
|
2010
|
|
Estimated grant-date fair value
|
|
$15.83
|
|
$
|
12.36
|
|
Expected stock volatility
|
|
29.0
|
%
|
|
26.9
|
%
|
Risk-free interest rate
|
|
1.08% - 1.41
|
%
|
|
3.35
|
%
|
Expected option life (in years)
|
|
7.0
|
|
|
7.0
|
|
There
were no stock options granted under the DIRECTV Plan during the year ended December 31, 2011.
As
part of the Liberty Transaction on November 19, 2009, we assumed 16.7 million stock options and stock appreciation rights, and issued 1.1 million shares of common
stock to holders of restricted stock units. The holders of the majority of the equity instruments assumed as a result of the Liberty Transaction did not become DIRECTV employees or directors.
Accordingly, we recognize those equity instruments as a liability that is subject to fair value measurement at each reporting date pursuant to accounting rules for non-employee awards. We
include that liability within "Other liabilities and deferred credits" in our Consolidated Balance Sheets. Of the 16.7 million equity instruments assumed, 8.8 million were held by
persons other than employees or directors. As of December 31, 2012, 0.4 million non-employee awards remained outstanding with a fair value of approximately
$12 million. As of December 31, 2011, there were 0.6 million non-employee awards outstanding with a fair value of approximately $15 million. We recorded net
losses of $4 million during the year ended December 31, 2012, $4 million during the year ended December 31, 2011 and $11 million during the year ended
December 31, 2010 to "Other, net" in the Consolidated Statements of Operations for gains and losses recognized for exercised options and the adjustment of the liability to fair value.
The
following table presents the estimated weighted-average fair value as of December 31, 2012, 2011 and 2010 for the equity instruments issued to persons other than employees and
directors carried as a liability using the Black-Scholes valuation model along with the weighted-average assumptions used in the fair value calculations. Expected stock volatility is based primarily
on the historical volatility of our common stock. The risk-free rates for periods within the contractual lives of the options are based on the U.S. Treasury yield curve in effect at the
measurement date. The expected option life is based on the contractual life of the awards.
|
|
|
|
|
|
|
|
|
|
December 31,
2012
|
|
December 31,
2011
|
|
December 31,
2010
|
|
Estimated fair value
|
|
$34.59
|
|
$26.63
|
|
$22.52
|
|
Expected stock volatility
|
|
22.8
|
%
|
27.5
|
%
|
26.5
|
%
|
Range of risk-free interest rates
|
|
0.02 - 0.36
|
%
|
0.06 - 0.83
|
%
|
0.07 - 2.01
|
%
|
Range of expected option lives (in years)
|
|
0.2 - 4.4
|
|
0.5 - 5.4
|
|
0.1 - 6.4
|
|
The
intrinsic value of awards assumed as part of the Liberty Transaction carried as a liability that were exercised was $3 million during the year ended December 31, 2012,
$8 million during the year ended December 31, 2011 and $145 million during the year ended December 31, 2010, based on the intrinsic value of individual awards on the date
of exercise.
Beginning
in 2009, we implemented a net exercise plan pursuant to which we only issue new shares in connection with employee option exercises equal to the intrinsic value of the
exercised award on the exercise date reduced by the sum of (i) the amount of statutory employee withholding taxes and (ii) the option exercise price, divided by the current market price
of the our common stock. As a result, we no longer receive cash in connection with the exercise of most stock options, but rather issue significantly fewer shares. We do receive cash for the exercise
of certain non-employee stock options. We received cash for the settlement of stock options of $3 million during the year ended December 31, 2012 and $38 million
during the year ended December 31, 2010, and did not receive any cash for the settlement of stock options during the year ended December 31, 2011. In addition, the company is required to
pay the employee withholding taxes to taxing authorities, the cash payments for which are reported in "Taxes paid in lieu of shares issued for share-based compensation" in the Consolidated Statements
of Cash Flows.
94
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Note 18: Other Income and Expenses
The following table sets forth the components of "Other, net" in our Consolidated Statements of Operations for the years ended
December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
Equity in earnings from unconsolidated affiliates
|
|
$
|
131
|
|
$
|
109
|
|
$
|
90
|
|
Net foreign currency transaction gain (loss)
|
|
|
(34
|
)
|
|
(50
|
)
|
|
11
|
|
Fair value adjustment loss on non-employee stock awards
|
|
|
(4
|
)
|
|
(4
|
)
|
|
(11
|
)
|
Loss on early extinguishment of debt
|
|
|
(64
|
)
|
|
(25
|
)
|
|
(16
|
)
|
Gain on sale of investments
|
|
|
122
|
|
|
63
|
|
|
6
|
|
Other
|
|
|
(11
|
)
|
|
(9
|
)
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
Total other, net
|
|
$
|
140
|
|
$
|
84
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
See
Note 8 regarding equity method investments and net gains and losses recorded on the sale of investments.
Note 19: 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.
Liberty Media, Liberty Global and Discovery Communications
As discussed above in Note 15, on June 16, 2010, we completed the Malone Transaction, which resulted in the reduction of
the Malones' voting interest in DIRECTV from approximately 24% to approximately 3% and Dr. Malone's resignation from our Board of Directors.
Prior
to the completion of the Malone Transaction, Dr. Malone was Chairman of the Board of Directors of DIRECTV and of Liberty Media. Dr. Malone also had an approximate 35%
voting interest in Liberty Media, an approximate 31% voting interest in Discovery Communications, Inc., or Discovery Communications, an approximate 40% voting interest in Liberty
Global Inc., or Liberty Global, and serves as Chairman of Liberty Global, and certain of Liberty Media's management and directors also serve as directors of Discovery Communications or Liberty
Global. As a result of this common ownership and management, transactions with Liberty Media, Discovery Communications and Liberty Global and their subsidiaries or equity method investees were
considered to be related party transactions through the completion of the Malone Transaction. Our transactions with Liberty Media, Discovery Communications and Liberty Global consisted
primarily of purchases of programming created, owned or distributed by Liberty Media and Discovery Communications and its subsidiaries and investees.
The
following table sets forth sales and purchase transactions with related parties for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
Liberty Media and affiliates
|
|
$
|
|
|
$
|
|
|
$
|
26
|
|
Discovery Communications, Liberty Global and affiliates
|
|
|
|
|
|
|
|
|
5
|
|
Globo and other
|
|
|
5
|
|
|
6
|
|
|
13
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5
|
|
$
|
6
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
Purchases:
|
|
|
|
|
|
|
|
|
|
|
Liberty Media and affiliates
|
|
$
|
|
|
$
|
|
|
$
|
143
|
|
Discovery Communications, Liberty Global and affiliates
|
|
|
|
|
|
|
|
|
128
|
|
Globo and other
|
|
|
874
|
|
|
854
|
|
|
622
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
874
|
|
$
|
854
|
|
$
|
893
|
|
|
|
|
|
|
|
|
|
95
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
The
following table sets forth the amount of accounts receivable from and accounts payable to related parties as of December 31:
|
|
|
|
|
|
|
|
|
|
2012
|
|
2011
|
|
|
|
(Dollars in Millions)
|
|
Accounts receivable
|
|
$
|
26
|
|
$
|
1
|
|
Accounts payable
|
|
|
90
|
|
|
96
|
|
The
accounts receivable balance and accounts payable balances as of December 31, 2012 and December 31, 2011 are primarily related to Globo and companies in which we hold
equity method investments.
Note 20: 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.
The
following table sets forth selected information for the results of operations for each of our reporting segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
Revenues
|
|
Intersegment
Revenues
|
|
Total
Revenues
|
|
Operating
Profit (Loss)
|
|
Depreciation
and
Amortization
Expense
|
|
Operating Profit
(Loss) Before
Depreciation and
Amortization (1)
|
|
|
|
(Dollars in Millions)
|
|
Year Ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
23,227
|
|
$
|
8
|
|
$
|
23,235
|
|
$
|
4,153
|
|
$
|
1,501
|
|
$
|
5,654
|
|
Sky Brasil
|
|
|
3,501
|
|
|
|
|
|
3,501
|
|
|
555
|
|
|
533
|
|
|
1,088
|
|
PanAmericana
|
|
|
2,743
|
|
|
|
|
|
2,743
|
|
|
400
|
|
|
374
|
|
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
6,244
|
|
|
|
|
|
6,244
|
|
|
955
|
|
|
907
|
|
|
1,862
|
|
Sports Networks, Eliminations and Other
|
|
|
269
|
|
|
(8
|
)
|
|
261
|
|
|
(23
|
)
|
|
29
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,740
|
|
$
|
|
|
$
|
29,740
|
|
$
|
5,085
|
|
$
|
2,437
|
|
$
|
7,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
21,864
|
|
$
|
8
|
|
$
|
21,872
|
|
$
|
3,702
|
|
$
|
1,587
|
|
$
|
5,289
|
|
Sky Brasil
|
|
|
3,020
|
|
|
|
|
|
3,020
|
|
|
542
|
|
|
449
|
|
|
991
|
|
PanAmericana
|
|
|
2,076
|
|
|
|
|
|
2,076
|
|
|
374
|
|
|
298
|
|
|
672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
5,096
|
|
|
|
|
|
5,096
|
|
|
916
|
|
|
747
|
|
|
1,663
|
|
Sports Networks, Eliminations and Other
|
|
|
266
|
|
|
(8
|
)
|
|
258
|
|
|
11
|
|
|
15
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
27,226
|
|
$
|
|
|
$
|
27,226
|
|
$
|
4,629
|
|
$
|
2,349
|
|
$
|
6,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
20,261
|
|
$
|
7
|
|
$
|
20,268
|
|
$
|
3,290
|
|
$
|
1,926
|
|
$
|
5,216
|
|
Sky Brasil
|
|
|
2,013
|
|
|
|
|
|
2,013
|
|
|
383
|
|
|
298
|
|
|
681
|
|
PanAmericana
|
|
|
1,584
|
|
|
|
|
|
1,584
|
|
|
240
|
|
|
243
|
|
|
483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
3,597
|
|
|
|
|
|
3,597
|
|
|
623
|
|
|
541
|
|
|
1,164
|
|
Sports Networks, Eliminations and Other
|
|
|
244
|
|
|
(7
|
)
|
|
237
|
|
|
(17
|
)
|
|
15
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,102
|
|
$
|
|
|
$
|
24,102
|
|
$
|
3,896
|
|
$
|
2,482
|
|
$
|
6,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Operating
profit (loss) 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 (loss)." This measure should be used in conjunction with GAAP
96
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
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 (loss) 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 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 (loss) 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. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
(Dollars in Millions)
|
|
Operating profit before depreciation and amortization
|
|
$
|
7,522
|
|
$
|
6,978
|
|
$
|
6,378
|
|
Depreciation and amortization expense
|
|
|
(2,437
|
)
|
|
(2,349
|
)
|
|
(2,482
|
)
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
5,085
|
|
|
4,629
|
|
|
3,896
|
|
Interest income
|
|
|
59
|
|
|
34
|
|
|
39
|
|
Interest expense
|
|
|
(842
|
)
|
|
(763
|
)
|
|
(557
|
)
|
Liberty transaction and related gain
|
|
|
|
|
|
|
|
|
67
|
|
Other, net
|
|
|
140
|
|
|
84
|
|
|
69
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
4,442
|
|
|
3,984
|
|
|
3,514
|
|
Income tax expense
|
|
|
(1,465
|
)
|
|
(1,348
|
)
|
|
(1,202
|
)
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2,977
|
|
|
2,636
|
|
|
2,312
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
(28
|
)
|
|
(27
|
)
|
|
(114
|
)
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
2,949
|
|
$
|
2,609
|
|
$
|
2,198
|
|
|
|
|
|
|
|
|
|
97
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
The
following table sets forth capital expenditures and segment assets for each of our reporting segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended and As of December 31,
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
Capital
Expenditures
|
|
Segment
Assets
|
|
Capital
Expenditures
|
|
Segment
Assets
|
|
Capital
Expenditures
|
|
Segment
Assets
|
|
|
|
(Dollars in Millions)
|
|
DIRECTV U.S.
|
|
$
|
1,741
|
|
$
|
12,490
|
|
$
|
1,736
|
|
$
|
11,796
|
|
$
|
1,557
|
|
$
|
11,400
|
|
Sky Brasil
|
|
|
812
|
|
|
2,951
|
|
|
902
|
|
|
2,663
|
|
|
468
|
|
|
2,566
|
|
PanAmericana
|
|
|
786
|
|
|
3,335
|
|
|
526
|
|
|
2,601
|
|
|
389
|
|
|
2,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
1,598
|
|
|
6,286
|
|
|
1,428
|
|
|
5,264
|
|
|
857
|
|
|
4,696
|
|
Sports Networks, Eliminations and Other
|
|
|
10
|
|
|
1,779
|
|
|
6
|
|
|
1,363
|
|
|
2
|
|
|
1,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,349
|
|
$
|
20,555
|
|
$
|
3,170
|
|
$
|
18,423
|
|
$
|
2,416
|
|
$
|
17,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table sets forth revenues earned from subscribers located in different geographic areas. Property is grouped by its physical location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended and As of December 31,
|
|
|
|
2012
|
|
2011
|
|
2010
|
|
|
|
Revenues
|
|
Net Property
& Satellites
|
|
Revenues
|
|
Net Property
& Satellites
|
|
Revenues
|
|
Net Property
& Satellites
|
|
|
|
(Dollars in Millions)
|
|
United States
|
|
$
|
23,678
|
|
$
|
5,694
|
|
$
|
22,310
|
|
$
|
5,267
|
|
$
|
20,684
|
|
$
|
4,987
|
|
Latin America and the Caribbean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brazil
|
|
|
3,501
|
|
|
1,626
|
|
|
3,020
|
|
|
1,423
|
|
|
2,013
|
|
|
1,060
|
|
Other
|
|
|
2,561
|
|
|
1,075
|
|
|
1,896
|
|
|
748
|
|
|
1,405
|
|
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Latin America and the Caribbean
|
|
|
6,062
|
|
|
2,701
|
|
|
4,916
|
|
|
2,171
|
|
|
3,418
|
|
|
1,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,740
|
|
$
|
8,395
|
|
$
|
27,226
|
|
$
|
7,438
|
|
$
|
24,102
|
|
$
|
6,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 21: Commitments and Contingencies
Commitments
At December 31, 2012, minimum future commitments under noncancelable operating leases having lease terms in excess of one year
were primarily for real property and aggregated $978 million, payable as follows: $94 million in 2013, $88 million in 2014, $86 million in 2015, $88 million in 2016, $86 million in 2017 and $536
million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options, which we have not considered in the amounts disclosed. Rental expenses under operating leases
were $118 million in 2012, $99 million in 2011 and $78 million in 2010.
At
December 31, 2012, our minimum payments under agreements to purchase broadcast programming, regional professional team rights and the purchase of services that we have
outsourced to third parties, such as billing services, and satellite telemetry, tracking and control, satellite launch contracts and broadcast center services aggregated $7,079 million, payable as
follows: $2,186 million in
2013, $1,947 million in 2014, $1,145 million in 2015, $433 million in 2016, $375 million in 2017 and $993 million thereafter.
Satellite Commitments
DIRECTV U.S. has entered into contracts for the construction and launch of two new satellites: D14, which we expect to launch in the
first quarter of 2014 and D15, which we expect to launch in the fourth quarter of 2014. D14 and D15 are expected to provide additional HD, replacement, and backup capacity for DIRECTV U.S.
Additionally, DIRECTV Latin America has entered into a contract for the lease of two additional satellites for PanAmericana: ISDLA-1, which we expect to launch in the fourth quarter of
2014 and ISDLA-2, which we expect to launch in the fourth quarter of 2015. ISDLA-1 will become the primary satellite for PanAmericana with a substantial increase in channel
capacity from the current satellite, and ISDLA-2 is expected to serve as an in-orbit spare for ISDLA-1. As a part of the lease agreement for ISDLA-1 and
ISDLA-2, which we expect to account for as a capital lease, we are required to make prepayments prior to the launch of the satellites and commencement of the lease. Prepayments related to
this agreement totaled $128 million for the year ended December 31, 2012 and $104 million for the year ended December 31, 2011, and are included as "Cash paid for satellites" in the
Consolidated Statements of Cash Flows.
98
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Total future cash payments under these agreements aggregate to $1,281 million, payable as follows: $286 million in 2013, $171 million in 2014, $116 million in
2015, $50 million in 2016, $50 million in 2017 and $608 million thereafter.
Contingencies
Redeemable Noncontrolling Interest
In connection with our acquisition of Sky Brasil in 2006, 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. We estimated that Globo's remaining 7% equity interest in Sky Brasil had a
fair value of approximately $400 million as of December 31, 2012 and $265 million as of December 31, 2011. 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.
Venezuela Devaluation and 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 exchange rate. 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 of December 31, 2012, our Venezuelan subsidiary had Venezuelan bolivar denominated net monetary assets of $446 million, including cash of $563 million, based on the official
4.3 bolivars per U.S. dollar exchange rate at that time.
In
February 2013, the Venezuelan government announced a devaluation of the bolivar from the official exchange rate of 4.3 bolivars per U.S. dollar to an official rate of 6.3 bolivars per
U.S. dollar. As a result of the devaluation, we will record a pre-tax charge in "General and administrative expenses" in the Consolidated Statements of Operations of approximately $160 million in the
first quarter of 2013, related to the remeasurement of the bolivar denominated net monetary assets of our Venezuelan subsidiary as of the date of the devaluation. This devaluation did not impact our
results of operations, financial position or cash flows for the year ended December 31, 2012, but may affect the growth of our Venezuelan business. There will also be ongoing impacts to our
results of operations, primarily related to the translation of local financial statements at the new exchange rate. In the event of an additional devaluation of the bolivar, we will recognize a charge
to earnings based on the amount of bolivar denominated net monetary assets held at the time of such devaluation.
Litigation
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 December 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' fees. Trial is presently
scheduled for November 2013. The suit now involves claims of four of the seven patents
99
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
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. The final disposition of these claims is not expected to have a material effect on our consolidated financial position or results of operations. 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 we and Sky Brasil believe are
adequate to satisfy amounts owed to ECAD. In order to continue its opposition to ECAD's claims, Sky Brasil has provided letters of credit in the amount of approximately $103 million. 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.
Waste Disposal Inquiry.
On August 20, 2012, DIRECTV U.S. received from the State of California subpoenas and interrogatories
related to our
generation, handling, recordkeeping, transportation and disposal of hazardous waste, including universal waste, in the State of California, and the training of employees regarding the same. The
investigation is jointly conducted by the Office of the Attorney General and
the District Attorney for Alameda County and appears to be part of a broader effort to investigate waste handling and disposal processes of a number of industries. We are diligently reviewing our
policies and procedures applicable to all facilities and cooperating with the investigation. As this inquiry is in its early stages, we are currently unable to reasonably estimate the outcome of this
matter.
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 advertising and sales practices 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.
Income Tax Matters
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. While the outcome of these
assessments and other tax issues cannot be predicted with certainty, we believe
100
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
that
the ultimate outcome will not have a material effect on our consolidated financial position and result of operations.
Satellites
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 December 31, 2012, the net book value of in-orbit satellites was $1,664
million all of which was uninsured.
Other
We are contingently liable under standby letters of credit and bonds in the aggregate amount of $167 million at December 31,
2012 primarily related to a judicial deposit in Brazil for the ECAD matter discussed above, and insurance deductibles.
101
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Note 22: Selected Quarterly Data (Unaudited)
The following table presents unaudited selected quarterly data for the years presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st
|
|
2nd
|
|
3rd
|
|
4th
|
|
|
|
(Dollars in Millions,
Except Per Share Amounts)
|
|
2012 Quarters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
7,046
|
|
$
|
7,224
|
|
$
|
7,416
|
|
$
|
8,054
|
|
Operating profit
|
|
|
1,308
|
|
|
1,411
|
|
|
1,068
|
|
|
1,298
|
|
Net income attributable to DIRECTV
|
|
|
731
|
|
|
711
|
|
|
565
|
|
|
942
|
|
Basic earnings attributable to DIRECTV common stockholders per common share
|
|
|
1.08
|
|
|
1.09
|
|
|
0.91
|
|
|
1.57
|
|
Diluted earnings attributable to DIRECTV common stockholders per common share
|
|
|
1.07
|
|
|
1.09
|
|
|
0.90
|
|
|
1.55
|
|
2011 Quarters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
6,319
|
|
$
|
6,600
|
|
$
|
6,844
|
|
$
|
7,463
|
|
Operating profit
|
|
|
1,155
|
|
|
1,230
|
|
|
1,030
|
|
|
1,214
|
|
Net income attributable to DIRECTV
|
|
|
674
|
|
|
701
|
|
|
516
|
|
|
718
|
|
Basic earnings attributable to DIRECTV common stockholders per common share
|
|
|
0.85
|
|
|
0.92
|
|
|
0.70
|
|
|
1.02
|
|
Diluted earnings attributable to DIRECTV common stockholders per common share
|
|
|
0.85
|
|
|
0.91
|
|
|
0.70
|
|
|
1.02
|
|
102
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Note 23: Subsequent Events
2013 Financing Transactions
On January 10, 2013, DIRECTV U.S. issued, pursuant to a registration statement, $750 million in aggregate principal of 1.750%
senior notes due in 2018 with proceeds, net of an original issue discount, of $743 million. We incurred $4 million of debt issuance costs in connection with this transaction.
Venezuela Currency Devaluation
In February 2013, the Venezuelan government announced a devaluation of the Venezuelan bolivar, which will result in a pre-tax charge in
"General and administrative expenses" in the Consolidated Statements of Operations of approximately $160 million in the first quarter of 2013. See Note 21 for additional information regarding
the Venezuelan devaluation and foreign currency exchange controls.
Note 24: Condensed Consolidating Financial Statements
As discussed above in Note 10, 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.
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 guarantee had been in
place during that period.
These
condensed consolidating financial statements present the condensed consolidating statements of operations, condensed consolidating statements of comprehensive income and condensed
consolidating statements of cash flows for the years ended December 31, 2012, 2011 and 2010, and the condensed consolidating balance sheets as of December 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.
103
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
59
|
|
$
|
23,235
|
|
$
|
6,583
|
|
$
|
(137
|
)
|
$
|
29,740
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
10,743
|
|
|
2,355
|
|
|
(70
|
)
|
|
13,028
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
1,464
|
|
|
673
|
|
|
|
|
|
2,137
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
306
|
|
|
116
|
|
|
(8
|
)
|
|
414
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
2,673
|
|
|
724
|
|
|
|
|
|
3,397
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
1,253
|
|
|
174
|
|
|
|
|
|
1,427
|
|
General and administrative expenses
|
|
|
42
|
|
|
1
|
|
|
1,201
|
|
|
630
|
|
|
(59
|
)
|
|
1,815
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
1,501
|
|
|
936
|
|
|
|
|
|
2,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
42
|
|
|
1
|
|
|
19,141
|
|
|
5,608
|
|
|
(137
|
)
|
|
24,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(42
|
)
|
|
58
|
|
|
4,094
|
|
|
975
|
|
|
|
|
|
5,085
|
|
Equity in income of consolidated subsidiaries
|
|
|
2,980
|
|
|
2,819
|
|
|
|
|
|
|
|
|
(5,799
|
)
|
|
|
|
Interest income
|
|
|
2
|
|
|
1
|
|
|
|
|
|
68
|
|
|
(12
|
)
|
|
59
|
|
Interest expense
|
|
|
(2
|
)
|
|
(773
|
)
|
|
(3
|
)
|
|
(76
|
)
|
|
12
|
|
|
(842
|
)
|
Other, net
|
|
|
(4
|
)
|
|
(65
|
)
|
|
33
|
|
|
176
|
|
|
|
|
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
2,934
|
|
|
2,040
|
|
|
4,124
|
|
|
1,143
|
|
|
(5,799
|
)
|
|
4,442
|
|
Income tax benefit (expense)
|
|
|
15
|
|
|
246
|
|
|
(1,305
|
)
|
|
(421
|
)
|
|
|
|
|
(1,465
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2,949
|
|
|
2,286
|
|
|
2,819
|
|
|
722
|
|
|
(5,799
|
)
|
|
2,977
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
2,949
|
|
$
|
2,286
|
|
$
|
2,819
|
|
$
|
694
|
|
$
|
(5,799
|
)
|
$
|
2,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
682
|
|
$
|
21,872
|
|
$
|
5,422
|
|
$
|
(750
|
)
|
$
|
27,226
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
9,799
|
|
|
1,916
|
|
|
(60
|
)
|
|
11,655
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
1,435
|
|
|
476
|
|
|
|
|
|
1,911
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
300
|
|
|
96
|
|
|
(7
|
)
|
|
389
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
2,794
|
|
|
596
|
|
|
|
|
|
3,390
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
1,209
|
|
|
118
|
|
|
|
|
|
1,327
|
|
General and administrative expenses
|
|
|
11
|
|
|
|
|
|
1,729
|
|
|
519
|
|
|
(683
|
)
|
|
1,576
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
1,587
|
|
|
762
|
|
|
|
|
|
2,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
11
|
|
|
|
|
|
18,853
|
|
|
4,483
|
|
|
(750
|
)
|
|
22,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(11
|
)
|
|
682
|
|
|
3,019
|
|
|
939
|
|
|
|
|
|
4,629
|
|
Equity in income of consolidated subsidiaries
|
|
|
2,622
|
|
|
1,947
|
|
|
|
|
|
|
|
|
(4,569
|
)
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
1
|
|
|
44
|
|
|
(11
|
)
|
|
34
|
|
Interest expense
|
|
|
|
|
|
(692
|
)
|
|
(4
|
)
|
|
(78
|
)
|
|
11
|
|
|
(763
|
)
|
Other, net
|
|
|
(4
|
)
|
|
(25
|
)
|
|
60
|
|
|
53
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,607
|
|
|
1,912
|
|
|
3,076
|
|
|
958
|
|
|
(4,569
|
)
|
|
3,984
|
|
Income tax benefit (expense)
|
|
|
2
|
|
|
13
|
|
|
(1,129
|
)
|
|
(234
|
)
|
|
|
|
|
(1,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2,609
|
|
|
1,925
|
|
|
1,947
|
|
|
724
|
|
|
(4,569
|
)
|
|
2,636
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(27
|
)
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
2,609
|
|
$
|
1,925
|
|
$
|
1,947
|
|
$
|
697
|
|
$
|
(4,569
|
)
|
$
|
2,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
463
|
|
$
|
20,268
|
|
$
|
3,895
|
|
$
|
(524
|
)
|
$
|
24,102
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
8,699
|
|
|
1,428
|
|
|
(53
|
)
|
|
10,074
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
1,340
|
|
|
341
|
|
|
|
|
|
1,681
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
273
|
|
|
84
|
|
|
(7
|
)
|
|
350
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
2,631
|
|
|
374
|
|
|
|
|
|
3,005
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
1,106
|
|
|
63
|
|
|
|
|
|
1,169
|
|
General and administrative expenses
|
|
|
24
|
|
|
|
|
|
1,466
|
|
|
419
|
|
|
(464
|
)
|
|
1,445
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
1,926
|
|
|
556
|
|
|
|
|
|
2,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
24
|
|
|
|
|
|
17,441
|
|
|
3,265
|
|
|
(524
|
)
|
|
20,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(24
|
)
|
|
463
|
|
|
2,827
|
|
|
630
|
|
|
|
|
|
3,896
|
|
Equity in income of consolidated subsidiaries
|
|
|
2,219
|
|
|
1,835
|
|
|
|
|
|
|
|
|
(4,054
|
)
|
|
|
|
Interest income
|
|
|
1
|
|
|
1
|
|
|
4
|
|
|
44
|
|
|
(11
|
)
|
|
39
|
|
Interest expense
|
|
|
|
|
|
(480
|
)
|
|
(8
|
)
|
|
(80
|
)
|
|
11
|
|
|
(557
|
)
|
Liberty transaction and related charges
|
|
|
|
|
|
|
|
|
|
|
|
67
|
|
|
|
|
|
67
|
|
Other, net
|
|
|
(10
|
)
|
|
(25
|
)
|
|
20
|
|
|
84
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
2,186
|
|
|
1,794
|
|
|
2,843
|
|
|
745
|
|
|
(4,054
|
)
|
|
3,514
|
|
Income tax benefit (expense)
|
|
|
12
|
|
|
14
|
|
|
(1,008
|
)
|
|
(220
|
)
|
|
|
|
|
(1,202
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2,198
|
|
|
1,808
|
|
|
1,835
|
|
|
525
|
|
|
(4,054
|
)
|
|
2,312
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(114
|
)
|
|
|
|
|
(114
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
2,198
|
|
$
|
1,808
|
|
$
|
1,835
|
|
$
|
411
|
|
$
|
(4,054
|
)
|
$
|
2,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Comprehensive Income
For the Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
2,949
|
|
$
|
2,286
|
|
$
|
2,819
|
|
$
|
722
|
|
$
|
(5,799
|
)
|
$
|
2,977
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss related to changes in plan experience and actuarial assumptions arising during the period
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
Amortization of amounts resulting from changes in plan experience and actuarial assumptions recognized as periodic benefit
cost
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses arising during the period
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
Reclassification adjustments included in net income
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
(32
|
)
|
Unrealized holding losses on securities
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(33
|
)
|
|
(17
|
)
|
|
|
|
|
(36
|
)
|
|
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
2,916
|
|
|
2,269
|
|
|
2,819
|
|
|
686
|
|
|
(5,799
|
)
|
|
2,891
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(13
|
)
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
2,916
|
|
$
|
2,269
|
|
$
|
2,819
|
|
$
|
673
|
|
$
|
(5,799
|
)
|
$
|
2,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Comprehensive Income
For the Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
2,609
|
|
$
|
1,925
|
|
$
|
1,947
|
|
$
|
724
|
|
$
|
(4,569
|
)
|
$
|
2,636
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss related to changes in plan experience and actuarial assumptions arising during the period
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
Amortization of amounts resulting from changes in plan experience and actuarial assumptions recognized as periodic benefit
cost
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Amortization of amounts resulting from changes in plan provisions recognized as periodic benefit cost
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
(94
|
)
|
|
|
|
|
(94
|
)
|
Unrealized holding losses on securities
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(29
|
)
|
|
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
2,580
|
|
|
1,925
|
|
|
1,947
|
|
|
624
|
|
|
(4,569
|
)
|
|
2,507
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
2,580
|
|
$
|
1,925
|
|
$
|
1,947
|
|
$
|
607
|
|
$
|
(4,569
|
)
|
$
|
2,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Comprehensive Income
For the Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
2,198
|
|
$
|
1,808
|
|
$
|
1,835
|
|
$
|
525
|
|
$
|
(4,054
|
)
|
$
|
2,312
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of amounts resulting from changes in plan experience and actuarial assumptions recognized as periodic benefit
cost
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
20
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on securities
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
4
|
|
Reclassification adjustment for net gains recognized during period
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
8
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
2,206
|
|
|
1,808
|
|
|
1,835
|
|
|
546
|
|
|
(4,054
|
)
|
|
2,341
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(121
|
)
|
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
2,206
|
|
$
|
1,808
|
|
$
|
1,835
|
|
$
|
425
|
|
$
|
(4,054
|
)
|
$
|
2,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Balance Sheet
As of December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
883
|
|
$
|
884
|
|
$
|
2,788
|
|
$
|
2,039
|
|
$
|
(1,040
|
)
|
$
|
5,554
|
|
Satellites, net
|
|
|
|
|
|
|
|
|
1,795
|
|
|
562
|
|
|
|
|
|
2,357
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
3,290
|
|
|
2,748
|
|
|
|
|
|
6,038
|
|
Goodwill
|
|
|
|
|
|
1,828
|
|
|
1,349
|
|
|
886
|
|
|
|
|
|
4,063
|
|
Intangible assets, net
|
|
|
|
|
|
|
|
|
453
|
|
|
379
|
|
|
|
|
|
832
|
|
Intercompany receivables
|
|
|
4,382
|
|
|
6,152
|
|
|
16,355
|
|
|
3,703
|
|
|
(30,592
|
)
|
|
|
|
Investment in subsidiaries
|
|
|
(8,687
|
)
|
|
15,001
|
|
|
|
|
|
(10,915
|
)
|
|
4,601
|
|
|
|
|
Other assets
|
|
|
180
|
|
|
91
|
|
|
241
|
|
|
1,294
|
|
|
(95
|
)
|
|
1,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
(3,242
|
)
|
$
|
23,956
|
|
$
|
26,271
|
|
$
|
696
|
|
$
|
(27,126
|
)
|
$
|
20,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
384
|
|
$
|
646
|
|
$
|
3,526
|
|
$
|
2,025
|
|
$
|
(1,040
|
)
|
$
|
5,541
|
|
Long-term debt
|
|
|
|
|
|
17,170
|
|
|
|
|
|
|
|
|
|
|
|
17,170
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
1,397
|
|
|
361
|
|
|
(86
|
)
|
|
1,672
|
|
Intercompany liabilities
|
|
|
1,401
|
|
|
16,355
|
|
|
6,152
|
|
|
6,684
|
|
|
(30,592
|
)
|
|
|
|
Other liabilities and deferred credits
|
|
|
404
|
|
|
131
|
|
|
195
|
|
|
482
|
|
|
(9
|
)
|
|
1,203
|
|
Redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
|
|
|
|
400
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock and additional paid-in capital
|
|
|
4,021
|
|
|
12
|
|
|
4,802
|
|
|
(6,632
|
)
|
|
1,818
|
|
|
4,021
|
|
Retained earnings (accumulated deficit)
|
|
|
(9,210
|
)
|
|
(10,341
|
)
|
|
10,199
|
|
|
(2,560
|
)
|
|
2,702
|
|
|
(9,210
|
)
|
Accumulated other comprehensive loss
|
|
|
(242
|
)
|
|
(17
|
)
|
|
|
|
|
(64
|
)
|
|
81
|
|
|
(242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity (deficit)
|
|
|
(5,431
|
)
|
|
(10,346
|
)
|
|
15,001
|
|
|
(9,256
|
)
|
|
4,601
|
|
|
(5,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
(3,242
|
)
|
$
|
23,956
|
|
$
|
26,271
|
|
$
|
696
|
|
$
|
(27,126
|
)
|
$
|
20,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
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
|
|
$
|
412
|
|
$
|
533
|
|
$
|
2,514
|
|
$
|
1,397
|
|
$
|
(615
|
)
|
$
|
4,241
|
|
Satellites, net
|
|
|
|
|
|
|
|
|
1,724
|
|
|
491
|
|
|
|
|
|
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 receivables
|
|
|
3,746
|
|
|
4,011
|
|
|
11,582
|
|
|
3,442
|
|
|
(22,781
|
)
|
|
|
|
Investment in subsidiaries
|
|
|
(5,510
|
)
|
|
12,057
|
|
|
|
|
|
(7,607
|
)
|
|
1,060
|
|
|
|
|
Other assets
|
|
|
74
|
|
|
64
|
|
|
256
|
|
|
1,425
|
|
|
(81
|
)
|
|
1,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
(1,278
|
)
|
$
|
18,493
|
|
$
|
20,970
|
|
$
|
2,655
|
|
$
|
(22,417
|
)
|
$
|
18,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
383
|
|
$
|
204
|
|
$
|
3,422
|
|
$
|
1,349
|
|
$
|
(615
|
)
|
$
|
4,743
|
|
Long-term debt
|
|
|
|
|
|
13,464
|
|
|
|
|
|
|
|
|
|
|
|
13,464
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
1,321
|
|
|
531
|
|
|
(81
|
)
|
|
1,771
|
|
Intercompany liabilities
|
|
|
895
|
|
|
11,582
|
|
|
4,011
|
|
|
6,293
|
|
|
(22,781
|
)
|
|
|
|
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 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)
|
|
$
|
(1,278
|
)
|
$
|
18,493
|
|
$
|
20,970
|
|
$
|
2,655
|
|
$
|
(22,417
|
)
|
$
|
18,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 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
|
|
$
|
1,728
|
|
$
|
2,388
|
|
$
|
1,766
|
|
$
|
1,877
|
|
$
|
(2,125
|
)
|
$
|
5,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
|
|
|
|
|
|
(1,488
|
)
|
|
(1,472
|
)
|
|
|
|
|
(2,960
|
)
|
Cash paid for satellites
|
|
|
|
|
|
|
|
|
(253
|
)
|
|
(136
|
)
|
|
|
|
|
(389
|
)
|
Investment in companies, net of cash acquired
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
(9
|
)
|
|
|
|
|
(16
|
)
|
Proceeds from sale of investments
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
24
|
|
Return of capital from subsidiary
|
|
|
3,775
|
|
|
|
|
|
|
|
|
|
|
|
(3,775
|
)
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
3,775
|
|
|
|
|
|
(1,724
|
)
|
|
(1,639
|
)
|
|
(3,775
|
)
|
|
(3,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of commercial paper (maturity 90 days or less), net
|
|
|
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
156
|
|
Proceeds from short-term borrowings
|
|
|
|
|
|
202
|
|
|
|
|
|
|
|
|
|
|
|
202
|
|
Proceeds from borrowings under revolving credit facility
|
|
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
400
|
|
Repayment of borrowings under revolving credit facility
|
|
|
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
|
|
(400
|
)
|
Proceeds from issuance of long-term debt
|
|
|
|
|
|
5,190
|
|
|
|
|
|
|
|
|
|
|
|
5,190
|
|
Debt issuance costs
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,500
|
)
|
Repayment of other long-term obligations
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
(30
|
)
|
|
|
|
|
(51
|
)
|
Common shares repurchased and retired
|
|
|
(5,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,175
|
)
|
Stock options exercised
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
(9
|
)
|
|
|
|
|
(61
|
)
|
Excess tax benefit from share-based compensation
|
|
|
|
|
|
|
|
|
25
|
|
|
5
|
|
|
|
|
|
30
|
|
Intercompany payments (funding)
|
|
|
(52
|
)
|
|
|
|
|
13
|
|
|
39
|
|
|
|
|
|
|
|
Cash dividend to Parent
|
|
|
|
|
|
(5,900
|
)
|
|
|
|
|
|
|
|
5,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(5,224
|
)
|
|
(1,888
|
)
|
|
(35
|
)
|
|
5
|
|
|
5,900
|
|
|
(1,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
279
|
|
|
500
|
|
|
7
|
|
|
243
|
|
|
|
|
|
1,029
|
|
Cash and cash equivalents at beginning of the period
|
|
|
129
|
|
|
228
|
|
|
4
|
|
|
512
|
|
|
|
|
|
873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
408
|
|
$
|
728
|
|
$
|
11
|
|
$
|
755
|
|
$
|
|
|
$
|
1,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 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
|
|
$
|
1,831
|
|
$
|
1,835
|
|
$
|
1,745
|
|
$
|
1,537
|
|
$
|
(1,763
|
)
|
$
|
5,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
|
|
|
|
|
|
(1,595
|
)
|
|
(1,329
|
)
|
|
|
|
|
(2,924
|
)
|
Cash paid for satellites
|
|
|
(1
|
)
|
|
|
|
|
(141
|
)
|
|
(104
|
)
|
|
|
|
|
(246
|
)
|
Investment in companies, net of cash acquired
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
(11
|
)
|
Proceeds from sale of investments
|
|
|
|
|
|
|
|
|
55
|
|
|
61
|
|
|
|
|
|
116
|
|
Return of capital from subsidiary
|
|
|
3,487
|
|
|
|
|
|
|
|
|
|
|
|
(3,487
|
)
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
1
|
|
|
42
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
3,486
|
|
|
|
|
|
(1,691
|
)
|
|
(1,330
|
)
|
|
(3,487
|
)
|
|
(3,022
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from debt issuance
|
|
|
|
|
|
3,990
|
|
|
|
|
|
|
|
|
|
|
|
3,990
|
|
Debt issuance costs
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,000
|
)
|
Repayment of short-term borrowings
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
(39
|
)
|
Repayment of other long-term obligations
|
|
|
|
|
|
|
|
|
(66
|
)
|
|
(118
|
)
|
|
|
|
|
(184
|
)
|
Common shares repurchased and retired
|
|
|
(5,496
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,496
|
)
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
(5
|
)
|
|
|
|
|
(29
|
)
|
|
(24
|
)
|
|
|
|
|
(58
|
)
|
Excess tax benefit from share-based compensation
|
|
|
|
|
|
|
|
|
21
|
|
|
4
|
|
|
|
|
|
25
|
|
Intercompany payments (funding)
|
|
|
(134
|
)
|
|
|
|
|
20
|
|
|
114
|
|
|
|
|
|
|
|
Cash dividend to Parent
|
|
|
|
|
|
(5,250
|
)
|
|
|
|
|
|
|
|
5,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(5,635
|
)
|
|
(2,290
|
)
|
|
(54
|
)
|
|
(63
|
)
|
|
5,250
|
|
|
(2,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(318
|
)
|
|
(455
|
)
|
|
|
|
|
144
|
|
|
|
|
|
(629
|
)
|
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
|
|
$
|
129
|
|
$
|
228
|
|
$
|
4
|
|
$
|
512
|
|
$
|
|
|
$
|
873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
3,952
|
|
$
|
2,263
|
|
$
|
1,678
|
|
$
|
(607
|
)
|
$
|
(2,080
|
)
|
$
|
5,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
|
|
|
|
|
|
(1,444
|
)
|
|
(859
|
)
|
|
|
|
|
(2,303
|
)
|
Cash paid for satellites
|
|
|
|
|
|
|
|
|
(113
|
)
|
|
|
|
|
|
|
|
(113
|
)
|
Investment in companies, net of cash acquired
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
(616
|
)
|
|
|
|
|
(617
|
)
|
Proceeds from sale of investments
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
9
|
|
Return of capital from subsidiary
|
|
|
4,820
|
|
|
|
|
|
|
|
|
|
|
|
(4,820
|
)
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
3
|
|
|
(78
|
)
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
4,820
|
|
|
|
|
|
(1,555
|
)
|
|
(1,544
|
)
|
|
(4,820
|
)
|
|
(3,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from debt issuance
|
|
|
|
|
|
5,978
|
|
|
|
|
|
|
|
|
|
|
|
5,978
|
|
Debt issuance costs
|
|
|
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
(2,323
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,323
|
)
|
Proceeds from short-term borrowings
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
38
|
|
Repayment of collar loan and equity collars
|
|
|
|
|
|
|
|
|
|
|
|
(1,537
|
)
|
|
|
|
|
(1,537
|
)
|
Repayment of other long-term obligations
|
|
|
|
|
|
|
|
|
(99
|
)
|
|
(28
|
)
|
|
|
|
|
(127
|
)
|
Common shares repurchased and retired
|
|
|
(5,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,111
|
)
|
Stock options exercised
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
(58
|
)
|
|
|
|
|
(38
|
)
|
|
(22
|
)
|
|
|
|
|
(118
|
)
|
Excess tax benefit from share-based compensation
|
|
|
|
|
|
|
|
|
9
|
|
|
2
|
|
|
|
|
|
11
|
|
Dividends paid to redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
|
|
|
(15
|
)
|
Intercompany payments (funding)
|
|
|
(3,751
|
)
|
|
|
|
|
2
|
|
|
3,749
|
|
|
|
|
|
|
|
Cash dividend to Parent
|
|
|
|
|
|
(6,900
|
)
|
|
|
|
|
|
|
|
6,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(8,882
|
)
|
|
(3,289
|
)
|
|
(126
|
)
|
|
2,187
|
|
|
6,900
|
|
|
(3,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(110
|
)
|
|
(1,026
|
)
|
|
(3
|
)
|
|
36
|
|
|
|
|
|
(1,103
|
)
|
Cash and cash equivalents at beginning of the period
|
|
|
557
|
|
|
1,709
|
|
|
7
|
|
|
332
|
|
|
|
|
|
2,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
447
|
|
$
|
683
|
|
$
|
4
|
|
$
|
368
|
|
$
|
|
|
$
|
1,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114
DIRECTV