DIRECTV
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Three Months
Ended
June 30,
|
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Six Months
Ended
June 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
810
|
|
$
|
661
|
|
$
|
1,379
|
|
$
|
1,359
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
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|
Cash flows hedges:
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|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) arising during the period
|
|
|
6
|
|
|
9
|
|
|
(1
|
)
|
|
(27
|
)
|
Reclassification adjustments included in net income
|
|
|
(28
|
)
|
|
(1
|
)
|
|
(36
|
)
|
|
48
|
|
Foreign currency translation adjustments
|
|
|
32
|
|
|
(22
|
)
|
|
71
|
|
|
(48
|
)
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on securities
|
|
|
|
|
|
(3
|
)
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|
|
|
|
|
|
Reclassification adjustment for net losses recognized during the period
|
|
|
|
|
|
2
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
10
|
|
|
(15
|
)
|
|
34
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
820
|
|
|
646
|
|
|
1,413
|
|
|
1,333
|
|
Less: Comprehensive (income) loss attributable to noncontrolling interest
|
|
|
(8
|
)
|
|
21
|
|
|
(19
|
)
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
812
|
|
$
|
667
|
|
$
|
1,394
|
|
$
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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The
accompanying notes are an integral part of these Consolidated Financial Statements.
3
Table of Contents
DIRECTV
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
(Dollars in Millions,
Except Share Data)
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,290
|
|
$
|
2,180
|
|
Accounts receivable, net of allowances of $127 and $95
|
|
|
2,489
|
|
|
2,547
|
|
Inventories
|
|
|
312
|
|
|
283
|
|
Deferred income taxes
|
|
|
110
|
|
|
140
|
|
Prepaid expenses and other
|
|
|
668
|
|
|
803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
5,869
|
|
|
5,953
|
|
Satellites, net
|
|
|
2,464
|
|
|
2,467
|
|
Property and equipment, net
|
|
|
6,874
|
|
|
6,650
|
|
Goodwill
|
|
|
3,992
|
|
|
3,970
|
|
Intangible assets, net
|
|
|
903
|
|
|
920
|
|
Investments and other assets
|
|
|
2,024
|
|
|
1,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
22,126
|
|
$
|
21,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
4,314
|
|
$
|
4,685
|
|
Unearned subscriber revenues and deferred credits
|
|
|
637
|
|
|
589
|
|
Current debt
|
|
|
1,542
|
|
|
1,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
6,493
|
|
|
6,530
|
|
Long-term debt
|
|
|
18,439
|
|
|
18,284
|
|
Deferred income taxes
|
|
|
1,798
|
|
|
1,804
|
|
Other liabilities and deferred credits
|
|
|
1,523
|
|
|
1,456
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
|
|
|
|
375
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
Common stock and additional paid-in capital$0.01 par value, 3,950,000,000 shares authorized, 502,225,846 and 519,306,232 shares issued and
outstanding of common stock at June 30, 2014 and December 31, 2013, respectively
|
|
|
3,544
|
|
|
3,652
|
|
Accumulated deficit
|
|
|
(9,777
|
)
|
|
(9,874
|
)
|
Accumulated other comprehensive loss
|
|
|
(288
|
)
|
|
(322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total DIRECTV stockholders' deficit
|
|
|
(6,521
|
)
|
|
(6,544
|
)
|
Noncontrolling interest
|
|
|
394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' deficit
|
|
|
(6,127
|
)
|
|
(6,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
22,126
|
|
$
|
21,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
4
Table of Contents
DIRECTV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
June 30,
|
|
|
|
2014
|
|
2013
|
|
|
|
(Dollars in Millions)
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,379
|
|
$
|
1,359
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
1,443
|
|
|
1,409
|
|
Venezuelan currency devaluation charge
|
|
|
281
|
|
|
166
|
|
DSN Northwest deconsolidation charge
|
|
|
|
|
|
59
|
|
Amortization of deferred revenues and deferred credits
|
|
|
(24
|
)
|
|
(26
|
)
|
Share-based compensation expense
|
|
|
45
|
|
|
59
|
|
Equity in earnings from unconsolidated affiliates
|
|
|
(78
|
)
|
|
(56
|
)
|
Net foreign currency transaction (gain) loss
|
|
|
(11
|
)
|
|
33
|
|
Dividends received
|
|
|
|
|
|
35
|
|
Net gains from sale of investments
|
|
|
(17
|
)
|
|
(8
|
)
|
Deferred income taxes
|
|
|
115
|
|
|
(39
|
)
|
Excess tax benefit from share-based compensation
|
|
|
(22
|
)
|
|
(24
|
)
|
Other
|
|
|
45
|
|
|
29
|
|
Change in other operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
133
|
|
|
140
|
|
Inventories
|
|
|
(29
|
)
|
|
|
|
Prepaid expenses and other
|
|
|
122
|
|
|
22
|
|
Accounts payable and accrued liabilities
|
|
|
(342
|
)
|
|
(322
|
)
|
Unearned subscriber revenue and deferred credits
|
|
|
48
|
|
|
43
|
|
Other, net
|
|
|
(24
|
)
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
3,064
|
|
|
3,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
(1,417
|
)
|
|
(1,580
|
)
|
Cash paid for satellites
|
|
|
(109
|
)
|
|
(194
|
)
|
Investment in companies, net of cash acquired
|
|
|
(8
|
)
|
|
(27
|
)
|
Proceeds from sale of investments
|
|
|
29
|
|
|
140
|
|
Other, net
|
|
|
(4
|
)
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,509
|
)
|
|
(1,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
Issuance (repayment) of commercial paper (maturity 90 days or less), net
|
|
|
25
|
|
|
(105
|
)
|
Proceeds from short-term borrowings
|
|
|
270
|
|
|
284
|
|
Repayment of short-term borrowings
|
|
|
(235
|
)
|
|
(262
|
)
|
Proceeds from borrowings under revolving credit facility
|
|
|
|
|
|
10
|
|
Repayment of borrowings under revolving credit facility
|
|
|
|
|
|
(10
|
)
|
Proceeds from long-term debt
|
|
|
1,329
|
|
|
1,445
|
|
Debt issuance costs
|
|
|
(7
|
)
|
|
(7
|
)
|
Repayment of long-term debt
|
|
|
(1,026
|
)
|
|
(3
|
)
|
Repayment of other long-term obligations
|
|
|
(34
|
)
|
|
(32
|
)
|
Common shares repurchased and retired
|
|
|
(1,386
|
)
|
|
(1,968
|
)
|
Stock options exercised
|
|
|
10
|
|
|
|
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
(57
|
)
|
|
(61
|
)
|
Excess tax benefit from share-based compensation
|
|
|
22
|
|
|
24
|
|
Other, net
|
|
|
(40
|
)
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(1,129
|
)
|
|
(681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on Venezuelan cash and cash equivalents
|
|
|
(316
|
)
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
110
|
|
|
463
|
|
Cash and cash equivalents at beginning of the period
|
|
|
2,180
|
|
|
1,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
$
|
2,290
|
|
$
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
413
|
|
$
|
389
|
|
Cash paid for income taxes
|
|
|
767
|
|
|
702
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
5
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Description of Business and Basis of Presentation
DIRECTV, which we also 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 two regional sports
networks, hold a minority ownership interest in ROOT SPORTS Northwest 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 investments in ROOT SPORTS Northwest and 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, Peru, Puerto Rico, Venezuela
and certain other countries in the region, and Sky Brasil Servicos Ltda., or 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 and Other segment.
-
-
DIRECTV Sports
Networks.
DIRECTV Sports Networks LLC and its subsidiaries, or DSN, is comprised primarily of two wholly owned regional sports
networks based in Denver, Colorado and Pittsburgh, Pennsylvania, and a regional sports network based in Seattle, Washington in which DSN retains a noncontrolling interest, each of which operates under
the brand name ROOT SPORTS. On April 16, 2013, DSN transferred 100% of its interest in the regional sports network based in Seattle, Washington, or DSN Northwest, to NW Sports Net LLC.
The Seattle Mariners have a majority interest in NW Sports Net LLC and DSN retains a noncontrolling interest, which we account for using the equity method of accounting. The operating results
of DSN are reported as part of the "Sports Networks, Eliminations and Other" reporting segment.
We
have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, for
interim financial reporting. In the opinion of management, all adjustments (consisting only of normal recurring items) that are necessary for a fair presentation have been included. The results for
interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial
statements and footnotes thereto included in our Annual Report on Form 10-K/A for the year ended December 31, 2013 filed with the SEC on June 30, 2014, our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2014 filed with the SEC on May 12, 2014, and all of our other filings, including Current Reports on Form 8-K, filed with the SEC
after such date and through the date of this report.
We
prepare our consolidated financial statements in conformity with GAAP, which requires us to make estimates and assumptions that affect amounts reported herein. We base our estimates
and
6
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
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.
Proposed AT&T Merger Transaction
On May 18, 2014, DIRECTV and AT&T announced that they have entered into a definitive agreement under which DIRECTV will combine
with AT&T in a stock-and-cash transaction. The agreement has been approved unanimously by the Boards of Directors of both companies. Subject to the conditions in the merger agreement, at the effective
time of the merger, DIRECTV shareholders will receive $95.00 per share under the terms of the merger, comprised of $28.50 per share in cash and $66.50 per share in AT&T stock. The stock portion will
be subject to a collar such that DIRECTV shareholders will receive 1.905 AT&T shares if AT&T stock price is below $34.90 at closing and 1.724 AT&T shares if AT&T stock price is above $38.58 at
closing. If AT&T stock price at closing is between $34.90 and $38.58, DIRECTV shareholders will receive a number of shares between 1.724 and 1.905, equal to $66.50 in value. The merger is subject to
approval by DIRECTV shareholders and review by the U.S. Federal Communications Commission, U.S. Department of Justice, and the Instituto Federal de Telecomunicaciones in Mexico. The transaction is
expected to close within approximately 12 months of signing.
In
connection with the proposed combination with AT&T, Inc., DIRECTV has made certain representations, warranties and covenants in the Agreement and Plan of Merger, which was
included as Exhibit 2.1 to the Form 8-K filed with the SEC on May 19, 2014 (the "Merger Agreement"), including, among other things, covenants by the Company to conduct its
business in the ordinary course during the interim period between the execution of the Merger Agreement and consummation of the Merger and not to take certain actions prior to the closing of the
Merger without the prior approval of AT&T.
Note 2: New Accounting Standard
Revenue Recognition.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09,
Revenue from
Contracts with Customers, as a new Topic, Accounting Standards Codification (ASC) Topic 606. This is a comprehensive new revenue recognition standard which will supersede existing revenue recognition
guidance. The standard creates a five-step model for revenue recognition that requires companies to exercise judgment when considering contract terms and relevant facts and circumstances. The
five-step model includes (1) identifying the contract, (2) identifying the separate performance obligations in the contract, (3) determining the transaction price,
(4) allocating the transaction price to the separate performance obligations and (5) recognizing revenue when each performance obligation has been satisfied. The standard also requires
expanded disclosures surrounding revenue recognition. The standard is effective for fiscal periods beginning after December 15, 2016 and allows for either a full retrospective or modified
retrospective adoption. We are
currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
Note 3: Divestiture
DSN Northwest Transaction
On April 16, 2013, DSN transferred 100% of its interest in DSN Northwest to NW Sports Net LLC. Upon completion of the
transaction, the Seattle Mariners have a majority interest in NW
7
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Sports
Net LLC and DSN retains a noncontrolling interest, which we account for using the equity method of accounting. Additionally, DSN provides management oversight and programming services to
NW Sports Net LLC through management service agreements. As a result of this transaction, we deconsolidated DSN Northwest and recorded a non-cash, pre-tax charge of approximately
$59 million ($56 million after tax) in "Other, net" in the Consolidated Statements of Operations for the quarter ended June 30, 2013.
Note 4: Goodwill
The following table sets forth changes in the carrying amounts of "Goodwill" in the Consolidated Balance Sheets by reportable segment
for the six months ended June 30, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin
America
|
|
|
|
|
|
|
|
|
|
Sports
Networks,
Eliminations
and Other
|
|
|
|
|
|
DIRECTV
U.S.
|
|
Sky
Brasil
|
|
PanAmericana
and Other
|
|
Total
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2014
|
|
$
|
3,191
|
|
$
|
346
|
|
$
|
211
|
|
$
|
222
|
|
$
|
3,970
|
|
Sky Brasil foreign currency translation adjustment
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2014
|
|
$
|
3,191
|
|
$
|
368
|
|
$
|
211
|
|
$
|
222
|
|
$
|
3,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 5: Debt
The following table sets forth our outstanding debt as of:
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
(Dollars in Millions)
|
|
Current debt
|
|
|
|
|
|
|
|
Commercial paper
|
|
$
|
260
|
|
$
|
200
|
|
Current portion of long-term debt
|
|
|
1,200
|
|
|
1,000
|
|
Current portion of borrowings under BNDES financing facility
|
|
|
82
|
|
|
56
|
|
Long-term debt
|
|
|
|
|
|
|
|
Senior notes
|
|
|
18,327
|
|
|
18,203
|
|
Borrowings under BNDES financing facility
|
|
|
91
|
|
|
81
|
|
Borrowings under Desenvolve SP financing facility
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
19,981
|
|
$
|
19,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amount of interest accrued related to our outstanding debt was $309 million at June 30, 2014 and $271 million at December 31, 2013.
Senior Notes
Six Months Ended June 30, 2014 Financing Transactions
On March 17, 2014, DIRECTV U.S. issued, pursuant to a registration statement, $1,250 million in aggregate principal of
4.450% senior notes due in 2024 with proceeds, net of an original issue discount, of $1,245 million. We incurred $7 million of debt issuance costs in connection with this transaction.
8
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
On
March 20, 2014, we exercised our early redemption right under the indenture of the 4.750% senior notes due in 2014 ("the 2014 Notes") effective April 24, 2014. The
redemption price was based on the remaining scheduled payments of principal and interest using a discount rate equal to the Treasury Rate (as defined in the indenture governing the 2014 Notes) plus 40
basis points, together with accrued and unpaid interest as of April 24, 2014. The aggregate principal amount of the 2014 Notes outstanding on March 20, 2014 was $1,000 million and
we made a cash payment of $1,022 million in the second quarter of 2014 to redeem such Notes.
Six Months Ended June 30, 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.
On
May 13, 2013, DIRECTV U.S. issued, pursuant to a U.S. registration statement, €500 million ($650 million) in aggregate principal of 2.750% senior
notes due in 2023 resulting in proceeds, net of an original issue discount, of €497 million ($646 million). The U.S. dollar amounts reflect the conversion of the
€500 million aggregate principal and the €497 million proceeds, net of discount, to U.S. dollars based on the exchange rate of €1.00/
$1.30 at May 13, 2013. In connection with the issuance of these senior notes, DIRECTV U.S. entered into cross-currency swaps to effectively convert its fixed-rate euro 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 6. We incurred $4 million of debt
issuance costs in connection with this transaction.
9
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
following table sets forth our outstanding senior notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal amount
|
|
Carrying value, net of
unamortized original
issue discounts
|
|
|
|
June 30,
2014
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
(Dollars in Millions)
|
|
4.750% senior notes due in 2014
|
|
$
|
|
|
$
|
|
|
$
|
1,000
|
|
3.550% senior notes due in 2015
|
|
|
1,200
|
|
|
1,200
|
|
|
1,200
|
|
3.125% senior notes due in 2016
|
|
|
750
|
|
|
750
|
|
|
750
|
|
3.500% senior notes due in 2016
|
|
|
1,500
|
|
|
1,499
|
|
|
1,499
|
|
2.400% senior notes due in 2017
|
|
|
1,250
|
|
|
1,249
|
|
|
1,249
|
|
1.750% senior notes due in 2018
|
|
|
750
|
|
|
745
|
|
|
744
|
|
5.875% senior notes due in 2019
|
|
|
1,000
|
|
|
996
|
|
|
996
|
|
5.200% senior notes due in 2020
|
|
|
1,300
|
|
|
1,299
|
|
|
1,299
|
|
4.600% senior notes due in 2021
|
|
|
1,000
|
|
|
1,000
|
|
|
999
|
|
5.000% senior notes due in 2021(1)
|
|
|
1,500
|
|
|
1,501
|
|
|
1,495
|
|
3.800% senior notes due in 2022(1)
|
|
|
1,500
|
|
|
1,504
|
|
|
1,499
|
|
2.750% senior notes due in 2023(2)
|
|
|
684
|
|
|
681
|
|
|
684
|
|
4.450% senior notes due in 2024(1)
|
|
|
1,250
|
|
|
1,253
|
|
|
|
|
4.375% senior notes due in 2029(2)
|
|
|
1,283
|
|
|
1,271
|
|
|
1,229
|
|
5.200% senior notes due in 2033(2)
|
|
|
599
|
|
|
596
|
|
|
577
|
|
6.350% senior notes due in 2040
|
|
|
500
|
|
|
500
|
|
|
500
|
|
6.000% senior notes due in 2040
|
|
|
1,250
|
|
|
1,235
|
|
|
1,235
|
|
6.375% senior notes due in 2041
|
|
|
1,000
|
|
|
1,000
|
|
|
1,000
|
|
5.150% senior notes due in 2042
|
|
|
1,250
|
|
|
1,248
|
|
|
1,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total senior notes
|
|
$
|
19,566
|
|
$
|
19,527
|
|
$
|
19,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
carrying value as of June 30, 2014 includes a fair value adjustment increase of $5 million, $5 million and $7 million for the
5.000% senior notes due in 2021, the 3.800% senior notes due in 2022 and the 4.450% senior notes due in 2024, respectively.
-
(2)
-
These
amounts reflect the remeasurement of the aggregate principal and carrying value of our foreign currency denominated senior notes to U.S. dollars based
on the exchange rates in effect at each of the dates presented.
The
fair value of our senior notes was approximately $20,898 million at June 30, 2014 and $19,424 million at December 31, 2013. We calculated the fair values
based on quoted market prices of our senior notes, which is a Level 1 input under accounting guidance for fair value measurements of assets and liabilities.
All
of our senior notes were issued by DIRECTV Holdings LLC and DIRECTV Financing Co., Inc., or the Co-Issuers, and have been registered under the Securities Act of
1933, as amended.
The
principal amount of our senior notes mature as follows: $1,200 million in 2015, $2,250 million in 2016, $1,250 million in 2017, $750 million in 2018 and
$14,116 million thereafter.
10
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Commercial Paper
DIRECTV U.S. has 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 June 30, 2014, we had $260 million of short-term commercial paper outstanding,
with a weighted average remaining maturity of 59 days, at a weighted average yield of 0.41%, which may be refinanced on a periodic basis as borrowings mature. Aggregate amounts outstanding
under the revolving credit facilities described below and the commercial paper program are limited to $2.5 billion.
Revolving Credit Facilities
DIRECTV U.S. has 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 June 30, 2014, there were no borrowings outstanding under the revolving credit facilities.
Borrowings
under the revolving credit facilities are unsecured senior obligations of DIRECTV U.S. and rank equally in right of payment with all of DIRECTV U.S.' existing and future
senior debt and 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 limit 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 covenants that are similar. If
DIRECTV U.S. fails 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.
The senior notes provide that the borrowings may be required to be prepaid if certain change-in-control events, coupled with a ratings decline, occur. The revolving credit facilities provide that the
borrowings may be required to be prepaid if certain change-in-control events occur.
DIRECTV Guarantors.
DIRECTV guarantees all of the senior notes outstanding, jointly and severally with DIRECTV Holdings LLC's
material
domestic subsidiaries. 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. The revolving credit facilities and the commercial paper program are also similarly fully guaranteed by DIRECTV.
11
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
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 and our regional sports networks which are held by DSN. 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 program.
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 is not 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.
Desenvolve SP Financing Facility
In the second quarter of 2014, Sky Brasil entered into a Brazilian Real denominated financing facility with Desenvolve SP, an agency
created by the Sao Paulo State Government for economic development, under which Sky Brasil may borrow funds for the construction of a satellite and broadcast facility. Each borrowing under the
facility, including accrued interest, will be repaid in a single installment five years from the date of such borrowing. The financing facility is secured by a third party bank guarantee. As of
June 30, 2014, Sky Brasil had borrowings of R$48 million ($21 million) under the facility bearing interest of 2.5% per year, with a maturity of 2019. The U.S. dollar amounts
reflect the conversion of the Brazilian Real denominated amounts into U.S. dollars based on the exchange rate of R$2.20 / $1.00 at June 30, 2014.
BNDES Financing Facility
In March 2013, Sky Brasil entered into a Brazilian Real denominated financing facility with Banco Nacional de Desenvolvimento
Econômico e Social, or BNDES, a government owned bank in Brazil, under which Sky Brasil may borrow funds for the purchase of set-top receivers. As of June 30, 2014, Sky Brasil
had borrowings of R$382 million ($173 million) outstanding under the BNDES facility bearing interest at a weighted-average rate of 3.70% per year. As of December 31, 2013, Sky
Brasil had borrowings of R$320 million ($137 million) outstanding under the BNDES facility bearing interest at a weighted-average rate of 3.07% per year. Borrowings under the facility
are required to be repaid in 30 monthly installments. The U.S. dollar amounts reflect the conversion of the Brazilian Real denominated amounts into U.S. dollars based on the exchange rates of
R$2.20 / $1.00 and R$2.34 / $1.00 as of June 30, 2014 and December 31, 2013, respectively.
Borrowings
under the BNDES facility mature as follows: R$87 million ($39 million) in 2014, R$183 million ($83 million) in 2015, R$103 million
($47 million) in 2016 and R$9 million ($4 million) in 2017. The financing facility is collateralized by the financed set-top receivers with an original purchase price of
approximately R$543 million ($246 million) based on the exchange rate at the time of purchase.
12
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Restricted Cash
Restricted cash of $10 million as of June 30, 2014 and $7 million as of December 31, 2013 was included as
part of "Prepaid expenses and other" in our Consolidated Balance Sheets. These amounts secure certain of our letters of credit obligations and restrictions on the cash will be removed as the letters
of credit expire.
Note 6: Derivative Financial Instruments
We use derivative financial instruments primarily to manage the risks associated with fluctuations in foreign currency exchange rates
and interest rates. We do not use derivatives for trading or speculative purposes. We record derivative financial instruments in the Consolidated Balance Sheets as either assets or liabilities at fair
value. We calculate the fair value of derivative 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 yield curves, foreign currency exchange rates and incorporating counterparty credit risk, as applicable. For derivative financial instruments designated as fair value
hedges, the change in the fair value of both the derivative instrument and the hedged item are recognized in earnings in the current period. For derivative financial instruments designated as cash
flow hedges, the effective portion of the unrealized gains or losses on the derivative financial instruments are initially reported in "Accumulated other comprehensive loss" in the Consolidated
Balance Sheets, and subsequently reclassified to earnings in the same periods during which the hedged item affects earnings. The ineffective portion of the unrealized gains and losses on these
derivative financial instruments, if any, is recorded immediately in earnings. We evaluate the effectiveness of our derivative financial instruments at inception and on a quarterly basis.
The
following table sets forth the fair values of assets and liabilities associated with the derivative financial instruments as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
|
|
June 30,
2014
|
|
December 31,
2013
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
(Dollars in millions)
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross-currency swap contracts
|
|
$
|
128
|
|
$
|
112
|
|
$
|
|
|
$
|
|
|
Interest rate swap contracts
|
|
|
|
|
|
3
|
|
|
|
|
|
1
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of derivative financial instruments
|
|
$
|
147
|
|
$
|
115
|
|
$
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
fair values of the assets associated with derivative financial instruments are recorded in "Investments and other assets" in the Consolidated Balance Sheets and the fair value of the
liabilities associated with derivative financial instruments are recorded in "Other liabilities and deferred credits" in the Consolidated Balance Sheets.
13
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
following table sets forth the notional amounts of outstanding derivative financial instruments as of:
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
(Dollars in millions)
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
Cross-currency swap contracts
|
|
$
|
2,418
|
|
$
|
2,418
|
|
Interest rate swap contracts
|
|
|
|
|
|
500
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notional amount of derivative financial instruments
|
|
$
|
5,418
|
|
$
|
2,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateral Arrangements.
We have agreements with our derivative instrument 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. We held no cash collateral from
counterparties as of June 30, 2014 and held $10 million of cash collateral from counterparties as of December 31, 2013. We did not have any cash collateral posted with
counterparties as of June 30, 2014 and December 31, 2013. 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.
Cross-Currency Swap Contracts
On September 11, 2012, DIRECTV U.S. issued, pursuant to a U.S. registration statement, £750 million in
aggregate principal of 4.375% senior notes due in 2029. On May 13, 2013, DIRECTV U.S. issued, pursuant to a U.S. registration statement, €500 million in aggregate
principal of 2.750% senior notes due in 2023. On November 13, 2013, DIRECTV U.S. issued, pursuant to a U.S. registration statement, £350 million in aggregate principal of
5.200% senior notes due in 2033. In connection with the issuance of these senior notes, DIRECTV U.S. entered into cross-currency swap contracts to manage the related foreign exchange risk by
effectively converting all of the fixed-rate British pound sterling and fixed-rate euro 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 contracts correspond to the related hedged senior notes
and have maturities ranging from May 2023 to November 2033.
During
the six months ended June 30, 2014, DIRECTV U.S. recorded net remeasurement losses of $58 million in "Other, net" in the Consolidated Statements of Operations
related to the remeasurement of the hedged senior notes. To offset these remeasurement losses, we reclassified $58 million ($36 million after tax) from "Accumulated other comprehensive
loss" in the Consolidated Balance Sheets to "Other, net" in the Consolidated Statements of Operations. During the six months ended June 30, 2013, DIRECTV U.S. recorded net remeasurement gains
of $77 million in "Other, net" in the Consolidated Statements of Operations related to the remeasurement of the hedged senior notes. To offset these remeasurement gains, we reclassified
$77 million ($48 million after tax) from "Accumulated other comprehensive loss" in the Consolidated Balance Sheets to "Other, net" in the
14
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Consolidated
Statements of Operations. These reclassifications eliminate the impact of the remeasurement of the hedged senior notes from our results of operations. We measured no ineffectiveness for
the six months ended June 30, 2014 and June 30, 2013 related to these cross-currency swap contracts.
Forward-Starting Interest Rate Swap Contracts
On March 17, 2014, DIRECTV U.S. issued $1,250 million in aggregate principal of 4.450% senior notes due in 2024. In
connection with this transaction, DIRECTV U.S. settled all then-outstanding forward-starting interest rate swaps, which were previously entered into to protect against unfavorable interest rate
changes related to the forecasted issuance of debt. These interest rate swaps were designated and qualified as cash flow hedges. As a result of settling these forward-starting interest rate swaps, we
recognized $1 million of ineffectiveness in earnings in the first quarter of 2014. As of March 31, 2014, we had recorded $10 million in "Accumulated other comprehensive loss" in
the Consolidated Balance Sheets related to these forward-starting interest rate swaps that will be recognized as interest expense over the term of the 4.450% senior notes due in 2024.
Fixed-to-Floating Interest Rate Swap Contracts
During the second quarter of 2014, DIRECTV U.S. entered into interest rate swap contracts converting a portion of the total aggregate
principal amounts of the 5.000% senior notes due in 2021, the 3.800% senior notes due in 2022 and the 4.450% senior notes due in 2024 from a fixed to floating interest rate in order to manage our
interest rate exposure by adjusting our mix of fixed rate and floating rate debt. The total notional amount of these interest rate swaps was $3,000 million as of June 30, 2014. These
interest rate swaps are designated and qualify as fair value hedges. The terms of the interest rate swap contracts correspond to the related hedged senior notes and have maturities ranging from March
2021 to April 2024.
The
difference between the change in the fair value of these interest rate swap contracts and the fair value of the related senior notes as a result of changes in the benchmark interest
rate was a $2 million gain for the three and six months ended June 30, 2014, which was recognized in "Other, net" in the Consolidated Statements of Operations. The periodic interest
settlements for the interest rate swap contracts are recorded in "Interest expense" in the Consolidated Statements of Operations.
Note 7: Contingencies
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 and such approval has not consistently been granted for several years. Consequently, our ability to pay U.S. dollar denominated obligations and repatriate cash generated in Venezuela in excess
of local operating requirements is limited, which has resulted in increases in the cash balance at our Venezuelan subsidiary. 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 recorded a pre-tax charge in "Venezuelan
currency devaluation charge" in the Consolidated Statements of Operations of $166 million ($136 million after tax) 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.
15
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
In
the first quarter of 2013, the Venezuelan government announced a new currency exchange system, the Sistema Complementario de Administración de Divisas, or SICAD 1,
which is intended to function as an auction system for participants to exchange bolivars for U.S. dollars. The volume of amounts exchanged through such SICAD 1 system and the resulting exchange rate
are published by the Venezuelan Central Bank. Effective January 24, 2014, the Venezuelan government announced that dividends and royalties would be subject to the SICAD 1 program. The SICAD 1
exchange rate, which was 10.6 bolivars per U.S. dollar as of June 30, 2014, is determined by periodic auctions. Additionally, in February 2014, the Venezuelan government announced SICAD 2,
which is an exchange mechanism that became available on March 24, 2014. The exchange rate for SICAD 2 was 49.98 bolivars per U.S. dollar as of June 30, 2014.
We
currently believe the SICAD 1 rate is the most representative rate to use for remeasurement, as the official rate of 6.3 bolivars per U.S. dollar will likely be reserved only for the
settlement of U.S. dollar denominated obligations related to purchases of "essential goods and services," and the equity of our Venezuelan subsidiary would be realized, if at all, through permitted
dividends paid at the SICAD 1 rate. Therefore, as of June 30, 2014, we are continuing to remeasure our Venezuelan subsidiary's financial statements in U.S. dollars using the
exchange rate determined by periodic auctions under SICAD 1, which was 10.6 bolivars per U.S. dollar. Prior to March 31, 2014, we used the official exchange rate of 6.3 bolivars per U.S.
dollar. As a result of the devaluation, we recorded a pre-tax charge in "Venezuelan currency devaluation charge" in the Consolidated Statements of Operations of $281 million in the first
quarter of 2014, related to the remeasurement of the bolivar denominated net monetary assets of our Venezuelan subsidiary on March 31, 2014.
As
of June 30, 2014, our Venezuelan subsidiary had Venezuelan bolivar denominated net monetary assets of $494 million, including cash of $519 million, based on the
SICAD 1 exchange rate of 10.6 bolivars per U.S. dollar. The exchange rate used to report net monetary assets and operating results of our Venezuelan subsidiary is currently based on the results
of periodic SICAD 1 auctions, which is expected to result in fluctuations in reported amounts that could be material to the results of operations in Venezuela in future periods and could materially
affect the comparability of results for our Venezuelan subsidiary between periods. The comparability of our results of operations and financial position in Venezuela will also be affected in the event
of additional changes to the exchange rate system and further devaluations of the Venezuelan bolivar.
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 June 30, 2014. 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.
DIRECTV Shareholder LitigationProposed DIRECTV and AT&T Merger.
Beginning on May 21, 2014, and following the May 18,
2014
announcement that DIRECTV had entered into a definitive agreement to combine with AT&T, Inc., several shareholder putative class action lawsuits have been filed, six in Delaware Chancery Court
("Delaware Actions"), and one in California Superior Court
16
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
("California
Action"), against DIRECTV, its directors and AT&T, Inc., alleging breach of fiduciary duties in connection with the proposed transaction. The complaints generally and collectively
assert that defendants failed to maximize the value of DIRECTV, and seek to enjoin the proposed transaction as well as unspecified damages, costs and fees. Service has been accepted by DIRECTV and its
directors in all pending cases. An Order consolidating the Delaware Actions and appointing Lead Plaintiff and Lead Counsel was entered on July 21, 2014. Discovery in Delaware Actions stayed
pending the filing of a Consolidated Complaint. The California Action has been stayed pending a court status conference
scheduled for August 12, 2014. Insofar as the allegations in these lawsuits can be analyzed by us at this early stage, we believe the claims are without merit and intend to defend the actions
vigorously.
International Trade Commission Proceedings.
On April 17, 2014, ViXS Systems, Inc. submitted to the International Trade
Commission a
request to commence an investigation pursuant to Section 337 of the Tariff Act. The request alleges that certain patents owned by ViXS Systems, Inc. are infringed by components supplied
by Entropic Communications, Inc., or by devices that contain those components. Among those accused devices are satellite receivers and other devices for use in systems for receiving the DIRECTV
service. DIRECTV LLC, along with Entropic Communications, Inc. and certain companies alleged to be manufacturers of devices for DIRECTV, are identified as respondents. The request seeks
an order excluding the accused devices from entry into the United States, and a cease and desist order prohibiting unlawful importation and/or sale of the accused devices after importation. Also on
April 17, 2014, ViXS Systems Inc. filed in United States District Court a companion lawsuit alleging infringement of the same patents by the same products of the respondents named in the
action before the ITC. The lawsuit seeks an injunction and monetary damages. DIRECTV is in the process of evaluating the claims made in these actions and intends to defend them vigorously.
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. Further, in certain of these cases, suppliers of equipment to DIRECTV are also defendants, and
DIRECTV has contractual obligations to indemnify and hold harmless certain suppliers in those cases. 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.
As previously reported, 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. We have reached a settlement in principle with the individual plaintiffs in the
federal cases and are finalizing the settlement agreements. In the California state court action, the denial of our motion to compel arbitration is currently on appeal. We believe that our early
cancellation fees are adequately disclosed, and represent reasonable
17
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
estimates
of the costs we incur when customers cancel service before fulfilling their programming commitments.
State and Federal Inquiries.
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. As reported previously, DIRECTV U.S. received a request for information from the Federal
Trade Commission, or FTC, on issues similar to those resolved in 2011 with a multistate group of state attorneys general. We have been cooperating with the FTC by providing information about our sales
and marketing practices and customer complaints and have engaged in ongoing negotiations with FTC staff concerning these issues. The FTC staff has advised that they will refer this matter to the
Commissioners to obtain authority to file suit if we are unable to agree upon a resolution of these issues.
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 that the ultimate outcome will not have a material effect on our consolidated financial position or results 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 a portion of 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 June 30, 2014, the net book value of in-orbit satellites was $1,285 million, all of which was
uninsured.
Other
As of June 30, 2014, we were contingently liable under standby letters of credit and bonds in the aggregate amount of
$322 million primarily related to judicial deposit and payment guarantees in Latin America and insurance deductibles.
Note 8: 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, GSN and NW Sports Net LLC.
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.
18
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The following table summarizes revenues and expenses with related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
2
|
|
$
|
1
|
|
$
|
4
|
|
$
|
3
|
|
Expenses
|
|
|
300
|
|
|
246
|
|
|
541
|
|
|
482
|
|
The
following table sets forth the amount of accounts receivable from and accounts payable to related parties as of:
|
|
|
|
|
|
|
|
|
|
June 30,
2014
|
|
December 31,
2013
|
|
|
|
(Dollars in Millions)
|
|
Accounts receivable
|
|
$
|
14
|
|
$
|
18
|
|
Accounts payable
|
|
|
104
|
|
|
100
|
|
Long-term liability
|
|
|
97
|
|
|
69
|
|
Note 9: Stockholders' Deficit and Noncontrolling Interest
Capital Stock and Additional Paid-In Capital
Our certificate of incorporation authorizes the following capital stock: 3,950,000,000 shares of common stock, par value $0.01 per
share, and 50,000,000 shares of preferred stock, par value $0.01 per share. As of June 30, 2014 and December 31, 2013, there were no outstanding shares of preferred stock.
Share Repurchase Program
Since 2006 our Board of Directors has approved multiple authorizations for the repurchase of our common stock. In February 2014 our
Board of Directors approved a new authorization for up to $3.5 billion for repurchases of our common stock. On May 18, 2014 DIRECTV
and AT&T entered into a definitive agreement, under which AT&T would combine with DIRECTV in a stock-and-cash transaction. As a result, we have suspended the share repurchase program and agreed to not
purchase, repurchase, redeem or otherwise acquire any shares of our capital stock during the pendency of the proposed transaction and without AT&T's consent.
Accelerated Share Repurchase.
On March 20, 2013, we entered into a variable notional/variable maturity accelerated share
repurchase agreement,
or ASR, with a third-party financial institution to repurchase $300 million to $500 million of our common stock, which was settled during the second quarter of 2013. Under the agreement,
we paid $500 million up-front and received an initial delivery of 4.9 million shares, which were retired. The ASR agreement was settled on April 19, 2013 for a final notional
amount of $337 million, which was recorded as a reduction to stockholders' equity. Accordingly, we received an additional 1.2 million shares, which were retired, and we received a
$163 million cash payment from our counterparty equal to the difference between the $500 million up-front payment and the final notional amount. We accounted for the ASR as a repurchase
of common stock for purposes of calculating earnings per share and as a forward contract indexed to our
19
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
own
common stock, which met all of the applicable criteria for equity classification, and, therefore, was not accounted for as a derivative instrument.
The
following table sets forth information regarding shares repurchased and retired during the periods presented:
|
|
|
|
|
|
|
|
|
|
Six Months
Ended June 30,
|
|
|
|
2014
|
|
2013
|
|
|
|
(Amounts in
Millions, Except
Per Share
Amounts)
|
|
Total cost of repurchased shares(1)
|
|
$
|
1,386
|
|
$
|
1,998
|
|
Average price per share
|
|
$
|
73.82
|
|
$
|
54.23
|
|
Number of shares repurchased and retired
|
|
|
19
|
|
|
37
|
|
-
(1)
-
Of
the $1,998 million in repurchases during the six months ended June 30, 2013, $30 million were paid for in July 2013. Amounts
repurchased but settled subsequent to the end of such period are considered non-cash financing activities and excluded from the Consolidated Statements of Cash Flows.
Noncontrolling Interest
In connection with our acquisition of Sky Brasil in 2006, our partner who holds the remaining 7% interest, Globo
Comunicações e Participações S.A., or Globo, was granted the right, until January 2014, to require us to purchase all, but not less
than all, of its shares in Sky Brasil. Globo did not exercise its right to require us to purchase its shares in Sky Brasil. That right has now expired and the noncontrolling interest is no longer
redeemable. In accordance with Accounting Standards Codification 480,
Distinguishing Liabilities from Equity
, during the first quarter of 2014,
we reclassified
$375 million, which was the fair value of Globo's remaining 7% interest, from "Redeemable noncontrolling interest" to "Noncontrolling interest," a component of stockholders' deficit in the
Consolidated Balance Sheets. During the first quarter of 2014, we discontinued fair value accounting for this equity instrument.
20
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
following table sets forth a reconciliation of stockholders' deficit for the six months ended June 30, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
DIRECTV
Common
Shares
|
|
Common
Stock and
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
DIRECTV
Stockholders'
Deficit
|
|
Noncontrolling
Interest
|
|
Total
Stockholders'
Deficit
|
|
Redeemable
Noncontrolling
Interest
|
|
|
|
(Amounts in Millions, Except Share Data)
|
|
|
|
Balance as of January 1, 2014
|
|
|
519,306,232
|
|
$
|
3,652
|
|
$
|
(9,874
|
)
|
$
|
(322
|
)
|
$
|
(6,544
|
)
|
$
|
|
|
$
|
(6,544
|
)
|
$
|
375
|
|
Net income
|
|
|
|
|
|
|
|
|
1,367
|
|
|
|
|
|
1,367
|
|
|
12
|
|
|
1,379
|
|
|
|
|
Stock repurchased and retired
|
|
|
(18,774,194
|
)
|
|
(130
|
)
|
|
(1,256
|
)
|
|
|
|
|
(1,386
|
)
|
|
|
|
|
(1,386
|
)
|
|
|
|
Stock options exercised and restricted stock units vested and distributed
|
|
|
1,693,808
|
|
|
(46
|
)
|
|
|
|
|
|
|
|
(46
|
)
|
|
|
|
|
(46
|
)
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
45
|
|
|
|
|
Tax benefit from share-based compensation
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
22
|
|
|
|
|
Other
|
|
|
|
|
|
1
|
|
|
(14
|
)
|
|
|
|
|
(13
|
)
|
|
|
|
|
(13
|
)
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
34
|
|
|
|
|
|
34
|
|
|
|
|
CTA adjustment allocated to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
7
|
|
|
|
|
Noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375
|
|
|
375
|
|
|
(375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2014
|
|
|
502,225,846
|
|
$
|
3,544
|
|
$
|
(9,777
|
)
|
$
|
(288
|
)
|
$
|
(6,521
|
)
|
$
|
394
|
|
$
|
(6,127
|
)
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
following table sets forth a reconciliation of stockholders' deficit and redeemable noncontrolling interest for the six months ended June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
DIRECTV
Common
Shares
|
|
Common
Stock and
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Deficit
|
|
Redeemable
Noncontrolling
Interest
|
|
Net
Income
|
|
|
|
(Amounts in Millions, Except Share Data)
|
|
Balance as of January 1, 2013
|
|
|
586,839,817
|
|
$
|
4,021
|
|
$
|
(9,210
|
)
|
$
|
(242
|
)
|
$
|
(5,431
|
)
|
$
|
400
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
1,350
|
|
|
|
|
|
1,350
|
|
|
9
|
|
$
|
1,359
|
|
Stock repurchased and retired
|
|
|
(36,842,811
|
)
|
|
(252
|
)
|
|
(1,746
|
)
|
|
|
|
|
(1,998
|
)
|
|
|
|
|
|
|
Stock options exercised and restricted stock units vested and distributed
|
|
|
1,964,305
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
Share-based compensation expense
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
Tax benefit from share-based compensation
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
Adjustment to the fair value of redeemable noncontrolling interest
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
(5
|
)
|
|
5
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
|
(26
|
)
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2013
|
|
|
551,961,311
|
|
$
|
3,786
|
|
$
|
(9,606
|
)
|
$
|
(268
|
)
|
$
|
(6,088
|
)
|
$
|
400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Other Comprehensive Income (Loss)
The following represents the components of other comprehensive income (loss) for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2014
|
|
2013
|
|
|
|
Pre-Tax
|
|
Tax
Benefit
(Expense)
|
|
Net of
Tax
|
|
Pre-Tax
|
|
Tax
Benefit
(Expense)
|
|
Net of
Tax
|
|
|
|
(Dollars in Millions)
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains arising during the period
|
|
$
|
10
|
|
$
|
(4
|
)
|
$
|
6
|
|
$
|
15
|
|
$
|
(6
|
)
|
$
|
9
|
|
Reclassification adjustments included in "Other, net"
|
|
|
(45
|
)
|
|
17
|
|
|
(28
|
)
|
|
(1
|
)
|
|
|
|
|
(1
|
)
|
Foreign currency translation adjustments
|
|
|
58
|
|
|
(26
|
)
|
|
32
|
|
|
(33
|
)
|
|
11
|
|
|
(22
|
)
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on securities
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
2
|
|
|
(3
|
)
|
Reclassification adjustment for net losses recognized during the period, included in "Other, net"
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
(2
|
)
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
$
|
23
|
|
$
|
(13
|
)
|
$
|
10
|
|
$
|
(20
|
)
|
$
|
5
|
|
$
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2014
|
|
2013
|
|
|
|
Pre-Tax
|
|
Tax
Benefit
(Expense)
|
|
Net of
Tax
|
|
Pre-Tax
|
|
Tax
Benefit
(Expense)
|
|
Net of
Tax
|
|
|
|
(Dollars in Millions)
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses arising during the period
|
|
$
|
(2
|
)
|
$
|
1
|
|
$
|
(1
|
)
|
$
|
(42
|
)
|
$
|
15
|
|
$
|
(27
|
)
|
Reclassification adjustments included in "Other, net"
|
|
|
(58
|
)
|
|
22
|
|
|
(36
|
)
|
|
77
|
|
|
(29
|
)
|
|
48
|
|
Foreign currency translation adjustments
|
|
|
121
|
|
|
(50
|
)
|
|
71
|
|
|
(76
|
)
|
|
28
|
|
|
(48
|
)
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for net losses recognized during the period, included in "Other, net"
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
(1
|
)
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
$
|
61
|
|
$
|
(27
|
)
|
$
|
34
|
|
$
|
(39
|
)
|
$
|
13
|
|
$
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Accumulated Other Comprehensive Loss
The following represents the changes in the components of accumulated other comprehensive loss for each of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
Benefit Plan
Items
|
|
Gains
(Losses) on
Cash Flow
Hedges
|
|
Foreign
Currency
Items
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2014
|
|
$
|
(123
|
)
|
$
|
14
|
|
$
|
(213
|
)
|
$
|
(322
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
(37
|
)
|
|
71
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2014
|
|
$
|
(123
|
)
|
$
|
(23
|
)
|
$
|
(142
|
)
|
$
|
(288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
Benefit Plan
Items
|
|
Gains
(Losses) on
Cash Flow
Hedges
|
|
Foreign
Currency
Items
|
|
Unrealized
Gains
(Losses) on
Available for
Sale
Securities
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
|
(Dollars in Millions)
|
|
Balance as of January 1, 2013
|
|
$
|
(184
|
)
|
$
|
(17
|
)
|
$
|
(40
|
)
|
$
|
(1
|
)
|
$
|
(242
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
21
|
|
|
(48
|
)
|
|
1
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2013
|
|
$
|
(184
|
)
|
$
|
4
|
|
$
|
(88
|
)
|
$
|
|
|
$
|
(268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 10: Earnings Per Common Share
We compute basic earnings per common share, or EPS, by dividing net income attributable to DIRECTV by the weighted average number of
common shares outstanding for the period.
Diluted
EPS considers the effect of common equivalent shares, which consist entirely of common stock options and restricted stock units issued to employees. During the three and six
months ended June 30, 2014 we excluded 0.2 million common stock awards 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 the three and six months ended June 30, 2013.
24
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The reconciliation of the amounts used in the basic and diluted EPS computation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
Shares
|
|
Per Share
Amounts
|
|
|
|
(Dollars and Shares
in Millions,
Except Per Share Amounts)
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
806
|
|
|
504
|
|
$
|
1.60
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
4
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV
|
|
$
|
806
|
|
|
508
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
660
|
|
|
556
|
|
$
|
1.19
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
5
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV
|
|
$
|
660
|
|
|
561
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
Shares
|
|
Per Share
Amounts
|
|
|
|
(Dollars and Shares
in Millions,
Except Per Share Amounts)
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
1,367
|
|
|
507
|
|
$
|
2.70
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
5
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV
|
|
$
|
1,367
|
|
|
512
|
|
$
|
2.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
1,350
|
|
|
565
|
|
$
|
2.39
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and restricted stock units
|
|
|
|
|
|
4
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to DIRECTV
|
|
$
|
1,350
|
|
|
569
|
|
$
|
2.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Note 11: 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 and Other, 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 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.
Selected
information for our operating segments is reported as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
Revenues
|
|
Intersegment
Revenues
|
|
Total
Revenues
|
|
Operating
Profit
(Loss)
|
|
Depreciation
and
Amortization
Expense
|
|
Operating
Profit
(Loss) Before
Depreciation
and
Amortization(1)
|
|
|
|
(Dollars in Millions)
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
6,270
|
|
$
|
2
|
|
$
|
6,272
|
|
$
|
1,319
|
|
$
|
429
|
|
$
|
1,748
|
|
Sky Brasil
|
|
|
1,011
|
|
|
|
|
|
1,011
|
|
|
114
|
|
|
175
|
|
|
289
|
|
PanAmericana and Other
|
|
|
778
|
|
|
|
|
|
778
|
|
|
28
|
|
|
121
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
1,789
|
|
|
|
|
|
1,789
|
|
|
142
|
|
|
296
|
|
|
438
|
|
Sports Networks, Eliminations and Other
|
|
|
50
|
|
|
(2
|
)
|
|
48
|
|
|
(37
|
)
|
|
4
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,109
|
|
$
|
|
|
$
|
8,109
|
|
$
|
1,424
|
|
$
|
729
|
|
$
|
2,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
5,941
|
|
$
|
2
|
|
$
|
5,943
|
|
$
|
1,241
|
|
$
|
410
|
|
$
|
1,651
|
|
Sky Brasil
|
|
|
942
|
|
|
|
|
|
942
|
|
|
56
|
|
|
206
|
|
|
262
|
|
PanAmericana and Other
|
|
|
744
|
|
|
|
|
|
744
|
|
|
83
|
|
|
110
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
1,686
|
|
|
|
|
|
1,686
|
|
|
139
|
|
|
316
|
|
|
455
|
|
Sports Networks, Eliminations and Other
|
|
|
73
|
|
|
(2
|
)
|
|
71
|
|
|
(30
|
)
|
|
5
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,700
|
|
$
|
|
|
$
|
7,700
|
|
$
|
1,350
|
|
$
|
731
|
|
$
|
2,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
Revenues
|
|
Intersegment
Revenues
|
|
Total
Revenues
|
|
Operating
Profit
(Loss)
|
|
Depreciation
and
Amortization
Expense
|
|
Operating
Profit
(Loss) Before
Depreciation
and
Amortization(1)
|
|
|
|
(Dollars in Millions)
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
12,355
|
|
$
|
4
|
|
$
|
12,359
|
|
$
|
2,562
|
|
$
|
855
|
|
$
|
3,417
|
|
Sky Brasil
|
|
|
1,950
|
|
|
|
|
|
1,950
|
|
|
262
|
|
|
338
|
|
|
600
|
|
PanAmericana
|
|
|
1,560
|
|
|
|
|
|
1,560
|
|
|
(146
|
)
|
|
243
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
3,510
|
|
|
|
|
|
3,510
|
|
|
116
|
|
|
581
|
|
|
697
|
|
Sports Networks, Eliminations and Other
|
|
|
99
|
|
|
(4
|
)
|
|
95
|
|
|
(27
|
)
|
|
7
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,964
|
|
$
|
|
|
$
|
15,964
|
|
$
|
2,651
|
|
$
|
1,443
|
|
$
|
4,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV U.S.
|
|
$
|
11,729
|
|
$
|
4
|
|
$
|
11,733
|
|
$
|
2,356
|
|
$
|
816
|
|
$
|
3,172
|
|
Sky Brasil
|
|
|
1,907
|
|
|
|
|
|
1,907
|
|
|
210
|
|
|
363
|
|
|
573
|
|
PanAmericana
|
|
|
1,507
|
|
|
|
|
|
1,507
|
|
|
46
|
|
|
216
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
|
|
3,414
|
|
|
|
|
|
3,414
|
|
|
256
|
|
|
579
|
|
|
835
|
|
Sports Networks, Eliminations and Other
|
|
|
137
|
|
|
(4
|
)
|
|
133
|
|
|
(20
|
)
|
|
14
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,280
|
|
$
|
|
|
$
|
15,280
|
|
$
|
2,592
|
|
$
|
1,409
|
|
$
|
4,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(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 financial measures and is not presented
as an alternative measure of operating results, as determined in accordance with GAAP. Our management and Board of Directors use operating profit before depreciation and amortization to evaluate the
operating performance of our company and our business segments and to allocate resources and capital to business segments. This metric is also used as a measure of performance for incentive
compensation purposes and to measure income generated from operations that could be used to fund capital expenditures, service debt or pay taxes. Depreciation and amortization expense primarily
represents an allocation to current expense of the cost of historical capital expenditures and for intangible assets resulting from prior business acquisitions. To compensate for the exclusion of
depreciation and amortization expense from operating profit, our management and Board of Directors separately measure and budget for capital expenditures and business acquisitions.
We
believe this measure is useful to investors, along with GAAP measures (such as revenues, operating profit and net income), to compare our operating performance to other communications,
entertainment and media service providers. We believe that investors use current and projected operating profit before depreciation and amortization and similar measures to estimate our current 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
27
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
believes
this is useful given the significant variation in depreciation and amortization expense that can result from the timing of capital expenditures, the capitalization of intangible assets,
potential variations in expected useful lives when compared to other companies and periodic changes to estimated useful lives.
The
following represents a reconciliation of operating profit before depreciation and amortization to reported net income on the Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
(Dollars in Millions)
|
|
Operating profit before depreciation and amortization
|
|
$
|
2,153
|
|
$
|
2,081
|
|
$
|
4,094
|
|
$
|
4,001
|
|
Depreciation and amortization
|
|
|
(729
|
)
|
|
(731
|
)
|
|
(1,443
|
)
|
|
(1,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
1,424
|
|
|
1,350
|
|
|
2,651
|
|
|
2,592
|
|
Interest income
|
|
|
12
|
|
|
19
|
|
|
25
|
|
|
41
|
|
Interest expense
|
|
|
(230
|
)
|
|
(219
|
)
|
|
(462
|
)
|
|
(436
|
)
|
Other, net
|
|
|
35
|
|
|
(75
|
)
|
|
92
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,241
|
|
|
1,075
|
|
|
2,306
|
|
|
2,160
|
|
Income tax expense
|
|
|
(431
|
)
|
|
(414
|
)
|
|
(927
|
)
|
|
(801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
810
|
|
|
661
|
|
|
1,379
|
|
|
1,359
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
(4
|
)
|
|
(1
|
)
|
|
(12
|
)
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
806
|
|
$
|
660
|
|
$
|
1,367
|
|
$
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12: Condensed Consolidating Financial Statements
As discussed in Note 5, DIRECTV has 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. Also, restricted net assets of our Venezuelan subsidiary, which is included within Non-Guarantor subsidiaries, exceeded 25% of total consolidated net assets and as
such, the required condensed parent company information is included as part of the condensed consolidating financial statements below. For additional information regarding the Venezuelan restricted
net assets see Note 7.
These
condensed consolidating financial statements present the condensed consolidating statements of operations and condensed consolidating statements of comprehensive income for the
three and six months ended June 30, 2014 and 2013, the condensed consolidating statements of cash flows for the six months ended June 30, 2014 and 2013, and the condensed consolidating
balance sheets as of June 30, 2014 and December 31, 2013.
The
condensed consolidating financial statements are comprised of DIRECTV, or the Parent Guarantor, its indirect 100% 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
28
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
statements
on a consolidated basis. The Non-Guarantor Subsidiaries consist primarily of DIRECTV's 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. In addition, the Non-Guarantor Subsidiaries
include the entity that is the parent of DIRECTV Holdings.
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.
Subsequent
to the issuance of the 10-Q for the period ending June 30, 2013, management identified certain corrections that were needed in the presentation of the condensed
consolidating financial statements and related eliminations. These corrections only impact the condensed consolidating financial statements for the three and six months ended June 30, 2013 and
do not affect our consolidated results of operations, balance sheets or cash flows. Management believes these changes are not material.
In
the Condensed Consolidating Statement of Operations, we now present the equity earnings of DIRECTV Holdings, which is a subsidiary of DIRECTV Group, an entity included in
Non-Guarantor Subsidiaries, in "Equity in income of consolidated subsidiaries" for the Non-Guarantor Subsidiaries. We also recorded an adjustment to the tax allocation from the Guarantor Subsidiaries
to the Parent Guarantor, the Co-Issuers and the Non-Guarantor Subsidiaries for the the three and six months ended June 30, 2013.
29
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The following is a reconciliation of the amounts previously reported to the "As Revised" amounts as stated in the following components of the Condensed
Consolidating Statement of Operations for the three and six months ended June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
Parent Guarantor for the three months ended June 30, 2013
|
|
As Previously
Reported
|
|
Adjustments
|
|
As Revised
|
|
|
|
(Dollars in Millions)
|
|
Equity in income of consolidated subsidiaries
|
|
$
|
678
|
|
$
|
(3
|
)
|
$
|
675
|
|
Income before income tax
|
|
$
|
653
|
|
$
|
(3
|
)
|
$
|
650
|
|
Income tax benefit
|
|
$
|
7
|
|
$
|
3
|
|
$
|
10
|
|
Net income
|
|
$
|
660
|
|
$
|
|
|
$
|
660
|
|
Net income attributable to DIRECTV
|
|
$
|
660
|
|
$
|
|
|
$
|
660
|
|
|
|
|
|
|
|
|
|
|
|
|
Co-Issuers for the three months ended June 30, 2013
|
|
|
|
|
|
|
|
Equity in income of consolidated subsidiaries
|
|
$
|
917
|
|
$
|
(170
|
)
|
$
|
747
|
|
Income before income tax
|
|
$
|
711
|
|
$
|
(170
|
)
|
$
|
541
|
|
Income tax benefit
|
|
$
|
54
|
|
$
|
29
|
|
$
|
83
|
|
Net income
|
|
$
|
765
|
|
$
|
(141
|
)
|
$
|
624
|
|
Net income attributable to DIRECTV
|
|
$
|
765
|
|
$
|
(141
|
)
|
$
|
624
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries for the three months ended June 30, 2013
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
(329
|
)
|
$
|
(170
|
)
|
$
|
(499
|
)
|
Net income
|
|
$
|
917
|
|
$
|
(170
|
)
|
$
|
747
|
|
Net income attributable to DIRECTV
|
|
$
|
917
|
|
$
|
(170
|
)
|
$
|
747
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries for the three months ended June 30, 2013
|
|
|
|
|
|
|
|
Equity in income of consolidated subsidiaries
|
|
$
|
|
|
$
|
624
|
|
$
|
624
|
|
Income before income tax
|
|
$
|
60
|
|
$
|
624
|
|
$
|
684
|
|
Income tax expense
|
|
$
|
(146
|
)
|
$
|
138
|
|
$
|
(8
|
)
|
Net income (loss)
|
|
$
|
(86
|
)
|
$
|
762
|
|
$
|
676
|
|
Net income (loss) attributable to DIRECTV
|
|
$
|
(87
|
)
|
$
|
762
|
|
$
|
675
|
|
30
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Parent Guarantor for the six months ended June 30, 2013
|
|
As Previously
Reported
|
|
Adjustments
|
|
As Revised
|
|
|
|
(Dollars in Millions)
|
|
Equity in income of consolidated subsidiaries
|
|
$
|
1,376
|
|
$
|
(3
|
)
|
$
|
1,373
|
|
Income before income tax
|
|
$
|
1,340
|
|
$
|
(3
|
)
|
$
|
1,337
|
|
Income tax benefit
|
|
$
|
10
|
|
$
|
3
|
|
$
|
13
|
|
Net income
|
|
$
|
1,350
|
|
$
|
|
|
$
|
1,350
|
|
Net income attributable to DIRECTV
|
|
$
|
1,350
|
|
$
|
|
|
$
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
|
Co-Issuers for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Equity in income of consolidated subsidiaries
|
|
$
|
1,710
|
|
$
|
(170
|
)
|
$
|
1,540
|
|
Income before income tax
|
|
$
|
1,303
|
|
$
|
(170
|
)
|
$
|
1,133
|
|
Income tax benefit
|
|
$
|
114
|
|
$
|
29
|
|
$
|
143
|
|
Net income
|
|
$
|
1,417
|
|
$
|
(141
|
)
|
$
|
1,276
|
|
Net income attributable to DIRECTV
|
|
$
|
1,417
|
|
$
|
(141
|
)
|
$
|
1,276
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
(662
|
)
|
$
|
(170
|
)
|
$
|
(832
|
)
|
Net income
|
|
$
|
1,710
|
|
$
|
(170
|
)
|
$
|
1,540
|
|
Net income attributable to DIRECTV
|
|
$
|
1,710
|
|
$
|
(170
|
)
|
$
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Equity in income of consolidated subsidiaries
|
|
$
|
|
|
$
|
1,276
|
|
$
|
1,276
|
|
Income before income tax
|
|
$
|
231
|
|
$
|
1,276
|
|
$
|
1,507
|
|
Income tax expense
|
|
$
|
(263
|
)
|
$
|
138
|
|
$
|
(125
|
)
|
Net income (loss)
|
|
$
|
(32
|
)
|
$
|
1,414
|
|
$
|
1,382
|
|
Net income (loss) attributable to DIRECTV
|
|
$
|
(41
|
)
|
$
|
1,414
|
|
$
|
1,373
|
|
In
the Condensed Consolidating Statement of Comprehensive Income, we changed our presentation such that the comprehensive income of a subsidiary is included in the comprehensive income
of its parent. Comprehensive income is also impacted by the adjustments to net income noted above.
31
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The
following is a reconciliation of the amounts previously reported to the "As Revised" amounts as stated in the following components of the Condensed Consolidating Statement of
Comprehensive Income for the three and six months ended June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
Parent Guarantor for the three months ended June 30, 2013
|
|
As Previously
Reported
|
|
Adjustments
|
|
As Revised
|
|
|
|
(Dollars in Millions)
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains arising during the period
|
|
$
|
|
|
$
|
9
|
|
$
|
9
|
|
Reclassification adjustments included in net income
|
|
$
|
|
|
$
|
(1
|
)
|
$
|
(1
|
)
|
Unrealized holding losses on securities
|
|
$
|
|
|
$
|
(3
|
)
|
$
|
(3
|
)
|
Reclassification adjustment for net losses on securities recognized during the period
|
|
$
|
|
|
$
|
2
|
|
$
|
2
|
|
Other comprehensive income
|
|
$
|
|
|
$
|
7
|
|
$
|
7
|
|
Comprehensive income
|
|
$
|
660
|
|
$
|
7
|
|
$
|
667
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
660
|
|
$
|
7
|
|
$
|
667
|
|
|
|
|
|
|
|
|
|
|
|
|
Co-Issuers for the three months ended June 30, 2013
|
|
|
|
|
|
|
|
Net income
|
|
$
|
765
|
|
$
|
(141
|
)
|
$
|
624
|
|
Comprehensive income
|
|
$
|
773
|
|
$
|
(141
|
)
|
$
|
632
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
773
|
|
$
|
(141
|
)
|
$
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries for the three months ended June 30, 2013
|
|
|
|
|
|
|
|
Net income
|
|
$
|
917
|
|
$
|
(170
|
)
|
$
|
747
|
|
Comprehensive income
|
|
$
|
917
|
|
$
|
(170
|
)
|
$
|
747
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
917
|
|
$
|
(170
|
)
|
$
|
747
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries for the three months ended June 30, 2013
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(86
|
)
|
$
|
762
|
|
$
|
676
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains arising during the period
|
|
$
|
|
|
$
|
9
|
|
$
|
9
|
|
Reclassification adjustments included in net income
|
|
$
|
|
|
$
|
(1
|
)
|
$
|
(1
|
)
|
Other comprehensive loss
|
|
$
|
(23
|
)
|
$
|
8
|
|
$
|
(15
|
)
|
Comprehensive income (loss)
|
|
$
|
(109
|
)
|
$
|
770
|
|
$
|
661
|
|
Comprehensive income (loss) attributable to DIRECTV
|
|
$
|
(88
|
)
|
$
|
770
|
|
$
|
682
|
|
32
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Parent Guarantor for the six months ended June 30, 2013
|
|
As Previously
Reported
|
|
Adjustments
|
|
As Revised
|
|
|
|
(Dollars in Millions)
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses arising during the period
|
|
$
|
|
|
$
|
(27
|
)
|
$
|
(27
|
)
|
Reclassification adjustments included in net income
|
|
$
|
|
|
$
|
48
|
|
$
|
48
|
|
Foreign currency translation adjustments
|
|
$
|
|
|
$
|
(34
|
)
|
$
|
(34
|
)
|
Reclassification adjustment for net losses on securities recognized during the period
|
|
$
|
|
|
$
|
1
|
|
$
|
1
|
|
Other comprehensive loss
|
|
$
|
|
|
$
|
(12
|
)
|
$
|
(12
|
)
|
Comprehensive income
|
|
$
|
1,350
|
|
$
|
(12
|
)
|
$
|
1,338
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
1,350
|
|
$
|
(12
|
)
|
$
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
Co-Issuers for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,417
|
|
$
|
(141
|
)
|
$
|
1,276
|
|
Comprehensive income
|
|
$
|
1,438
|
|
$
|
(141
|
)
|
$
|
1,297
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
1,438
|
|
$
|
(141
|
)
|
$
|
1,297
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,710
|
|
$
|
(170
|
)
|
$
|
1,540
|
|
Comprehensive income
|
|
$
|
1,710
|
|
$
|
(170
|
)
|
$
|
1,540
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
1,710
|
|
$
|
(170
|
)
|
$
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(32
|
)
|
$
|
1,414
|
|
$
|
1,382
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses arising during the period
|
|
$
|
|
|
$
|
(27
|
)
|
$
|
(27
|
)
|
Reclassification adjustments included in net income
|
|
$
|
|
|
$
|
48
|
|
$
|
48
|
|
Other comprehensive loss
|
|
$
|
(47
|
)
|
$
|
21
|
|
$
|
(26
|
)
|
Comprehensive income (loss)
|
|
$
|
(79
|
)
|
$
|
1,435
|
|
$
|
1,356
|
|
Comprehensive income (loss) attributable to DIRECTV
|
|
$
|
(74
|
)
|
$
|
1,435
|
|
$
|
1,361
|
|
In
the Condensed Consolidating Statement of Cash Flows, we present changes in receivable balances of affiliates as investing activities and changes in payable balances of affiliates as
financing activities because these changes are a result of a subsidiary's deposit in or withdrawal from its parent's cash account under a centralized cash management arrangement. We previously
presented all changes from receivable and payable balances of affiliates as operating or financing activities.
33
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
The following is a reconciliation of the amounts previously reported to the "As Revised" amounts as stated in the following components of the Condensed
Consolidating Statement of Cash Flows for the six months ended June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
Parent Guarantor for the six months ended June 30, 2013
|
|
As Previously
Reported
|
|
Adjustments
|
|
As Revised
|
|
|
|
(Dollars in Millions)
|
|
Net cash provided by operating activities
|
|
$
|
45
|
|
$
|
506
|
|
$
|
551
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of investments
|
|
$
|
117
|
|
$
|
(117
|
)
|
$
|
|
|
Intercompany funding
|
|
$
|
|
|
$
|
(222
|
)
|
$
|
(222
|
)
|
Net cash provided by investing activities
|
|
$
|
1,499
|
|
$
|
(339
|
)
|
$
|
1,160
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
$
|
|
|
$
|
(61
|
)
|
$
|
(61
|
)
|
Excess tax benefit from share-based compensation
|
|
$
|
|
|
$
|
24
|
|
$
|
24
|
|
Intercompany payments
|
|
$
|
244
|
|
$
|
(130
|
)
|
$
|
114
|
|
Net cash used in financing activities
|
|
$
|
(1,724
|
)
|
$
|
(167
|
)
|
$
|
(1,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Co-Issuers for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
1,266
|
|
$
|
(2,129
|
)
|
$
|
(863
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Intercompany funding
|
|
$
|
|
|
$
|
(617
|
)
|
$
|
(617
|
)
|
Net cash used in investing activities
|
|
$
|
|
|
$
|
(617
|
)
|
$
|
(617
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Intercompany payments
|
|
$
|
|
|
$
|
2,746
|
|
$
|
2,746
|
|
Net cash provided by (used in) financing activities
|
|
$
|
(646
|
)
|
$
|
2,746
|
|
$
|
2,100
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor Subsidiaries for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
963
|
|
$
|
2,079
|
|
$
|
3,042
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Intercompany funding
|
|
$
|
|
|
$
|
(2,746
|
)
|
$
|
(2,746
|
)
|
Net cash used in investing activities
|
|
$
|
(935
|
)
|
$
|
(2,746
|
)
|
$
|
(3,681
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Intercompany payments
|
|
$
|
8
|
|
$
|
667
|
|
$
|
675
|
|
Net cash provided by (used in) financing activities
|
|
$
|
(35
|
)
|
$
|
667
|
|
$
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Guarantor Subsidiaries for the six months ended June 30, 2013
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
1,304
|
|
$
|
(419
|
)
|
$
|
885
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of investments
|
|
$
|
11
|
|
$
|
117
|
|
$
|
128
|
|
Intercompany funding
|
|
$
|
|
|
$
|
(121
|
)
|
$
|
(121
|
)
|
Net cash used in investing activities
|
|
$
|
(861
|
)
|
$
|
(4
|
)
|
$
|
(865
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
Intercompany payments (funding)
|
|
$
|
(252
|
)
|
$
|
423
|
|
$
|
171
|
|
Net cash provided by (used in) financing activities
|
|
$
|
(226
|
)
|
$
|
423
|
|
$
|
197
|
|
34
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Operations
For the Three Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
|
|
$
|
6,272
|
|
$
|
1,879
|
|
$
|
(42
|
)
|
$
|
8,109
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
2,800
|
|
|
736
|
|
|
(38
|
)
|
|
3,498
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
374
|
|
|
201
|
|
|
(1
|
)
|
|
574
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
75
|
|
|
34
|
|
|
(2
|
)
|
|
107
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
661
|
|
|
237
|
|
|
|
|
|
898
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
314
|
|
|
48
|
|
|
|
|
|
362
|
|
General and administrative expenses
|
|
|
30
|
|
|
|
|
|
300
|
|
|
188
|
|
|
(1
|
)
|
|
517
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
429
|
|
|
300
|
|
|
|
|
|
729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
30
|
|
|
|
|
|
4,953
|
|
|
1,744
|
|
|
(42
|
)
|
|
6,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(30
|
)
|
|
|
|
|
1,319
|
|
|
135
|
|
|
|
|
|
1,424
|
|
Equity in income of consolidated subsidiaries
|
|
|
826
|
|
|
813
|
|
|
|
|
|
667
|
|
|
(2,306
|
)
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
12
|
|
Interest expense
|
|
|
(1
|
)
|
|
(222
|
)
|
|
(1
|
)
|
|
(6
|
)
|
|
|
|
|
(230
|
)
|
Other, net
|
|
|
(1
|
)
|
|
(18
|
)
|
|
13
|
|
|
41
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
794
|
|
|
573
|
|
|
1,331
|
|
|
849
|
|
|
(2,306
|
)
|
|
1,241
|
|
Income tax benefit (expense)
|
|
|
12
|
|
|
94
|
|
|
(518
|
)
|
|
(19
|
)
|
|
|
|
|
(431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
806
|
|
|
667
|
|
|
813
|
|
|
830
|
|
|
(2,306
|
)
|
|
810
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
806
|
|
$
|
667
|
|
$
|
813
|
|
$
|
826
|
|
$
|
(2,306
|
)
|
$
|
806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of OperationsAs Revised
For the Three Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
|
|
$
|
5,943
|
|
$
|
1,772
|
|
$
|
(15
|
)
|
$
|
7,700
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
2,642
|
|
|
647
|
|
|
(14
|
)
|
|
3,275
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
360
|
|
|
194
|
|
|
|
|
|
554
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
71
|
|
|
27
|
|
|
(1
|
)
|
|
97
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
594
|
|
|
215
|
|
|
|
|
|
809
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
324
|
|
|
50
|
|
|
|
|
|
374
|
|
General and administrative expenses
|
|
|
28
|
|
|
|
|
|
301
|
|
|
181
|
|
|
|
|
|
510
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
410
|
|
|
321
|
|
|
|
|
|
731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
28
|
|
|
|
|
|
4,702
|
|
|
1,635
|
|
|
(15
|
)
|
|
6,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(28
|
)
|
|
|
|
|
1,241
|
|
|
137
|
|
|
|
|
|
1,350
|
|
Equity in income of consolidated subsidiaries
|
|
|
675
|
|
|
747
|
|
|
|
|
|
624
|
|
|
(2,046
|
)
|
|
|
|
Interest income
|
|
|
4
|
|
|
|
|
|
1
|
|
|
17
|
|
|
(3
|
)
|
|
19
|
|
Interest expense
|
|
|
(1
|
)
|
|
(206
|
)
|
|
|
|
|
(15
|
)
|
|
3
|
|
|
(219
|
)
|
Other, net
|
|
|
|
|
|
|
|
|
4
|
|
|
(79
|
)
|
|
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
650
|
|
|
541
|
|
|
1,246
|
|
|
684
|
|
|
(2,046
|
)
|
|
1,075
|
|
Income tax benefit (expense)
|
|
|
10
|
|
|
83
|
|
|
(499
|
)
|
|
(8
|
)
|
|
|
|
|
(414
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
660
|
|
|
624
|
|
|
747
|
|
|
676
|
|
|
(2,046
|
)
|
|
661
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
660
|
|
$
|
624
|
|
$
|
747
|
|
$
|
675
|
|
$
|
(2,046
|
)
|
$
|
660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Operations
For the Six Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
|
|
$
|
12,359
|
|
$
|
3,677
|
|
$
|
(72
|
)
|
$
|
15,964
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
5,568
|
|
|
1,377
|
|
|
(64
|
)
|
|
6,881
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
733
|
|
|
393
|
|
|
(1
|
)
|
|
1,125
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
147
|
|
|
61
|
|
|
(4
|
)
|
|
204
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
1,309
|
|
|
417
|
|
|
(1
|
)
|
|
1,725
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
595
|
|
|
89
|
|
|
(1
|
)
|
|
683
|
|
General and administrative expenses
|
|
|
39
|
|
|
|
|
|
590
|
|
|
343
|
|
|
(1
|
)
|
|
971
|
|
Venezuelan currency devaluation
|
|
|
|
|
|
|
|
|
|
|
|
281
|
|
|
|
|
|
281
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
855
|
|
|
588
|
|
|
|
|
|
1,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
39
|
|
|
|
|
|
9,797
|
|
|
3,549
|
|
|
(72
|
)
|
|
13,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(39
|
)
|
|
|
|
|
2,562
|
|
|
128
|
|
|
|
|
|
2,651
|
|
Equity in income of consolidated subsidiaries
|
|
|
1,394
|
|
|
1,600
|
|
|
|
|
|
1,315
|
|
|
(4,309
|
)
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
1
|
|
|
24
|
|
|
|
|
|
25
|
|
Interest expense
|
|
|
(1
|
)
|
|
(442
|
)
|
|
(4
|
)
|
|
(15
|
)
|
|
|
|
|
(462
|
)
|
Other, net
|
|
|
(3
|
)
|
|
(18
|
)
|
|
18
|
|
|
95
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,351
|
|
|
1,140
|
|
|
2,577
|
|
|
1,547
|
|
|
(4,309
|
)
|
|
2,306
|
|
Income tax benefit (expense)
|
|
|
16
|
|
|
175
|
|
|
(977
|
)
|
|
(141
|
)
|
|
|
|
|
(927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,367
|
|
|
1,315
|
|
|
1,600
|
|
|
1,406
|
|
|
(4,309
|
)
|
|
1,379
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
1,367
|
|
$
|
1,315
|
|
$
|
1,600
|
|
$
|
1,394
|
|
$
|
(4,309
|
)
|
$
|
1,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of OperationsAs Revised
For the Six Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Revenues
|
|
$
|
|
|
$
|
|
|
$
|
11,733
|
|
$
|
3,583
|
|
$
|
(36
|
)
|
$
|
15,280
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
|
|
|
|
|
|
|
5,243
|
|
|
1,260
|
|
|
(32
|
)
|
|
6,471
|
|
Subscriber service expenses
|
|
|
|
|
|
|
|
|
711
|
|
|
380
|
|
|
|
|
|
1,091
|
|
Broadcast operations expenses
|
|
|
|
|
|
|
|
|
152
|
|
|
59
|
|
|
(4
|
)
|
|
207
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
|
|
|
|
|
|
|
1,223
|
|
|
400
|
|
|
|
|
|
1,623
|
|
Upgrade and retention costs
|
|
|
|
|
|
|
|
|
643
|
|
|
99
|
|
|
|
|
|
742
|
|
General and administrative expenses
|
|
|
41
|
|
|
|
|
|
589
|
|
|
349
|
|
|
|
|
|
979
|
|
Venezuelan currency devaluation
|
|
|
|
|
|
|
|
|
|
|
|
166
|
|
|
|
|
|
166
|
|
Depreciation and amortization expense
|
|
|
|
|
|
|
|
|
816
|
|
|
593
|
|
|
|
|
|
1,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
41
|
|
|
|
|
|
9,377
|
|
|
3,306
|
|
|
(36
|
)
|
|
12,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
(41
|
)
|
|
|
|
|
2,356
|
|
|
277
|
|
|
|
|
|
2,592
|
|
Equity in income of consolidated subsidiaries
|
|
|
1,373
|
|
|
1,540
|
|
|
|
|
|
1,276
|
|
|
(4,189
|
)
|
|
|
|
Interest income
|
|
|
10
|
|
|
|
|
|
1
|
|
|
36
|
|
|
(6
|
)
|
|
41
|
|
Interest expense
|
|
|
(1
|
)
|
|
(407
|
)
|
|
(1
|
)
|
|
(33
|
)
|
|
6
|
|
|
(436
|
)
|
Other, net
|
|
|
(4
|
)
|
|
|
|
|
16
|
|
|
(49
|
)
|
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1,337
|
|
|
1,133
|
|
|
2,372
|
|
|
1,507
|
|
|
(4,189
|
)
|
|
2,160
|
|
Income tax benefit (expense)
|
|
|
13
|
|
|
143
|
|
|
(832
|
)
|
|
(125
|
)
|
|
|
|
|
(801
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,350
|
|
|
1,276
|
|
|
1,540
|
|
|
1,382
|
|
|
(4,189
|
)
|
|
1,359
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DIRECTV
|
|
$
|
1,350
|
|
$
|
1,276
|
|
$
|
1,540
|
|
$
|
1,373
|
|
$
|
(4,189
|
)
|
$
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
806
|
|
$
|
667
|
|
$
|
813
|
|
$
|
830
|
|
$
|
(2,306
|
)
|
$
|
810
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains arising during the period
|
|
|
6
|
|
|
6
|
|
|
|
|
|
6
|
|
|
(12
|
)
|
|
6
|
|
Reclassification adjustments included in net income
|
|
|
(28
|
)
|
|
(28
|
)
|
|
|
|
|
(28
|
)
|
|
56
|
|
|
(28
|
)
|
Foreign currency translation adjustments
|
|
|
28
|
|
|
|
|
|
|
|
|
32
|
|
|
(28
|
)
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
6
|
|
|
(22
|
)
|
|
|
|
|
10
|
|
|
16
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
812
|
|
|
645
|
|
|
813
|
|
|
840
|
|
|
(2,290
|
)
|
|
820
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
812
|
|
$
|
645
|
|
$
|
813
|
|
$
|
832
|
|
$
|
(2,290
|
)
|
$
|
812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive IncomeAs Revised
For the Three Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
660
|
|
$
|
624
|
|
$
|
747
|
|
$
|
676
|
|
$
|
(2,046
|
)
|
$
|
661
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains arising during the period
|
|
|
9
|
|
|
9
|
|
|
|
|
|
9
|
|
|
(18
|
)
|
|
9
|
|
Reclassification adjustments included in net income
|
|
|
(1
|
)
|
|
(1
|
)
|
|
|
|
|
(1
|
)
|
|
2
|
|
|
(1
|
)
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
(22
|
)
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on securities
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
(3
|
)
|
|
3
|
|
|
(3
|
)
|
Reclassification adjustments recognized for net losses during the period
|
|
|
2
|
|
|
|
|
|
|
|
|
2
|
|
|
(2
|
)
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
7
|
|
|
8
|
|
|
|
|
|
(15
|
)
|
|
(15
|
)
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
667
|
|
|
632
|
|
|
747
|
|
|
661
|
|
|
(2,061
|
)
|
|
646
|
|
Less: Comprehensive loss attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
667
|
|
$
|
632
|
|
$
|
747
|
|
$
|
682
|
|
$
|
(2,061
|
)
|
$
|
667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the Six Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
1,367
|
|
$
|
1,315
|
|
$
|
1,600
|
|
$
|
1,406
|
|
$
|
(4,309
|
)
|
$
|
1,379
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses arising during the period
|
|
|
(1
|
)
|
|
(1
|
)
|
|
|
|
|
(1
|
)
|
|
2
|
|
|
(1
|
)
|
Reclassification adjustments included in net income
|
|
|
(36
|
)
|
|
(36
|
)
|
|
|
|
|
(36
|
)
|
|
72
|
|
|
(36
|
)
|
Foreign currency translation adjustments
|
|
|
64
|
|
|
|
|
|
|
|
|
71
|
|
|
(64
|
)
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
27
|
|
|
(37
|
)
|
|
|
|
|
34
|
|
|
10
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
1,394
|
|
|
1,278
|
|
|
1,600
|
|
|
1,440
|
|
|
(4,299
|
)
|
|
1,413
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
1,394
|
|
$
|
1,278
|
|
$
|
1,600
|
|
$
|
1,421
|
|
$
|
(4,299
|
)
|
$
|
1,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive IncomeAs Revised
For the Six Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
Net income
|
|
$
|
1,350
|
|
$
|
1,276
|
|
$
|
1,540
|
|
$
|
1,382
|
|
$
|
(4,189
|
)
|
$
|
1,359
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses arising during the period
|
|
|
(27
|
)
|
|
(27
|
)
|
|
|
|
|
(27
|
)
|
|
54
|
|
|
(27
|
)
|
Reclassification adjustments included in net income
|
|
|
48
|
|
|
48
|
|
|
|
|
|
48
|
|
|
(96
|
)
|
|
48
|
|
Foreign currency translation adjustments
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
(48
|
)
|
|
34
|
|
|
(48
|
)
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for net losses recognized during the period
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
|
(1
|
)
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
(12
|
)
|
|
21
|
|
|
|
|
|
(26
|
)
|
|
(9
|
)
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
1,338
|
|
|
1,297
|
|
|
1,540
|
|
|
1,356
|
|
|
(4,198
|
)
|
|
1,333
|
|
Less: Comprehensive loss attributable to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to DIRECTV
|
|
$
|
1,338
|
|
$
|
1,297
|
|
$
|
1,540
|
|
$
|
1,361
|
|
$
|
(4,198
|
)
|
$
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
1,007
|
|
$
|
1,080
|
|
$
|
2,508
|
|
$
|
1,712
|
|
$
|
(438
|
)
|
$
|
5,869
|
|
Satellites, net
|
|
|
|
|
|
|
|
|
1,760
|
|
|
704
|
|
|
|
|
|
2,464
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
3,754
|
|
|
3,120
|
|
|
|
|
|
6,874
|
|
Goodwill
|
|
|
|
|
|
1,828
|
|
|
1,363
|
|
|
801
|
|
|
|
|
|
3,992
|
|
Intangible assets, net
|
|
|
|
|
|
|
|
|
517
|
|
|
394
|
|
|
(8
|
)
|
|
903
|
|
Intercompany receivables
|
|
|
4,937
|
|
|
8,916
|
|
|
23,516
|
|
|
1,562
|
|
|
(38,931
|
)
|
|
|
|
Investment in subsidiaries
|
|
|
(10,232
|
)
|
|
19,465
|
|
|
|
|
|
(12,413
|
)
|
|
3,180
|
|
|
|
|
Investments and other assets
|
|
|
96
|
|
|
234
|
|
|
313
|
|
|
1,489
|
|
|
(108
|
)
|
|
2,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
(4,192
|
)
|
$
|
31,523
|
|
$
|
33,731
|
|
$
|
(2,631
|
)
|
$
|
(36,305
|
)
|
$
|
22,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
294
|
|
$
|
1,759
|
|
$
|
3,428
|
|
$
|
1,450
|
|
$
|
(438
|
)
|
$
|
6,493
|
|
Long-term debt
|
|
|
|
|
|
18,327
|
|
|
|
|
|
112
|
|
|
|
|
|
18,439
|
|
Deferred income taxes
|
|
|
|
|
|
|
|
|
1,613
|
|
|
293
|
|
|
(108
|
)
|
|
1,798
|
|
Intercompany liabilities
|
|
|
1,631
|
|
|
23,494
|
|
|
8,916
|
|
|
4,890
|
|
|
(38,931
|
)
|
|
|
|
Other liabilities and deferred credits
|
|
|
404
|
|
|
356
|
|
|
309
|
|
|
462
|
|
|
(8
|
)
|
|
1,523
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and additional paid-in capital
|
|
|
3,544
|
|
|
14
|
|
|
4,983
|
|
|
3,636
|
|
|
(8,633
|
)
|
|
3,544
|
|
Retained earnings (accumulated deficit)
|
|
|
(9,777
|
)
|
|
(12,405
|
)
|
|
14,482
|
|
|
(13,676
|
)
|
|
11,599
|
|
|
(9,777
|
)
|
Accumulated other comprehensive loss
|
|
|
(288
|
)
|
|
(22
|
)
|
|
|
|
|
(192
|
)
|
|
214
|
|
|
(288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total DIRECTV stockholders' equity (deficit)
|
|
|
(6,521
|
)
|
|
(12,413
|
)
|
|
19,465
|
|
|
(10,232
|
)
|
|
3,180
|
|
|
(6,521
|
)
|
Noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
394
|
|
|
|
|
|
394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity (deficit)
|
|
|
(6,521
|
)
|
|
(12,413
|
)
|
|
19,465
|
|
|
(9,838
|
)
|
|
3,180
|
|
|
(6,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
(4,192
|
)
|
$
|
31,523
|
|
$
|
33,731
|
|
$
|
(2,631
|
)
|
$
|
(36,305
|
)
|
$
|
22,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Guarantor
|
|
Co-Issuers
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
DIRECTV
Consolidated
|
|
|
|
(Dollars in Millions)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
979
|
|
$
|
1,133
|
|
$
|
2,577
|
|
$
|
1,775
|
|
$
|
(511
|
)
|
$
|
5,953
|
|
Satellites, net
|
|
|
|
|
|
|
|
|
1,810
|
|
|
657
|
|
|
|
|
|
2,467
|
|
Property and equipment, net
|
|
|
|
|
|
|
|
|
3,724
|
|
|
2,926
|
|
|
|
|
|
6,650
|
|
Goodwill
|
|
|
|
|
|
1,828
|
|
|
1,363
|
|
|
779
|
|
|
|
|
|
3,970
|
|
Intangible assets, net
|
|
|
|
|
|
|
|
|
527
|
|
|
401
|
|
|
(8
|
)
|
|
920
|
|
Intercompany receivables
|
|
|
4,799
|
|
|
7,820
|
|
|
20,988
|
|
|
1,386
|
|
|
(34,993
|
)
|
|
|
|
Investment in subsidiaries
|
|
|
(10,177
|
)
|
|
17,812
|
|
|
|
|
|
(12,247
|
)
|
|
4,612
|
|
|
|
|
Investments and other assets
|
|
|
92
|
|
|
190
|
|
|
361
|
|
|
1,416
|
|
|
(114
|
)
|
|
1,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
(4,307
|
)
|
$
|
28,783
|
|
$
|
31,350
|
|
$
|
(2,907
|
)
|
$
|
(31,014
|
)
|
$
|
21,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
448
|
|
$
|
1,478
|
|
$
|
3,812
|
|
$
|
1,303
|
|
$
|
(511
|
)
|
$
|
6,530
|
|
Long-term debt
|
|
|
|
|
|
18,203
|
|
|
|
|
|
81
|
|
|
|
|
|
18,284
|
|
Deferred income taxes
|
|
|
|
|
|
9
|
|
|
1,632
|
|
|
277
|
|
|
(114
|
)
|
|
1,804
|
|
Intercompany liabilities
|
|
|
1,390
|
|
|
21,019
|
|
|
7,820
|
|
|
4,764
|
|
|
(34,993
|
)
|
|
|
|
Other liabilities and deferred credits
|
|
|
399
|
|
|
321
|
|
|
274
|
|
|
470
|
|
|
(8
|
)
|
|
1,456
|
|
Redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
375
|
|
|
|
|
|
375
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock and additional paid-in capital
|
|
|
3,652
|
|
|
25
|
|
|
4,930
|
|
|
3,671
|
|
|
(8,626
|
)
|
|
3,652
|
|
Retained earnings (accumulated deficit)
|
|
|
(9,874
|
)
|
|
(12,286
|
)
|
|
12,882
|
|
|
(13,620
|
)
|
|
13,024
|
|
|
(9,874
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
(322
|
)
|
|
14
|
|
|
|
|
|
(228
|
)
|
|
214
|
|
|
(322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity (deficit)
|
|
|
(6,544
|
)
|
|
(12,247
|
)
|
|
17,812
|
|
|
(10,177
|
)
|
|
4,612
|
|
|
(6,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
(4,307
|
)
|
$
|
28,783
|
|
$
|
31,350
|
|
$
|
(2,907
|
)
|
$
|
(31,014
|
)
|
$
|
21,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the Six Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
1,042
|
|
$
|
(1,033
|
)
|
$
|
3,139
|
|
$
|
1,026
|
|
$
|
(1,110
|
)
|
$
|
3,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
|
|
|
|
|
|
(773
|
)
|
|
(644
|
)
|
|
|
|
|
(1,417
|
)
|
Cash paid for satellites
|
|
|
|
|
|
|
|
|
(33
|
)
|
|
(76
|
)
|
|
|
|
|
(109
|
)
|
Investment in companies, net of cash acquired
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
(7
|
)
|
|
|
|
|
(8
|
)
|
Proceeds from sale of investments
|
|
|
|
|
|
|
|
|
16
|
|
|
13
|
|
|
|
|
|
29
|
|
Return of capital from subsidiary
|
|
|
425
|
|
|
|
|
|
|
|
|
|
|
|
(425
|
)
|
|
|
|
Intercompany payments (funding)
|
|
|
103
|
|
|
(653
|
)
|
|
(2,990
|
)
|
|
72
|
|
|
3,468
|
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
528
|
|
|
(653
|
)
|
|
(3,781
|
)
|
|
(646
|
)
|
|
3,043
|
|
|
(1,509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of commercial paper (maturity 90 days or less), net
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
Proceeds from short-term borrowings
|
|
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
270
|
|
Repayment of short-term borrowings
|
|
|
|
|
|
(235
|
)
|
|
|
|
|
|
|
|
|
|
|
(235
|
)
|
Proceeds from long-term debt
|
|
|
|
|
|
1,245
|
|
|
|
|
|
84
|
|
|
|
|
|
1,329
|
|
Debt issuance costs
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
(1,000
|
)
|
|
|
|
|
(26
|
)
|
|
|
|
|
(1,026
|
)
|
Repayment of other long-term obligations
|
|
|
|
|
|
|
|
|
(15
|
)
|
|
(19
|
)
|
|
|
|
|
(34
|
)
|
Common shares repurchased and retired
|
|
|
(1,386
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,386
|
)
|
Stock options exercised
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
(57
|
)
|
|
|
|
|
(47
|
)
|
|
(10
|
)
|
|
57
|
|
|
(57
|
)
|
Excess tax benefit from share-based compensation
|
|
|
22
|
|
|
|
|
|
18
|
|
|
4
|
|
|
(22
|
)
|
|
22
|
|
Intercompany payments (funding)
|
|
|
(75
|
)
|
|
2,966
|
|
|
702
|
|
|
(125
|
)
|
|
(3,468
|
)
|
|
|
|
Cash dividend to Parent
|
|
|
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
1,500
|
|
|
|
|
Other, net
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
(14
|
)
|
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(1,486
|
)
|
|
1,738
|
|
|
658
|
|
|
(106
|
)
|
|
(1,933
|
)
|
|
(1,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on Venezuelan cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
(316
|
)
|
|
|
|
|
(316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
84
|
|
|
52
|
|
|
16
|
|
|
(42
|
)
|
|
|
|
|
110
|
|
Cash and cash equivalents at beginning of the period
|
|
|
498
|
|
|
791
|
|
|
6
|
|
|
885
|
|
|
|
|
|
2,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
$
|
582
|
|
$
|
843
|
|
$
|
22
|
|
$
|
843
|
|
$
|
|
|
$
|
2,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
Table of Contents
DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
(Unaudited)
Condensed Consolidating Statement of Cash FlowsAs Revised
For the Six Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
551
|
|
$
|
(863
|
)
|
$
|
3,042
|
|
$
|
885
|
|
$
|
(605
|
)
|
$
|
3,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
|
|
|
|
|
|
|
(820
|
)
|
|
(760
|
)
|
|
|
|
|
(1,580
|
)
|
Cash paid for satellites
|
|
|
|
|
|
|
|
|
(108
|
)
|
|
(86
|
)
|
|
|
|
|
(194
|
)
|
Investment in companies, net of cash acquired
|
|
|
|
|
|
|
|
|
(21
|
)
|
|
(6
|
)
|
|
|
|
|
(27
|
)
|
Proceeds from sale of investments
|
|
|
|
|
|
|
|
|
12
|
|
|
128
|
|
|
|
|
|
140
|
|
Return of capital from subsidiary
|
|
|
1,382
|
|
|
|
|
|
|
|
|
|
|
|
(1,382
|
)
|
|
|
|
Intercompany funding
|
|
|
(222
|
)
|
|
(617
|
)
|
|
(2,746
|
)
|
|
(121
|
)
|
|
3,706
|
|
|
|
|
Other, net
|
|
|
|
|
|
|
|
|
2
|
|
|
(20
|
)
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
1,160
|
|
|
(617
|
)
|
|
(3,681
|
)
|
|
(865
|
)
|
|
2,324
|
|
|
(1,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of commercial paper (maturity 90 days or less), net
|
|
|
|
|
|
(105
|
)
|
|
|
|
|
|
|
|
|
|
|
(105
|
)
|
Proceeds from short-term borrowings
|
|
|
|
|
|
284
|
|
|
|
|
|
|
|
|
|
|
|
284
|
|
Repayment of short-term borrowings
|
|
|
|
|
|
(262
|
)
|
|
|
|
|
|
|
|
|
|
|
(262
|
)
|
Proceeds from borrowings under revolving credit facility
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Repayment of borrowings under revolving credit facility
|
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
Proceeds from long-term debt
|
|
|
|
|
|
1,390
|
|
|
|
|
|
55
|
|
|
|
|
|
1,445
|
|
Debt issuance costs
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
(3
|
)
|
Repayment of other long-term obligations
|
|
|
|
|
|
|
|
|
(12
|
)
|
|
(20
|
)
|
|
|
|
|
(32
|
)
|
Common shares repurchased and retired
|
|
|
(1,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,968
|
)
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
|
(61
|
)
|
|
|
|
|
(51
|
)
|
|
(10
|
)
|
|
61
|
|
|
(61
|
)
|
Excess tax benefit from share-based compensation
|
|
|
24
|
|
|
|
|
|
20
|
|
|
4
|
|
|
(24
|
)
|
|
24
|
|
Intercompany payments
|
|
|
114
|
|
|
2,746
|
|
|
675
|
|
|
171
|
|
|
(3,706
|
)
|
|
|
|
Cash dividend to Parent
|
|
|
|
|
|
(1,950
|
)
|
|
|
|
|
|
|
|
1,950
|
|
|
|
|
Other, net
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(1,891
|
)
|
|
2,100
|
|
|
632
|
|
|
197
|
|
|
(1,719
|
)
|
|
(681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on Venezuelan cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
(187
|
)
|
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(180
|
)
|
|
620
|
|
|
(7
|
)
|
|
30
|
|
|
|
|
|
463
|
|
Cash and cash equivalents at beginning of the period
|
|
|
408
|
|
|
728
|
|
|
11
|
|
|
755
|
|
|
|
|
|
1,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
$
|
228
|
|
$
|
1,348
|
|
$
|
4
|
|
$
|
785
|
|
$
|
|
|
$
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
Table of Contents
DIRECTV