| Document and Entity Information | |
| 3 Months Ended
Mar. 31, 2010 | |
| Document and Entity Information | |
| Document Type | 10-Q |
| Amendment Flag | false |
| Document Period End Date | 2010-03-31 |
| Document Fiscal Year Focus | 2,010 |
| Document Fiscal Period Focus | Q1 |
| Entity Registrant Name | DIRECTV HOLDINGS LLC |
| Entity Central Index Key | 0001234308 |
| Current Fiscal Year End Date | --12-31 |
| Entity Filer Category | Non-accelerated Filer |
| Entity Common Stock, Shares Outstanding | 0 |
| CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||
| In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Revenues | $4,772 | $4,303 |
| Costs of revenues, exclusive of depreciation and amortization expense | ||
| Broadcast programming and other | 2,014 | 1,808 |
| Subscriber service expenses | 323 | 301 |
| Broadcast operations expenses | 69 | 69 |
| Selling, general and administrative expenses, exclusive of depreciation and amortization expense | ||
| Subscriber acquisition costs | 595 | 653 |
| Upgrade and retention costs | 250 | 274 |
| General and administrative expenses | 215 | 212 |
| Depreciation and amortization expense | 498 | 589 |
| Total operating costs and expenses | 3,964 | 3,906 |
| Operating profit | 808 | 397 |
| Interest income | 3 | 2 |
| Interest expense | (97) | (84) |
| Other, net | (5) | (1) |
| Income before income taxes | 709 | 314 |
| Income tax expense | (276) | (117) |
| Net income | $433 | $197 |
| CONSOLIDATED BALANCE SHEETS (USD $) | ||
| In Millions | Mar. 31, 2010
| Dec. 31, 2009
|
| ASSETS | ||
| Cash and cash equivalents | $1,137 | $1,716 |
| Accounts receivable, net of allowances of $32 and $29 | 1,330 | 1,421 |
| Inventories | 208 | 200 |
| Deferred income taxes | 31 | 60 |
| Prepaid expenses and other | 149 | 163 |
| Total current assets | 2,855 | 3,560 |
| Satellites, net | 1,833 | 1,870 |
| Property and equipment, net | 2,879 | 2,998 |
| Goodwill | 3,167 | 3,167 |
| Intangible assets, net | 552 | 582 |
| Other assets | 243 | 231 |
| Total assets | 11,529 | 12,408 |
| LIABILITIES AND OWNER'S EQUITY | ||
| Accounts payable and accrued liabilities | 2,973 | 2,727 |
| Unearned subscriber revenues and deferred credits | 328 | 353 |
| Current portion of long-term debt | 360 | 308 |
| Total current liabilities | 3,661 | 3,388 |
| Long-term debt | 8,438 | 6,500 |
| Deferred income taxes | 549 | 559 |
| Other liabilities and deferred credits | 473 | 510 |
| Commitments and contingencies | ||
| Owner's equity (deficit) | ||
| Capital stock and additional paid-in capital | 12 | 1,076 |
| Retained earnings (Accumulated deficit) | (1,604) | 375 |
| Total owner's equity (deficit) | (1,592) | 1,451 |
| Total liabilities and owner's equity | $11,529 | $12,408 |
| CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
| In Millions | Mar. 31, 2010
| Dec. 31, 2009
|
| Allowance for Doubtful Accounts | $32 | $29 |
| CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
| In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Cash Flows From Operating Activities | ||
| Net income | $433 | $197 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 498 | 589 |
| Amortization of deferred revenues and deferred credits | (8) | (18) |
| Share-based compensation expense | 16 | 14 |
| Deferred income taxes | 34 | 35 |
| Other | 10 | 3 |
| Change in other operating assets and liabilities: | ||
| Accounts receivable | 90 | 102 |
| Inventories | (8) | (1) |
| Prepaid expenses and other | 15 | 47 |
| Accounts payable and accrued liabilities | 238 | (64) |
| Unearned subscriber revenue and deferred credits | (25) | 9 |
| Other, net | (13) | 22 |
| Net cash provided by operating activities | 1,280 | 935 |
| Cash Flows From Investing Activities | ||
| Cash paid for property and equipment | (109) | (103) |
| Cash paid for subscriber leased equipment - subscriber acquisitions | (115) | (179) |
| Cash paid for subscriber leased equipment - upgrade and retention | (81) | (136) |
| Cash paid for satellites | (8) | (17) |
| Investment in companies, net of cash acquired | (3) | |
| Net cash used in investing activities | (313) | (438) |
| Cash Flows From Financing Activities | ||
| Cash proceeds from debt issuance | 2,996 | |
| Debt issuance costs | (14) | |
| Repayment of long-term debt | (1,013) | (18) |
| Repayment of other long-term obligations | (23) | (22) |
| Cash dividends to Parent | (3,500) | |
| Excess tax benefit from share-based compensation | 8 | 6 |
| Net cash used in financing activities | (1,546) | (34) |
| Net increase (decrease) in cash and cash equivalents | (579) | 463 |
| Cash and cash equivalents at beginning of the period | 1,716 | 1,149 |
| Cash and cash equivalents at end of the period | 1,137 | 1,612 |
| Supplemental cash flow information | ||
| Cash paid for interest | 19 | 58 |
| Cash paid for income taxes | $1 | $3 |
| Basis of Presentation | |
| 3 Months Ended
Mar. 31, 2010 | |
| Basis of Presentation | Note 1: Basis of Presentation DIRECTV Holdings LLC is an indirect, whollyowned subsidiary of DIRECTV and consists of DIRECTV Enterprises, LLC and its whollyowned subsidiaries and DIRECTV Financing Co., Inc., or DIRECTV Financing. We sometimes refer to DIRECTV Holdings LLC as DIRECTV Holdings, DIRECTV U.S., we or us and sometimes refer to DIRECTV as our Parent. We are the largest provider of direct-to-home, or DTH, digital television services and the second largest provider in the multichannel video programming distribution, or MVPD, industry in the United States. We have prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial reporting. In the opinion of management, all adjustments (consisting only of normal recurring items) that are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on February 26, 2010 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. |
| Accounting Changes and New Accounting Standards | |
| 3 Months Ended
Mar. 31, 2010 | |
| Accounting Changes and New Accounting Standards | Note 2: Accounting Changes and New Accounting Standards Accounting Changes On January 1, 2010, we adopted the revisions issued by the Financial Accounting Standards Board, or FASB, to consolidation accounting standards for variable interest entities, or VIEs. The new standard replaces the quantitativebased risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity. Instead, the new approach is qualitative and focused on identifying which enterprise has the power to direct the activities of a VIE that most significantly impact the entity's performance and (1) the obligation to absorb the losses of an entity or (2) the right to receive benefits from the entity. As a result of the changed requirements, it is possible that an entity's previous assessment of a VIE will change, and the standard now requires ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. Disclosure requirements under the new standard have been enhanced, and now include disclosure of the method the entity used to determine whether they are the primary beneficiary of the VIE. The adoption of these changes did not have an effect on our consolidated results of operations and financial position. New Accounting Standards In September 2009, the FASB approved a revised standard for revenue arrangements with multiple deliverables. Under the revised standard, the criteria for determining whether a deliverable should be considered a separate unit of accounting has changed to remove a limitation for separation to only items with objective and reliable evidence of fair value. Instead, the revised standard allows entities to use the "best estimate of selling price" in addition to thirdparty evidence or actual selling prices for determining the fair value of a deliverable. The standard also includes additional disclosure requirements for revenue arrangements for multiple deliverables. We currently do not expect the adoption of the revised standard to have an effect on our consolidated results of operations and financial position, when adopted, as required, on January 1, 2011. |
| Intangible Assets | |
| 3 Months Ended
Mar. 31, 2010 | |
| Intangible Assets | Note 3: Intangible Assets The following table sets forth the amounts recorded for intangible assets as of the periods presented: EstimatedUseful March 31, 2010 December31, 2009 Lives(years) Gross Amount AccumulatedAmortization NetAmount GrossAmount AccumulatedAmortization NetAmount (Dollars in Millions) Orbital slots Indefinite $432 $432 $432 $432 Subscriber related 5-10 1,348 $1,325 23 1,348 $1,309 39 Dealer network 15 130 92 38 130 90 40 Distribution rights 7 334 275 59 334 263 71 Total intangible assets $2,244 $1,692 $552 $2,244 $1,662 $582 The following table sets forth amortization expense for intangible assets for each of the periods presented: Three MonthsEndedMarch31, 2010 2009 (Dollars inMillions) Amortization expense $30 $88 Estimated amortization expense for intangible assets in each of the next five years and thereafter is as follows: $60million for the remainder of 2010, $34million in 2011, $10million in 2012, $10million in 2013, $5million in 2014 and $1million thereafter. |
| Borrowings | |
| 3 Months Ended
Mar. 31, 2010 | |
| Borrowings | Note 4: Borrowings The following table sets forth our outstanding borrowings: March 31, 2010 December 31, 2009 (Dollars in Millions) Senior notes $7,489 $4,492 Senior secured credit facility, net of unamortized discount of $7million as of December31, 2009 1,309 2,316 Total debt 8,798 6,808 Less: Current portion of long-term debt (360) (308) Long-term debt $8,438 $6,500 2010 Financing Transactions On March 11, 2010, we issued $1,200 million in five year 3.550% senior notes due in 2015 at a 0.1% discount resulting in $1,199 million of proceeds, $1,300 million in 10 year 5.200% senior notes due in 2020 at a 0.2% discount resulting in $1,298 million of proceeds and $500 million in 30 year 6.350% senior notes at a 0.1% discount resulting in $499 million of proceeds in private placement transactions. Principal on these senior notes is payable upon maturity, while interest is payable semi-annually commencing September 15, 2010. We incurred $17 million of debt issuance costs in connection with these transactions. The senior notes have been fully and unconditionally guaranteed, jointly and severally, by substantially all of our current and certain of our future domestic subsidiaries on a senior unsecured basis. Pursuant to a registration rights agreement with the initial purchasers of the senior notes, we have caused to become effective a registration statement, whereby all holders of the original notes can elect to exchange their existing notes for registered notes with identical terms, except that the registered notes will be registered under the Securities Act of 1933, as amended and will not bear the legends restricting their transfer. We expect to complete the exchange offer of these senior notes during the second quarter of 2010. On March 16, 2010, we repaid the $985 million of remaining principal on Term Loan C of our senior secured credit facility. The repayment of Term Loan C resulted in a first quarter 2010 pre-tax charge of $9 million, $6 million after tax, of which $6 million resulted from the write-off of unamortized discount and $3 million resulted from the write-off of deferred debt issuance and other transaction costs. The charge was recorded in "Other, net" in our Consolidated Statements of Operations. Senior Notes. The following table sets forth our outstanding senior notes balance and fair value as of: Outstanding Balance Fair value March 31, 2010 December 31, 2009 March 31, 2010 December 31, 2009 (Dollars in millions) 4.750% senior notes due in 2014, net of unamortized discount of $2million as ofMarch31, 2010 and $3million as ofDecember31, 2009 $998 $997 $1,043 $1,017 6.375% senior notes due in 2015, includes unamortized bond premium of $2 million as of March 31, 2010 and December 31, 2009 1,002 1,002 1,040 1,038 3.550% senior notes due in 2015, net of unamortized discount of $1 million as of March 31, 2010 1,199 1,184 7.625% senior notes due in 2016 1,500 1,500 1,684 1,642 5.875% senior notes due in 2019, net of unamortized discount of $7million as ofMarch 31, |
| Contingencies | |
| 3 Months Ended
Mar. 31, 2010 | |
| Contingencies | Note 5: Contingencies 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 March 31, 2010. 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 adverse effect on our consolidated results of operations or financial position. During the quarter ended March 31, 2010 an arbitration panel determined that, pursuant to a contractual indemnity provision, one of our vendors was required to reimburse us $19 million for legal fees and settlement payments incurred and pay accrued interest to us for patent infringement claims settled by us in previous periods. We received the cash payment during the quarter ended March 31, 2010 and recorded $16 million as a reduction to General and administrative expenses and $3 million as "Interest income" in the Consolidated Statements of Operations. Satellites We may purchase in-orbit and launch insurance to mitigate the potential financial impact of satellite launch and in-orbit failures if the premium costs are considered economic relative to the risk of satellite failure. The insurance generally covers the unamortized book value of covered satellites. We do not insure against lost revenues in the event of a total or partial loss of the capacity of a satellite. We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to mitigate the impact a satellite failure could have on our ability to provide service. At March 31, 2010, the net book value of in-orbit satellites was $1,474 million, all of which was uninsured. |
| Related Party Transactions | |
| 3 Months Ended
Mar. 31, 2010 | |
| Related Party Transactions | Note 6: Related Party Transactions In the ordinary course of our operations, we enter into transactions with related parties as discussed below. DIRECTV and affiliates We determine our income taxes based upon our tax sharing agreement with our Parent, which generally provides that the current income tax liability or receivable be computed as if we were a separate taxpayer. No payments were made under the tax sharing arrangement for the three months ended March 31, 2010 and 2009. We also receive an allocation of employee benefit expenses from DIRECTV Group. We believe that our consolidated financial statements reflect our cost of doing business in accordance with SEC Staff Accounting Bulletin No. 55, "Allocation of Expenses and Related Disclosures in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity." During the first quarter of 2010, we paid $3,500 million in dividends to our Parent from available cash and cash equivalents. We did not pay any dividends to our Parent during the first quarter of 2009. Beginning November 19, 2009, transactions with three regional sports networks that DIRECTV acquired on that date are also included as transactions with DIRECTV and affiliates. Liberty Media, Liberty Global and Discovery Communications Beginning with Liberty's acquisition of its ownership interest in DIRECTV Group from News Corporation on February 27, 2008, transactions with Liberty Media and its affiliates, including its equity method investees, may be considered to be related party transactions. Our transactions with Liberty Media and its affiliates consist primarily of the purchase of programming. Although as a result of the Liberty Transaction, Liberty no longer has any equity interest in DIRECTV, John Malone, Chairman of the Board of Directors of DIRECTV and of Liberty Media, has an approximate 24% voting interest in DIRECTV, an approximate 31% voting interest in Discovery Communications, Inc., or Discovery Communications, and an approximate 40% voting interest in Liberty Global Inc., or Liberty Global, and serves as Chairman of Liberty Global, and certain of Liberty Media's management and directors also serve as directors of Discovery Communications or Liberty Global. As a result of this common ownership and management, transactions with Discovery Communications and Liberty Global, and their subsidiaries or equity method investees may be considered to be related party transactions. Our transactions with Discovery Communications and Liberty Global consist primarily of purchases of programming created, owned or distributed by Discovery Communications and its subsidiaries and investees. Other Companies in which we hold equity method investments are also considered related parties. Beginning November 19, 2009, transactions with the Game Show Network, in which our Parent holds an equity method investment, are also included as transactions with Other. 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 nu |
| Condensed Consolidating Financial Statements | |
| 3 Months Ended
Mar. 31, 2010 | |
| Condensed Consolidating Financial Statements | Note 7: Condensed Consolidating Financial Statements The following presents the condensed consolidating statements of operations for the three months ended March 31, 2010 and March 31, 2009, the condensed consolidating balance sheets as of March 31, 2010 and December 31, 2009, and the condensed consolidating statements of cash flows for the three months ended March 31, 2010 and 2009 of DIRECTV Holdings together with DIRECTV Financing or the Co-Issuers, and each of DIRECTV Holdings' material subsidiaries (other than DIRECTV Financing), or the Guarantor Subsidiaries, and the eliminations necessary to present DIRECTV Holdings' financial statements on a consolidated basis. These condensed consolidating financial statements should be read in conjunction with the accompanying consolidated financial statements of DIRECTV Holdings. Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2010 Co-Issuers GuarantorSubsidiaries Eliminations DIRECTVHoldingsConsolidated (Dollars in Millions) Revenues $91 $4,772 $(91) $4,772 Operating costs and expenses Costs of revenues, exclusive of depreciation and amortization expense Broadcast programming and other 2,014 2,014 Subscriber service expenses 323 323 Broadcast operations expenses 69 69 Selling, general and administrative expenses, exclusive of depreciation and amortization expense Subscriber acquisition costs 595 595 Upgrade and retention costs 250 250 General and administrative expenses 306 (91) 215 Depreciation and amortization expense 498 498 Total operating costs and expenses 4,055 (91) 3,964 Operating profit 91 717 808 Equity in income of consolidated subsidiaries 441 (441) Interest income 3 3 Interest expense (95) (2) (97) Other, net (9) 4 (5) Income before income taxes 428 722 (441) 709 Income tax benefit (expense) 5 (281) (276) Net income $433 $441 $(441) $433 Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2009 Co-Issuers GuarantorSubsidiaries Eliminations DIRECTVHoldingsConsolidated (Dollars in Millions) Revenues $82 $4,303 $(82) $4,303 Operating costs and expenses Costs of revenues, exclusive of depreciation and amortization expense Broadcast programming and other 1,808 1,808 Subscriber service expenses 301 301 Broadcast operations expenses 69 69 Selling, general and administrative expenses, exclusive of depreciation and amortization expense Subscriber acquisition costs 653 653 Upgrade and retention costs 274 274 General and administrative expenses 294 (82) 212 Depreciation and amortization expense 589 589 Total operating costs and expenses 3,988 (82) 3,906 Operating profit 82 315 397 Equity in income of consolidated subsidiaries 194 (194) Interest income 2 |
