Directv 10-Q 7 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	May. 03, 2010 DIRECTV Class B Common Shares	May. 03, 2010 DIRECTV Class A Common Shares
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
Entity Central Index Key	0001465112
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		21,809,863	886,991,010

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Revenues	$5,608	$4,901
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other	2,314	2,025
Subscriber service expenses	395	352
Broadcast operations expenses	88	84
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs	672	709
Upgrade and retention costs	260	281
General and administrative expenses	304	360
Depreciation and amortization expense	619	666
Total operating costs and expenses	4,652	4,477
Operating profit	956	424
Interest income	11	10
Interest expense	(115)	(101)
Liberty transaction and related gains	67
Other, net	6	3
Income before income taxes	925	336
Income tax expense	(350)	(124)
Net income	575	212
Less: Net income attributable to noncontrolling interest	(17)	(11)
Net income attributable to DIRECTV	$558	$201
Basic earnings attributable to DIRECTV per common share	0.6	0.2
Diluted earnings attributable to DIRECTV per common share	0.59	0.2
Weighted average number of common shares outstanding (in millions)
Basic	931	1,018
Diluted	938	1,021

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Millions	Mar. 31, 2010	Dec. 31, 2009
ASSETS
Cash and cash equivalents	$3,488	$2,605
Accounts receivable, net of allowances of $59 and $56	1,543	1,625
Inventories	222	212
Deferred income taxes	148	217
Prepaid expenses and other	327	396
Total current assets	5,728	5,055
Satellites, net	2,288	2,338
Property and equipment, net	4,074	4,138
Goodwill	4,108	4,164
Intangible assets, net	1,175	1,131
Investments and other assets	1,453	1,434
Total assets	18,826	18,260
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities	3,639	3,757
Unearned subscriber revenues and deferred credits	401	434
Current portion of long-term debt	360	1,510
Total current liabilities	4,400	5,701
Long-term debt	8,438	6,500
Deferred income taxes	1,085	1,070
Other liabilities and deferred credits	1,572	1,678
Commitments and contingencies
Redeemable noncontrolling interest	400	400
Stockholders' equity
Common stock and additional paid-in capital-$0.01 par value, 3,500,000,000 shares authorized, 898,788,526 and 911,377,919 shares issued and outstanding of DIRECTV Class A common stock at March 31, 2010 and December 31, 2009, respectively and $0.01 par value, 30,000,000 shares authorized, 21,809,863 shares issued and outstanding of DIRECTV Class B common stock at March 31, 2010 and December 31, 2009	6,589	6,689
Accumulated deficit	(3,578)	(3,722)
Accumulated other comprehensive loss	(80)	(56)
Total stockholders' equity	2,931	2,911
Total liabilities and stockholders' equity	$18,826	$18,260

CONSOLIDATED BALANCE SHEETS [Pa

CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)
In Millions, except Share data	Mar. 31, 2010	Dec. 31, 2009
Allowance for doubtful accounts	$59	$56
DIRECTV Class B Common Shares
Common stock - par value	0.01	0.01
Common stock - shares authorized	30,000,000	30,000,000
Common stock - shares issued	21,809,863	21,809,863
Common stock - shares outstanding	21,809,863	21,809,863
DIRECTV Class A Common Shares
Common stock - par value	0.01	0.01
Common stock - shares authorized	3,500,000,000	3,500,000,000
Common stock - shares issued	898,788,526	911,377,919
Common stock - shares outstanding	898,788,526	911,377,919

CONSOLIDATED STATEMENTS OF CASH

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	$575	$212
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	619	666
Amortization of deferred revenues and deferred credits	(8)	(18)
Share-based compensation expense	20	17
Dividends received	47
Net foreign currency transaction loss	8
Liberty transaction and related gains	(67)
Deferred income taxes	62	50
Other	(5)	12
Change in other operating assets and liabilities:
Accounts receivable	83	101
Inventories	(10)
Prepaid expenses and other	67	18
Accounts payable and accrued liabilities	164	(105)
Unearned subscriber revenue and deferred credits	(33)	17
Other, net	(18)	26
Net cash provided by operating activities	1,504	996
Cash Flows From Investing Activities
Cash paid for property and equipment	(465)	(522)
Cash paid for satellites	(8)	(17)
Investment in companies, net of cash acquired		(3)
Other, net	(23)
Net cash used in investing activities	(496)	(542)
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 collar loan	(1,537)
Repayment of other long-term obligations	(30)	(28)
Common shares repurchased and retired	(466)	(346)
Stock options exercised		29
Taxes paid in lieu of shares issued for share-based compensation	(70)
Excess tax benefit from share-based compensation	9	9
Net cash used in financing activities	(125)	(354)
Net increase in cash and cash equivalents	883	100
Cash and cash equivalents at beginning of the period	2,605	2,005
Cash and cash equivalents at end of the period	3,488	2,105
Supplemental Cash Flow Information
Cash paid for interest	36	74
Cash paid for income taxes	$18	$42

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
Basis of Presentation	Note 1: Basis of Presentation DIRECTV, which we sometimes refer to as the company, we, or us, is a leading provider of digital television entertainment in the United States and Latin America. We operate two direct-to-home, or DTH, operating segments: DIRECTV U.S. and DIRECTV Latin America, which are differentiated by their geographic location and are engaged in acquiring, promoting, selling and/or distributing digital entertainment programming via satellite to residential and commercial subscribers. Beginning November 19, 2009 we also operate three regional sports networks and own a 65% interest in Game Show Network LLC, or GSN, a television network dedicated to game-related programming and Internet interactive game playing. We account for our investment in GSN using the equity method of accounting. * DIRECTV U.S. DIRECTV HoldingsLLC 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 multichannel video programming distribution, or MVPD, industry in the United States. * DIRECTV Latin America. DIRECTV Latin America Holdings, Inc. and its subsidiaries, or DTVLA, is a leading provider of DTH digital television services throughout Latin America. DTVLA is comprised of: PanAmericana, which provides services in Argentina, Chile, Colombia, Puerto Rico, Venezuela and certain other countries in the region; our 74% owned subsidiary Sky Brasil ServicosLtda., which we refer to as Sky Brazil; and our 41% equity method investment in Innova, S. de R.L. de C.V., or Sky Mexico. * DIRECTV Sports Networks. DIRECTV Sports NetworksLLC and its subsidiaries, or DSN, is comprised primarily of three regional sports television networks based in Seattle, Washington, Denver, Colorado and Pittsburgh, Pennsylvania, currently known as FSN Northwest, FSN Rocky Mountain and FSN Pittsburgh, respectively. The operating results of DSN beginning November19, 2009 are reported as part of the "Sports Networks, Eliminations and Other" operating 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 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.

Acquisition

Acquisition
	3 Months Ended Mar. 31, 2010
Acquisition	Note 2: Acquisition Liberty Transaction On November 19, 2009, The DIRECTV Group, Inc., or DIRECTV Group, and Liberty Media Corporation, which we refer to as Liberty or Liberty Media, obtained shareholder approval of and closed a series of related transactions which we refer to collectively as the Liberty Transaction. The Liberty Transaction included the split-off of certain of the assets of the Liberty Entertainment group into Liberty Entertainment, Inc., or LEI, which was then split-off from Liberty. Following the split-off, DIRECTV Group and LEI merged with subsidiaries of DIRECTV. As a result of the Liberty Transaction, DIRECTV Group, which is comprised of the DIRECTV U.S. and DIRECTV Latin America businesses, and LEI, which held Liberty's 57% interest in DIRECTV Group, a 100% interest in three regional sports networks, a 65% interest in Game Show Network, LLC, approximately $120 million in cash and cash equivalents and approximately $2.1 billion of indebtedness and a related series of equity collars, became whollyowned subsidiaries of DIRECTV. The Liberty Transaction was accounted for using the acquisition method of accounting pursuant to accounting standards for business combinations. DIRECTV Group has been treated as the acquiring corporation in the Liberty Transaction for accounting and financial reporting purposes, and accordingly the historical financial statements of DIRECTV Group have become the historical financial statements of DIRECTV. The acquisition date fair value of consideration paid, in the form of DIRECTV common stock, for the assets and liabilities of LEI (excluding LEI's interest in DIRECTV Group) has been allocated to a premium expensed at the close of the transaction and to LEI's other tangible and intangible assets acquired and liabilities assumed based on their estimated acquisition date fair values, with any excess being treated as goodwill. The assets, liabilities and results of operations of LEI have been consolidated beginning on the acquisition date, November 19, 2009. The following table sets forth the preliminary allocation of the purchase price to the LEI net liabilities assumed on November 19, 2009 (dollars in millions): Total current assets $244 Property and equipment 5 Goodwill 295 Investments and other assets 754 Total assets acquired $1,298 Total current liabilities $2,492 Other liabilities 259 Total liabilities assumed $2,751 Net liabilities assumed $1,453 As part of the mergers, DIRECTV assumed 16.7 million common stock options and stock appreciation rights issued by LEI. Since many of the replacement awards are held by individuals who remained employees of Liberty and did not become employees or directors of DIRECTV, they are reported as a liability at fair value by DIRECTV in accordance with accounting standards for non-employee awards. The assumed indebtedness also included related equity collars and we completed settlement of those equity collars during the first quarter of 2010. We accounted for the derivative financial instruments of the equity collars acquired as a net asset or liability at fair value. For the

Accounting Changes and New Acco

Accounting Changes and New Accounting Standards
	3 Months Ended Mar. 31, 2010
Accounting Changes and New Accounting Standards	Note 3: 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.

Goodwill and Intangible Assets

Goodwill and Intangible Assets
	3 Months Ended Mar. 31, 2010
Goodwill and Intangible Assets	Note 4: Goodwill and Intangible Assets The changes in the carrying amounts of goodwill at each of our segments for the three months ended March 31, 2010 were as follows: DIRECTVU.S. DIRECTVLatinAmerica Sports Networks, Eliminations and Other Total (Dollars in Millions) Balance as of December31, 2009 $3,167 $656 $341 $4,164 Sky Brazil foreign currency translation adjustment (10) (10) Purchase or acquisition accounting adjustments (46) (46) Balance as of March 31, 2010 $3,167 $646 $295 $4,108 The following table sets forth the amounts recorded for intangible assets as of the periods presented: EstimatedUseful March31, 2010 December31, 2009 Lives(years) GrossAmount AccumulatedAmortization NetAmount GrossAmount AccumulatedAmortization NetAmount (Dollars in Millions) Orbital slots Indefinite $432 $432 $432 $432 Satellite rights 15 116 116 Subscriber related 5-10 1,781 1,570 211 1,787 1,526 261 Dealer network 15 130 92 38 130 90 40 Trade name and other 10-20 342 23 319 344 17 327 Distribution rights 7 334 275 59 334 263 71 Total intangible assets $3,135 $1,960 $1,175 $3,027 $1,896 $1,131 Satellite Rights Sky Brazil has entered into an agreement for the right to use a satellite should its existing leased satellite suffer a significant failure and replacement capacity is needed. During the first quarter of 2010 the satellite was launched and we recorded the total payments for the right to use the satellite of $116 million in "Intangible Assets" in the Consolidated Balance Sheets, including payments made to date of $29 million. As of March 31, 2010, the remaining $87 million of required payments is recorded in "Accounts payable and accrued liabilities" in the Consolidated Balance Sheets, the accrual of which is considered a non-cash investing and financing activity excluded from the Consolidated Statements of Cash Flows for the quarter ended March 31, 2010. The intangible asset is being amortized on a straight line basis over the 15 year period of the agreement. The following table sets forth amortization expense for intangible assets for each of the periods presented: Three MonthsEndedMarch31, 2010 2009 (Dollars inMillions) Amortization expense $57 $103 Estimated amortization expense for intangible assets in each of the next five years and thereafter is as follows: $131 million in the remainder of 2010; $135 million in 2011; $89 million in 2012; $45 million in 2013; $38 million in 2014; and $305 million thereafter.

Borrowings

Borrowings
	3 Months Ended Mar. 31, 2010
Borrowings	Note 5: 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 Collar Loan 1,202 Total debt 8,798 8,010 Less: Current portion of long-term debt (360) (1,510) Long-term debt $8,438 $6,500 All of the senior notes and the senior secured credit facility were issued by DIRECTV U.S. The senior secured credit facility is secured by substantially all of DIRECTV U.S.' assets. Collar Loan As part of the Liberty Transaction completed on November 19, 2009, we assumed a credit facility and related equity collars, which we refer to as the Collar Loan. During the first quarter of 2010, we paid $1,537 million to repay the remaining principal balance of the loan and settle the equity collars, which had a fair value of $400 million as of December 31, 2009 and accordingly recorded a gain of $67 million in "Liberty transaction and related gains" in the Consolidated Statements of Operations in the first quarter of 2010 related to the Collar Loan. We accounted for the equity collars pursuant to the accounting standards for derivatives and hedging, which require that all derivatives, whether designated in hedging relationships or not, are recorded on the balance sheet at fair value. The equity collars were not designated as a hedge, and therefore changes in the fair value of the derivative were recognized in earnings. We determined the December 31, 2009 fair value of the equity collars using the Black Scholes Model. Our use of the BlackScholes Model to value the equity collars was considered a Level 2 valuation technique, which used observable inputs such as exchangetraded equity prices, risk-free interest rates, dividend yields and volatilities. See Note 2 for further discussion of the Liberty Transaction. 2010 Financing Transactions On March 11, 2010, DIRECTV U.S. 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 DIRECTV U.S.' current and certain of its future domestic subsidiaries on a senior unsecured basis. Pursuant to a registration rights agreement with the initial purchasers of the senior notes, DIRECTV U.S. has 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

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
Contingencies	Note6: Contingencies Contingencies Puerto Rico Condition In connection with approval by the Federal Communications Commission, or FCC, of the sale of News Corporation's interest in DIRECTV Group to Liberty Media in 2008, the FCC imposed certain conditions related to attributable interests in two pay television operations: DIRECTV Puerto Rico and Liberty Cablevision of Puerto RicoLtd. We refer to the FCC's requirements as the "Puerto Rico Condition". Because neither News Corporation nor Liberty Media could satisfy the Puerto Rico Condition, in connection with the close of that transaction, a special committee of independent directors of our Board of Directors approved an agreement with News Corporation and Liberty Media in which we assumed responsibility for the satisfaction, modification or waiver of the Puerto Rico Condition within the one year period specified by the FCC. As part of this agreement, during the first quarter of 2008, we received a $160million cash capital contribution, which we recorded as "Additional paid-in-capital" in the Consolidated Balance Sheets. In order to comply with terms of the FCC order, effective February25, 2009, we placed the shares of DIRECTV Puerto Rico into a trust and appointed an independent trustee who oversees the management and operation of DIRECTV Puerto Rico, and has the authority, subject to certain conditions, to divest ownership of DIRECTV Puerto Rico. We continue to consolidate the results of DIRECTV Puerto Rico. The FCC staff recently has advised us that the trust arrangement created in 2009 for the purpose of satisfying the Puerto Rico Condition could not remain in place indefinitely and was not alone sufficient to comply with the requirements of its order. In order to resolve the Puerto Rico Condition, on April 6, 2010, we entered into an agreement with Dr. John C. Malone, his wife and certain family trusts, which we believe will sever all attributable interests in satisfaction of the requirements of the FCC order. The agreement achieves these requirements through the recapitalization of the DIRECTV stock ownership held by Dr. Malone and his family and the resignation of Dr. Malone and two other board members originally appointed at the request of Liberty Media from our Board of Directors. Under the terms of the agreement, the Malones will exchange 21.8 million shares of high-vote Class B common stock, which is all of the outstanding Class B shares, for 26.5 million shares of Class A common stock, resulting in the reduction of the Malones' voting interest in DIRECTV from approximately 24.3% to approximately 3%. The number of Class A shares to be issued was determined as follows: one share of Class A common stock for each share of Class B common stock held, plus an additional number of Class A shares with a fair value of $160 million based on the market price of the DIRECTV Class A (DTV) common stock prior to the announcement of the transaction with the Malones. Weexpect to account for the recapitalization of Class B into Class A common stock pursuant to accounting standards for induced conversions, whereby the $160 million in incremental Class A shares, which will be issu

Related-Party Transactions

Related-Party Transactions
	3 Months Ended Mar. 31, 2010
Related-Party Transactions	Note 7: RelatedParty Transactions In the ordinary course of our operations, we enter into transactions with related parties as discussed below. 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 Other related parties include Globo, which provides programming and advertising to Sky Brazil, and companies in which we hold equity method investments, including Sky Mexico. The majority of payments under contractual arrangements with related parties are pursuant to multi-year programming contracts. Payments under these contracts are typically subject to annual rate increases and are based on the number of subscribers receiving the related programming. The following table summarizes sales to, and purchases from, related parties: Three Months EndedMarch31, 2010 2009 (Dollars in Millions) Sales: Liberty Media and affiliates $14 $12 Discovery Communications, Liberty Global and affiliates 3 3 Other 2 2 Total $19 $17 Purchases: Liberty Media and affiliates $78 $87 Discovery Communications, Liberty Global and affiliates 69 60 Other 142 105 Total $289 $252 The following table sets forth the amount of accounts receivable from and accounts payable to related parties as of: March 31,2010 December 31,2009 (Dollars in Millions) Accounts receivable $10 $26 Accounts payable 187 184 The accounts receivable and accounts payable balances as of March 31, 2010 and December 31, 2009 are primarily related to affiliates of Liberty Media.

Earnings Per Common Share

Earnings Per Common Share
	3 Months Ended Mar. 31, 2010
Earnings Per Common Share	Note 8: Earnings Per Common Share Earnings per share has been computed using the number of outstanding shares of DIRECTV Group from January 1, 2009 through March 31, 2009, and based on the outstanding shares of DIRECTV Class A and Class B common stock from January 1, 2010 through March 31, 2010. We compute basic earnings per common share, or EPS, by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS considers the effect of common equivalent shares, which consist primarily of common stock options and restricted stock units issued to employees. In the computation of diluted EPS under the treasury stock method, the amount of assumed proceeds from nonvested stock awards and unexercised stock options includes the amount of compensation cost attributable to future services not yet recognized, proceeds from the exercise of the options, and the incremental income tax benefit or liability as if the awards were distributed during the period. We exclude common equivalent shares from the computation in loss periods, as their effect would be antidilutive and we exclude common stock options from the computation of diluted EPS when their exercise price is greater than the average market price of our common stock. The following table sets forth the number of common stock options excluded from the computation of diluted EPS because the options' exercise prices were greater than the average market price of our common stock during the periods presented: Three MonthsEndedMarch31, 2010 2009 (Shares in Millions) Common stock options excluded 5 27 The following table sets forth comparative information regarding common shares outstanding: Three MonthsEndedMarch31, 2010 2009 (Shares in Millions) Common shares outstanding at January1 933 1,024 Decrease for common shares repurchased and retired (15) (17) Increase for stock options exercised and restricted stock units vested and distributed 3 3 Common shares outstanding at March31 921 1,010 Weighted average number of common shares outstanding 931 1,018 The reconciliation of the amounts used in the basic and diluted EPS computation is as follows: Income Shares Per ShareAmounts (Dollars and Shares inMillions, Except Per ShareAmounts) Three Months Ended March31, 2010: Basic EPS Net income attributable to DIRECTV. $558 931 $0.60 Effect of Dilutive Securities Dilutive effect of stock options and restricted stock units 7 (0.01) Diluted EPS Adjusted net income attributable to DIRECTV. $558 938 $0.59 Three Months Ended March31, 2009: Basic EPS Net income attributable to DIRECTV. $201 1,018 $0.20 Effect of Dilutive Securities Dilutive effect of stock options and restricted stock units 3 Diluted EPS Adjusted net income attributable to DIRECTV. $201 1,021 $0.20

Stockholders' Equity

Stockholders' Equity
	3 Months Ended Mar. 31, 2010
Stockholders' Equity	Note 9: Stockholders' Equity Share Repurchase Program During 2010 and 2009, our Board of Directors approved multiple authorizations for the repurchase of our common stock, the most recent of which was in February 2010, authorizing share repurchases of $3.5 billion. As of March 31, 2010, we had approximately $2,974 million remaining under this authorization. The authorizations allow us to repurchase our common stock from time to time through open market purchases and negotiated transactions, or otherwise. The timing, nature and amount of such transactions will depend on a variety of factors, including market conditions, and the program may be suspended, discontinued or accelerated at any time. The sources of funds for the purchases under the remaining authorization are our existing cash on hand and cash from operations. Purchases are made in the open market, through block trades and other negotiated transactions. Repurchased shares are retired but remain authorized for registration and issuance in the future. The following table sets forth information regarding shares repurchased and retired during the periods presented: Three Months EndedMarch31, 2010 2009 (Amounts in Millions,Except Per ShareAmounts) Total cost of repurchased shares $526 $361 Average price per share 34.15 21.23 Number of shares repurchased and retired 15 17 For the three months ended March 31, 2010, we recorded the $526 million in repurchases as a decrease of $112 million to "Common stock and additional paid in capital" and an increase of $414 million to "Accumulated deficit" in the Consolidated Balance Sheets. Of the $526 million in repurchases during the three months ended March 31, 2010, $60 million were paid for in April 2010. Of the $361 million in repurchases during the three months ended March 31, 2009, $15 million were paid for in April 2009. Amounts repurchased but settled subsequent to the end of such periods are considered non-cash financing activities and excluded from the Consolidated Statements of Cash Flows. The following tables set forth a reconciliation of stockholders' equity and redeemable noncontrolling interest for each of the periods presented: Stockholders' Equity DIRECTV Class A CommonShares DIRECTV Class B Common Shares CommonStock andAdditionalPaid-InCapital AccumulatedDeficit AccumulatedOtherComprehensiveLoss, net oftaxes TotalStockholders'Equity RedeemableNoncontrollingInterest NetIncome (Dollars in Millions) Balance at January1, 2010 911,377,919 21,809,863 $6,689 $(3,722) $(56) $2,911 $400 Net income 558 558 17 $575 Stock repurchased and retired (15,400,000) (112) (414) (526) Stock options exercised and restricted stockunits vested and distributed 2,810,607 (42) (42) Sharebased compensation expense 20 20 Tax benefit from stock option exercises 22 22 Adjustment to the fair value of redeemablenoncontrolling interest 14 14 (14) Other (2) (2) Foreign currency translation adjustment. (23) (23) (3) Unreal

Segment Reporting

Segment Reporting
	3 Months Ended Mar. 31, 2010
Segment Reporting	Note 10: Segment Reporting Our three reporting segments, which are differentiated by their products and services as well as geographic location, are DIRECTV U.S. and DIRECTV Latin America, which acquire, promote, sell and distribute digital entertainment programming via satellite to residential and commercial subscribers, and the Sports Networks, Eliminations and Other segment which includes our three regional sports networks that provide programming devoted to local professional sports teams and college sporting events and locally produces its 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: DIRECTVU.S. DIRECTVLatin America Sports Networks, Eliminations and Other Total (Dollars in Millions) Three Months Ended:March31, 2010 External revenues $4,762 $779 $67 $5,608 Intersegment revenues 10 (10) Revenues $4,772 $779 $57 $5,608 Operating profit $808 $126 $22 $956 Add: Depreciation and amortization expense 498 118 3 619 Operating profit before depreciation and amortization(1) $1,306 $244 $25 $1,575 March31, 2009 External revenues $4,303 $598 $ $4,901 Intersegment revenues Revenues $4,303 $598 $ $4,901 Operating profit (loss) $397 $41 $(14) $424 Add: Depreciation and amortization expense 589 78 (1) 666 Operating profit (loss) before depreciation and amortization(1) $986 $119 $(15) $1,090 (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 (loss) before depreciation and amortization to evaluate the operating performance of our company and our business segments and to allocate resources and capital to business segments. This metric is also used as a measure of performance for incentive compensation purposes and to measure income generated from operations that could be used to fund capital expenditures, service debt or pay taxes. Depreciation and amortization expense primarily represents an allocation to current expense of the cost of historical capital expenditures and for intangible assets resulting from prior business acquisitions. To compensate for the exclusion of depreciation and amortization expense from operating profit, our management and 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 othe