DIRECTV 2009 Annual Report Download - page 110

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
(ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or
acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another
entity, (vi) sell, assign, lease or otherwise dispose of all or substantially all of its assets, and (vii) make
voluntary prepayments of certain debt, in each case subject to exceptions as provided in the credit
agreement and senior notes indentures. DIRECTV U.S. 4.750% and 5.875% senior notes are rated as
investment grade and have fewer covenants and restrictions than our other senior notes. Should
DIRECTV U.S. fail to comply with these covenants, all or a portion of its borrowings under the senior
notes and senior secured credit facility could become immediately payable and its revolving credit
facility could be terminated. At December 31, 2009, DIRECTV U.S. was in compliance with all such
covenants. The senior notes and senior secured credit facility also provide that the borrowings may be
required to be prepaid if certain change-in-control events occur. In September 2008, Liberty Media
became the majority owner of DIRECTV Group’s outstanding common stock. There was no ratings
decline for the senior notes associated with that event, and DIRECTV U.S. was not required either to
offer to redeem any of the senior notes pursuant to their respective indentures or to prepay any of the
borrowings under the senior secured credit facility.
Restricted Cash. Restricted cash of $16 million as of December 31, 2009 and $15 million as of
December 31, 2008 was included as part of ‘‘Prepaid expenses and other’’ in our Consolidated Balance
Sheets. These amounts secure our letter of credit obligations. Restrictions on the cash will be removed
as the letters of credit expire.
Note 10: Income Taxes
We base our income tax expense or benefit on reported ‘‘Income from continuing operations
before income taxes.’’ Deferred income tax assets and liabilities reflect the impact of temporary
differences between the amounts of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes, as measured by applying currently enacted tax laws.
Our income tax expense consisted of the following for the years ended December 31:
2009 2008 2007
(Dollars in Millions)
Current tax expense:
U.S. federal ................................................ $(308) $(543) $(450)
Foreign ................................................... (97) (128) (73)
State and local ............................................. (63) (72) (103)
Total ................................................... (468) (743) (626)
Deferred tax expense:
U.S. federal ................................................ (309) (210) (285)
Foreign ................................................... 1 97 5
State and local ............................................. (51) (8) (37)
Total ................................................... (359) (121) (317)
Total income tax expense .................................... $(827) $(864) $(943)
98