DIRECTV 2009 Annual Report Download - page 60

DIRECTV
See Note 3 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual
Report, which we incorporate herein by reference. Financial Statements and Supplementary Data for
additional information regarding these transactions and Amendment No. 5 to DIRECTV’s Registration
Statement on Form S-4 filed with the SEC on October 20, 2009.
180 Connect. In July 2008, we acquired 100% of 180 Connect’s outstanding common stock and
exchangeable shares. Simultaneously, in a separate transaction, UniTek USA, LLC acquired 100% of
180 Connect’s cable service operating unit and operations in certain of our installation services markets
in exchange for satellite installation operations in certain markets and $7 million in cash. These
transactions provide us with control over a significant portion of DIRECTV U.S.’ home service
provider network. We paid $91 million in cash, net of the $7 million we received from UniTek USA, for
the acquisition, including the equity purchase price, repayment of assumed debt and related transaction
costs.
Darlene Transaction. On January 30, 2007, we acquired Darlene’s 14% equity interest in
DLA LLC for $325 million in cash. We accounted for this acquisition using the purchase method of
accounting.
Other Developments
In addition to the items described above, the following items had a significant effect on the
comparability of our operating results and financial position as of and for the years ended
December 31, 2009, 2008 and 2007:
Lease Program. On March 1, 2006, DIRECTV U.S. introduced a new set-top receiver lease
program. Prior to March 1, 2006, we expensed most set-top receivers provided to new and existing
DIRECTV U.S. subscribers upon activation as a subscriber acquisition or upgrade and retention cost in
the Consolidated Statements of Operations. Subsequent to the introduction of our lease program, we
lease most set-top receivers provided to new and existing subscribers, and therefore capitalize the
set-top receivers in ‘‘Property and equipment, net’’ in the Consolidated Balance Sheets.
The following table sets forth the amount of DIRECTV U.S. set-top receivers we capitalized, and
depreciation expense we recorded, under the lease program for the years ended December 31:
Capitalized subscriber leased equipment: 2009 2008 2007
(Dollars in Millions)
Subscriber leased equipment—subscriber acquisitions ................. $ 564 $ 599 $ 762
Subscriber leased equipment—upgrade and retention ................. 419 537 774
Total subscriber leased equipment capitalized ....................... $ 983 $1,136 $1,536
Depreciation expense—subscriber leased equipment .................. $1,333 $1,100 $ 645
Financing Transactions. On September 22, 2009, DIRECTV U.S. issued $1 billion in five year
4.750% senior notes due in 2014 at a 0.3% discount resulting in $997 million of proceeds. DIRECTV
U.S. also issued $1 billion in 10 year 5.875% senior notes due in 2019 at a 0.7% discount resulting in
$993 million of proceeds.
On September 22, 2009, DIRECTV U.S. purchased, pursuant to a tender offer, $583 million of its
then outstanding $910 million 8.375% senior notes at a price of 103.125% plus accrued and unpaid
interest, for a total of $603 million. On September 23, 2009, DIRECTV U.S. exercised its right to
redeem the remaining $327 million of the 8.375% senior notes at a price of 102.792% plus accrued and
48