DIRECTV 2010 Annual Report Download - page 58

DIRECTV
SIGNIFICANT TRANSACTIONS AFFECTING THE COMPARABILITY OF right to sell its remaining 7% interest to us until January 2014 as discussed in
THE RESULTS OF OPERATIONS Note 19 of the Notes to the Consolidated Financial Statements in Item 8, Part II
of this Annual Report.
Malone Transaction
Liberty Transaction. On November 19, 2009, The DIRECTV Group, Inc., or
In order to resolve a condition imposed by the FCC on Liberty Media’s DIRECTV Group, and Liberty Media Corporation, which we refer to as Liberty or
acquisition of an ownership interest in us from News Corporation in 2008, which Liberty Media, obtained shareholder approval of and closed a series of related
we refer to as the ‘‘Puerto Rico Condition’’, on April 6, 2010, we entered into an transactions which we refer to collectively as the Liberty Transaction. The Liberty
agreement with Dr. John C. Malone which severed all attributable interests in Transaction included the split-off of certain of the assets of the Liberty
satisfaction of the requirements of the FCC order. Under the terms of the Entertainment group into Liberty Entertainment, Inc., or LEI, which was then
agreement, the Malones exchanged 21.8 million shares of high-vote DIRECTV split-off from Liberty. Following the split-off, DIRECTV Group and LEI merged
Class B common stock, which were all of the outstanding DIRECTV Class B with subsidiaries of DIRECTV. As a result of Liberty Transaction, DIRECTV
shares, for 26.5 million shares of DIRECTV Class A common stock, resulting in Group, which is comprised of the DIRECTV U.S. and DIRECTV Latin America
the reduction of the Malone’s voting interest in DIRECTV from approximately businesses, and LEI, which held Liberty’s 57% interest in DIRECTV Group, a
24.3% to approximately 3%. 100% interest in three regional sports networks, a 65% interest in Game Show
We accounted for the exchange of DIRECTV Class B common stock into Network, LLC, approximately $120 million in cash and cash equivalents and
DIRECTV Class A common stock pursuant to accounting standards for induced approximately $2.1 billion of indebtedness and a series of related equity collars
conversions, whereby the $160 million in incremental DIRECTV Class A common became wholly-owned subsidiaries of DIRECTV. The assets, liabilities and results of
stock issued to the former DIRECTV Class B stockholders has been deducted from operations of LEI have been consolidated beginning on the acquisition date,
earnings attributable to DIRECTV Class A stockholders for purposes of calculating November 19, 2009.
earnings per share in the Consolidated Statements of Operations. This adjustment As part of the Liberty Transaction, we assumed a credit facility with a
had the effect of reducing diluted earnings per DIRECTV Class A common share principal balance of $1,878 million, which we refer to as the Collar Loan, and a
by $0.18 for the year ended December 31, 2010. See Note 13 of the Notes to the series of related equity collars which were in a liability position with an estimated
Consolidated Financial Statements in Item 8, Part II of this Annual Report for acquisition date fair value of $369 million. During 2009, we repaid a total of
additional information. $751 million, including $676 million in principal payments and $75 million in
payments to settle a portion of the equity collars. During 2010, we repaid
Acquisitions $1,537 million, including $1,202 million of remaining principal payments and
Globo Transaction. In connection with our acquisition of Sky Brazil in 2006, $335 million to settle the equity collars.
Globo was granted the right, until January 2014, to require us to purchase all or a Cash paid, net of cash acquired in connection with the transaction was
portion (but not less than half) of its 25.9% interest in Sky Brazil. In June 2010, $97 million and includes a $226 million repayment of LEI’s existing loan from
Globo notified us that it was exercising its right to exchange 178,830,000 shares Liberty at the close of the transaction and $43 million of cash paid for transaction
representing approximately 19% of the ownership interests in Sky Brazil. The fair costs, partially offset by $120 million in cash at LEI, and $56 million of cash at
value of the approximate 19% interest was determined to be $605 million by an the regional sports networks.
independent investment bank according to a process specified by Globo and us in
the related agreement. During the fourth quarter of 2010, we paid cash for the As a result of the Liberty Transaction, we recorded $491 million in charges to
approximate 19% ownership interest, which was recorded as a reduction to ‘‘Liberty transaction and related gains (charges)’’ in the Consolidated Statements of
‘‘Redeemable noncontrolling interest’’ in the Consolidated Balance Sheet. We and Operations for the year ended December 31, 2009, which is comprised of: a
our subsidiaries now own approximately 93% of Sky Brazil and Globo retains the
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