DIRECTV 2012 Annual Report Download - page 60

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DIRECTV
SIGNIFICANT EVENTS AFFECTING THE COMPARABILITY OF THE Divestitures
RESULTS OF OPERATIONS In December 2012, we sold an 18% interest in GSN to our equity partner for
Change in Accounting Estimate $234 million, reducing our ownership interest from 60% to 42%. We recognized a
pre-tax gain of $111 million ($68 million after tax) on the sale in ‘‘Other, net’’ in
Depreciable Lives of Leased Set-Top Receivers the Consolidated Statements of Operations. For additional information regarding
We currently lease most set-top receivers provided to new and existing the GSN sale, refer to Note 8 of the Notes to the Consolidated Financial
subscribers and therefore capitalize the cost of those set-top receivers. We depreciate Statements in Item 8, Part II of this Annual Report.
capitalized set-top receivers over the estimated useful life of the equipment. As a In April 2011, we sold an equity method investment for $55 million in cash.
result of the completion of an extensive evaluation of the estimated useful life of We recognized a pre-tax gain of $37 million ($23 million after tax) on the sale in
the set-top receivers, including consideration of historical write-offs, improved ‘‘Other, net’’ in the Consolidated Statements of Operations.
efficiencies in our refurbishment program, improved set-top receiver failure rates
over time and management’s judgment of the risk of technological obsolescence, we In March 2011, we sold a 5% ownership interest in GSN to our equity
determined that the estimated useful life of HD set-top receivers used in our partner for $60 million in cash, reducing our ownership interest to 60%. We
DIRECTV U.S. business has increased to four years, from three years, as previously recognized a pre-tax gain of $25 million ($16 million after tax) on the sale in
estimated. We will continue to depreciate standard-definition set-top receivers at ‘‘Other, net’’ in the Consolidated Statements of Operations.
DIRECTV U.S. over a three-year estimated useful life. We are accounting for this
change in the useful life of the HD set-top receivers at DIRECTV U.S. as a change Malone Transaction
in an accounting estimate beginning July 1, 2011. In April 2010, we entered into an agreement with Dr. John C. Malone and
This change had the effect of reducing depreciation and amortization expense his family, or the Malones, under which they exchanged 21.8 million shares of
and increasing both net income attributable to DIRECTV and earnings per share high-vote DIRECTV Class B common stock, which were all of the outstanding
in our consolidated results of operations as follows: DIRECTV Class B shares, for 26.5 million shares of DIRECTV Class A common
stock, resulting in the reduction of the Malone’s voting interest in DIRECTV from
Years Ended approximately 24% to approximately 3% on June 16, 2010. We refer to this
December 31, transaction as the Malone Transaction.
2012 2011
(Dollars in We accounted for the exchange of DIRECTV Class B common stock into
Millions, Except DIRECTV Class A common stock pursuant to accounting standards for induced
Per Share
Amounts) conversions, whereby the $160 million in incremental DIRECTV Class A common
Depreciation and amortization expense ................... $(176) $(141) stock issued to the former DIRECTV Class B stockholders has been deducted from
Net income attributable to DIRECTV ................... 109 86 earnings attributable to DIRECTV Class A stockholders for purposes of calculating
Basic earnings attributable to DIRECTV common stockholders earnings per share in the Consolidated Statements of Operations. As a result of the
per common share .............................. $0.17 $0.12 Malone Transaction, diluted earnings per DIRECTV Class A common stock in the
Diluted earnings attributable to DIRECTV common stockholders Consolidated Statements of Operations was reduced by $0.18 for the year ended
per common share .............................. $0.17 $0.11 December 31, 2010. For additional information, refer to Note 16 of the Notes to
the Consolidated Financial Statements in Item 8, Part II of this Annual Report.
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