DIRECTV Increases Net Additions 10% with a First Quarter Record
674,000
DIRECTV Latin America sets all-time records for gross and net
additions with 1.0 million and 593,000, respectively in the quarter.
DIRECTV U.S. adds 81,000 new subscribers in the quarter as churn
drops 6 basis points to 1.44%.
DIRECTV Revenues Grow 12% to $7.05 Billion
Increase driven by strong subscriber growth coupled with 3.6%
higher ARPU at DIRECTV U.S.
Operating Profit before Depreciation and Amortization Increases 8%
to $1.90 Billion and Operating Profit Grows 13% to $1.31 Billion
Growth driven by DIRECTV Latin Am
DIRECTV (NASDAQ:DTV) today reported an increase in first quarter 2012
revenues of 12% to $7.05 billion, operating profit before depreciation
and amortization1 (OPBDA) of 8% to $1.90 billion and
operating profit of 13% to $1.31 billion compared to last year's first
quarter. DIRECTV reported that first quarter net income increased 8% to
$731 million and diluted earnings per share grew 26% to $1.07 compared
with the same period last year.
"DIRECTV delivered another strong quarter of financial and operating
results highlighted by double-digit revenue, EPS and cash flow growth,
fueled in part by another quarter of record-setting subscriber growth in
Latin America," said Mike White, president and CEO of DIRECTV. "Our
industry leading revenue and earnings growth continues to be driven by
the strength of our premier brands, popularity of our differentiated
product and service offerings, and an enhanced focus on achieving
operational excellence through effective cost management."
DIRECTV'S OPERATIONAL REVIEW
First Quarter Review
DIRECTV's first quarter revenues of $7.05 billion increased 12% over the
same period last year principally due to strong subscriber growth at
DIRECTV Latin America (DTVLA) and DIRECTV U.S., as well as higher ARPU
at DIRECTV U.S. Operating profit before depreciation and amortization
(OPBDA) increased 8% to $1.90 billion and operating profit increased 13%
to $1.31 billion. Also in the quarter, OPBDA margin declined primarily
due to higher programming and general and administrative (G&A) costs at
DIRECTV U.S., increased subscriber acquisition and customer service
costs at DTVLA, as well as higher upgrade and retention spending at both
DIRECTV U.S. and DTVLA. These increases were partially offset by lower
subscriber acquisition costs at DIRECTV U.S. In addition, operating
profit margin increased as the lower OPBDA margin was more than offset
by lower depreciation expense at DIRECTV U.S.
DIRECTV Consolidated
Three Months
Dollars in Millions except Earnings
Ended March 31,
per Common Share
2012
2011
Revenues
$
7,046
$
6,319
Operating Profit Before Depreciation and Amortization(1)
1,903
1,766
OPBDA Margin(1)
27.0
%
27.9
%
Operating Profit
1,308
1,155
Operating Profit Margin
18.6
%
18.3
%
Net Income Attributable to DIRECTV
731
674
Diluted Earnings Per Common Share
1.07
0.85
Capital Expenditures and Cash Flow
Cash paid for property and equipment
153
115
Cash paid for subscriber leased equipment - subscriber acquisitions
412
345
Cash paid for subscriber leased equipment - upgrade and retention
188
153
Cash paid for satellites
58
31
Cash Flow Before Interest and Taxes(2)
1,308
899
Free Cash Flow(3)
952
665
Net income attributable to DIRECTV increased 8% to $731 million and
diluted earnings per share improved 26% to $1.07 compared with the first
quarter of last year primarily due to the higher operating profit
partially offset by more income tax expense primarily related to the
increased earnings before tax and a lower effective tax rate in 2011
resulting from foreign tax credits not previously recognized. Net income
also reflected higher interest expense principally resulting from an
increase in long-term debt. In addition, diluted earnings per share were
favorably impacted by share repurchases made over the last twelve months.
Cash flow before interest and taxes2 increased 45% to $1.31
billion and free cash flow3 increased 43% to $952 million
compared to the first quarter of 2011 primarily due to the higher OPBDA
as well as an increase in cash generated from working capital primarily
related to the timing of customer receipts and vendor payments. These
increases were partially offset by greater capital expenditures
primarily driven by the higher gross additions, infrastructure
investment and satellite payments at DTVLA, as well as an increase in
equipment upgrades at both DTVLA and DIRECTV U.S. The year over year
comparison also reflects a $43 million dividend payment from Sky Mexico
in the first quarter of 2011. In addition, free cash flow was impacted
by higher interest payments related to an increase in long-term debt and
greater tax payments. Also during the quarter but not included in free
cash flow, was cash paid for share repurchases of $1.26 billion. In
addition, in March 2012, DIRECTV U.S. completed a $4.0 billion debt
financing consisting of $1.25 billion in 2.40% Senior Notes due 2017,
$1.5 billion in 3.80% Senior Notes due 2022 and $1.25 billion in 5.15%
Senior Notes due 2042. In April 2012, DIRECTV announcedthat it
will redeem for cash $1.5 billion of its outstanding 7.625% Senior Notes
due 2016 on May 15, 2012, at a price of 103.813% of the principal
amount, together with accrued interest.
SEGMENT FINANCIAL REVIEW
DIRECTV U.S. Segment
First Quarter Review
Three Months
DIRECTV U.S.
Ended March 31,
Dollars in Millions except ARPU
2012
2011
Revenue
$
5,499
$
5,145
Average Monthly Revenue per Subscriber(ARPU) ($)
91.99
88.79
Operating Profit Before Depreciation and Amortization(1)
1,410
1,363
OPBDA Margin(1)
25.6
%
26.5
%
Operating Profit
1,038
921
Operating Profit Margin
18.9
%
17.9
%
Capital Expenditures and Cash Flow
Cash paid for property and equipment
109
102
Cash paid for subscriber leased equipment - subscriber acquisitions
160
174
Cash paid for subscriber leased equipment - upgrade and retention
85
69
Cash paid for satellites
34
31
Cash Flow Before Interest and Taxes(2)
1,211
717
Free Cash Flow(3)
971
568
Subscriber Data (in 000's except Churn)
Gross Subscriber Additions
941
1,052
Average Monthly Subscriber Churn
1.44
%
1.50
%
Net Subscriber Additions
81
184
Cumulative Subscribers
19,966
19,407
In the quarter, DIRECTV U.S. revenues increased 7% to $5.50 billion
primarily due to strong ARPU growth and the larger subscriber base. Net
subscriber additions declined principally due to lower gross subscriber
additions partially offset by a reduction in the average monthly churn
rate. The lower gross additions were mainly due to a greater focus on
higher quality subscribers and stricter credit policies while the lower
churn rate was mainly driven by a greater percentage of subscribers on
commitments and auto-bill pay. ARPU increased 3.6% to $91.99 due mostly
to price increases on programming packages and leased boxes, higher
advanced service fees and higher penetration of premium channels,
partially offset by increased promotional offers to new and existing
customers. DIRECTV U.S. ended the quarter with 19.97 million
subscribers, an increase of 3% over the 19.41 million subscribers
reported for the quarter ended March 31, 2011.
First quarter OPBDA increased 3% to $1.41 billion and operating profit
increased 13% to $1.04 billion. OPBDA margin declined principally due to
higher programming costs mostly related to program supplier rate
increases, greater G&A primarily resulting from a $25 million property
tax adjustment in 2011, as well as higher upgrade and retention spending
associated with upgrade and churn initiatives. These increases were
partially offset by lower subscriber acquisition costs related to the
reduction in gross additions. Operating profit margin increased as the
decline in OPBDA margin was more than offset by lower depreciation and
amortization expense principally related to an increase in the estimated
depreciable life of HD set-top boxes from three years to four years
implemented in July 2011.
DIRECTV Latin America
DIRECTV Latin America (DTVLA) owns approximately 93% of Sky Brasil, 41%
of Sky Mexico and 100% of PanAmericana, which covers most of the
remaining countries in the region. Sky Mexico, whose results are
accounted for as an equity method investment and therefore are not
consolidated by DTVLA, had approximately 4.28 million subscribers as of
March 31, 2012 bringing the total subscribers in the region to 12.75
million.
Three Months
DIRECTV Latin America
Ended March 31,
Dollars in Millions except ARPU
2012
2011
Revenue
$
1,485
$
1,114
Average Monthly Revenue per Subscriber (ARPU) ($)
60.59
61.69
Operating Profit Before Depreciation and Amortization(1)
468
384
OPBDA Margin(1)
31.5
%
34.5
%
Operating Profit
249
219
Operating Profit Margin
16.8
%
19.7
%
Capital Expenditures and Cash Flow
Cash paid for property and equipment
44
11
Cash paid for subscriber leased equipment - subscriber acquisitions
252
171
Cash paid for subscriber leased equipment - upgrade and retention
103
84
Cash paid for satellites
22
0
Cash Flow Before Interest and Taxes(2)
68
156
Free Cash Flow(3)
(34
)
76
Subscriber Data(4) (in 000's except
Churn)
Gross Subscriber Additions
1,034
765
Average Monthly Total Subscriber Churn
1.80
%
1.87
%
Average Monthly Post-paid Subscriber Churn
1.47
%
1.43
%
Net Subscriber Additions
593
427
Cumulative Subscribers
8,464
6,235
First Quarter Review
In the first quarter, DTVLA revenues increased 33% to $1.49 billion
principally due to strong subscriber growth partially offset by a 1.8%
decline in ARPU. Net additions increased 39% to an all-time record of
593,000 driven by a 35% increase in gross additions to 1.03 million
principally due to greater middle market demand across the region, most
notably in Brazil, Colombia and Argentina. Also positively impacting net
additions was lower total average churn of 1.80% due in large part to
higher pre-paid reconnections in PanAmericana. This improvement was
partially offset by an increase in monthly post-paid churn in the
quarter of 1.47% primarily driven by higher churn in Brazil mostly
related to the higher penetration of middle market subscribers. The
decline in ARPU to $60.59 was principally due to unfavorable exchange
rates, mainly in Brazil and Argentina, as well as from the impact of
increased penetration of middle market subscribers, partially offset by
price increases and greater penetration of advanced services. Excluding
the impact of exchange rates, DTVLA ARPU increased approximately 1.5% in
the first quarter.
DIRECTV Latin America's first quarter 2012 OPBDA increased 22% to $468
million and operating profit rose 14% to $249 million. Also in the
quarter, OPBDA and operating profit margins declined primarily due to
increased subscriber acquisition costs due to higher gross subscriber
additions, more upgrade costs and increased customer service expenses
across the region.
CONFERENCE CALL INFORMATION
A live webcast of DIRECTV's first quarter 2012 earnings call will be
available on the company's website at www.directv.com/investor.
The webcast will begin at 2:00 p.m. ET, today May 8, 2012. Access to the
earnings call is also available in the United States by dialing (888)
401-4685 and internationally by dialing (719) 325-2286. The conference
ID number is 9400901. A replay of the call can be accessed by dialing
(888) 203-1112 in the U.S. and (719) 457-0820 internationally. The
Replay pass code is 9400901. The replay will be available from 3:00 p.m.
PT Tuesday, May 8, through 11:59 p.m. PT Tuesday, May 15, and will also
be archived on our website at www.directv.com/investor.
FOOTNOTES
(1) Operating profit before depreciation and amortization, which is a
financial measure that is not determined in accordance with accounting
principles generally accepted in the United States of America, or GAAP,
should be used in conjunction with other GAAP financial measures and is
not presented as an alternative measure of operating results, as
determined in accordance with GAAP. Please see DIRECTV's Annual Report
on Form 10-K for the year ended December 31, 2011 for further discussion
of operating profit before depreciation and amortization. Operating
profit before depreciation and amortization margin is calculated by
dividing operating profit before depreciation and amortization by total
revenues.
(2) Cash flow before interest and taxes, which is a financial measure
that is not determined in accordance with GAAP, is calculated by
deducting amounts under the captions "Cash paid for property and
equipment," "Cash paid for satellites," "Cash paid for subscriber leased
equipment - subscriber acquisitions" and "Cash paid for subscriber
leased equipment - upgrade and retention" from "Net cash provided by
operating activities" from the Consolidated Statements of Cash Flows and
adding back net interest paid and "Cash paid for income taxes." This
financial measure should be used in conjunction with other GAAP
financial measures and is not presented as an alternative measure of
cash flows from operating activities, as determined in accordance with
GAAP. DIRECTV management uses cash flow before interest and taxes to
evaluate the cash generated by our current subscriber base, net of
capital expenditures, and excluding the impact of interest and taxes,
for the purpose of allocating resources to activities such as adding new
subscribers, retaining and upgrading existing subscribers, for
additional capital expenditures and as a measure of performance for
incentive compensation purposes. We believe this measure is useful to
investors, along with other GAAP measures (such as cash flows from
operating and investing activities), to compare our operating
performance to other communications, entertainment and media companies.
We believe that investors also use current and projected cash flow
before interest and taxes to determine the ability of our current and
projected subscriber base to fund required and discretionary spending
and to help determine the financial value of the company.
(3) Free cash flow, which is a financial measure that is not determined
in accordance with GAAP, is calculated by deducting amounts under the
captions "Cash paid for property and equipment," "Cash paid for
satellites," "Cash paid for subscriber leased equipment - subscriber
acquisitions," and "Cash paid for subscriber leased equipment - upgrade
and retention" from "Net cash provided by operating activities" from the
Consolidated Statements of Cash Flows. This financial measure should be
used in conjunction with other GAAP financial measures and is not
presented as an alternative measure of cash flows from operating
activities, as determined in accordance with GAAP. DIRECTV management
uses free cash flow to evaluate the cash generated by our current
subscriber base, net of capital expenditures, for the purpose of
allocating resources to activities such as adding new subscribers,
retaining and upgrading existing subscribers, for additional capital
expenditures and as a measure of performance for incentive compensation
purposes. We believe this measure is useful to investors, along with
other GAAP measures (such as cash flows from operating and investing
activities), to compare our operating performance to other
communications, entertainment and media companies. We believe that
investors also use current and projected free cash flow to determine the
ability of our current and projected subscriber base to fund required
and discretionary spending and to help determine the financial value of
the company.
(4) DIRECTV Latin America subscriber data exclude subscribers of the Sky
Mexico service.
NOTE: This presentation may include or incorporate by reference certain
statements that we believe are, or may be considered to be,
"forward-looking statements" within the meaning of various provisions of
the Securities Act of 1933 and the Securities Exchange Act of 1934.
These forward-looking statements generally can be identified by use of
statements that include phrases such as "believe," "expect," "estimate,"
"anticipate," "intend," "plan," "project" or other similar words or
phrases. Similarly, statements that describe our objectives, plans or
goals also are forward-looking statements. All of these forward-looking
statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical results or
from those expressed or implied by the relevant forward-looking
statement. Such risks and uncertainties include, but are not limited to:
increased competition; increasing programming costs and our ability to
renew programming contracts under favorable terms; increased subscriber
churn or subscriber upgrade and retention costs; potential material
increase in subscriber acquisition costs; general economic conditions;
risks associated with doing business internationally, which for DIRECTV
Latin America include political and economic instability and foreign
currency exchange rate volatility and controls; pace of technological
development; potential intellectual property infringement; loss of key
personnel; satellite construction or launch delays; satellite launch and
operational risks; loss of a satellite; theft of satellite programming
signals; U.S. and foreign governmental and regulatory action; ability to
maintain licenses and regulatory approvals; significant debt;
indemnification obligations; reliance on network and information
systems; and the outcome of legal proceedings. We may face other risks
described from time to time in periodic reports filed by us with the
U.S. Securities and Exchange Commission.
DIRECTV (NASDAQ:DTV) is one of the world's leading providers of digital
television entertainment services. Through its subsidiaries and
affiliated companies in the United States, Brazil, Mexico and other
countries in Latin America, DIRECTV provides digital television service
to more than 19.9 million customers in the United States and over 12.7
million customers in Latin America. DIRECTV sports and entertainment
properties include three regional sports networks (Northwest, Rocky
Mountain and Pittsburgh) as well as a 60 percent ownership interest in
Game Show Network. For more information on DIRECTV, visit directv.com.
DIRECTV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
2012
2011
Revenues
$
7,046
$
6,319
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other
2,964
2,593
Subscriber service expenses
499
449
Broadcast operations expenses
104
94
Selling, general and administrative expenses, exclusive of
depreciation and amortization expense
Subscriber acquisition costs
816
796
Upgrade and retention costs
343
281
General and administrative expenses
417
340
Depreciation and amortization expense
595
611
Total operating costs and expenses
5,738
5,164
Operating profit
1,308
1,155
Interest income
12
7
Interest expense
(204
)
(172
)
Other, net
41
42
Income before income taxes
1,157
1,032
Income tax expense
(416
)
(349
)
Net income
741
683
Less: Net income attributable to noncontrolling interest
(10
)
(9
)
Net income attributable to DIRECTV
$
731
$
674
Basic earnings attributable to DIRECTV per common share
$
1.08
$
0.85
Diluted earnings attributable to DIRECTV per common share
1.07
0.85
Weighted average number of common shares outstanding (in millions)
Basic
678
793
Diluted
681
797
DIRECTV
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
March 31,
December 31,
ASSETS
2012
2011
Current assets
Cash and cash equivalents
$
4,526
$
873
Accounts receivable, net of allowances of $83 and $79
2,197
2,474
Inventories
285
280
Deferred income taxes
71
62
Prepaid expenses and other
368
552
Total current assets
7,447
4,241
Satellites, net
2,225
2,215
Property and equipment, net
5,493
5,223
Goodwill
4,109
4,097
Intangible assets, net
889
909
Investments and other assets
1,749
1,738
Total assets
$
21,912
$
18,423
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities
$
4,188
$
4,210
Unearned subscriber revenues and deferred credits
549
533
Current portion of long-term debt
1,500
-
Total current liabilities
6,237
4,743
Long-term debt
15,961
13,464
Deferred income taxes
1,796
1,771
Other liabilities and deferred credits
1,295
1,287
Commitments and contingencies
Redeemable noncontrolling interest
265
265
Stockholders' deficit
(3,642
)
(3,107
)
Total liabilities and stockholders' deficit
$
21,912
$
18,423
DIRECTV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31,
2012
2011
Cash Flows From Operating Activities
Net income
$
741
$
683
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
595
611
Amortization of deferred revenues and deferred credits
(12
)
(8
)
Share-based compensation expense
27
22
Equity in earnings from unconsolidated affiliates
(33
)
(25
)
Net foreign currency transaction gain
(13
)
(8
)
Dividends received
-
45
Gain from sale of investments
-
(26
)
Deferred income taxes
58
115
Excess tax benefit from share-based compensation
(28
)
(24
)
Other
22
14
Change in operating assets and liabilities:
Accounts receivable
312
87
Inventories
(5
)
(65
)
Prepaid expenses and other
161
53
Accounts payable and accrued liabilities
(77
)
(142
)
Unearned subscriber revenue and deferred credits
16
(5
)
Other, net
(1
)
(18
)
Net cash provided by operating activities
1,763
1,309
Cash Flows From Investing Activities
Cash paid for property and equipment
(753
)
(613
)
Cash paid for satellites
(58
)
(31
)
Proceeds from sale of investments
-
61
Other, net
25
39
Net cash used in investing activities
(786
)
(544
)
Cash Flows From Financing Activities
Cash proceeds from debt issuance
3,996
3,990
Debt issuance costs
(23
)
(28
)
Proceeds from borrowings under revolving credit facility
400
-
Repayment of borrowings under revolving credit facility
(400
)
-
Repayment of long-term debt
-
(341
)
Repayment of short-term borrowings
-
(39
)
Repayment of other long-term obligations
(13
)
(120
)
Common shares repurchased and retired
(1,260
)
(1,405
)
Taxes paid in lieu of shares issued for share-based compensation
(52
)
(53
)
Excess tax benefit from share-based compensation
28
24
Net cash provided by financing activities
2,676
2,028
Net increase in cash and cash equivalents
3,653
2,793
Cash and cash equivalents at beginning of the period
873
1,502
Cash and cash equivalents at the end of the period
$
4,526
$
4,295
Supplemental Cash Flow Information
Cash paid for interest
$
255
$
164
Cash paid for income taxes
113
77
DIRECTV
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31,
2012
2011
DIRECTV U.S.
Revenues
$
5,499
$
5,145
Operating profit before depreciation and amortization (1)
1,410
1,363
Operating profit before depreciation and amortization margin (1)
25.6
%
26.5
%
Operating profit
$
1,038
$
921
Operating profit margin
18.9
%
17.9
%
Depreciation and amortization
$
372
$
442
SKY BRASIL
Revenues
$
881
$
654
Operating profit before depreciation and amortization (1)
287
228
Operating profit before depreciation and amortization margin (1)
32.6
%
34.9
%
Operating profit
$
151
$
133
Operating profit margin
17.1
%
20.3
%
Depreciation and amortization
$
136
$
95
PANAMERICANA
Revenues
$
604
$
460
Operating profit before depreciation and amortization (1)
181
156
Operating profit before depreciation and amortization margin (1)
30.0
%
33.9
%
Operating profit
$
98
$
86
Operating profit margin
16.2
%
18.7
%
Depreciation and amortization
$
83
$
70
SPORTS NETWORKS, ELIMINATIONS and OTHER
Revenues
$
62
$
60
Operating profit before depreciation and amortization (1)
25
19
Operating profit
21
15
Depreciation and amortization
4
4
TOTAL
Revenues
$
7,046
$
6,319
Operating profit before depreciation and amortization (1)
1,903
1,766
Operating profit before depreciation and amortization margin (1)
27.0
%
27.9
%
Operating profit
$
1,308
$
1,155
Operating profit margin
18.6
%
18.3
%
Depreciation and amortization
$
595
$
611
(1) See footnote 1 above
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31,
2012
2011
Revenues
$
5,499
$
5,145
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other
2,441
2,200
Subscriber service expenses
349
351
Broadcast operations expenses
78
74
Selling, general and administrative expenses, exclusive of
depreciation and amortization expense
Subscriber acquisition costs
646
682
Upgrade and retention costs
305
259
General and administrative expenses
270
216
Depreciation and amortization expense
372
442
Total operating costs and expenses
4,461
4,224
Operating profit
1,038
921
Interest expense
(188
)
(156
)
Other, net
1
(6
)
Income before income taxes
851
759
Income tax expense
(315
)
(288
)
Net income
$
536
$
471
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
March 31,
December 31,
ASSETS
2012
2011
Current assets
Cash and cash equivalents
$
2,744
$
232
Accounts receivable, net of allowances of $52 and $51
1,818
2,126
Inventories
260
253
Prepaid expenses and other
197
419
Total current assets
5,019
3,030
Satellites, net
1,714
1,724
Property and equipment, net
3,117
3,084
Goodwill
3,177
3,177
Intangible assets, net
460
461
Other assets
303
320
Total assets
$
13,790
$
11,796
LIABILITIES AND OWNER'S DEFICIT
Current liabilities
Accounts payable and accrued liabilities
$
3,063
$
3,226
Unearned subscriber revenues and deferred credits
379
377
Current portion of long-term debt
1,500
-
Total current liabilities
4,942
3,603
Long-term debt
15,961
13,464
Deferred income taxes
1,334
1,321
Other liabilities and deferred credits
249
239
Commitments and contingencies
Owner's deficit
(8,696
)
(6,831
)
Total liabilities and owner's deficit
$
13,790
$
11,796
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
Three Months Ended
March 31,
2012
2011
Cash Flows From Operating Activities
Net income
$
536
$
471
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization expense
372
442
Amortization of deferred revenues and deferred credits
(12
)
(8
)
Share-based compensation expense
21
18
Deferred income taxes
35
84
Excess tax benefit from share-based compensation
(23
)
(20
)
Other
2
(1
)
Change in other operating assets and liabilities:
Accounts receivable
344
131
Inventories
(7
)
(66
)
Prepaid expenses and other
224
22
Accounts payable and accrued liabilities
(167
)
(108
)
Unearned subscriber revenue and deferred credits
2
(18
)
Other, net
32
(3
)
Net cash provided by operating activities
1,359
944
Cash Flows From Investing Activities
Cash paid for property and equipment
(109
)
(102
)
Cash paid for subscriber leased equipment - subscriber acquisitions
(160
)
(174
)
Cash paid for subscriber leased equipment - upgrade and retention
(85
)
(69
)
Cash paid for satellites
(34
)
(31
)
Net cash used in investing activities
(388
)
(376
)
Cash Flows From Financing Activities
Cash proceeds from debt issuance
3,996
3,990
Debt issuance costs
(23
)
(28
)
Proceeds from borrowings under revolving credit facility
400
-
Repayment of borrowings under revolving credit facility
(400
)
-
Repayment of long-term debt
-
(341
)
Repayment of other long-term obligations
(5
)
(26
)
Cash dividends to Parent
(2,450
)
(3,250
)
Cash contribution from Parent
-
60
Excess tax benefit from share-based compensation
23
20
Net cash provided by financing activities
1,541
425
Net increase in cash and cash equivalents
2,512
993
Cash and cash equivalents at beginning of the period
Reconciliation of Operating Profit Before Depreciation and
Amortization to Operating Profit*
Three Months Ended
March 31,
2012
2011
Operating Profit Before Depreciation and Amortization
$
1,903
$
1,766
Subtract: Depreciation and amortization expense
595
611
Operating Profit
$
1,308
$
1,155
*For a reconciliation of this non-GAAP financial measure for each of
our segments, please see the Notes to the Consolidated Financial
Statements which will be included in DIRECTV's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2012, which is expected to
be filed with the SEC in May 2012.
DIRECTV
Reconciliation of Cash Flow Before Interest and Taxes2
and Free Cash Flow3 to Net
Cash Provided by Operating Activities
Three Months Ended
March 31,
2012
2011
Cash Flow Before Interest and Taxes
$
1,308
$
899
Adjustments:
Cash paid for interest
(255
)
(164
)
Interest income
12
7
Income taxes paid
(113
)
(77
)
Subtotal - Free Cash Flow
952
665
Add Cash Paid For:
Property and equipment
753
613
Satellites
58
31
Net Cash Provided by Operating Activities
$
1,763
$
1,309
DIRECTV Latin America
Reconciliation of Cash Flow Before Interest and Taxes2
and Free Cash Flow3 to Net Cash Provided
by Operating Activities
Subscriber leased equipment - upgrade and retention
85
69
Satellites
34
31
Net Cash Provided by Operating Activities
$
1,359
$
944
(2) and (3) - See footnotes above
* Pre-SAC Margin, which is a financial measure that is not
determined in accordance with accounting principles generally
accepted in the United States of America, or GAAP, is calculated
for DIRECTV U.S. by adding amounts under the captions "Subscriber
acquisition costs" and "Depreciation and amortization expense" to
"Operating Profit" from the Consolidated Statements of Operations
and subtracting "Cash paid for subscriber leased equipment -
upgrade and retention" from the Consolidated Statements of Cash
Flows. This financial 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. DIRECTV management use Pre-SAC Margin to evaluate the
profitability of DIRECTV U.S.' current subscriber base for the
purpose of allocating resources to discretionary activities such
as adding new subscribers, upgrading and retaining existing
subscribers and for capital expenditures. To compensate for the
exclusion of "Subscriber acquisition costs," management also uses
operating profit and operating profit before depreciation and
amortization expense to measure profitability.
DIRECTV believes this measure is useful to investors, along with
GAAP measures (such as revenues, operating profit and net income),
to compare DIRECTV U.S.' operating performance to other
communications, entertainment and media companies. DIRECTV believes
that investors also use current and projected Pre-SAC Margin to
determine the ability of DIRECTV U.S.' current and projected
subscriber base to fund discretionary spending and to determine the
financial returns for subscriber additions.
SAC Calculation
Three Months Ended
March 31,
2012
2011
Subscriber acquisition costs (expensed)
$
646
$
682
Cash paid for subscriber leased equipment - subscriber acquisitions
160
174
Total acquisition costs
$
806
$
856
Gross subscriber additions (000's)
941
1,052
Average subscriber acquisition costs-per subscriber (SAC)
$
857
$
814
DIRECTV Media Contact: Darris Gringeri, 212-205-0882 Investor
Relations, 310-964-0808
United Kingdom
France
Deutschland
Schweiz (DE)
