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 announced that 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.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
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 232 687 Cash and
cash equivalents at end of the period $ 2,744
$ 1,680
Supplemental Cash Flow Information
Cash paid for interest $ 239 $ 148 Cash paid for income taxes 1 1
Non-GAAP Financial Measure Reconciliation
Schedules (Unaudited) DIRECTV
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
Three Months Ended March 31, 2012 2011
Cash Flow Before Interest and Taxes $ 68 $ 156 Adjustments:
Cash paid for interest (14 ) (14 ) Interest income 12 7 Income
taxes paid (100 ) (73 ) Subtotal - Free Cash
Flow (34 ) 76 Add Cash Paid For: Property and equipment 44 11
Subscriber leased equipment - subscriber acquisitions 252 171
Subscriber leased equipment - upgrade and retention 103 84
Satellites 22 - Net Cash
Provided by Operating Activities $ 387 $ 342
(2) and (3) - See footnotes above
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
Non-GAAP Financial Measure Reconciliation and SAC
Calculation (Unaudited) Reconciliation of
Pre-SAC Margin* to Operating Profit Three Months
Ended March 31, 2012 2011
Operating Profit $ 1,038 $ 921 Adjustments: Subscriber acquisition
costs (expensed) 646 682 Depreciation and amortization expense 372
442 Cash paid for subscriber leased equipment - upgrade and
retention (85 ) (69 ) Pre-SAC margin*
$ 1,971 $ 1,976 Pre-SAC margin as a
percentage of revenue* 35.8 % 38.4 %
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 $ 1,211 $ 717
Adjustments: Cash paid for interest (239 ) (148 ) Interest income 0
0 Income taxes paid (1 ) (1 ) Subtotal - Free
Cash Flow 971 568 Add Cash Paid For: Property and equipment 109 102
Subscriber leased equipment - subscriber acquisitions 160 174
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
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