DIRECTV Eclipses 37 Million Total Subscribers in the
Quarter.
- DIRECTV U.S. attains net subscriber
additions of 139,000 driven by the lowest third quarter churn in 6
years.
- Sky Brasil and PanAmericana add 260,000
net new customers in the quarter.
- DIRECTV Latin America and Sky Mexico
surpass 17 million customers.
DIRECTV Revenues Grow 6% to $7.9 Billion.
- Revenue driven by DIRECTV U.S. ARPU
growth of 6.2% along with strong DIRECTV Latin America subscriber
growth over the last year.
DIRECTV OPBDA Increases 15% to $1.9 Billion.
- DIRECTV U.S. grows OPBDA 12% driven by
strong top-line growth and disciplined cost management.
- DIRECTV Latin America increases OPBDA
23% from strong margins in Brazil due in part to the settlement of
a fee dispute.
DIRECTV Repurchases $1.3 billion of Stock in the Third
Quarter Bringing the Year-to-Date Total to $3.2 Billion Helping
Drive Diluted EPS Growth of 42% to $1.28 in the Third
Quarter.
DIRECTV (NASDAQ:DTV) today announced an increase in third
quarter 2013 revenues of 6% to $7.88 billion, operating profit
before depreciation and amortization1 (OPBDA) of 15% to $1.93
billion, operating profit of 15% to $1.23 billion, and earnings per
share of 42% to $1.28 compared to last year's third quarter.
“DIRECTV’s diversified portfolio of businesses across the
Americas delivered another solid quarter of consolidated results
highlighted by strong top-line growth and continued operational
discipline across disparate geographies, macro-economic conditions
and competitive environments,” said Mike White, President and CEO
of DIRECTV. “We continue to extend our position as the world’s
largest Pay TV service by leveraging the strength of our premier
brands and our differentiated suite of products and services across
the Americas to drive industry leading growth.” White added, “At
the same time, our commitment to profitably grow our businesses
through disciplined expense management and productivity
improvements was clearly a highlight as operating profit before
depreciation and amortization margin expanded driving double digit
OPBDA and cash flow growth in the quarter.”
DIRECTV'S Operational Review
DIRECTV Consolidated Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
Dollars in Millions except
Earnings per Common Share 2013 2012 2013
2012 Revenues $ 7,880 $ 7,416
$ 23,160 $ 21,686 Reported Operating
Profit Before Depreciation and Amortization(1) 1,933 1,686
5,934 5,598 Reported OPBDA Margin(1) 24.5 %
22.7 % 25.6 % 25.8 % Reported Operating Profit 1,225
1,068 3,817 3,787 Reported Operating Profit Margin 15.5 %
14.4 % 16.5 % 17.5 % Reported Net Income
Attributable to DIRECTV 699 565
2,049 2,007 Reported Diluted Earnings Per
Common Share $ 1.28 $ 0.90 $
3.65 $ 3.06
Capital Expenditures and Cash
Flow
Cash paid for property and equipment 218 178
563 546 Cash paid for subscriber
leased equipment - subscriber acquisitions 418
379 1,190 1,081 Cash paid for
subscriber leased equipment - upgrade and retention 255
186
718 533 Cash paid for satellites
82 47 276 231
Cash Flow Before Interest and Taxes(2) 1,085
957 3,371 3,293 Free Cash
Flow(3) 372 319 1,608
1,742
Adjusted Financial Results
Adjusted Operating Profit
Before Depreciation and Amortization(1)
6,100 5,598 Adjusted OPBDA Margin(1)
26.3 % 25.8 % Adjusted Operating Profit
3,983 3,787 Adjusted Operating Profit Margin
17.2 % 17.5 % Adjusted Net Income Attributable to DIRECTV
2,185 2,007 Adjusted Diluted Earnings Per
Common Share
$ 3.89 $ 3.06
"Adjusted" financial results in the table above and year-to-date
discussion below exclude a $166 million pre-tax charge ($136
million after-tax) associated with the revaluation of the net
monetary assets of the company's subsidiary in Venezuela at the
time of the bolivar's devaluation in February 2013.
Third Quarter Review
DIRECTV's third quarter revenues of $7.88 billion increased 6%
principally due to higher ARPU at DIRECTV U.S. as well as
subscriber growth at DIRECTV Latin America (DTVLA) and DIRECTV U.S.
over the last twelve months. These increases were partially offset
by lower ARPU at DTVLA primarily due to unfavorable changes in
exchange rates.
In the third quarter, DTVLA settled a fee dispute and paid $92
million to Escritorio Central de Arrecadacao, or ECAD, the
organization in Brazil responsible for collecting performance
rights fees under Brazilian law. The settlement resulted in a
pre-tax gain for the reversal of amounts previously expensed of
$128 million. The gain is comprised of a reduction in "Broadcast
Programming and Other" of $70 million, a reduction in "Interest
Expense" of $37 million and $21 million in "Other, net" in the
Consolidated Statements of Operations.
Third quarter 2013 OPBDA and operating profit increased 15% to
$1.93 billion and $1.23 billion, respectively, while OPBDA and
operating profit margin increased to 24.5% and 15.5%, respectively.
The improvements in margin were primarily due to the $70 million
ECAD settlement and improvements at DIRECTV U.S. and DTVLA driven
by slightly lower subscriber acquisition costs, partially offset by
higher programming costs at DIRECTV U.S. Operating profit margin
was also impacted by higher depreciation and amortization mostly at
DTVLA primarily related to higher leased equipment and
infrastructure capital expenditures, as well as higher churn in
Brazil.
Net income attributable to DIRECTV increased 24% to $699 million
mainly from the higher operating profit but also due to lower
interest expense as the impact from the ECAD settlement more than
offset increased interest expense related to higher average debt
balances. These gains were partially offset by higher tax expense
associated with the higher pre-tax income. Diluted earnings per
share grew 42% to $1.28 in the quarter due to the higher net income
and share repurchases made over the last twelve months.
Cash flow before interest and taxes2 increased 13% to $1.09
billion and free cash flow3 increased 17% to $372 million compared
to the third quarter of 2012 primarily due to the higher OPBDA and
higher cash generated from working capital mostly due to the timing
of receivables, payables and a reduction in inventory levels at
DIRECTV U.S. These increases were partially offset by higher
capital expenditures mostly related to increased cash paid for
leased equipment at DIRECTV U.S. associated with higher penetration
of advanced boxes to existing customers, as well as higher
infrastructure and satellite capital expenditures at both DIRECTV
U.S. and DTVLA. Free cash flow was also impacted by higher net
interest due to the timing of payments and higher average debt
balances, as well as a $92 million payment to settle the ECAD
dispute. Also during the quarter but not included in free cash flow
was cash paid for share repurchases of $1.26 billion, as well as
$137 million in payments for spectrum at DTVLA and new patent
licenses at DIRECTV U.S.
Year to Date Review
DIRECTV's revenues for the first nine months of 2013 of $23.16
billion increased 7% principally due to higher ARPU at DIRECTV U.S.
as well as subscriber growth over the last year at DTVLA and
DIRECTV U.S. These increases were partially offset by lower ARPU at
DTVLA primarily due to unfavorable changes in exchange rates. Year
to date adjusted OPBDA increased 9% to $6.10 billion and adjusted
operating profit increased 5% to $3.98 billion compared with the
same period of 2012. Adjusted OPBDA margin increased to 26.3% in
the first nine months of 2013 as the ECAD settlement at DTVLA and
lower subscriber acquisition costs at DIRECTV U.S were partially
offset by higher programming costs at DIRECTV U.S. Adjusted
operating profit margin was negatively impacted by higher
depreciation and amortization at both DTVLA and DIRECTV U.S.
primarily resulting from higher leased equipment and infrastructure
capital expenditures. Reported OPBDA increased 6% to $5.93 billion
and reported operating profit increased to $3.82 billion in the
first nine months of 2013.
Adjusted net income attributable to DIRECTV increased 9% to
$2.19 billion compared with the first nine months of 2012 primarily
due to the higher adjusted operating profit. Also impacting the
comparison was a $59 million non-cash pre-tax charge in 2013 due to
the deconsolidation of DSN Northwest, as well as a $64 million
pre-tax charge in 2012 for the loss on the early retirement of
debt. In addition, adjusted diluted earnings per share improved 27%
to $3.89 due to the higher net income, as well as share repurchases
made over the last twelve months. Reported net income attributable
to DIRECTV increased 2% to $2.05 billion while reported diluted
earnings per share improved 19% to $3.65.
Cash flow before interest and taxes increased 2% to $3.37
billion compared to the first nine months of 2012 due to the higher
OPBDA and increased cash generated from working capital mainly
associated with a reduction in inventory levels at DIRECTV U.S.
These increases were mostly offset by greater capital expenditures
driven by increased cash paid for leased equipment related to
higher penetration of advanced boxes to both new and existing
customers at DIRECTV U.S., as well as increased infrastructure
expenditures and higher leased equipment to new customers at DTVLA.
Also in the period, free cash flow declined to $1.61 billion, as
the higher cash flow before interest and taxes was more than offset
by an increase in tax payments mostly related to the reversal of
prior bonus depreciation deductions and the timing of tax payments,
greater interest payments related to higher average debt balances,
as well as a $92 million payment to settle the ECAD dispute.
Also during the first nine months of 2013 but not included in
free cash flow was cash paid for share repurchases of $3.23
billion, $155 million in payments for spectrum at DTVLA and new
patent licenses at DIRECTV U.S., cash received of $140 million for
the sale of investments primarily for the partial sale of the Game
Show Network equity investment, as well as two debt issuances by
DIRECTV U.S. -- the first in January 2013 of $750 million principal
amount of 1.750% senior notes due in 2018, and the second in May
2013 of €500 million (or about $650 million) aggregate principal
amount of 2.750% senior notes due in 2023.
SEGMENT FINANCIAL REVIEW DIRECTV
U.S. Segment DIRECTV U.S. Three Months
EndedSeptember 30, Nine Months EndedSeptember 30,
Dollars
in Millions except ARPU 2013 2012 2013
2012 Revenues $ 6,170 $ 5,769
$ 17,903 $ 16,915 Average Monthly
Revenue per Subscriber (ARPU) ($) 102.37 96.41
99.00 94.27 Operating Profit
Before Depreciation and Amortization(1) 1,396 1,251 4,568
4,246 OPBDA Margin(1) 22.6 % 21.7 %
25.5 % 25.1 % Operating Profit 987 876 3,343 3,130 Operating
Profit Margin 16.0 % 15.2 % 18.7 % 18.5
%
Capital Expenditures and Cash Flow
Cash paid for property and
equipment 155 137 420
377 Cash paid for subscriber leased equipment -
subscriber acquisitions 190 184
515 462 Cash paid for subscriber leased
equipment - upgrade and retention 162 79
392 209 Cash paid for satellites
46 23 154 139
Cash Flow Before Interest and Taxes(2) 1,060
861 3,179 3,018 Free Cash
Flow(3) 404 275 1,662
1,773
Subscriber Data (in 000's except Churn)
Gross
Subscriber Additions 1,109 1,107
2,841 2,911 Average Monthly Subscriber Churn
1.61 % 1.74 % 1.53 % 1.57 % Net
Subscriber Additions 139 67 76
96 Cumulative Subscribers 20,160
19,981 20,160 19,981
Third Quarter Review
In the quarter, DIRECTV U.S. revenues increased 7% to $6.17
billion compared with the third quarter of 2012 primarily due to
strong ARPU growth along with a larger subscriber base. DIRECTV
U.S. net subscriber additions increased in the quarter relative to
the prior year period principally due to a lower average monthly
churn rate of 1.61%. In the third quarter of 2012, churn was
unfavorably impacted by a contract dispute with a large programmer
that resulted in the removal of several channels for nine days.
ARPU increased 6.2% to $102.37 mostly due to higher advanced
receiver service fees, price increases on programming packages,
higher fees for a new enhanced warranty program, as well as higher
pay-per-view revenues. These improvements were partially offset by
increased promotional offers to new and existing customers. DIRECTV
U.S. ended the quarter with 20.16 million subscribers compared with
19.98 million subscribers reported for the quarter ended
September 30, 2012.
Third quarter OPBDA increased 12% to $1.40 billion and operating
profit was 13% higher at $987 million. OPBDA and operating profit
margin increased to 22.6% and 16.0%, respectively in the third
quarter, driven principally by the incremental margin generated by
the higher revenues combined with relatively unchanged subscriber
acquisition costs due mostly to the flat gross additions in the
quarter compared to the year ago period. Also contributing to the
margin improvement was relatively unchanged subscriber services and
broadcast operations expenses mainly due to productivity
improvements and disciplined cost management. These margin
improvements were partially offset by higher programming costs
mostly related to programming supplier rate increases.
DIRECTV Latin America
DIRECTV Latin America 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 Brasil and PanAmericana
ended the third quarter with 5.26 million and 6.08 million
subscribers, respectively. Sky Mexico, whose results are accounted
for as an equity method investment and therefore are not
consolidated by DTVLA, had approximately 5.88 million subscribers
as of September 30, 2013, bringing the total subscribers in
the region to 17.22 million.
DIRECTV Latin America Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
Dollars in Millions except
ARPU 2013 2012 2013 2012 Revenues
$ 1,662 $ 1,577 $ 5,076
$ 4,570 Average Monthly Revenue per Subscriber (ARPU)
($) 49.42 55.97 51.68
57.83 Operating Profit Before Depreciation and
Amortization(1) 558 455 1,393 1,368 OPBDA
Margin(1) 33.6 % 28.9 % 27.4 % 29.9 %
Operating Profit 262 221 518 694 Operating Profit Margin
15.8 % 14.0 % 10.2 % 15.2 %
Capital
Expenditures and Cash Flow
Cash paid for property and equipment 62
40 142 167 Cash
paid for subscriber leased equipment - subscriber acquisitions
228 195 675 619
Cash paid for subscriber leased equipment - upgrade and
retention 93 107 326
324 Cash paid for satellites 32
22 112 86 Cash Flow Before
Interest and Taxes(2) 53 81 162
238 Free Cash Flow(3) (40 ) 15
(89 ) (5 )
Subscriber Data(4)
(in 000's except Churn)
Gross Subscriber Additions 1,023
1,081 3,393 3,234 Average
Monthly Total Subscriber Churn 2.27 % 1.91 %
2.43 % 1.84 % Average Monthly Post-paid Subscriber Churn
1.93 % 1.54 % 2.18 % 1.51 % Net
Subscriber Additions 260 543
1,008 1,781 Cumulative Subscribers
11,337 9,666 11,337 9,666
Third Quarter Review
In the third quarter, DTVLA revenues increased 5% to $1.66
billion principally due to strong subscriber growth over the last
year partially offset by an 11.7% decline in ARPU mostly driven by
unfavorable changes in foreign exchange rates. Net additions of
260,000 were lower than the prior year due to a decline in gross
additions and higher churn. Gross additions fell 5% to 1.02 million
principally due to certain limitations on importing set-top boxes
for new customers in Venezuela, as well as lower post-paid
subscriber additions in Argentina and Brazil mostly associated with
stricter credit and sales filters. These declines were partially
offset by improved gross additions in Chile and Colombia. Total
average monthly churn increased to 2.27% and average monthly
post-paid churn increased to 1.93% mainly due to higher churn in
Brazil primarily related to the effect of a higher mix of middle
market subscribers along with more challenging economic and
competitive conditions.
The decline in ARPU to $49.42 was mainly due to the devaluation
in Venezuela and unfavorable changes in foreign exchange rates in
Brazil and Argentina. Excluding the impact of changes in exchange
rates, ARPU increased 3.7% in the quarter principally due to price
increases and continued upgrades including advanced services,
partially offset by the higher penetration of lower ARPU middle
market subscribers.
Also in the third quarter, DTVLA OPBDA increased 23% to $558
million and OPBDA margin was higher at 33.6% while operating profit
climbed 19% to $262 million and operating profit margin improved to
15.8%. Excluding the impact of the favorable ECAD settlement, OPBDA
margin increased to 29.4% primarily driven by the higher revenue as
well as lower subscriber acquisition and general and administrative
expenses in Brazil. These improvements were partially offset by
higher programming costs driven mainly by inflationary pressure in
Venezuela as well as expenses related to special events, as well as
increased customer service costs at PanAmericana. Excluding the
impact of the favorable ECAD settlement, operating profit margin
declined to 11.6% as the increase in OPBDA margin was more than
offset by the impact of higher depreciation and amortization
resulting from increased leased equipment and infrastructure
capital expenditures, as well as the higher churn in Brazil.
CONTACT INFORMATION
Media Contact: Darris Gringeri (212) 205-0882.
Investor Relations: (310) 964-0808
CONFERENCE CALL INFORMATION
A live webcast of DIRECTV's third quarter 2013 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 November 5, 2013. Access to the earnings call is also
available in the United States by dialing (888) 710-4015 and
internationally by dialing (913) 312-1437. The conference ID number
is 7239151. 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 7239151. The replay will be available from 3:00 p.m.
PT Tuesday, November 5 through 3:00 p.m. PT Tuesday,
November 12 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, 2012 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. In addition, DTVLA gross and net additions
exclude 7,000 video subscribers acquired during the three months
ended September 30, 2012 as well as 1,000 and 14,000 video
subscribers acquired during the nine months ended
September 30, 2013 and September 30, 2012, respectively.
DTVLA cumulative subscriber counts include these acquired
customers.
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 over 20 million customers in the United
States and over 17 million customers in Latin America. DIRECTV
sports and entertainment properties include two regional sports
networks (Rocky Mountain and Pittsburgh) and minority ownership
interests in Root Sports Northwest and 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
EndedSeptember 30, Nine Months EndedSeptember
30, 2013 2012 2013
2012 Revenues $ 7,880 $ 7,416
$ 23,160 $ 21,686
Operating
costs and expenses Costs of revenues, exclusive of depreciation
and amortization expense Broadcast programming and other 3,441
3,288 9,912 9,249 Subscriber service expenses 583 566 1,674 1,592
Broadcast operations expenses 98 103 305 310 Selling, general and
administrative expenses, exclusive of depreciation and amortization
expense Subscriber acquisition costs 941 944 2,564 2,549 Upgrade
and retention costs 411 382 1,153 1,056 General and administrative
expenses 473 447 1,452 1,332 Venezuelan currency devaluation charge
— — 166 — Depreciation and amortization expense 708
618 2,117 1,811
Total
operating costs and expenses 6,655 6,348
19,343 17,899
Operating
profit 1,225 1,068 3,817 3,787 Interest income 15 17 56 40
Interest expense (182 ) (204 ) (618 ) (622 ) Other, net 43
39 6 13
Income
before income taxes 1,101 920 3,261 3,218 Income tax expense
(391 ) (348 ) (1,192 ) (1,189 ) Net
income 710 572 2,069 2,029 Less: Net income attributable to
noncontrolling interest (11 ) (7 ) (20 )
(22 )
Net income attributable to DIRECTV $ 699
$ 565 $ 2,049 $ 2,007
Basic earnings attributable to DIRECTV per common
share $ 1.29 $ 0.91 $ 3.68 $ 3.08
Diluted earnings
attributable to DIRECTV per common share $ 1.28 $ 0.90 $ 3.65 $
3.06 Weighted average number of common shares outstanding (in
millions): Basic 541 624 557 651 Diluted 545 629 562 655
DIRECTV CONSOLIDATED BALANCE SHEETS
(Dollars in Millions) (Unaudited)
ASSETS September 30, 2013 December
31, 2012 Current assets Cash and cash equivalents $
1,622 $ 1,902 Accounts receivable, net of allowances of $118 and
$81 2,527 2,696 Inventories 350 412 Deferred income taxes 73 73
Prepaid expenses and other 457 471
Total current assets 5,029 5,554
Satellites, net
2,443 2,357
Property and equipment, net 6,462 6,038
Goodwill 3,985 4,063
Intangible assets, net 930 832
Investments and other assets 1,739
1,711
Total assets $ 20,588 $
20,555
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities Accounts
payable and accrued liabilities $ 4,017 $ 4,618 Unearned subscriber
revenues and deferred credits 715 565 Current debt 597
358
Total current liabilities 5,329
5,541
Long-term debt 18,635 17,170
Deferred income
taxes 1,542 1,672
Other liabilities and deferred credits
1,290 1,203
Commitments and contingencies Redeemable
noncontrolling interest 400 400
Total stockholders'
deficit (6,608 ) (5,431 )
Total liabilities
and stockholders' deficit $ 20,588 $
20,555
DIRECTV CONSOLIDATED
STATEMENTS OF CASH FLOWS (Dollars in Millions)
(Unaudited) Nine Months EndedSeptember 30,
2013 2012 Cash Flows From
Operating Activities Net income $ 2,069 $ 2,029 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 2,117 1,811 Venezuelan
currency devaluation charge 166 — DSN Northwest deconsolidation
charge 59 — Amortization of deferred revenues and deferred credits
(40 ) (54 ) Share-based compensation expense 79 77 Equity in
earnings from unconsolidated affiliates (86 ) (107 ) Net foreign
currency transaction loss 42 32 Dividends received 38 28 Net gains
from sale of investments (8 ) (11 ) Deferred income taxes (19 ) 41
Excess tax benefit from share-based compensation (24 ) (30 ) Other
(91 ) 76 Change in other operating assets and liabilities: Accounts
receivable 200 15 Inventories 53 (97 ) Prepaid expenses and other 9
146 Accounts payable and accrued liabilities (477 ) (143 ) Unearned
subscriber revenue and deferred credits 152 139 Other, net
116 181 Net cash provided by operating
activities 4,355 4,133
Cash Flows
From Investing Activities Cash paid for property and equipment
(2,471 ) (2,160 ) Cash paid for satellites (276 ) (231 ) Investment
in companies, net of cash acquired (47 ) (4 ) Proceeds from sale of
investments 140 24 Other, net (158 ) 25 Net
cash used in investing activities (2,812 ) (2,346 )
DIRECTV CONSOLIDATED STATEMENTS OF
CASH FLOWS-(continued) (Dollars in Millions)
(Unaudited) Nine Months
EndedSeptember 30, 2013
2012 Cash Flows From Financing Activities Issuance of
commercial paper (maturity 90 days or less), net 90 — Proceeds from
short-term borrowings 441 — Repayment of short-term borrowings (327
) — Proceeds from borrowings under revolving credit facility 10 400
Repayment of borrowings under revolving credit facility (10 ) (400
) Proceeds from long-term debt 1,484 5,190 Debt issuance costs (8 )
(35 ) Repayment of long-term debt (9 ) (1,500 ) Repayment of other
long-term obligations (48 ) (40 ) Common shares repurchased and
retired (3,228 ) (3,828 ) Stock options exercised — 2 Taxes paid in
lieu of shares issued for share-based compensation (61 ) (58 )
Excess tax benefit from share-based compensation 24 30 Other, net
6 — Net cash used in financing
activities (1,636 ) (239 ) Effect of exchange rate
changes on Venezuelan cash and cash equivalents (187 )
— Net increase (decrease) in cash and cash
equivalents (280 ) 1,548 Cash and cash equivalents at beginning of
the period 1,902 873 Cash and cash
equivalents at end of the period $ 1,622 $
2,421
Supplemental Cash Flow Information Cash paid
for interest $ 784 $ 710 Cash paid for income taxes 1,035 881
DIRECTV SELECTED
SEGMENT DATA (Dollars in Millions) (Unaudited)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2013
2012 2013 2012 DIRECTV
U.S. Revenues $ 6,170 $ 5,769 $ 17,903 $ 16,915 Operating
profit before depreciation and amortization (1) 1,396 1,251 4,568
4,246 Operating profit before depreciation and amortization margin
(1) 22.6 % 21.7 % 25.5 % 25.1 % Operating profit $ 987 $ 876 $
3,343 $ 3,130 Operating profit margin 16.0 % 15.2 % 18.7 % 18.5 %
Depreciation and amortization $ 409 $ 375
$ 1,225 $ 1,116
SKY
BRASIL Revenues $ 883 $ 868 $ 2,790 $ 2,587 Operating profit
before depreciation and amortization (1) 353 255 926 802 Operating
profit before depreciation and amortization margin (1) 40.0 % 29.4
% 33.2 % 31.0 % Operating profit $ 169 $ 122 $ 379 $ 399 Operating
profit margin 19.1 % 14.1 % 13.6 % 15.4 % Depreciation and
amortization $ 184 $ 133 $ 547
$ 403
PANAMERICANA Revenues $
779 $ 709 $ 2,286 $ 1,983 Operating profit before depreciation and
amortization (1) 205 200 467 566 Operating profit before
depreciation and amortization margin (1) 26.3 % 28.2 % 20.4 % 28.5
% Operating profit $ 93 $ 99 $ 139 $ 295 Operating profit margin
11.9 % 14.0 % 6.1 % 14.9 % Depreciation and amortization $
112 $ 101 $ 328 $ 271
SPORTS NETWORKS, ELIMINATIONS and OTHER
Revenues $ 48 $ 70 $ 181 $ 201 Operating loss before depreciation
and amortization (1) (21 ) (20 ) (27 ) (16 ) Operating loss (24 )
(29 ) (44 ) (37 ) Depreciation and amortization 3
9 17 21
TOTAL Revenues $ 7,880 $ 7,416 $ 23,160 $ 21,686 Operating
profit before depreciation and amortization (1) 1,933 1,686 5,934
5,598 Operating profit before depreciation and amortization margin
(1) 24.5 % 22.7 % 25.6 % 25.8 % Operating profit $ 1,225 $ 1,068 $
3,817 $ 3,787 Operating profit margin 15.5 % 14.4 % 16.5 % 17.5 %
Depreciation and amortization $ 708 $ 618
$ 2,117 $ 1,811 (1) See
footnote 1 above
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in
Millions) (Unaudited)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2013 2012
2013 2012 Revenues $ 6,170
$ 5,769 $ 17,903 $ 16,915
Operating costs and expenses Costs of revenues,
exclusive of depreciation and amortization expense Broadcast
programming and other 2,904 2,685 8,147 7,549 Subscriber service
expenses 391 390 1,102 1,096 Broadcast operations expenses 68 74
220 229 Selling, general and administrative expenses, exclusive of
depreciation and amortization expense Subscriber acquisition costs
756 757 1,979 2,017 Upgrade and retention costs 359 340 1,002 930
General and administrative expenses 296 272 885 848 Depreciation
and amortization expense 409 375
1,225 1,116
Total operating costs and
expenses 5,183 4,893 14,560
13,785
Operating profit 987 876 3,343
3,130 Interest income 1 1 2 1 Interest expense (207 ) (189 ) (615 )
(577 ) Other, net 6 17 22
(39 )
Income before income taxes 787 705 2,752 2,515
Income tax expense (302 ) (266 ) (1,031 )
(936 )
Net income $ 485 $ 439
$ 1,721 $ 1,579
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED BALANCE SHEETS (Dollars in Millions)
(Unaudited) ASSETS September 30,
2013 December 31, 2012 Current assets Cash
and cash equivalents $ 702 $ 739 Accounts receivable, net of
allowances of $74 and $42 2,002 2,096 Inventories 307 372 Prepaid
expenses and other 182 247
Total
current assets 3,193 3,454
Satellites, net 1,820 1,795
Property and equipment, net 3,556 3,290
Goodwill
3,188 3,177
Intangible assets, net 525 453
Other
assets 410 321
Total assets
$ 12,692 $ 12,490
LIABILITIES
AND OWNER'S DEFICIT Current
liabilities Accounts payable and accrued liabilities $ 3,008 $
3,391 Unearned subscriber revenues and deferred credits 518 367
Current debt 562 358
Total current
liabilities 4,088 4,116
Long-term debt 18,585 17,170
Deferred income taxes 1,463 1,386
Other liabilities and
deferred credits 423 326
Commitments and contingencies
Owner's deficit (11,867 ) (10,508 )
Total
liabilities and owner's deficit $ 12,692 $
12,490
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions) (Unaudited) Nine Months
EndedSeptember 30, 2013
2012 Cash Flows From Operating Activities Net income
$ 1,721 $ 1,579 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
expense 1,225 1,116 Amortization of deferred revenues and deferred
credits (40 ) (54 ) Share-based compensation expense 60 61 Deferred
income taxes 128 86 Excess tax benefit from share-based
compensation (20 ) (25 ) Other 4 21 Change in other operating
assets and liabilities: Accounts receivable 127 92 Inventories 66
(88 ) Prepaid expenses and other 67 242 Accounts payable and
accrued liabilities (385 ) (251 ) Unearned subscriber revenue and
deferred credits 153 111 Other, net 37 70
Net cash provided by operating activities 3,143
2,960
Cash Flows From Investing
Activities Cash paid for property and equipment (420 ) (377 )
Cash paid for subscriber leased equipment - subscriber acquisitions
(515 ) (462 ) Cash paid for subscriber leased equipment - upgrade
and retention (392 ) (209 ) Cash paid for satellites (154 ) (139 )
Investment in companies, net of cash acquired (38 ) (1 ) Proceeds
from sale of investments 12 24 Other, net (67 ) (1 )
Net cash used in investing activities (1,574 ) (1,165
)
Cash Flows From Financing Activities Issuance of
commercial paper (maturity 90 days or less), net 90 — Proceeds from
short-term borrowings 441 — Repayment of short-term borrowings (327
) — Proceeds from borrowings under revolving credit facility 10 400
Repayment of borrowings under revolving credit facility (10 ) (400
) Proceeds from issuance of long-term debt 1,390 5,190 Debt
issuance costs (8 ) (35 ) Repayment of long-term debt — (1,500 )
Repayment of other long-term obligations (18 ) (15 ) Cash dividends
paid to Parent (3,200 ) (5,000 ) Excess tax benefit from
share-based compensation 20 25 Other, net 6 —
Net cash used in financing activities (1,606 )
(1,335 ) Net increase (decrease) in cash and cash equivalents (37 )
460 Cash and cash equivalents at beginning of the period 739
232 Cash and cash equivalents at end of the
period $ 702 $ 692
Supplemental Cash
Flow Information Cash paid for interest $ 733 $ 665 Cash paid
for income taxes 786 581
DIRECTV Consolidated Non-GAAP Financial
Measure Reconciliation Schedules
(Dollars in Millions)
(Unaudited)
DIRECTV Reconciliation of Cash Flow Before
Interest and Taxes2 and Free Cash Flow3
to
Net Cash Provided by Operating
Activities
Three Months EndedSeptember 30, Nine
Months EndedSeptember 30, 2013 2012
2013 2012 Cash Flow Before Interest and Taxes
$ 1,085 $ 957 $ 3,371 $ 3,293 Adjustments: Cash paid for interest
(395 ) (333 ) (784 ) (710 ) Interest income 15 17 56 40 Income
taxes paid (333 ) (322 ) (1,035 ) (881 )
Subtotal - Free Cash Flow 372 319 1,608 1,742 Add Cash Paid For:
Property and equipment 891 743 2,471 2,160 Satellites 82
47 276 231 Net Cash Provided by
Operating Activities $ 1,345 $ 1,109 $ 4,355
$ 4,133 (2) and (3) - See footnotes above
Reconciliation of Reported Operating Profit Before
Depreciation and Amortization to Operating Profit* Three
Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2013 2012 2013
2012 Operating profit before depreciation and amortization $
1,933 $ 1,686 $ 5,934 $ 5,598 Subtract: Depreciation and
amortization 708 618 2,117 1,811
Operating profit $ 1,225 $ 1,068 $
3,817 $ 3,787
* 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 September 30, 2013, which is expected to be filed with the
SEC in November 2013.
DIRECTV Consolidated Non-GAAP
Financial Measure Reconciliation Schedules (Dollars in
Millions, Except Per Share Amounts) (Unaudited)
DIRECTV Reconciliation of Adjusted
Operating Profit Before Depreciation and Amortization (excluding
the Venezuelan currency devaluation charge) to Operating Profit
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2013 2012
2013 2012 Revenues $ 7,880 $ 7,416 $ 23,160 $
21,686 Operating profit before depreciation and amortization
excluding the Venezuelan currency devaluation charge $ 1,933 $
1,686 $ 6,100 $ 5,598 OPBDA growth excluding Venezuelan currency
devaluation charge 14.7 % 9.0 % Subtract: Venezuelan currency
devaluation charge — — 166 —
Operating profit before depreciation and amortization 1,933
1,686 5,934 5,598 Subtract: Depreciation and amortization 708
618 2,117 1,811 Operating
profit $ 1,225 $ 1,068 $ 3,817 $
3,787 Operating profit before depreciation and amortization
margin excluding the Venezuelan currency devaluation charge
24.5 % 22.7 % 26.3 % 25.8 %
Reconciliation of Adjusted Operating Profit (excluding the
Venezuelan currency devaluation charge) to Operating Profit
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2013 2012 2013
2012 Revenues $ 7,880 $ 7,416 $ 23,160 $ 21,686
Operating profit excluding the Venezuelan currency
devaluation charge $ 1,225 $ 1,068 $ 3,983 $ 3,787 Operating Profit
growth excluding Venezuelan currency devaluation charge 14.7 % 5.2
% Subtract: Venezuelan currency devaluation charge —
— 166 — Operating profit $ 1,225
$ 1,068 $ 3,817 $ 3,787
Operating profit margin excluding the Venezuelan currency
devaluation charge 15.5 % 14.4 % 17.2 %
17.5 %
Reconciliation of Adjusted Net Income
(excluding the Venezuelan currency devaluation charge) to Net
Income Three Months EndedSeptember 30, Nine
Months EndedSeptember 30, 2013 2012
2013 2012 Net income attributable to DIRECTV
excluding the Venezuelan currency devaluation charge $ 699 $ 565 $
2,185 $ 2,007 Subtract: Venezuelan after-tax currency devaluation
charge — — 136 — Net income
attributable to DIRECTV $ 699 $ 565 $ 2,049
$ 2,007 Net Income growth excluding Venezuelan
currency devaluation charge 23.7 % 8.9 % Diluted Weighted Average
Shares 545 629 562 655 Adjusted Diluted Earnings Per Common Share $
1.28 $ 0.90 $ 3.89 $ 3.06 Adjusted Diluted Earnings Per Common
Share growth excluding Venezuelan currency devaluation charge
42.2 % 27.1 %
DIRECTV Latin America Non-GAAP
Financial Measure Reconciliation Schedules
(Dollars in Millions)
(Unaudited)
DIRECTV Latin America Reconciliation of Cash Flow Before
Interest and Taxes2 and Free Cash Flow3
to
Net Cash Provided by Operating
Activities
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2013 2012 2013
2012 Cash Flow Before Interest and Taxes $ 53 $ 81 $ 162 $
238 Adjustments: Cash paid for interest (39 ) (13 ) (69 ) (40 )
Interest income 10 16 41 39 Income taxes paid (64 )
(69 ) (223 ) (242 ) Subtotal - Free Cash Flow (40 ) 15 (89 )
(5 ) Add Cash Paid For: Property and equipment 62 40 142 167
Subscriber leased equipment - subscriber acquisitions 228 195 675
619 Subscriber leased equipment - upgrade and retention 93 107 326
324 Satellites 32 22 112 86
Net Cash Provided by Operating Activities $ 375
$ 379 $ 1,166 $ 1,191 (2) and
(3) - See footnotes above
Reconciliation of Adjusted Operating
Profit Before Depreciation and Amortization (excluding the
Venezuelan currency devaluation charge) to Operating Profit
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2013 2012 2013
2012 Revenues $ 1,662 $ 1,577 $ 5,076 $ 4,570
Operating profit before depreciation and amortization excluding the
Venezuelan currency devaluation charge $ 558 $ 455 $ 1,559 $ 1,368
OPBDA growth excluding Venezuelan currency devaluation charge 22.6
% 14.0 % Subtract: Venezuelan currency devaluation charge —
— 166 — Operating profit before
depreciation and amortization 558 455 1,393 1,368 Subtract:
Depreciation and amortization 296 234 875
674 Operating profit $ 262 $ 221
$ 518 $ 694 Operating profit before
depreciation and amortization margin excluding the Venezuelan
currency devaluation charge 33.6 % 28.9 % 30.7
% 29.9 %
Reconciliation of Adjusted
Operating Profit (excluding the Venezuelan currency devaluation
charge) to Operating Profit Three Months
EndedSeptember 30, Nine Months EndedSeptember
30, 2013 2012 2013 2012
Revenues $ 1,662 $ 1,577 $ 5,076 $ 4,570 Operating profit
excluding the Venezuelan currency devaluation charge $ 262 $ 221 $
684 $ 694 Operating Profit growth excluding Venezuelan currency
devaluation charge 18.6 % (1.4 )% Subtract: Venezuelan currency
devaluation charge — — 166 —
Operating profit $ 262 $ 221 $ 518
$ 694 Operating profit margin excluding the
Venezuelan currency devaluation charge 15.8 % 14.0 %
13.5 % 15.2 %
DIRECTV Latin America
Non-GAAP Financial Measure Reconciliation Schedules (Dollars
in Millions) (Unaudited)
Reconciliation of Adjusted Operating Profit Before
Depreciation and Amortization (excluding the ECAD settlement gain)
to Operating Profit Three Months EndedSeptember
30, Nine Months EndedSeptember 30, 2013
2012 2013 2012 Revenues $ 1,662 $ 1,577 $
5,076 $ 4,570 Operating profit before depreciation and
amortization excluding the ECAD settlement gain $ 488 $ 455 $ 1,323
$ 1,368 Subtract: ECAD settlement gain (70 ) — (70 )
— Operating profit before depreciation and
amortization 558 455 1,393 1,368 Subtract: Depreciation and
amortization 296 234 875 674
Operating profit $ 262 $ 221 $ 518
$ 694 Operating profit before depreciation and
amortization margin excluding the ECAD settlement gain 29.4
% 28.9 % 26.1 % 29.9 %
DIRECTV Latin America Reconciliation of Adjusted
Operating Profit (excluding the ECAD settlement gain) to Operating
Profit Three Months EndedSeptember 30, Nine
Months EndedSeptember 30, 2013 2012
2013 2012 Revenues $ 1,662 $ 1,577 $ 5,076 $ 4,570
Operating profit excluding the ECAD settlement gain $ 192 $
221 $ 448 $ 694 Subtract: ECAD settlement gain (70 ) —
(70 ) — Operating profit $ 262 $
221 $ 518 $ 694 Operating profit margin
excluding the ECAD settlement gain 11.6 % 14.0 %
8.8 % 15.2 %
DIRECTV U.S. Non-GAAP
Financial Measure Reconciliation Schedules (Dollars in
Millions) (Unaudited)
DIRECTV
HOLDINGS LLC (DIRECTV U.S.) Reconciliation of Pre-SAC
Margin* to Operating Profit Three Months
EndedSeptember 30, Nine Months EndedSeptember
30, 2013 2012 2013 2012 Operating
profit $ 987 $ 876 $ 3,343 $ 3,130 Adjustments: Subscriber
acquisition costs (expensed) 756 757 1,979 2,017 Depreciation and
amortization 409 375 1,225 1,116 Cash paid for subscriber leased
equipment - upgrade and retention (162 ) (79 ) (392 )
(209 ) Pre-SAC Margin $ 1,990 $ 1,929 $ 6,155
$ 6,054 Pre-SAC Margin as a percentage of
revenue 32.3 % 33.4 % 34.4 % 35.8 %
Reconciliation of Cash Flow Before Interest and
Taxes2 and Free Cash Flow3 to
Net Cash Provided by Operating
Activities
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2013 2012 2013
2012 Cash Flow Before Interest and Taxes $ 1,060 $ 861 $
3,179 $ 3,018 Adjustments: Cash paid for interest (373 ) (317 )
(733 ) (665 ) Interest income 1 1 2 1 Income taxes paid (284
) (270 ) (786 ) (581 ) Subtotal - Free Cash Flow 404
275 1,662 1,773 Add Cash Paid For: Property and equipment 155 137
420 377 Subscriber leased equipment - subscriber acquisitions 190
184 515 462 Subscriber leased equipment - upgrade and retention 162
79 392 209 Satellites 46 23 154
139 Net Cash Provided by Operating Activities $ 957
$ 698 $ 3,143 $ 2,960 (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.
DIRECTV U.S.
Non-GAAP Financial Measure SAC Calculations (Dollars in
Millions, Except Per Subscriber Amounts) (Unaudited)
DIRECTV HOLDINGS LLC (DIRECTV
U.S.) SAC Calculation Three Months
EndedSeptember 30, Nine Months EndedSeptember
30, 2013 2012 2013 2012 Subscriber
acquisition costs (expensed) $ 756 $ 757 $ 1,979 $ 2,017 Cash paid
for subscriber leased equipment - subscriber acquisitions 190
184 515 462 Total acquisition
costs $ 946 $ 941 $ 2,494 $
2,479 Gross subscriber additions (000's) 1,109 1,107 2,841 2,911
Average subscriber acquisition costs - per subscriber (SAC)
$ 853 $ 850 $ 878 $ 852
DIRECTVMedia Contact: Darris Gringeri, (212) 205-0882Investor
Relations: (310) 964-0808
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