UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of report (Date
of earliest event reported)
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July
31, 2014
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DIRECTV
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(Exact Name of Registrant as Specified in Charter)
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Delaware
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(State or Other Jurisdiction of Incorporation)
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1-34554
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26-4772533
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(Commission File Number)
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(IRS Employer Identification No.)
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2260 East Imperial Highway El Segundo, California
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90245
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(310) 964-5000
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(Registrant’s Telephone Number, Including Area Code)
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2.
below):
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
ITEM 2.02. Results of Operations and Financial Condition.
On July 31, 2014, DIRECTV issued a press release, which contained
information regarding the second quarter 2014 consolidated results of
DIRECTV. The press release did not include certain financial statements,
related notes and certain other financial information that will be filed
with the Securities and Exchange Commission as part of DIRECTV’s
Quarterly Report on Form 10-Q. A copy of the press release relating to
such announcement, dated July 31, 2014, is attached hereto as Exhibit
99.1 and is incorporated herein by reference.
This information
shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated
by reference in any filing under the Securities Act of 1933, as amended,
or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.
SIGNATURE
Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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DIRECTV
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(Registrant)
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Date:
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July 31, 2014
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By:
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/s/ Patrick T. Doyle
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Name:
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Patrick T. Doyle
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Title:
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Executive Vice President and
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Chief Financial Officer
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EXHIBIT INDEX
Exhibit No.
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Exhibit
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99.1
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Press Release, dated July 31, 2014
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Exhibit 99.1
DIRECTV
Announces Second Quarter 2014 Results
DIRECTV
Surpasses 39 Million Total Subscribers in the Quarter.
-
Sky
Brasil and PanAmericana achieve record-breaking gross subscriber
additions resulting in strong DTVLA second quarter net new customer
additions of 543,000.
DIRECTV
Revenues Grow 5% to $8.1 Billion.
-
Revenue
driven by DIRECTV U.S. ARPU growth of 4.6% along with strong DIRECTV
Latin America subscriber growth over the last year.
DIRECTV's
Reported Diluted EPS Increases 35% to $1.59.
DIRECTV
Free Cash Flow Increases 24% to Nearly $1.5 Billion Year To Date.
EL SEGUNDO, Calif.--(BUSINESS WIRE)--July 31, 2014--DIRECTV (NASDAQ:DTV)
today reported that second quarter 2014 revenues increased 5% to $8.11
billion, reported operating profit before depreciation and amortization1
(OPBDA) increased 3% to $2.15 billion, reported operating profit
increased 5% to $1.42 billion and reported diluted earnings per share
increased 35% to $1.59 compared to last year's second quarter.
“Building on our first quarter momentum, DIRECTV delivered yet another
excellent quarter of operating and financial results,” said Mike White,
President and CEO of DIRECTV. “We continue to extend our position as the
world’s largest pay TV service with industry leading growth by
leveraging the strength of our premier brands and distinctive products
and service offerings throughout the Americas.” White added, “DIRECTV
Latin America’s second quarter results highlight the tremendous success
of our unparalleled FIFA World Cup coverage, while DIRECTV U.S.
continues to successfully execute on our overarching goal to balance top
line sales with bottom line profitability. Overall, DIRECTV continues to
deliver on our strategic imperatives as we prepare for the exciting
opportunities that our merger with AT&T will bring to our customers,
employees and key stakeholders."
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DIRECTV'S Operational Review
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DIRECTV Consolidated
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Three Months Ended June 30,
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Six Months Ended June 30,
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Dollars in Millions except Earnings per Common Share
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2014
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2013
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2014
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2013
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Reported Financial Results
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Revenues
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$
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8,109
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$
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7,700
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$
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15,964
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$
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15,280
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Reported Operating Profit Before Depreciation and Amortization(1)
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2,153
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2,081
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4,094
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4,001
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Reported OPBDA Margin(1)
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26.6
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%
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27.0
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%
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25.6
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%
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26.2
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%
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Reported Operating Profit
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1,424
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1,350
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2,651
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2,592
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Reported Operating Profit Margin
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17.6
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%
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17.5
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%
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16.6
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%
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17.0
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%
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Reported Net Income Attributable to DIRECTV
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806
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660
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1,367
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1,350
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Reported Diluted Earnings Per Common Share
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$
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1.59
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$
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1.18
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$
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2.67
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$
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2.37
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Capital Expenditures and Cash Flow
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Cash Paid for Property and Equipment
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255
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193
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454
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345
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Cash Paid for Subscriber Leased Equipment - Subscriber Acquisitions
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300
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403
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545
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772
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Cash Paid for Subscriber Leased Equipment - Upgrade and Retention
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212
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236
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418
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463
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Cash Paid for Satellites
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55
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116
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109
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194
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Cash Flow Before Interest and Taxes(2)
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1,408
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1,179
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2,693
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2,286
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Free Cash Flow(3)
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652
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526
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1,538
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1,236
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Venezuela Currency Charge Impact On(4):
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Operating Profit Before Depreciation and Amortization
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(3
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)
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—
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(284
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)
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(166
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)
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Operating Profit
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(3
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)
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—
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(284
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)
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(166
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)
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Net Income Attributable to DIRECTV
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(3
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)
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—
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(284
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)
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(136
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Diluted Earnings Per Common Share
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$
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—
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$
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—
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$
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(0.55
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)
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$
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(0.24
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)
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Adjusted Financial Results
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Adjusted Operating Profit Before Depreciation and Amortization(1)
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2,156
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2,081
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4,378
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4,167
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Adjusted OPBDA Margin(1)
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26.6
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%
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27.0
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%
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27.4
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%
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27.3
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%
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Adjusted Operating Profit
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1,427
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1,350
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2,935
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2,758
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Adjusted Operating Profit Margin
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17.6
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%
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17.5
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%
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18.4
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%
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18.0
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%
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Adjusted Net Income Attributable to DIRECTV
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809
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660
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1,651
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1,486
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Adjusted Diluted Earnings Per Common Share
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$
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1.59
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$
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1.18
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$
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3.22
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$
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2.61
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"Adjusted" financial results exclude the impact of the gains and charges
outlined above associated with the remeasurement of the net monetary
assets of the company's subsidiary in Venezuela. See footnote 4 for
additional information.
Second Quarter Review
DIRECTV's second quarter revenues increased 5% to $8.11 billion
principally due to strong ARPU growth 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 due to unfavorable changes in exchange rates. Reported
OPBDA increased 3% to $2.15 billion, while reported OPBDA margin
decreased to 26.6% in the quarter. The decline in margin was primarily
due to higher programming and subscriber acquisition costs at both
DIRECTV U.S. and DTVLA. Reported operating profit increased 5% to $1.42
billion, while reported operating profit margin remained flat at 17.6%.
The operating profit margin was unchanged as the lower OPBDA margin was
offset by the impact of lower depreciation expense at DTVLA compared to
the prior year period.
Second quarter reported net income attributable to DIRECTV increased 22%
to $806 million due to the higher reported operating profit, as well as
favorable changes on the "Other, net" line of the Consolidated
Statements of Operations. "Other, net" was impacted by a $44 million
improvement in foreign currency translation at Sky Brasil and a $59
million non-cash pre-tax charge in the second quarter of 2013 due to the
deconsolidation of DSN Northwest. Reported diluted earnings per share
grew 35% to $1.59 in the quarter due to the higher adjusted net income
attributable to DIRECTV and the impact of share repurchases.
Cash flow before interest and taxes2 increased 19% to $1.41
billion compared to the second quarter of 2013, primarily due to the
higher OPBDA along with a reduction in cash paid for leased equipment at
DIRECTV U.S. and DTVLA related to declining set-top box costs and the
timing of purchases at DTVLA. Free cash flow3 grew 24% to
$652 million compared to the second quarter of 2013, as the higher cash
flow before interest and taxes was partially offset by an increase in
income tax payments related to higher earnings before taxes, as well as
higher interest payments associated with an increase in average debt
balances.
Also during the quarter, but not included in free cash flow, were an
April 2014 debt redemption by DIRECTV U.S. of $1,000 million principal
amount of 4.750% senior notes due in 2014 and cash paid for share
repurchases of $491 million. DIRECTV halted share buybacks following the
announcement of the proposed transaction with AT&T on May 18, 2014.
Year to Date Review
DIRECTV's revenues for the first six months of 2014 of $15.96 billion
increased 4% 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. Adjusted OPBDA increased 5% to
$4.38 billion and adjusted operating profit increased 6% to $2.94
billion compared with the same period of 2013. Adjusted OPBDA margin
remained relatively unchanged in the period, while adjusted operating
profit margin expanded from 18.0% to 18.4% due to the impact of
relatively unchanged depreciation expense at DTVLA compared to the prior
year period. Reported OPBDA and reported operating profit both increased
2% to $4.09 billion and $2.65 billion, respectively, in the first half
of the year.
Adjusted net income attributable to DIRECTV increased 11% to $1.65
billion compared with the first six months of 2013 primarily due to
higher adjusted operating profit and favorable comparisons on the
"Other, net" line of the Consolidated Statements of Operations. "Other,
net" was impacted by a $44 million improvement in foreign currency
translation at Sky Brasil and a $59 million non-cash pre-tax charge in
the second quarter of 2013 due to the deconsolidation of DSN Northwest.
These increases were partially offset by an increase in income tax
expense related to higher earnings before taxes, as well as higher
interest expense associated with an increase in average debt balances.
Adjusted diluted earnings per share improved 23% to $3.22 due to the
higher net income, as well as the impact of share repurchases. Reported
net income attributable to DIRECTV increased slightly to $1.37 billion
while reported diluted earnings per share improved 13% to $2.67.
Cash flow before interest and taxes increased 18% to $2.69 billion
compared to the first six months of 2013 primarily due to the higher
OPBDA, along with a reduction in cash paid for leased equipment at
DIRECTV U.S. and DTVLA related to declining set-top box costs and the
timing of purchases at DTVLA. Free cash flow grew 24% to $1.54 billion
compared to the first six months of 2013, as the higher cash flow before
interest and taxes was partially offset by an increase in income tax
payments related to higher earnings before taxes, as well as higher
interest payments associated with an increase in average debt balances.
Also during the first half of 2014, but not included in free cash flow,
were a March 2014 debt issuance by DIRECTV U.S. of $1,250
million principal amount of 4.45% senior notes due in 2024, an April
2014 debt redemption by DIRECTV U.S. of $1,000 million principal amount
of 4.750% senior notes due in 2014, cash paid for share repurchases of
$1.39 billion, as well as a $316 million reduction in DIRECTV’s cash
balance resulting from the devaluation of the Venezuelan bolivar
denominated cash balance in March 2014.
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SEGMENT FINANCIAL REVIEW
DIRECTV U.S. Segment
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DIRECTV U.S.
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Three Months Ended June 30,
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Six Months Ended June 30,
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Dollars in Millions except ARPU
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2014
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2013
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2014
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2013
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Reported Financial Results
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Revenues
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$
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6,272
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$
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5,943
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$
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12,359
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$
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11,733
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Average Monthly Revenue per Subscriber (ARPU) ($)
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103.26
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98.73
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101.72
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97.43
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Operating Profit Before Depreciation and Amortization(1)
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1,748
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1,651
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3,417
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3,172
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OPBDA Margin(1)
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27.9
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%
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27.8
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%
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27.6
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%
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27.0
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%
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Operating Profit
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1,319
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1,241
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2,562
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|
|
2,356
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Operating Profit Margin
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21.0
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%
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20.9
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%
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20.7
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%
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20.1
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%
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Capital Expenditures and Cash Flow
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|
|
|
|
|
|
|
|
|
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Cash Paid for Property and Equipment
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183
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154
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327
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265
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Cash Paid for Subscriber Leased Equipment - Subscriber Acquisitions
|
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115
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151
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|
232
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|
|
325
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Cash Paid for Subscriber Leased Equipment - Upgrade and Retention
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104
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|
|
119
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|
214
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|
|
230
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Cash Paid for Satellites
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22
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|
55
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33
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|
|
108
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Cash Flow Before Interest and Taxes(2)
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1,236
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|
1,127
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2,303
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2,119
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Subscriber Data (in 000's except Churn)
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Gross Subscriber Additions
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908
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839
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1,799
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1,732
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Average Monthly Subscriber Churn
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1.55
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%
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|
1.53
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%
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1.50
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%
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|
1.49
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%
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Net Subscriber Disconnections
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(34
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)
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(84
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)
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(22
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)
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(63
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)
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Cumulative Subscribers
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20,231
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|
20,021
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20,231
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20,021
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Second Quarter Review
In the quarter, DIRECTV U.S. revenues increased 6% to $6.27 billion
compared with the second quarter of 2013 primarily due to strong ARPU
growth along with a larger subscriber base. The ARPU increase of 4.6% to
$103.26 was driven by price increases on programming packages, higher
advanced receiver service fees, higher fees for the new enhanced
warranty program, as well as increased commercial business and ad sales
revenues. These improvements were partially offset by increased
promotional offers to new and existing customers.
DIRECTV U.S. net subscriber losses of approximately (34) thousand
improved compared to the prior year period primarily due to an 8%
increase in gross additions to approximately 908 thousand, partially
offset by a slightly higher average monthly churn rate of 1.55%
principally resulting from a more competitive environment. The
improvement in gross additions was primarily driven by streamlined
promotional offers and investments in retail distributors. DIRECTV U.S.
ended the quarter with 20.23 million subscribers.
Second quarter OPBDA increased 6% to $1.75 billion and OPBDA margin
improved slightly from 27.8% to 27.9% principally due to higher revenues
combined with lower upgrade and retention expenses mostly related to
reduced equipment costs, as well as relatively unchanged general and
administrative expenses. These improvements were mostly offset by higher
subscriber acquisition costs associated with the increase in gross
additions and higher programming costs primarily related to programming
supplier rate increases. Operating profit increased 6% to $1.32 billion
and operating profit margin was up slightly from 20.9% to 21.0% in the
second quarter mainly due to the higher OPBDA and OPBDA margin.
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DIRECTV Latin America
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DIRECTV Latin America
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Three Months Ended June 30,
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Six Months Ended June 30,
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Dollars in Millions except ARPU
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2014
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|
2013
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2014
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2013
|
Reported Financial Results
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Revenues
|
|
$
|
1,789
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|
|
$
|
1,686
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$
|
3,510
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|
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$
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3,414
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|
Average Monthly Revenue per Subscriber (ARPU) ($)
|
|
48.88
|
|
|
51.13
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|
48.79
|
|
|
52.82
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|
Reported Operating Profit Before Depreciation and Amortization(1)
|
|
438
|
|
|
455
|
|
697
|
|
|
835
|
|
Reported OPBDA Margin(1)
|
|
24.5
|
%
|
|
27.0
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%
|
19.9
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%
|
|
24.5
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%
|
Reported Operating Profit
|
|
142
|
|
|
139
|
|
116
|
|
|
256
|
|
Reported Operating Profit Margin
|
|
7.9
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%
|
|
8.2
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%
|
3.3
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%
|
|
7.5
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%
|
Capital Expenditures and Cash Flow
|
|
|
|
|
|
|
|
|
|
|
|
Cash Paid for Property and Equipment
|
|
70
|
|
|
39
|
|
126
|
|
|
80
|
|
Cash Paid for Subscriber Leased Equipment - Subscriber Acquisitions
|
|
185
|
|
|
252
|
|
313
|
|
|
447
|
|
Cash Paid for Subscriber Leased Equipment - Upgrade and Retention
|
|
108
|
|
|
117
|
|
204
|
|
|
233
|
|
Cash Paid for Satellites
|
|
27
|
|
|
58
|
|
65
|
|
|
80
|
|
Cash Flow Before Interest and Taxes(2)
|
|
150
|
|
|
7
|
|
354
|
|
|
109
|
|
Subscriber Data (in 000's except Churn)
|
|
|
|
|
|
|
|
|
|
|
|
Gross Subscriber Additions(6)
|
|
1,311
|
|
|
1,189
|
|
2,422
|
|
|
2,370
|
|
Average Monthly Total Subscriber Churn(5)
|
|
2.10
|
%
|
|
3.10
|
%
|
2.11
|
%
|
|
2.51
|
%
|
Average Monthly Post-paid Subscriber Churn(5)
|
|
1.90
|
%
|
|
2.86
|
%
|
1.88
|
%
|
|
2.31
|
%
|
Net Subscriber Additions(5)(6)
|
|
543
|
|
|
165
|
|
904
|
|
|
748
|
|
Cumulative Subscribers (5) (6)
|
|
12,472
|
|
|
11,077
|
|
12,472
|
|
|
11,077
|
|
Venezuela Currency Charge Impact On(4):
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit Before Depreciation and Amortization
|
|
(3
|
)
|
|
—
|
|
(284
|
)
|
|
(166
|
)
|
Operating Profit
|
|
(3
|
)
|
|
—
|
|
(284
|
)
|
|
(166
|
)
|
Adjusted Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Profit Before Depreciation and Amortization(1)
|
|
441
|
|
|
455
|
|
981
|
|
|
1,001
|
|
Adjusted OPBDA Margin(1)
|
|
24.7
|
%
|
|
27.0
|
%
|
27.9
|
%
|
|
29.3
|
%
|
Adjusted Operating Profit
|
|
145
|
|
|
139
|
|
400
|
|
|
422
|
|
Adjusted Operating Profit Margin
|
|
8.1
|
%
|
|
8.2
|
%
|
11.4
|
%
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
"Adjusted" financial results exclude the impact of the gains and charges
outlined above associated with the remeasurement of the net monetary
assets of the company's subsidiary in Venezuela. See footnote 4 for
additional information.
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 Mexico, whose results are accounted for as
an equity method investment and therefore are not consolidated by DTVLA,
had approximately 6.36 million subscribers as of June 30, 2014, bringing
the total subscribers in the region to 18.83 million.
|
|
|
|
Sky Brasil Segment
|
|
|
|
|
Sky Brasil
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
Dollars in Millions except ARPU
|
|
2014
|
|
2013
|
2014
|
|
2013
|
Reported Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,011
|
|
|
$
|
942
|
|
$
|
1,950
|
|
|
$
|
1,907
|
|
Average Monthly Revenue per Subscriber (ARPU) ($)
|
|
60.77
|
|
|
60.32
|
|
59.21
|
|
|
61.72
|
|
Operating Profit Before Depreciation and Amortization(1)
|
|
289
|
|
|
262
|
|
600
|
|
|
573
|
|
OPBDA Margin(1)
|
|
28.6
|
%
|
|
27.8
|
%
|
30.8
|
%
|
|
30.0
|
%
|
Operating Profit
|
|
114
|
|
|
56
|
|
262
|
|
|
210
|
|
Operating Profit Margin
|
|
11.3
|
%
|
|
5.9
|
%
|
13.4
|
%
|
|
11.0
|
%
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital Expenditures
|
|
229
|
|
|
263
|
|
390
|
|
|
470
|
|
Net Subscriber Additions (Disconnections)(5)(6) (in 000's)
|
|
137
|
|
|
(80
|
)
|
246
|
|
|
128
|
|
Cumulative Subscribers(5)(6) (in 000's)
|
|
5,617
|
|
|
5,167
|
|
5,617
|
|
|
5,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter Review
Excluding changes in foreign exchange rates, Sky Brasil's second quarter
revenues grew 15% versus the prior year period driven by a 7% increase
in the average number of subscribers and an 8% increase in local
currency ARPU. The increase in local currency ARPU was principally due
to reduced promotional offers, as well as growth in advanced services.
When factoring in unfavorable changes in foreign exchange rates, Sky
Brasil's revenues increased 7% to $1.01 billion and ARPU improved 0.7%
to $60.77 compared to the second quarter of 2013.
Second quarter net subscriber additions of approximately 137 thousand
were higher than the prior year period due to record gross additions, as
well as a lower average monthly churn rate. The increase in gross
additions was primarily driven by demand related to the FIFA World Cup.
Churn in the quarter was lower than the prior year period due to the
termination of subscribers related to the improper crediting of certain
customer accounts in the second quarter of 2013(5).
Also in the second quarter, Sky Brasil OPBDA increased 10% to $289
million and OPBDA margin expanded from 27.8% to 28.6% primarily due to
the increase in local currency ARPU, partially offset by higher expenses
associated with the broadband network buildout. Operating profit more
than doubled to $114 million and operating profit margin increased from
5.9% to 11.3% due to the improvements in OPBDA and OPBDA margin, as well
as lower depreciation expense compared to the prior year period. The
second quarter of 2013 was unfavorably impacted by additional
depreciation associated with capitalized installation costs and
subscriber equipment related to the higher subscriber churn(5).
|
|
|
|
PanAmericana and Other Segment
|
|
|
|
|
PanAmericana and Other
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
Dollars in Millions except ARPU
|
|
2014
|
|
2013
|
2014
|
|
2013
|
Reported Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
778
|
|
|
$
|
744
|
|
$
|
1,560
|
|
|
$
|
1,507
|
|
Average Monthly Revenue per Subscriber (ARPU) ($)
|
|
38.96
|
|
|
42.96
|
|
39.99
|
|
|
44.79
|
|
Reported Operating Profit Before Depreciation and Amortization(1)
|
|
149
|
|
|
193
|
|
97
|
|
|
262
|
|
Reported OPBDA Margin(1)
|
|
19.2
|
%
|
|
25.9
|
%
|
6.2
|
%
|
|
17.4
|
%
|
Reported Operating Profit (Loss)
|
|
28
|
|
|
83
|
|
(146
|
)
|
|
46
|
|
Reported Operating Profit Margin
|
|
3.6
|
%
|
|
11.2
|
%
|
*NM
|
|
3.1
|
%
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital Expenditures
|
|
161
|
|
|
203
|
|
318
|
|
|
370
|
|
Net Subscriber Additions (in 000's)
|
|
406
|
|
|
245
|
|
658
|
|
|
620
|
|
Cumulative Subscribers (in 000's)
|
|
6,855
|
|
|
5,910
|
|
6,855
|
|
|
5,910
|
|
Venezuela Currency Charge Impact On(4):
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit Before Depreciation and Amortization
|
|
(3
|
)
|
|
—
|
|
(284
|
)
|
|
(166
|
)
|
Operating Profit
|
|
(3
|
)
|
|
—
|
|
(284
|
)
|
|
(166
|
)
|
Adjusted Financial Results
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Profit Before Depreciation and Amortization(1)
|
|
152
|
|
|
193
|
|
381
|
|
|
428
|
|
Adjusted OPBDA Margin(1)
|
|
19.5
|
%
|
|
25.9
|
%
|
24.4
|
%
|
|
28.4
|
%
|
Adjusted Operating Profit
|
|
31
|
|
|
83
|
|
138
|
|
|
212
|
|
Adjusted Operating Profit Margin
|
|
4.0
|
%
|
|
11.2
|
%
|
8.8
|
%
|
|
14.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
* Percentage not meaningful
"Adjusted" financial results exclude the impact of the gains and charges
outlined above associated with the remeasurement of the net monetary
assets of the company's subsidiary in Venezuela. See footnote 4 for
additional information.
Second Quarter Review
Excluding changes in foreign exchange rates, second quarter revenues in
the PanAmericana and Other segment grew 42% versus the prior year period
driven by a 15% increase in the average number of subscribers and a 23%
increase in local currency ARPU. The increase in local currency ARPU was
principally due to price increases and growth in advanced services,
partially offset by the higher penetration of lower ARPU mass market
subscribers. When factoring in unfavorable changes in foreign exchange
rates, most notably in Argentina and Venezuela, revenues increased 5% to
$778 million compared to the second quarter of 2013, while ARPU
decreased 9.3% to $38.96.
Second quarter subscriber net additions of approximately 406 thousand
were higher than the prior year period due to record gross additions and
lower average monthly subscriber churn primarily driven by demand
related to the FIFA World Cup, including higher pre-paid subscriber
reconnection rates.
Also in the second quarter, reported OPBDA and reported OPBDA margin in
the PanAmericana and Other segment decreased to $149 million and 19.2%,
respectively. The declines were primarily due to higher programming
costs associated with special events including the FIFA World Cup and
increased subscriber acquisition costs related to the higher gross
additions. OPBDA margin was also negatively impacted by inflation and
the timing of price increases in Venezuela. In addition, reported
operating profit decreased to $28 million and reported operating profit
margin declined to 3.6% due to the lower OPBDA and OPBDA margin, as well
as the impact of higher depreciation and amortization resulting from
increased leased equipment and infrastructure capital expenditures.
CONFERENCE CALL INFORMATION
A live webcast of DIRECTV's second quarter 2014 earnings call will be
available on the company's website at investor.directv.com. The webcast
will begin at 2:00 p.m. ET, today July 31, 2014. Access to the earnings
call is also available in the United States by dialing (888) 300-2342
and internationally by dialing (719) 325-2333. The conference ID number
is 9916031. A replay will also be archived on our website at
investor.directv.com beginning August 1, 2014.
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, 2013 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) In February 2013, the Venezuelan government announced a devaluation
of the bolivar from the official exchange rate of 4.3 bolivars per U.S.
dollar to an official rate of 6.3 bolivars per U.S. dollar. As a result
of the devaluation, we recorded a pre-tax charge of $166 million ($136
million after tax) in the first quarter of 2013 related to the
remeasurement of the bolivar denominated net monetary assets of our
Venezuelan subsidiary as of the date of the devaluation. This charge is
listed as "Venezuelan currency devaluation charge" in the Consolidated
Statements of Operations.
In the first quarter of 2013, the Venezuelan government announced an
additional currency exchange system, the Sistema Complementario de
Administración de Divisas, or SICAD 1, intended to function as an
auction system for participants to exchange bolivars for U.S. dollars.
Effective January 24, 2014, the Venezuelan government announced that
dividends and royalties would be subject to the SICAD 1 program. We
believe the SICAD 1 rate is the most representative rate to use for
remeasurement, as the official rate of 6.3 bolivars per U.S. dollar will
likely be reserved only for the settlement of U.S. dollar denominated
obligations related to purchases of “essential goods and services,” and
the equity of our Venezuelan subsidiary would be realized, if at all,
through permitted dividends paid at the SICAD 1 rate. Therefore, as of
March 31, 2014, we are remeasuring our Venezuelan subsidiary’s financial
statements in U.S. dollars using the exchange rate determined by
periodic auctions under SICAD 1, which was 10.7 bolivars per U.S.
dollar. Until that date, we used the official exchange rate of 6.3
bolivars per U.S. dollar. As a result of the remeasurement, we recorded
a pre-tax (and after-tax) charge of $281 million in the first quarter of
2014 related to the remeasurement of the bolivar denominated net
monetary assets of our Venezuelan subsidiary. This charge is listed as
"Venezuelan currency devaluation charge" in the Consolidated Statements
of Operations. Beginning in the second quarter of 2014, we are
remeasuring the results of the Venezuelan subsidiary at the
weighted-average rate of SICAD 1 auctions during the reporting period,
and remeasuring the net monetary asset balance at the period-end rate
based on the latest auction.
(5) Based on the results of an internal investigation, DTVLA determined
that, beginning in 2012, certain employees of Sky Brasil directed
activities which were inconsistent with Sky Brasil's authorized policies
for subscriber retention and churn management. These activities had the
effect of artificially reducing churn and increasing the Sky Brasil
subscriber base during portions of 2012 and the first quarter of 2013.
See DIRECTV's Current Report on Form 8-K filed with the SEC on June 27,
2013 for further details. Prior year results for subscribers, churn and
ARPU have not been adjusted for the findings of this investigation.
(6) DIRECTV Latin America subscriber data exclude subscribers of the Sky
Mexico service. In addition, DTVLA gross and net additions exclude 1,000
video subscribers acquired in transactions in Brazil during the six
months ended June 30, 2013. 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 18 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 Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
|
$
|
8,109
|
|
|
$
|
7,700
|
|
|
$
|
15,964
|
|
|
$
|
15,280
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
3,498
|
|
|
3,275
|
|
|
6,881
|
|
|
6,471
|
|
Subscriber service expenses
|
|
574
|
|
|
554
|
|
|
1,125
|
|
|
1,091
|
|
Broadcast operations expenses
|
|
107
|
|
|
97
|
|
|
204
|
|
|
207
|
|
Selling, general and administrative expenses, exclusive of
depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
898
|
|
|
809
|
|
|
1,725
|
|
|
1,623
|
|
Upgrade and retention costs
|
|
362
|
|
|
374
|
|
|
683
|
|
|
742
|
|
General and administrative expenses
|
|
517
|
|
|
510
|
|
|
971
|
|
|
979
|
|
Venezuelan currency devaluation charge
|
|
—
|
|
|
—
|
|
|
281
|
|
|
166
|
|
Depreciation and amortization expense
|
|
729
|
|
|
731
|
|
|
1,443
|
|
|
1,409
|
|
Total operating costs and expenses
|
|
6,685
|
|
|
6,350
|
|
|
13,313
|
|
|
12,688
|
|
Operating profit
|
|
1,424
|
|
|
1,350
|
|
|
2,651
|
|
|
2,592
|
|
Interest income
|
|
12
|
|
|
19
|
|
|
25
|
|
|
41
|
|
Interest expense
|
|
(230
|
)
|
|
(219
|
)
|
|
(462
|
)
|
|
(436
|
)
|
Other, net
|
|
35
|
|
|
(75
|
)
|
|
92
|
|
|
(37
|
)
|
Income before income taxes
|
|
1,241
|
|
|
1,075
|
|
|
2,306
|
|
|
2,160
|
|
Income tax expense
|
|
(431
|
)
|
|
(414
|
)
|
|
(927
|
)
|
|
(801
|
)
|
Net income
|
|
810
|
|
|
661
|
|
|
1,379
|
|
|
1,359
|
|
Less: Net income attributable to noncontrolling interest
|
|
(4
|
)
|
|
(1
|
)
|
|
(12
|
)
|
|
(9
|
)
|
Net income attributable to DIRECTV
|
|
$
|
806
|
|
|
$
|
660
|
|
|
$
|
1,367
|
|
|
$
|
1,350
|
|
Basic earnings attributable to DIRECTV per common share
|
|
$
|
1.60
|
|
|
$
|
1.19
|
|
|
$
|
2.70
|
|
|
$
|
2.39
|
|
Diluted earnings attributable to DIRECTV per common share
|
|
$
|
1.59
|
|
|
$
|
1.18
|
|
|
$
|
2.67
|
|
|
$
|
2.37
|
|
Weighted average number of common shares outstanding (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
504
|
|
|
556
|
|
|
507
|
|
|
565
|
|
Diluted
|
|
508
|
|
|
561
|
|
|
512
|
|
|
569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
June 30, 2014
|
|
|
December 31, 2013
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,290
|
|
|
$
|
2,180
|
|
Accounts receivable, net of allowances of $127 and $95
|
|
2,489
|
|
|
2,547
|
|
Inventories
|
|
312
|
|
|
283
|
|
Deferred income taxes
|
|
110
|
|
|
140
|
|
Prepaid expenses and other
|
|
668
|
|
|
803
|
|
Total current assets
|
|
5,869
|
|
|
5,953
|
|
Satellites, net
|
|
2,464
|
|
|
2,467
|
|
Property and equipment, net
|
|
6,874
|
|
|
6,650
|
|
Goodwill
|
|
3,992
|
|
|
3,970
|
|
Intangible assets, net
|
|
903
|
|
|
920
|
|
Investments and other assets
|
|
2,024
|
|
|
1,945
|
|
Total assets
|
|
$
|
22,126
|
|
|
$
|
21,905
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
4,314
|
|
|
$
|
4,685
|
|
Unearned subscriber revenues and deferred credits
|
|
637
|
|
|
589
|
|
Current debt
|
|
1,542
|
|
|
1,256
|
|
Total current liabilities
|
|
6,493
|
|
|
6,530
|
|
Long-term debt
|
|
18,439
|
|
|
18,284
|
|
Deferred income taxes
|
|
1,798
|
|
|
1,804
|
|
Other liabilities and deferred credits
|
|
1,523
|
|
|
1,456
|
|
Commitments and contingencies
|
|
|
|
|
|
|
Redeemable noncontrolling interest
|
|
—
|
|
|
375
|
|
Total stockholders' deficit
|
|
(6,127
|
)
|
|
(6,544
|
)
|
Total liabilities and stockholders' deficit
|
|
$
|
22,126
|
|
|
$
|
21,905
|
|
|
|
|
|
|
|
|
|
|
DIRECTV
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
|
2013
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
Net income
|
|
$
|
1,379
|
|
|
$
|
1,359
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
1,443
|
|
|
1,409
|
|
Venezuelan currency devaluation charge
|
|
281
|
|
|
166
|
|
DSN Northwest deconsolidation charge
|
|
—
|
|
|
59
|
|
Amortization of deferred revenues and deferred credits
|
|
(24
|
)
|
|
(26
|
)
|
Share-based compensation expense
|
|
45
|
|
|
59
|
|
Equity in earnings from unconsolidated affiliates
|
|
(78
|
)
|
|
(56
|
)
|
Net foreign currency transaction (gain) loss
|
|
(11
|
)
|
|
33
|
|
Dividends received
|
|
—
|
|
|
35
|
|
Net gains from sale of investments
|
|
(17
|
)
|
|
(8
|
)
|
Deferred income taxes
|
|
115
|
|
|
(39
|
)
|
Excess tax benefit from share-based compensation
|
|
(22
|
)
|
|
(24
|
)
|
Other
|
|
45
|
|
|
29
|
|
Change in other operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
133
|
|
|
140
|
|
Inventories
|
|
(29
|
)
|
|
—
|
|
Prepaid expenses and other
|
|
122
|
|
|
22
|
|
Accounts payable and accrued liabilities
|
|
(342
|
)
|
|
(322
|
)
|
Unearned subscriber revenue and deferred credits
|
|
48
|
|
|
43
|
|
Other, net
|
|
(24
|
)
|
|
131
|
|
Net cash provided by operating activities
|
|
3,064
|
|
|
3,010
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
(1,417
|
)
|
|
(1,580
|
)
|
Cash paid for satellites
|
|
(109
|
)
|
|
(194
|
)
|
Investment in companies, net of cash acquired
|
|
(8
|
)
|
|
(27
|
)
|
Proceeds from sale of investments
|
|
29
|
|
|
140
|
|
Other, net
|
|
(4
|
)
|
|
(18
|
)
|
Net cash used in investing activities
|
|
(1,509
|
)
|
|
(1,679
|
)
|
|
|
|
|
|
|
|
DIRECTV
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS-(continued)
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
Issuance (repayment) of commercial paper (maturity 90 days or less),
net
|
|
25
|
|
|
(105
|
)
|
Proceeds from short-term borrowings
|
|
270
|
|
|
284
|
|
Repayment of short-term borrowings
|
|
(235
|
)
|
|
(262
|
)
|
Proceeds from borrowings under revolving credit facility
|
|
—
|
|
|
10
|
|
Repayment of borrowings under revolving credit facility
|
|
—
|
|
|
(10
|
)
|
Proceeds from long-term debt
|
|
1,329
|
|
|
1,445
|
|
Debt issuance costs
|
|
(7
|
)
|
|
(7
|
)
|
Repayment of long-term debt
|
|
(1,026
|
)
|
|
(3
|
)
|
Repayment of other long-term obligations
|
|
(34
|
)
|
|
(32
|
)
|
Common shares repurchased and retired
|
|
(1,386
|
)
|
|
(1,968
|
)
|
Stock options exercised
|
|
10
|
|
|
—
|
|
Taxes paid in lieu of shares issued for share-based compensation
|
|
(57
|
)
|
|
(61
|
)
|
Excess tax benefit from share-based compensation
|
|
22
|
|
|
24
|
|
Other, net
|
|
(40
|
)
|
|
4
|
|
Net cash used in financing activities
|
|
(1,129
|
)
|
|
(681
|
)
|
Effect of exchange rate changes on Venezuelan cash and cash
equivalents
|
|
(316
|
)
|
|
(187
|
)
|
Net increase in cash and cash equivalents
|
|
110
|
|
|
463
|
|
Cash and cash equivalents at beginning of the period
|
|
2,180
|
|
|
1,902
|
|
Cash and cash equivalents at end of the period
|
|
$
|
2,290
|
|
|
$
|
2,365
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
413
|
|
|
$
|
389
|
|
Cash paid for income taxes
|
|
767
|
|
|
702
|
|
|
|
|
|
|
|
|
DIRECTV
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED SEGMENT DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
DIRECTV U.S.
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
6,272
|
|
|
$
|
5,943
|
|
|
$
|
12,359
|
|
|
$
|
11,733
|
|
Operating profit before depreciation and amortization(1)
|
|
1,748
|
|
|
1,651
|
|
|
3,417
|
|
|
3,172
|
|
Operating profit before depreciation and amortization margin(1)
|
|
27.9
|
%
|
|
27.8
|
%
|
|
27.6
|
%
|
|
27.0
|
%
|
Operating profit
|
|
$
|
1,319
|
|
|
$
|
1,241
|
|
|
$
|
2,562
|
|
|
$
|
2,356
|
|
Operating profit margin
|
|
21.0
|
%
|
|
20.9
|
%
|
|
20.7
|
%
|
|
20.1
|
%
|
Depreciation and amortization
|
|
$
|
429
|
|
|
$
|
410
|
|
|
$
|
855
|
|
|
$
|
816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SKY BRASIL
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,011
|
|
|
$
|
942
|
|
|
$
|
1,950
|
|
|
$
|
1,907
|
|
Operating profit before depreciation and amortization(1)
|
|
289
|
|
|
262
|
|
|
600
|
|
|
573
|
|
Operating profit before depreciation and amortization margin(1)
|
|
28.6
|
%
|
|
27.8
|
%
|
|
30.8
|
%
|
|
30.0
|
%
|
Operating profit
|
|
$
|
114
|
|
|
$
|
56
|
|
|
$
|
262
|
|
|
$
|
210
|
|
Operating profit margin
|
|
11.3
|
%
|
|
5.9
|
%
|
|
13.4
|
%
|
|
11.0
|
%
|
Depreciation and amortization
|
|
$
|
175
|
|
|
$
|
206
|
|
|
$
|
338
|
|
|
$
|
363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PANAMERICANA AND OTHER
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
778
|
|
|
$
|
744
|
|
|
$
|
1,560
|
|
|
$
|
1,507
|
|
Operating profit before depreciation and amortization (1)
|
|
149
|
|
|
193
|
|
|
97
|
|
|
262
|
|
Operating profit before depreciation and amortization margin(1)
|
|
19.2
|
%
|
|
25.9
|
%
|
|
6.2
|
%
|
|
17.4
|
%
|
Operating profit (loss)
|
|
$
|
28
|
|
|
$
|
83
|
|
|
$
|
(146
|
)
|
|
$
|
46
|
|
Operating profit margin
|
|
3.6
|
%
|
|
11.2
|
%
|
|
*NM
|
|
3.1
|
%
|
Depreciation and amortization
|
|
$
|
121
|
|
|
$
|
110
|
|
|
$
|
243
|
|
|
$
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SPORTS NETWORKS, ELIMINATIONS AND OTHER
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
48
|
|
|
$
|
71
|
|
|
$
|
95
|
|
|
$
|
133
|
|
Operating loss before depreciation and amortization(1)
|
|
(33
|
)
|
|
(25
|
)
|
|
(20
|
)
|
|
(6
|
)
|
Operating loss
|
|
(37
|
)
|
|
(30
|
)
|
|
(27
|
)
|
|
(20
|
)
|
Depreciation and amortization
|
|
4
|
|
|
5
|
|
|
7
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
8,109
|
|
|
$
|
7,700
|
|
|
$
|
15,964
|
|
|
$
|
15,280
|
|
Operating profit before depreciation and amortization(1)
|
|
2,153
|
|
|
2,081
|
|
|
4,094
|
|
|
4,001
|
|
Operating profit before depreciation and amortization margin(1)
|
|
26.6
|
%
|
|
27.0
|
%
|
|
25.6
|
%
|
|
26.2
|
%
|
Operating profit
|
|
$
|
1,424
|
|
|
$
|
1,350
|
|
|
$
|
2,651
|
|
|
$
|
2,592
|
|
Operating profit margin
|
|
17.6
|
%
|
|
17.5
|
%
|
|
16.6
|
%
|
|
17.0
|
%
|
Depreciation and amortization
|
|
$
|
729
|
|
|
$
|
731
|
|
|
$
|
1,443
|
|
|
$
|
1,409
|
|
* Percentage not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
|
$
|
6,272
|
|
|
$
|
5,943
|
|
|
$
|
12,359
|
|
|
$
|
11,733
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues, exclusive of depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadcast programming and other
|
|
2,800
|
|
|
2,642
|
|
|
5,568
|
|
|
5,243
|
|
Subscriber service expenses
|
|
374
|
|
|
360
|
|
|
733
|
|
|
711
|
|
Broadcast operations expenses
|
|
75
|
|
|
71
|
|
|
147
|
|
|
152
|
|
Selling, general and administrative expenses, exclusive of
depreciation and amortization expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs
|
|
661
|
|
|
594
|
|
|
1,309
|
|
|
1,223
|
|
Upgrade and retention costs
|
|
314
|
|
|
324
|
|
|
595
|
|
|
643
|
|
General and administrative expenses
|
|
300
|
|
|
301
|
|
|
590
|
|
|
589
|
|
Depreciation and amortization expense
|
|
429
|
|
|
410
|
|
|
855
|
|
|
816
|
|
Total operating costs and expenses
|
|
4,953
|
|
|
4,702
|
|
|
9,797
|
|
|
9,377
|
|
Operating profit
|
|
1,319
|
|
|
1,241
|
|
|
2,562
|
|
|
2,356
|
|
Interest income
|
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Interest expense
|
|
(223
|
)
|
|
(206
|
)
|
|
(446
|
)
|
|
(408
|
)
|
Other, net
|
|
(5
|
)
|
|
4
|
|
|
—
|
|
|
16
|
|
Income before income taxes
|
|
1,091
|
|
|
1,040
|
|
|
2,117
|
|
|
1,965
|
|
Income tax expense
|
|
(407
|
)
|
|
(394
|
)
|
|
(788
|
)
|
|
(729
|
)
|
Net income
|
|
$
|
684
|
|
|
$
|
646
|
|
|
$
|
1,329
|
|
|
$
|
1,236
|
|
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
June 30, 2014
|
|
December 31, 2013
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
865
|
|
|
$
|
797
|
|
Accounts receivable, net of allowances of $82 and $59
|
|
2,019
|
|
|
2,103
|
|
Inventories
|
|
283
|
|
|
249
|
|
Prepaid expenses and other
|
|
411
|
|
|
494
|
|
Total current assets
|
|
3,578
|
|
|
3,643
|
|
Satellites, net
|
|
1,760
|
|
|
1,810
|
|
Property and equipment, net
|
|
3,754
|
|
|
3,724
|
|
Goodwill
|
|
3,191
|
|
|
3,191
|
|
Intangible assets, net
|
|
517
|
|
|
527
|
|
Other assets
|
|
540
|
|
|
551
|
|
Total assets
|
|
$
|
13,340
|
|
|
$
|
13,446
|
|
LIABILITIES AND OWNER'S DEFICIT
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
3,277
|
|
|
$
|
3,695
|
|
Unearned subscriber revenues and deferred credits
|
|
426
|
|
|
380
|
|
Current debt
|
|
1,460
|
|
|
1,200
|
|
Total current liabilities
|
|
5,163
|
|
|
5,275
|
|
Long-term debt
|
|
18,327
|
|
|
18,203
|
|
Deferred income taxes
|
|
1,606
|
|
|
1,641
|
|
Other liabilities and deferred credits
|
|
665
|
|
|
595
|
|
Commitments and contingencies
|
|
|
|
|
|
|
Owner's deficit
|
|
(12,421
|
)
|
|
(12,268
|
)
|
Total liabilities and owner's deficit
|
|
$
|
13,340
|
|
|
$
|
13,446
|
|
|
|
|
|
|
|
|
|
|
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
(Dollars in Millions)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
Net income
|
|
$
|
1,329
|
|
|
$
|
1,236
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
855
|
|
|
816
|
|
Amortization of deferred revenues and deferred credits
|
|
(24
|
)
|
|
(26
|
)
|
Share-based compensation expense
|
|
35
|
|
|
45
|
|
Deferred income taxes
|
|
48
|
|
|
75
|
|
Excess tax benefit from share-based compensation
|
|
(18
|
)
|
|
(20
|
)
|
Other
|
|
(5
|
)
|
|
3
|
|
Change in other operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
170
|
|
|
141
|
|
Inventories
|
|
(34
|
)
|
|
13
|
|
Prepaid expenses and other
|
|
81
|
|
|
102
|
|
Accounts payable and accrued liabilities
|
|
(422
|
)
|
|
(284
|
)
|
Unearned subscriber revenue and deferred credits
|
|
46
|
|
|
49
|
|
Other, net
|
|
23
|
|
|
36
|
|
Net cash provided by operating activities
|
|
2,084
|
|
|
2,186
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
Cash paid for property and equipment
|
|
(327
|
)
|
|
(265
|
)
|
Cash paid for subscriber leased equipment - subscriber acquisitions
|
|
(232
|
)
|
|
(325
|
)
|
Cash paid for subscriber leased equipment - upgrade and retention
|
|
(214
|
)
|
|
(230
|
)
|
Cash paid for satellites
|
|
(33
|
)
|
|
(108
|
)
|
Investment in companies, net of cash acquired
|
|
(1
|
)
|
|
(21
|
)
|
Proceeds from sale of investments
|
|
16
|
|
|
12
|
|
Other, net
|
|
—
|
|
|
2
|
|
Net cash used in investing activities
|
|
(791
|
)
|
|
(935
|
)
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
Issuance (repayment) of commercial paper (maturity 90 days or less),
net
|
|
25
|
|
|
(105
|
)
|
Proceeds from short-term borrowings
|
|
270
|
|
|
284
|
|
Repayment of short-term borrowings
|
|
(235
|
)
|
|
(262
|
)
|
Proceeds from borrowings under revolving credit facility
|
|
—
|
|
|
10
|
|
Repayment of borrowings under revolving credit facility
|
|
—
|
|
|
(10
|
)
|
Proceeds from issuance of long-term debt
|
|
1,245
|
|
|
1,390
|
|
Debt issuance costs
|
|
(7
|
)
|
|
(7
|
)
|
Repayment of long-term debt
|
|
(1,000
|
)
|
|
—
|
|
Repayment of other long-term obligations
|
|
(15
|
)
|
|
(12
|
)
|
Cash dividends paid to Parent
|
|
(1,500
|
)
|
|
(1,950
|
)
|
Excess tax benefit from share-based compensation
|
|
18
|
|
|
20
|
|
Other, net
|
|
(26
|
)
|
|
4
|
|
Net cash used in financing activities
|
|
(1,225
|
)
|
|
(638
|
)
|
Net increase in cash and cash equivalents
|
|
68
|
|
|
613
|
|
Cash and cash equivalents at beginning of the period
|
|
797
|
|
|
739
|
|
Cash and cash equivalents at end of the period
|
|
$
|
865
|
|
|
$
|
1,352
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
397
|
|
|
$
|
360
|
|
Cash paid for income taxes
|
|
629
|
|
|
502
|
|
|
|
|
|
|
|
|
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 Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Cash Flow Before Interest and Taxes
|
|
$
|
1,408
|
|
|
$
|
1,179
|
|
|
$
|
2,693
|
|
|
$
|
2,286
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
(85
|
)
|
|
(64
|
)
|
|
(413
|
)
|
|
(389
|
)
|
Interest income
|
|
12
|
|
|
19
|
|
|
25
|
|
|
41
|
|
Income taxes paid
|
|
(683
|
)
|
|
(608
|
)
|
|
(767
|
)
|
|
(702
|
)
|
Subtotal - Free Cash Flow
|
|
652
|
|
|
526
|
|
|
1,538
|
|
|
1,236
|
|
Add Cash Paid For:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
767
|
|
|
832
|
|
|
1,417
|
|
|
1,580
|
|
Satellites
|
|
55
|
|
|
116
|
|
|
109
|
|
|
194
|
|
Net Cash Provided by Operating Activities
|
|
$
|
1,474
|
|
|
$
|
1,474
|
|
|
$
|
3,064
|
|
|
$
|
3,010
|
|
(2) and (3) - See footnotes above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Reported Operating Profit Before Depreciation
and Amortization to Operating Profit*
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Operating profit before depreciation and amortization
|
|
$
|
2,153
|
|
|
$
|
2,081
|
|
|
$
|
4,094
|
|
|
$
|
4,001
|
Subtract: Depreciation and amortization
|
|
729
|
|
|
731
|
|
|
1,443
|
|
|
1,409
|
Operating profit
|
|
$
|
1,424
|
|
|
$
|
1,350
|
|
|
$
|
2,651
|
|
|
$
|
2,592
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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 June 30, 2014, which is expected to
be filed with the SEC in July 2014.
|
|
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 Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
|
$
|
8,109
|
|
|
$
|
7,700
|
|
|
$
|
15,964
|
|
|
$
|
15,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before depreciation and amortization excluding the
Venezuelan currency devaluation charge
|
|
$
|
2,156
|
|
|
$
|
2,081
|
|
|
$
|
4,378
|
|
|
$
|
4,167
|
|
OPBDA growth excluding Venezuelan currency devaluation charge
|
|
3.6
|
%
|
|
|
|
|
5.1
|
%
|
|
|
|
Subtract: Venezuelan currency devaluation charge
|
|
3
|
|
|
—
|
|
|
284
|
|
|
166
|
|
Operating profit before depreciation and amortization
|
|
2,153
|
|
|
2,081
|
|
|
4,094
|
|
|
4,001
|
|
Subtract: Depreciation and amortization
|
|
729
|
|
|
731
|
|
|
1,443
|
|
|
1,409
|
|
Operating profit
|
|
$
|
1,424
|
|
|
$
|
1,350
|
|
|
$
|
2,651
|
|
|
$
|
2,592
|
|
Operating profit before depreciation and amortization margin
excluding the Venezuelan currency devaluation charge
|
|
26.6
|
%
|
|
27.0
|
%
|
|
27.4
|
%
|
|
27.3
|
%
|
|
Reconciliation of Adjusted Operating Profit (excluding the
Venezuelan currency devaluation charge) to Operating Profit
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
|
$
|
8,109
|
|
|
$
|
7,700
|
|
|
$
|
15,964
|
|
|
$
|
15,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit excluding the Venezuelan currency devaluation charge
|
|
$
|
1,427
|
|
|
$
|
1,350
|
|
|
$
|
2,935
|
|
|
$
|
2,758
|
|
Operating profit growth excluding Venezuelan currency devaluation
charge
|
|
5.7
|
%
|
|
|
|
|
6.4
|
%
|
|
|
|
Subtract: Venezuelan currency devaluation charge
|
|
3
|
|
|
—
|
|
|
284
|
|
|
166
|
|
Operating profit
|
|
$
|
1,424
|
|
|
$
|
1,350
|
|
|
$
|
2,651
|
|
|
$
|
2,592
|
|
Operating profit margin excluding the Venezuelan currency
devaluation charge
|
|
17.6
|
%
|
|
17.5
|
%
|
|
18.4
|
%
|
|
18.0
|
%
|
|
Reconciliation of Adjusted Net Income (excluding the Venezuelan
currency devaluation charge) to Net Income
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net income attributable to DIRECTV excluding the Venezuelan currency
devaluation charge
|
|
$
|
809
|
|
|
$
|
660
|
|
|
$
|
1,651
|
|
|
$
|
1,486
|
Subtract: Venezuelan after-tax currency devaluation charge
|
|
3
|
|
|
—
|
|
|
284
|
|
|
136
|
Net income attributable to DIRECTV
|
|
$
|
806
|
|
|
$
|
660
|
|
|
$
|
1,367
|
|
|
$
|
1,350
|
Net income growth excluding Venezuelan currency devaluation charge
|
|
22.6
|
%
|
|
|
|
|
11.1
|
%
|
|
|
Diluted weighted average shares
|
|
508
|
|
|
561
|
|
|
512
|
|
|
569
|
Adjusted diluted earnings per common share
|
|
$
|
1.59
|
|
|
$
|
1.18
|
|
|
$
|
3.22
|
|
|
$
|
2.61
|
Adjusted diluted earnings per common share growth excluding
Venezuelan currency devaluation charge
|
|
34.7
|
%
|
|
|
|
|
23.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECTV Latin America Non-GAAP Financial Measure Reconciliation
Schedules
|
(Dollars in Millions)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
DIRECTV Latin America
|
Reconciliation of Cash Flow Before Interest and Taxes2
to
Net Cash Provided by Operating Activities
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Cash Flow Before Interest and Taxes
|
|
$
|
150
|
|
|
$
|
7
|
|
|
$
|
354
|
|
|
$
|
109
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
(12
|
)
|
|
(13
|
)
|
|
(25
|
)
|
|
(30
|
)
|
Interest income
|
|
10
|
|
|
16
|
|
|
23
|
|
|
31
|
|
Income taxes paid
|
|
(53
|
)
|
|
(69
|
)
|
|
(142
|
)
|
|
(159
|
)
|
Add Cash Paid For:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
70
|
|
|
39
|
|
|
126
|
|
|
80
|
|
Subscriber leased equipment - subscriber acquisitions
|
|
185
|
|
|
252
|
|
|
313
|
|
|
447
|
|
Subscriber leased equipment - upgrade and retention
|
|
108
|
|
|
117
|
|
|
204
|
|
|
233
|
|
Satellites
|
|
27
|
|
|
58
|
|
|
65
|
|
|
80
|
|
Net Cash Provided by Operating Activities
|
|
$
|
485
|
|
|
$
|
407
|
|
|
$
|
918
|
|
|
$
|
791
|
|
(2) See footnotes above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Operating Profit Before Depreciation
and Amortization (excluding the Venezuelan currency devaluation
charge) to Operating Profit
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
|
$
|
1,789
|
|
|
$
|
1,686
|
|
|
$
|
3,510
|
|
|
$
|
3,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before depreciation and amortization excluding the
Venezuelan currency devaluation charge
|
|
$
|
441
|
|
|
$
|
455
|
|
|
$
|
981
|
|
|
$
|
1,001
|
|
OPBDA growth excluding Venezuelan currency devaluation charge
|
|
(3.1
|
)%
|
|
|
|
|
(2.0
|
)%
|
|
|
|
Subtract: Venezuelan currency devaluation charge
|
|
3
|
|
|
—
|
|
|
284
|
|
|
166
|
|
Operating profit before depreciation and amortization
|
|
438
|
|
|
455
|
|
|
697
|
|
|
835
|
|
Subtract: Depreciation and amortization
|
|
296
|
|
|
316
|
|
|
581
|
|
|
579
|
|
Operating profit
|
|
$
|
142
|
|
|
$
|
139
|
|
|
$
|
116
|
|
|
$
|
256
|
|
Operating profit before depreciation and amortization margin
excluding the Venezuelan currency devaluation charge
|
|
24.7
|
%
|
|
27.0
|
%
|
|
27.9
|
%
|
|
29.3
|
%
|
|
Reconciliation of Adjusted Operating Profit (excluding the
Venezuelan currency devaluation charge) to Operating Profit
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
|
$
|
1,789
|
|
|
$
|
1,686
|
|
|
$
|
3,510
|
|
|
$
|
3,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit excluding the Venezuelan currency devaluation charge
|
|
$
|
145
|
|
|
$
|
139
|
|
|
$
|
400
|
|
|
$
|
422
|
|
Operating Profit growth excluding Venezuelan currency devaluation
charge
|
|
4.3
|
%
|
|
|
|
|
(5.2
|
)%
|
|
|
|
Subtract: Venezuelan currency devaluation charge
|
|
3
|
|
|
—
|
|
|
284
|
|
|
166
|
|
Operating profit
|
|
$
|
142
|
|
|
$
|
139
|
|
|
$
|
116
|
|
|
$
|
256
|
|
Operating profit margin excluding the Venezuelan currency
devaluation charge
|
|
8.1
|
%
|
|
8.2
|
%
|
|
11.4
|
%
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PanAmericana and Other Segment Non-GAAP Financial Measure
Reconciliation Schedules
|
(Dollars in Millions)
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
PanAmericana and Other
|
Reconciliation of Adjusted Operating Profit Before Depreciation
and Amortization (excluding the Venezuelan currency devaluation
charge) to Operating Profit
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
|
$
|
778
|
|
|
$
|
744
|
|
|
$
|
1,560
|
|
|
$
|
1,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before depreciation and amortization excluding the
Venezuelan currency devaluation charge
|
|
$
|
152
|
|
|
$
|
193
|
|
|
$
|
381
|
|
|
$
|
428
|
|
OPBDA growth excluding Venezuelan currency devaluation charge
|
|
(21.2
|
)%
|
|
|
|
|
(11.0
|
)%
|
|
|
|
Subtract: Venezuelan currency devaluation charge
|
|
3
|
|
|
—
|
|
|
284
|
|
|
166
|
|
Operating profit before depreciation and amortization
|
|
149
|
|
|
193
|
|
|
97
|
|
|
262
|
|
Subtract: Depreciation and amortization
|
|
121
|
|
|
110
|
|
|
243
|
|
|
216
|
|
Operating profit (loss)
|
|
$
|
28
|
|
|
$
|
83
|
|
|
$
|
(146
|
)
|
|
$
|
46
|
|
Operating profit before depreciation and amortization margin
excluding the Venezuelan currency devaluation charge
|
|
19.5
|
%
|
|
25.9
|
%
|
|
24.4
|
%
|
|
28.4
|
%
|
|
Reconciliation of Adjusted Operating Profit (excluding the
Venezuelan currency devaluation charge) to Operating Profit
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
|
$
|
778
|
|
|
$
|
744
|
|
|
$
|
1,560
|
|
|
$
|
1,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit excluding the Venezuelan currency devaluation charge
|
|
$
|
31
|
|
|
$
|
83
|
|
|
$
|
138
|
|
|
$
|
212
|
|
Operating profit growth excluding Venezuelan currency devaluation
charge
|
|
(62.7
|
)%
|
|
|
|
|
(34.9
|
)%
|
|
|
|
Subtract: Venezuelan currency devaluation charge
|
|
3
|
|
|
—
|
|
|
284
|
|
|
166
|
|
Operating profit (loss)
|
|
$
|
28
|
|
|
$
|
83
|
|
|
$
|
(146
|
)
|
|
$
|
46
|
|
Operating profit margin excluding the Venezuelan currency
devaluation charge
|
|
4.0
|
%
|
|
11.2
|
%
|
|
8.8
|
%
|
|
14.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Operating profit
|
|
$
|
1,319
|
|
|
$
|
1,241
|
|
|
$
|
2,562
|
|
|
$
|
2,356
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs (expensed)
|
|
661
|
|
|
594
|
|
|
1,309
|
|
|
1,223
|
|
Depreciation and amortization
|
|
429
|
|
|
410
|
|
|
855
|
|
|
816
|
|
Cash paid for subscriber leased equipment - upgrade and retention
|
|
(104
|
)
|
|
(119
|
)
|
|
(214
|
)
|
|
(230
|
)
|
Pre-SAC Margin
|
|
$
|
2,305
|
|
|
$
|
2,126
|
|
|
$
|
4,512
|
|
|
$
|
4,165
|
|
Pre-SAC Margin as a percentage of revenue
|
|
36.8
|
%
|
|
35.8
|
%
|
|
36.5
|
%
|
|
35.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Cash Flow Before Interest and Taxes2
to
Net Cash Provided by Operating Activities
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Cash Flow Before Interest and Taxes
|
|
$
|
1,236
|
|
|
$
|
1,127
|
|
|
$
|
2,303
|
|
|
$
|
2,119
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
(77
|
)
|
|
(50
|
)
|
|
(397
|
)
|
|
(360
|
)
|
Interest income
|
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Income taxes paid
|
|
(628
|
)
|
|
(502
|
)
|
|
(629
|
)
|
|
(502
|
)
|
Add Cash Paid For:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
183
|
|
|
154
|
|
|
327
|
|
|
265
|
|
Subscriber leased equipment - subscriber acquisitions
|
|
115
|
|
|
151
|
|
|
232
|
|
|
325
|
|
Subscriber leased equipment - upgrade and retention
|
|
104
|
|
|
119
|
|
|
214
|
|
|
230
|
|
Satellites
|
|
22
|
|
|
55
|
|
|
33
|
|
|
108
|
|
Net Cash Provided by Operating Activities
|
|
$
|
955
|
|
|
$
|
1,055
|
|
|
$
|
2,084
|
|
|
$
|
2,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) 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 Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Subscriber acquisition costs (expensed)
|
|
$
|
661
|
|
|
$
|
594
|
|
|
$
|
1,309
|
|
|
$
|
1,223
|
Cash paid for subscriber leased equipment - subscriber acquisitions
|
|
115
|
|
|
151
|
|
|
232
|
|
|
325
|
Total acquisition costs
|
|
$
|
776
|
|
|
$
|
745
|
|
|
$
|
1,541
|
|
|
$
|
1,548
|
Gross subscriber additions (000's)
|
|
908
|
|
|
839
|
|
|
1,799
|
|
|
1,732
|
Average subscriber acquisition costs - per subscriber (SAC)
|
|
$
|
855
|
|
|
$
|
888
|
|
|
$
|
857
|
|
|
$
|
894
|
CONTACT:
DIRECTV
Darris Gringeri, (212) 205-0882
Investor
Relations: (310) 964-0808
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