DIRECTV Fourth Quarter Revenue Growth of 4% Drives Full Year
Revenues Up 5% to $33.3 billion.
- DIRECTV Latin America full year
revenues increase 3% to $7.1 billion principally related to the
addition of approximately 903,000 net new subscribers during the
year.
- Full year DIRECTV U.S. revenue growth
of 5% to $26.0 billion driven by ARPU growth of 4.7% and annual
subscriber growth of 99,000.
DIRECTV Full Year 2014 Adjusted Diluted Earnings Per Share
Increase 12% to $6.08.
- EPS growth driven by a 3% increase in
consolidated adjusted operating profit before depreciation and
amortization as well as $1.4 billion of share repurchases in
2014.
DIRECTV Full Year Free Cash Flow Increases 21% to $3.1
billion.
DIRECTV (NASDAQ:DTV) today reported that fourth quarter 2014
revenues increased 4% to $8.92 billion, operating profit before
depreciation and amortization1 (OPBDA) and operating profit
decreased to $2.00 billion and $1.26 billion, respectively, and
diluted earnings per share was unchanged at $1.53 compared to last
year's fourth quarter.
“Our fourth quarter results, although marked by challenging
macroeconomic conditions in Latin America and a conscious decision
to reinvest in our U.S. business, capped off another strong year of
operations for DIRECTV. In Latin America, despite the macroeconomic
headwinds, our DIRECTV and Sky brands attracted over 1.4 million
net new customers - surpassing the 19 million cumulative subscriber
mark by year-end. More importantly, even excluding Venezuela, DTVLA
improved cash flow by over $400 million and generated positive cash
flow for the year - easily surpassing our internal plans for the
business,” said Mike White, President and CEO of DIRECTV.
“And in the U.S., despite operating in a mature,
hyper-competitive market with significant cost pressures, we were
able to improve our OPBDA margins for the third consecutive year
and surpass all of our 2014 plans for subscriber, revenue, OPBDA
and cash flow growth, while also making significant headway on
improving both the customer service and entertainment experience,”
White added. “The focused performance of our two primary segments
resulted in a 21% increase in our consolidated free cash flow,
topping $3.1 billion for the year - and leaving us with $4.6
billion of cash on the balance sheet at year end.”
White finished, “2015 will bring additional challenges to our
businesses, but given our solid continued operating momentum and
the pending merger with AT&T, I am confident that we will
continue to drive value for our shareholders for the foreseeable
future.”
DIRECTV'S Operational Review
DIRECTV Consolidated
Dollars in Millions except Earnings per
Common Share
Three Months EndedDecember 31, Twelve Months
EndedDecember 31, 2014
2013 2014 2013
Reported Financial Results
Revenues
$ 8,922 $ 8,594
$ 33,260 $ 31,754
Reported Operating Profit Before Depreciation and
Amortization(1) 2,000 2,044 8,071
7,978 Reported OPBDA Margin(1)
22.4 % 23.8 % 24.3 %
25.1 % Reported Operating Profit 1,255 1,333
5,128 5,150 Reported Operating Profit Margin
14.1 % 15.5 % 15.4 %
16.2 % Reported Net Income Attributable to
DIRECTV 778 810
2,756 2,859
Reported Diluted Earnings Per Common Share
$ 1.53 $ 1.53
$ 5.40 $ 5.17
Capital Expenditures and Cash Flow
Cash Paid
for Property and Equipment 269
310 979
873 Cash Paid for Subscriber Leased Equipment
- Subscriber Acquisitions 301
399 1,173
1,589 Cash Paid for Subscriber Leased
Equipment - Upgrade and Retention 163
229 788
947 Cash Paid for Satellites
96 101
285 377 Cash Flow
Before Interest and Taxes(2) 1,268
1,484 5,475
4,855 Free Cash Flow(3)
814 1,000
3,144 2,608
Venezuela
Currency Charge Impact On(4):
Operating Profit Before Depreciation and Amortization
(346 ) (166 ) Operating Profit
(346 ) (166 ) Net Income Attributable to
DIRECTV
(346 ) (136 ) Diluted Earnings Per Common
Share
$ (0.68 ) $ (0.25
)
Adjusted Financial Results†
Adjusted
Operating Profit Before Depreciation and Amortization(1)
8,417 8,144 Adjusted OPBDA Margin(1)
25.3 % 25.6 % Adjusted Operating Profit
5,474 5,316 Adjusted Operating Profit Margin
16.5 % 16.7 % Adjusted Net Income Attributable
to DIRECTV
3,102 2,995 Adjusted Diluted
Earnings Per Common Share
$ 6.08 $
5.42
†"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.
Fourth Quarter Review
DIRECTV's fourth quarter revenues increased 4% to $8.92 billion
principally due to strong ARPU growth at DIRECTV U.S.
Fourth quarter OPBDA and operating profit decreased to $2.00
billion and $1.26 billion, respectively, compared to the prior year
period. OPBDA margin and operating profit margin declined to 22.4%
and 14.1%, respectively, due to lower margins at DIRECTV Latin
America (DTVLA), as well as a slight decline at DIRECTV U.S. The
results of our Sports Networks, Eliminations and Other segment also
impacted the comparison in the quarter with merger related costs of
$33 million in 2014. This was offset by lower consulting costs in
the fourth quarter 2014, as well as a pension settlement charge in
the same period of 2013.
Fourth quarter net income attributable to DIRECTV decreased to
$778 million primarily due to the lower operating profit and
unfavorable comparisons in the "Other, net" line of the
Consolidated Statements of Operations, partially offset by a
decrease in income tax expense mostly due to lower earnings before
taxes and a lower effective tax rate in the fourth quarter of 2014
related to the settlement and resolution of state income tax
issues. "Other, net" was impacted by a $78 million decrease in
equity earnings from Sky Mexico primarily related to Sky Mexico's
recognition of certain one-time tax benefits in 2013, which was
partially offset by a $39 million gain on interest rate swap
contracts at DIRECTV. Diluted earnings per share was unchanged at
$1.53 as the favorable impact of share repurchases made prior to
the announcement of the pending transaction with AT&T offset
the decline in net income.
Cash flow before interest and taxes2 declined to $1.27 billion
compared to the fourth quarter of 2013 primarily due to a reduction
in cash generated from working capital, partially offset by lower
capital expenditures. The decrease in cash generated from working
capital was mostly due to the timing of customer receivables at
DIRECTV U.S. and the timing of vendor payments at DTVLA, partially
offset by $90 million in proceeds from the settlement of certain
swap contracts at DIRECTV U.S. The lower capital expenditures were
principally due to a reduction in cash paid for leased equipment at
DIRECTV U.S. and DTVLA mostly due to declining set-top box costs,
higher usage of refurbished set-top boxes at DIRECTV U.S. and the
timing of set-top box purchases at DTVLA. Fourth quarter free cash
flow3 decreased to $814 million due to the lower cash flow before
interest and taxes, partially offset by lower tax payments due to
the timing of such payments.
Also during the quarter, but not included in free cash flow, was
a December 2014 debt issuance by DIRECTV U.S. of $1,200 million
principal amount of 3.950% senior notes due in 2025.
Full Year Review
DIRECTV's full year 2014 revenues increased 5% to $33.26 billion
principally due to higher ARPU at DIRECTV U.S., as well as
subscriber growth over the last year at DTVLA.
DIRECTV's adjusted OPBDA increased 3% to $8.42 billion and
adjusted operating profit increased 3% to $5.47 billion in 2014.
Adjusted OPBDA margin and adjusted operating profit margin declined
to 25.3% and 16.5%, respectively, as higher margin at DIRECTV U.S.
was more than offset by a decline in margin at DTVLA primarily due
to costs associated with the FIFA World Cup in 2014 and the ECAD
settlement in 2013 discussed below. The results of our Sports
Networks, Eliminations and Other segment also impacted the annual
comparison with merger related costs of $72 million in 2014. This
was offset by lower consulting costs in 2014, as well as a pension
settlement charge in 2013. Reported OPBDA increased 1% to $8.07
billion and reported operating profit declined slightly to $5.13
billion.
In September 2013, DTVLA settled a fee dispute and paid $92
million to Escritório Central de Arrecadação e Distribuição, or
ECAD, the organization 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.
Adjusted net income attributable to DIRECTV increased 4% to
$3.10 billion in 2014 primarily due to the higher adjusted
operating profit and favorable comparisons in the "Other, net" line
of the Consolidated Statements of Operations, partially offset by
an increase in interest expense principally related to higher
average debt balances and an increase in income tax expense mostly
due to higher adjusted earnings before taxes. "Other, net" was
impacted by a $39 million gain on interest rate swap contracts, a
$30 million improvement in foreign currency translation at Sky
Brasil and a $59 million non-cash pre-tax charge in 2013 due to the
deconsolidation of DIRECTV Sports Network (DSN) Northwest. Also
impacting the comparison was the favorable ECAD settlement in the
prior year and a $76 million decrease in equity earnings from Sky
Mexico primarily related to Sky Mexico's recognition of certain
one-time tax benefits in 2013. Adjusted diluted earnings per share
increased 12% to $6.08 due to the higher adjusted net income and
the favorable impact of share repurchases made prior to the
announcement of the pending transaction with AT&T. Reported net
income attributable to DIRECTV decreased to $2.76 billion, while
reported diluted earnings per share improved 4% to $5.40 compared
to the prior year.
In 2014, cash flow before interest and taxes increased 13% to
$5.48 billion primarily due to higher adjusted OPBDA, as well as a
reduction in cash paid for leased equipment at DIRECTV U.S. and
DTVLA mostly due to declining set-top box costs, higher usage of
refurbished set-top boxes at DIRECTV U.S. and lower post-paid gross
additions, stricter upgrade policies and the timing of set-top-box
purchases at DTVLA. Also impacting the comparison were $104 million
in proceeds from the settlement of certain swap contracts at
DIRECTV U.S. and a $92 million payment in 2013 to settle the ECAD
dispute. Free cash flow grew 21% to $3.14 billion, as the higher
cash flow before interest and taxes was partially offset by
increased net interest payments principally related to the higher
average debt balances and increased cash tax payments primarily
related to higher adjusted earnings before taxes.
Also during 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, a December
2014 debt issuance by DIRECTV U.S. of $1,200 million principal
amount of 3.950% senior notes due in 2025, cash paid for share
repurchases of $1.39 billion, as well as a $383
million reduction in DIRECTV’s cash balance resulting from the
devaluation of the Venezuelan bolivar denominated cash balances in
2014.
SEGMENT FINANCIAL REVIEW
DIRECTV U.S. Segment
DIRECTV U.S. Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
Dollars in
Millions except ARPU 2014
2013 2014 2013
Reported Financial Results
Revenues
$ 7,136 $ 6,773
$ 26,001 $ 24,676
Average Monthly Revenue per Subscriber (ARPU) ($)
117.30 111.74
106.94 102.18
Operating Profit Before Depreciation and Amortization(1)
1,506 1,516 6,471 6,084
OPBDA Margin(1) 21.1 %
22.4 % 24.9 % 24.7 %
Operating Profit 1,074 1,101 4,749 4,444 Operating Profit Margin
15.1 % 16.3 %
18.3 % 18.0 %
Capital
Expenditures and Cash Flow
Cash Paid for Property
and Equipment 212
228 726 648
Cash Paid for Subscriber Leased Equipment - Subscriber
Acquisitions 132
151 507 666
Cash Paid for Subscriber Leased Equipment - Upgrade and
Retention 103 146
451 538
Cash Paid for Satellites 21
44 73
198 Cash Flow Before Interest and
Taxes(2) 1,203
1,292 4,808
4,471
Subscriber Data (in 000's except Churn)
Gross Subscriber Additions 982
949 3,804
3,790 Average Monthly Subscriber Churn
1.37 % 1.41 %
1.52 % 1.50 % Net Subscriber
Additions 149 93
99 169
Cumulative Subscribers 20,352
20,253 20,352
20,253
Fourth Quarter Review
In the fourth quarter, DIRECTV U.S. revenues increased 5% to
$7.14 billion compared with the fourth quarter of 2013 primarily
due to strong ARPU growth along with a larger subscriber base. ARPU
increased 5.0% to $117.30 mostly due to price increases on
programming packages, higher advanced receiver service fees, higher
ad sales, increased commercial business revenues and higher set-top
box lease fees. These improvements were partially offset by
increased promotional offers to existing customers and lower
revenues from pay-per-view events. DIRECTV U.S. ended the year with
20.35 million subscribers.
DIRECTV U.S. net subscriber additions of approximately 149,000
increased compared to the prior year period principally due to
higher gross subscriber additions and a four basis point
improvement in the average monthly churn rate. The increase in
gross additions was mainly associated with a successful new ad
campaign, enhanced promotions, wider distribution in the consumer
electronics channel and competitor programming disputes. The
decrease in the monthly churn rate was primarily due to lower
voluntary churn from improved retention practices, as well as more
successful winback offers.
Fourth quarter OPBDA decreased slightly to $1.51 billion and
OPBDA margin declined to 21.1% as higher revenues were offset by
increased programming costs mostly related to programming supplier
rate increases and higher subscriber acquisition costs. The higher
subscriber acquisition costs were principally associated with an
increase in promotional offers targeted at higher quality
subscribers and a higher mix of sales from the consumer electronics
channel, as well as increased usage of refurbished set-top boxes.
The decline in margin was partially offset by lower upgrade and
retention expenses mostly related to reduced equipment costs, as
well as lower general and administrative expenses primarily related
to a pension settlement charge in the fourth quarter of 2013.
Operating profit decreased to $1.07 billion and operating profit
margin declined to 15.1% in the fourth quarter mostly due to the
decline in OPBDA margin.
Full Year Review
In 2014, DIRECTV U.S. revenues increased 5% to $26.00 billion
compared to 2013 due to strong ARPU growth along with a larger
subscriber base. ARPU increased 4.7% to $106.94 mostly due to price
increases on programming packages, higher advanced receiver service
fees, higher fees for an enhanced warranty program, higher ad sales
and increased commercial business revenues. These improvements were
partially offset by increased promotional offers to new and
existing customers.
DIRECTV U.S. net subscriber additions of approximately 99,000 in
2014 decreased from the prior year as slightly higher gross
additions were offset by a two basis point increase in the average
monthly churn rate. The higher churn rate was primarily driven by a
more competitive environment.
In 2014, OPBDA increased 6% to $6.47 billion and OPBDA margin
improved from 24.7% to 24.9% 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 margin improvements were
partially offset by higher programming costs primarily related to
programming supplier rate increases, as well as higher subscriber
acquisition costs. The higher subscriber acquisition costs were
principally associated with an increase in promotional offers
targeted at higher quality subscribers and increased usage of
refurbished set-top boxes. Operating profit increased 7% to $4.75
billion in 2014 and operating profit margin increased from 18.0% to
18.3% mostly due to the improvement in OPBDA margin.
DIRECTV Latin America
DIRECTV Latin America Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
Dollars in
Millions except ARPU 2014
2013 2014 2013
Reported Financial Results
Revenues
$ 1,731 $ 1,768
$ 7,061 $ 6,844
Average Monthly Revenue per Subscriber (ARPU) ($)
46.48 51.47
48.39 51.64
Reported Operating Profit Before Depreciation and Amortization(1)
499 550 1,649 1,943
Reported OPBDA Margin(1) 28.8 %
31.1 % 23.4 % 28.4
% Reported Operating Profit 189 258 442 776 Reported Operating
Profit Margin 10.9 % 14.6
% 6.3 % 11.3 %
Capital
Expenditures and Cash Flow
Cash Paid for Property
and Equipment 59
82 254 224
Cash Paid for Subscriber Leased Equipment - Subscriber
Acquisitions 169
248 666 923
Cash Paid for Subscriber Leased Equipment - Upgrade and
Retention 60 83
337 409
Cash Paid for Satellites 70
52 190
164 Cash Flow Before Interest and
Taxes(2) 103 164
707 326
Subscriber Data (in 000's except Churn)
Gross Subscriber Additions(6) 980
989 4,395
4,382 Average Monthly Total Subscriber
Churn(5) 2.31 % 2.21 %
2.39 % 2.37 % Average
Monthly Post-paid Subscriber Churn(5) 2.00 %
1.85 % 1.95 %
2.10 % Net Subscriber Additions(5)(6)
118 231
903 1,239 Cumulative
Subscribers(5)(6) 12,471
11,568 12,471
11,568
Venezuela Currency Charge Impact
On(4):
Operating Profit Before
Depreciation and Amortization
(346 ) (166 ) Operating Profit
(346 ) (166 )
Adjusted Financial Results†
Adjusted
Operating Profit Before Depreciation and Amortization(1)
1,995 2,109 Adjusted OPBDA Margin(1)
28.3 % 30.8 % Adjusted Operating Profit
788 942 Adjusted Operating Profit Margin
11.2 % 13.8 %
†"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's results are
accounted for as an equity method investment and therefore are not
consolidated by DTVLA.
Sky Brasil Segment
Sky Brasil Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
Dollars in
Millions except ARPU 2014
2013 2014 2013
Reported Financial Results
Revenues
$ 923 $ 963
$ 3,887 $ 3,753
Average Monthly Revenue per Subscriber (ARPU) ($)
54.52 60.41
58.35 59.97 Operating
Profit Before Depreciation and Amortization(1) 268
326 1,175 1,252 OPBDA Margin(1)
29.0 % 33.9 %
30.2 % 33.4 % Operating Profit 108 150
488 529 Operating Profit Margin 11.7 %
15.6 % 12.6 %
14.1 %
Other Data
Total Capital
Expenditures 223
269 867 961
Net Subscriber Additions (Disconnections)(5)(6) (in 000's)
(1 ) 116
272 332 Cumulative
Subscribers(5)(6) (in 000's) 5,643
5,371 5,643
5,371
Fourth Quarter Review
Excluding changes in foreign exchange rates, Sky Brasil's fourth
quarter revenues grew 7% versus the prior year period driven by a
6% increase in the average number of subscribers and a 1% increase
in local currency ARPU. When factoring in changes in foreign
exchange rates, Sky Brasil's revenues decreased to $923 million and
ARPU declined 9.8% to $54.52 compared to the fourth quarter of
2013.
Subscriber net losses of approximately 1,000 in the fourth
quarter of 2014 compared to subscriber net additions of
approximately 116,000 in the prior year period. The change was
primarily due to a higher average monthly churn rate driven by a
higher mix of subscribers taking prepaid services, the migration of
key systems that impacted existing subscribers and challenging
macroeconomic conditions, as well as slightly lower gross additions
also associated with the macroeconomic conditions.
Sky Brasil OPBDA decreased to $268 million in the fourth quarter
of 2014 and OPBDA margin declined to 29.0%.The decline in OPBDA
margin was principally due to increased expenses related to the
migration of key systems and the rollout of a new broadband
service, as well as higher subscriber acquisition costs mostly
driven by higher advertising expenses. Fourth quarter operating
profit decreased to $108 million and operating profit margin
declined to 11.7%, as the decline in OPBDA margin was slightly
offset by the impact of lower depreciation expense resulting from
changes in foreign exchange rates.
Full Year Review
Excluding changes in foreign exchange rates, Sky Brasil's full
year revenues grew 13% versus the prior year period driven by a 6%
increase in the average number of subscribers and a 6% increase in
local currency ARPU. The increase in local currency ARPU was
principally due to a reduction in credits to existing subscribers,
as well as growth in advanced services. When factoring in changes
in foreign exchange rates, Sky Brasil's revenues increased 4% to
$3.89 billion compared to 2013, while ARPU declined 2.7% to
$58.35.
Subscriber net additions of approximately 272,000 declined
compared to 2013, as improved gross additions were more than offset
by the impact of higher disconnections associated with the larger
subscriber base, as well as a slight increase in the total average
monthly churn rate. The higher gross additions were primarily
driven by demand related to the FIFA World Cup. The increase in the
total churn rate was principally related to the introduction of a
prepaid service in the fourth quarter of 2013, a reduction in
credits to existing customers and challenging macroeconomic
conditions, as well as the migration of key systems that impacted
existing subscribers.
Excluding the impact of the favorable ECAD settlement in the
third quarter of 2013, Sky Brasil’s full year OPBDA decreased
slightly to $1.18 billion and OPBDA margin declined from 31.5% to
30.2%. The decline in OPBDA margin was principally due to increased
expenses related to the rollout of the new broadband service and
the migration of key systems. Also excluding the impact of the
favorable ECAD settlement, operating profit increased 6% to $488
million and operating profit margin increased from 12.2% to 12.6%.
Operating profit margin improved as the decline in OPBDA margin was
more than offset by the impact of lower depreciation expense
resulting from changes in foreign exchange rates.
PanAmericana and Other Segment
PanAmericana and Other Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
Dollars in
Millions except ARPU 2014
2013 2014 2013
Reported Financial Results
Revenues
$ 808 $ 805
$ 3,174 $ 3,091
Average Monthly Revenue per Subscriber (ARPU) ($)
39.78 43.74
40.03 44.19 Reported
Operating Profit Before Depreciation and Amortization(1) 231
224 474 691 Reported OPBDA
Margin(1) 28.6 % 27.8 %
14.9 % 22.4 % Reported
Operating Profit (Loss) 81 108 (46 ) 247 Reported Operating Profit
Margin 10.0 % 13.4 %
NM* 8.0 %
Other
Data
Total Capital Expenditures
135 196
580 759 Net Subscriber
Additions (in 000's) 119
115 631
907 Cumulative Subscribers (in 000's)
6,828 6,197
6,828 6,197
Venezuela
Currency Charge Impact On(4):
Operating Profit Before Depreciation and Amortization
(346 ) (166 ) Operating Profit
(346 ) (166 )
Adjusted Financial Results†
Adjusted
Operating Profit Before Depreciation and Amortization(1)
820 857 Adjusted OPBDA Margin(1)
25.8 % 27.7 % Adjusted Operating Profit
300 413 Adjusted Operating Profit Margin
9.5 % 13.4 %
* 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.
Fourth Quarter Review
Excluding changes in foreign exchange rates, fourth quarter
revenues in the PanAmericana and Other segment grew 42% versus the
prior year period driven by a 10% increase in the average number of
subscribers and a 29% 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 slightly to $808
million compared to the fourth quarter of 2013, while ARPU
decreased 9.1% to $39.78.
Subscriber net additions of approximately 119,000 increased
slightly compared to the fourth quarter of 2013 due to slightly
higher gross additions and a lower average monthly total churn rate
driven by an improvement in prepaid reconnection rates.
Fourth quarter OPBDA in the PanAmericana and Other segment
increased 3% to $231 million and OPBDA margin improved to 28.6%
from 27.8% in the prior year period. The increase in OPBDA margin
was primarily due to a decrease in subscriber acquisition costs
principally driven by lower advertising expenses. This margin
improvement was partially offset by the ongoing impact of the
decline in value of the Venezuelan bolivar, as well as inflation
and the timing of price increases in Venezuela. Operating profit
decreased to $81 million and operating profit margin declined to
10.0% as the higher OPBDA margin was more than offset by the impact
of higher depreciation and amortization resulting from leased
equipment and infrastructure capital expenditures made over the
last year.
Full Year Review
Excluding changes in foreign exchange rates, full year revenues
in the PanAmericana and Other segment grew 40% versus the prior
year period driven by a 13% increase in the average number of
subscribers and a 24% 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 3% to $3.17 billion
compared to 2013, while ARPU decreased 9.4% to $40.03.
Subscriber net additions of approximately 631,000 decreased
compared to 2013 due to higher disconnections associated with the
larger subscriber base, lower gross additions and a slight increase
in the total average monthly churn rate. The decline in gross
additions was primarily related to tighter sales filters instituted
due to challenging macroeconomic conditions. The total churn rate
was negatively impacted by a higher mix of subscribers taking
prepaid services.
Adjusted OPBDA in the PanAmericana and Other segment decreased
to $820 million in 2014 and adjusted OPBDA margin declined to
25.8%. The decline in adjusted OPBDA margin was primarily driven by
the ongoing impact of the decline in value of the Venezuelan
bolivar and higher programming costs associated with special
events, including the FIFA World Cup. OPBDA margin was also
negatively impacted by inflation and the timing of price increases
in Venezuela. Adjusted operating profit decreased to $300 million
and adjusted operating profit margin declined to 9.5% mainly due to
the lower OPBDA margin, as well as the impact of higher
depreciation and amortization resulting from leased equipment and
infrastructure capital expenditures made over the last year.
Reported OPBDA decreased to $474 million and reported operating
loss was $46 million in 2014.
CONFERENCE CALL INFORMATION
A live webcast of DIRECTV's fourth 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 February 19, 2015.
Access to the earnings call is also available in the United States
by dialing (800) 533-9703 and internationally by dialing (785)
830-1926. The conference ID number is 3390787. A replay of the call
will also be archived on our website at investor.directv.com.
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, 2014, which is expected to be filed in February
2015, 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 at that date. 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. The period-end rates
based on the latest auctions was 10.6 as of June 30, 2014 and 12.0
bolivars per U.S. dollar as of both September 30, 2014 and December
31, 2014.
(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 the full year of
2013.
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,” "strive" 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 19 million customers in Latin America. DIRECTV
sports and entertainment properties include ownership interests and
management of four Regional Sports Networks: ROOT SPORTS Rocky
Mountain, Pittsburgh, Southwest and Northwest; and has minority
ownership interests in Game Show Network. For more information on
DIRECTV, visit directv.com.
DIRECTV CONSOLIDATED STATEMENTS OF
OPERATIONS (Dollars in Millions, Except Per Share
Amounts) (Unaudited) Three Months
EndedDecember 31, Years EndedDecember 31,
2014 2013
2014 2013 Revenues
$ 8,922 $ 8,594
$ 33,260 $ 31,754
Operating costs and expenses Costs of revenues,
exclusive of depreciation and amortization expense Broadcast
programming and other 4,317 4,079 14,930 13,991 Subscriber service
expenses 587 568 2,320 2,242 Broadcast operations expenses 118 104
430 409 Selling, general and administrative expenses, exclusive of
depreciation and amortization expense Subscriber acquisition costs
954 855 3,659 3,419 Upgrade and retention costs 375 394 1,456 1,547
General and administrative expenses 538 550 2,041 2,002
Merger-related costs 33 — 72 — Venezuelan currency devaluation
charge — — 281 166 Depreciation and amortization expense
745 711
2,943 2,828
Total operating costs and expenses
7,667 7,261
28,132 26,604
Operating
profit 1,255 1,333 5,128 5,150 Interest income 25 16 68 72
Interest expense (221 ) (222 ) (898 ) (840 ) Other, net
57 100
150 106
Income
before income taxes 1,116 1,227 4,448 4,488 Income tax expense
(335 ) (411 )
(1,673 ) (1,603 ) Net income 781
816 2,775 2,885 Less: Net income attributable to noncontrolling
interest (3 ) (6 )
(19 ) (26 ) Net income
attributable to DIRECTV $ 778
$ 810 $ 2,756
$ 2,859
Basic earnings attributable
to DIRECTV per common share $ 1.55 $ 1.55 $ 5.46 $ 5.22
Diluted earnings attributable to DIRECTV per common share $
1.53 $ 1.53 $ 5.40 $ 5.17 Weighted average number of common
shares outstanding (in millions): Basic 502 523 505 548 Diluted 507
528 510 553
DIRECTV CONSOLIDATED
BALANCE SHEETS (Dollars in Millions) (Unaudited)
ASSETS December 31, 2014
December
31, 2013 Current assets Cash and cash equivalents $
4,635 $ 2,180 Accounts receivable, net of allowances of $109 and
$95 2,800 2,547 Inventories 299 283 Deferred income taxes 68 140
Prepaid expenses and other 1,017
803
Total current assets 8,819 5,953
Satellites, net
3,040 2,467
Property and equipment, net 6,721 6,650
Goodwill 3,929 3,970
Intangible assets, net 994 920
Investments and other assets 1,956
1,945
Total assets $ 25,459
$
21,905
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current
liabilities Accounts payable and accrued liabilities $ 5,048 $
4,685 Unearned subscriber revenues and deferred credits 584 589
Current debt 1,327
1,256
Total current
liabilities 6,959 6,530
Long-term debt 19,485 18,284
Deferred income taxes 1,726 1,804
Other liabilities and
deferred credits 2,117 1,456
Commitments and
contingencies Redeemable noncontrolling interest — 375
Stockholders' deficit (4,828 )
(6,544 )
Total
liabilities and stockholders' deficit $
25,459
$ 21,905
DIRECTV CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions) (Unaudited) Years Ended
December 31, 2014
2013
Cash Flows From Operating Activities Net income $ 2,775 $
2,885 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization expense 2,943
2,828 Venezuelan currency devaluation charge 281 166 DSN Northwest
deconsolidation charge — 59 Amortization of deferred revenues and
deferred credits (48 ) (53 ) Share-based compensation expense 104
100 Equity in earnings from unconsolidated affiliates (133 ) (198 )
Net foreign currency transaction loss 87 52 Dividends received 28
41 Net gains from sale of investments (19 ) (8 ) Deferred income
taxes 166 323 Excess tax benefit from share-based compensation (23
) (24 ) Other 31 (7 ) Change in operating assets and liabilities:
Accounts receivable (242 ) — Inventories (16 ) 118 Prepaid expenses
and other (81 ) (334 ) Accounts payable and accrued liabilities 361
272 Unearned subscriber revenues and deferred credits (5 ) 26
Other, net 160
148 Net cash
provided by operating activities 6,369
6,394
Cash Flows From Investing Activities Cash paid
for property and equipment (2,940 ) (3,409 ) Cash paid for
satellites (285 ) (377 ) Investment in companies, net of cash
acquired (47 ) (66 ) Proceeds from sale of investments 32 257
Other, net (123 )
(158 ) Net cash used in
investing activities (3,363 )
(3,753 )
DIRECTV
CONSOLIDATED STATEMENTS OF CASH FLOWS -
(continued)
(Dollars in Millions) (Unaudited) Years Ended
December 31, 2014
2013
Cash Flows From Financing Activities Repayment of commercial
paper (maturity 90 days or less), net — (155 ) Proceeds from
short-term borrowings 301 556 Repayment of short-term borrowings
(501 ) (559 ) Proceeds from borrowings under revolving credit
facility — 10 Repayment of borrowings under revolving credit
facility — (10 ) Proceeds from long-term debt 2,650 2,099 Debt
issuance costs (14 ) (12 ) Repayment of long-term debt (1,066 ) (15
) Repayment of other long-term obligations (69 ) (63 ) Common
shares repurchased and retired (1,386 ) (4,000 ) Stock options
exercised 21 — Taxes paid in lieu of shares issued for share-based
compensation (60 ) (61 ) Excess tax benefit from share-based
compensation 23 24 Other, net (67 )
10 Net cash
used in financing activities (168 )
(2,176 ) Effect of
exchange rate changes on Venezuelan cash and cash equivalents
(383 )
(187 ) Net increase in cash and cash
equivalents 2,455 278 Cash and cash equivalents at beginning of the
year 2,180
1,902 Cash and cash equivalents
at end of the year $ 4,635
$ 2,180
Supplemental Cash Flow Information Cash paid for interest $
886 $ 840 Cash paid for income taxes 1,513 1,479
DIRECTV SELECTED SEGMENT DATA
(Dollars in Millions) (Unaudited) Three Months
EndedDecember 31, Years
EndedDecember 31,
2014 2013
2014 2013 DIRECTV U.S.
Revenues $ 7,136 $ 6,773 $ 26,001 $ 24,676 Operating profit before
depreciation and amortization(1) 1,506 1,516 6,471 6,084 Operating
profit before depreciation and amortization margin(1) 21.1 % 22.4 %
24.9 % 24.7 % Operating profit $ 1,074 $ 1,101 $ 4,749 $ 4,444
Operating profit margin 15.1 % 16.3 % 18.3 % 18.0 % Depreciation
and amortization $ 432
$ 415 $ 1,722
$ 1,640
SKY BRASIL Revenues $
923 $ 963 $ 3,887 $ 3,753 Operating profit before depreciation and
amortization(1) 268 326 1,175 1,252 Operating profit before
depreciation and amortization margin(1) 29.0 % 33.9 % 30.2 % 33.4 %
Operating profit $ 108 $ 150 $ 488 $ 529 Operating profit margin
11.7 % 15.6 % 12.6 % 14.1 % Depreciation and amortization
$ 160 $ 176
$ 687 $ 723
PANAMERICANA AND OTHER Revenues $ 808 $ 805 $ 3,174 $ 3,091
Operating profit before depreciation and amortization(1) 231 224
474 691 Operating profit before depreciation and amortization
margin(1) 28.6 % 27.8 % 14.9 % 22.4 % Operating profit (loss) $ 81
$ 108 $ (46 ) $ 247 Operating profit margin 10.0 % 13.4 % NM* 8.0 %
Depreciation and amortization $ 150
$ 116 $ 520
$ 444
SPORTS NETWORKS,
ELIMINATIONS AND OTHER Revenues $ 55 $ 53 $ 198 $ 234 Operating
loss before depreciation and amortization(1) (5 ) (22 ) (49 ) (49 )
Operating loss (8 ) (26 ) (63 ) (70 ) Depreciation and amortization
3 4
14 21
TOTAL Revenues $ 8,922 $ 8,594 $ 33,260 $ 31,754 Operating
profit before depreciation and amortization(1) 2,000 2,044 8,071
7,978 Operating profit before depreciation and amortization
margin(1) 22.4 % 23.8 % 24.3 % 25.1 % Operating profit $ 1,255 $
1,333 $ 5,128 $ 5,150 Operating profit margin 14.1 % 15.5 % 15.4 %
16.2 % Depreciation and amortization $ 745
$ 711 $
2,943 $ 2,828 *Percentage not
meaningful (1)See footnote 1 above
DIRECTV
HOLDINGS LLC (DIRECTV U.S.) CONSOLIDATED STATEMENTS OF
OPERATIONS (Dollars in Millions) (Unaudited)
Three Months EndedDecember 31,
Years EndedDecember 31,
2014 2013
2014 2013 Revenues
$ 7,136 $ 6,773
$ 26,001 $ 24,676
Operating costs and expenses Costs of revenues,
exclusive of depreciation and amortization expense Broadcast
programming and other 3,718 3,469 12,343 11,616 Subscriber service
expenses 389 372 1,519 1,474 Broadcast operations expenses 82 73
303 293 Selling, general and administrative expenses, exclusive of
depreciation and amortization expense Subscriber acquisition costs
768 663 2,853 2,642 Upgrade and retention costs 334 348 1,276 1,350
General and administrative expenses 339 332 1,236 1,217
Depreciation and amortization expense 432
415 1,722
1,640
Total operating costs
and expenses 6,062
5,672 21,252
20,232
Operating profit 1,074 1,101
4,749 4,444 Interest income 2 — 4 2 Interest expense (212 ) (212 )
(862 ) (827 ) Other, net 46
7 51
29
Income before income taxes 910 896 3,942
3,648 Income tax expense (263 )
(322 ) (1,387 )
(1,353 )
Net income $ 647
$ 574 $ 2,555
$ 2,295
DIRECTV HOLDINGS LLC (DIRECTV U.S.) CONSOLIDATED BALANCE
SHEETS (Dollars in Millions) (Unaudited)
ASSETS December 31, 2014
December 31,
2013 Current assets Cash and cash equivalents $ 3,211 $
797 Accounts receivable, net of allowances of $66 and $59 2,354
2,103 Inventories 270 249 Prepaid expenses and other
804
494
Total current assets 6,639 3,643
Satellites, net 1,717 1,810
Property and equipment,
net 3,891 3,724
Goodwill 3,191 3,191
Intangible
assets, net 512 527
Other assets
769
551
Total assets $ 16,719
$ 13,446
LIABILITIES AND OWNER'S DEFICIT
Current liabilities Accounts
payable and accrued liabilities $ 4,048 $ 3,695 Unearned subscriber
revenues and deferred credits 398 380 Current debt
1,200
1,200
Total current liabilities 5,646
5,275
Long-term debt 19,327 18,203
Deferred income
taxes 1,769 1,641
Other liabilities and deferred credits
687 595
Commitments and contingencies Owner's deficit
(10,710 )
(12,268 )
Total liabilities and owner's
deficit $ 16,719
$ 13,446
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in
Millions) (Unaudited) Years Ended December 31,
2014
2013 Cash Flows From
Operating Activities Net income $ 2,555 $ 2,295 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 1,722 1,640 Amortization of
deferred revenues and deferred credits (48 ) (53 ) Share-based
compensation expense 83 78 Deferred income taxes 266 450 Excess tax
benefit from share-based compensation (19 ) (20 ) Other (45 ) 18
Change in other operating assets and liabilities: Accounts
receivable (227 ) (23 ) Inventories (21 ) 124 Prepaid expenses and
other (164 ) (242 ) Accounts payable and accrued liabilities 311
312 Unearned subscriber revenue and deferred credits 18 15 Other,
net 35
39 Net cash provided by
operating activities 4,466
4,633
Cash Flows From Investing Activities Cash paid for property
and equipment (726 ) (648 ) Cash paid for subscriber leased
equipment - subscriber acquisitions (507 ) (666 ) Cash paid for
subscriber leased equipment - upgrade and retention (451 ) (538 )
Cash paid for satellites (73 ) (198 ) Investment in companies, net
of cash acquired (1 ) (53 ) Proceeds from sale of investments 16 12
Other, net —
(67 ) Net cash used in investing
activities (1,742 )
(2,158 )
DIRECTV HOLDINGS LLC (DIRECTV U.S.) CONSOLIDATED
STATEMENTS OF CASH FLOWS - (continued) (Dollars in
Millions) (Unaudited) Years Ended December 31,
2014
2013 Cash Flows From
Financing Activities Repayment of commercial paper (maturity 90
days or less), net — (155 ) Proceeds from short-term borrowings 301
556 Repayment of short-term borrowings (501 ) (559 ) Proceeds from
borrowings under revolving credit facility — 10 Repayment of
borrowings under revolving credit facility — (10 ) Cash proceeds
from debt issuance 2,437 1,947 Debt issuance costs (14 ) (12 )
Repayment of long-term debt (1,000 ) — Repayment of other long-term
obligations (30 ) (24 ) Cash dividends to Parent (1,500 ) (4,200 )
Excess tax benefit from share-based compensation 19 20 Other, net
(22 )
10 Net cash used in financing
activities (310 )
(2,417 ) Net increase in cash and cash
equivalents 2,414 58 Cash and cash equivalents at beginning of the
period 797
739 Cash and cash equivalents at
end of the period $ 3,211
$ 797
Supplemental Cash Flow Information Cash paid for interest $
852 $ 782 Cash paid for income taxes 1,251 1,108
DIRECTV Consolidated Non-GAAP Financial Measure
Reconciliation Schedules(Dollars in
Millions)(Unaudited)
DIRECTV
Reconciliation of Cash Flow Before
Interest and Taxes(2) and Free Cash
Flow(3) to
Net Cash Provided by Operating
Activities
Three Months EndedDecember 31,
Years EndedDecember 31,
2014 2013 2014
2013 Cash Flow Before Interest and Taxes $
1,268 $ 1,484 $ 5,475 $
4,855 Adjustments: Cash paid for interest (100 ) (56 ) (886 ) (840
) Interest income 25 16 68 72 Income taxes paid
(379 ) (444 ) (1,513 )
(1,479 ) Subtotal - Free Cash Flow 814 1,000 3,144 2,608 Add
Cash Paid For: Property and equipment 733 938 2,940 3,409
Satellites 96 101 285
377 Net Cash Provided by Operating
Activities $ 1,643 $ 2,039 $
6,369 $ 6,394
(2)(3) - See footnotes above
Reconciliation of Reported Operating
Profit Before Depreciation and Amortization to Operating
Profit* Three Months EndedDecember 31, Years
EndedDecember 31, 2014
2013 2014 2013 Operating
profit before depreciation and amortization $ 2,000 $ 2,044 $ 8,071
$ 7,978 Subtract: Depreciation and amortization 745
711 2,943 2,828
Operating profit $ 1,255 $ 1,333
$ 5,128 $ 5,150
* 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 Annual Report on Form 10-K for the year ended December
31, 2014, which is expected to be filed with the SEC in February
2015.
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 EndedDecember 31,
Years EndedDecember 31, 2014
2013 2014
2013 Revenues $ 8,922 $ 8,594 $ 33,260
$ 31,754 Operating profit before
depreciation and amortization excluding the Venezuelan currency
devaluation charge $ 2,000 $ 2,044 $ 8,417 $ 8,144 OPBDA growth
excluding Venezuelan currency devaluation charge (2.2 )% 3.4 %
Subtract: Venezuelan currency devaluation charge —
— 346 166
Operating profit before depreciation and amortization 2,000 2,044
8,071 7,978 Subtract: Depreciation and amortization 745
711 2,943
2,828 Operating profit $ 1,255 $
1,333 $ 5,128 $ 5,150
Operating profit before depreciation and amortization margin
excluding the Venezuelan currency devaluation charge
22.4 % 23.8 % 25.3
% 25.6 %
Reconciliation of
Adjusted Operating Profit (excluding the Venezuelan currency
devaluation charge) to Operating
Profit
Three Months EndedDecember 31, Years
EndedDecember 31, 2014
2013 2014 2013 Revenues $
8,922 $ 8,594 $ 33,260 $ 31,754
Operating profit excluding the Venezuelan
currency devaluation charge
$ 1,255 $ 1,333 $ 5,474 $ 5,316 Operating Profit growth excluding
Venezuelan currency devaluation charge (5.9 )% 3.0 % Subtract:
Venezuelan currency devaluation charge —
— 346 166
Operating profit $ 1,255 $ 1,333
$ 5,128 $ 5,150 Operating profit
margin excluding the Venezuelan currency devaluation charge
14.1 % 15.5 %
16.5 % 16.7 %
Reconciliation of Adjusted Net Income (excluding the Venezuelan
currency devaluation charge) to Net Income Three Months
EndedDecember 31, Years EndedDecember 31,
2014 2013 2014
2013 Net income attributable to DIRECTV
excluding the Venezuelan currency devaluation charge $ 778 $ 810 $
3,102 $ 2,995 Net Income growth excluding Venezuelan currency
devaluation charge (4.0 )% 3.6 % Subtract: Venezuelan after-tax
currency devaluation charge — —
346 136 Net income attributable to
DIRECTV $ 778 $ 810 $ 2,756
$ 2,859 Diluted weighted average shares
507 528 510 553 Adjusted diluted earnings per common share $ 1.53 $
1.53 $ 6.08 $ 5.42 Adjusted diluted earnings per common share
growth excluding Venezuelan currency devaluation charge
— %
12.2 %
DIRECTV Consolidated Non-GAAP Financial Measure
Reconciliation Schedules(Dollars in Millions, Except Per
Share Amounts)(Unaudited)
DIRECTV Reconciliation of Adjusted Net Income (excluding
the Venezuelan currency devaluation charge and the ECAD settlement
gain) to Net Income Three Months
EndedDecember 31, Years
EndedDecember 31, 2014
2013 2014 2013 Net income
attributable to DIRECTV excluding the Venezuelan currency
devaluation charge and the ECAD settlement gain $ 778
$ 810 $ 3,102 $ 2,917 Net income growth
excluding the Venezuelan currency devaluation charge and the ECAD
settlement gain (4.0 )% 6.3 % Subtract: Venezuelan after-tax
currency devaluation charge — — 346 136 Subtract: ECAD settlement
gain — — —
(78 Net income attributable to DIRECTV $ 778
$ 810 $ 2,756 $
2,859 Diluted weighted average shares 507 528 510 553 Adjusted
diluted earnings per common share $ 1.53 $ 1.53 $ 6.08 $ 5.27
Adjusted diluted earnings per common share growth excluding the
Venezuelan currency devaluation charge and the ECAD settlement gain
— %
15.4 %
DIRECTV Latin America Non-GAAP Financial Measure
Reconciliation Schedules(Dollars in
Millions)(Unaudited)
DIRECTV Latin America Reconciliation of Cash Flow Before
Interest and Taxes to
Net Cash Provided by Operating
Activities
Three Months EndedDecember 31,
Years EndedDecember 31,
2014 2013 2014
2013 Cash Flow Before Interest and Taxes $ 103
$ 164 $ 707 $ 326
Adjustments: Cash paid for interest (18 ) (11 ) (54 ) (80 )
Interest income 22 13 62 54 Income taxes paid
(65 ) (82 ) (265 )
(305 ) Add Cash Paid For: Property and equipment 59
82 254 224 Subscriber leased equipment - subscriber acquisitions
169 248 666 923 Subscriber leased equipment - upgrade and retention
60 83 337 409 Satellites 70 52
190 164 Net Cash Provided by
Operating Activities $ 400
$ 549 $ 1,897
$ 1,715
Reconciliation
of Adjusted Operating Profit Before Depreciation and Amortization
(excluding the Venezuelan currency devaluation charge) to Operating
Profit Three Months EndedDecember 31, Years
EndedDecember 31, 2014
2013 2014 2013 Revenues $
1,731 $ 1,768 $ 7,061 $ 6,844 Operating profit before
depreciation and amortization excluding the Venezuelan currency
devaluation charge $ 499 $ 550 $ 1,995 $ 2,109 OPBDA growth
excluding Venezuelan currency devaluation charge (9.3 )% (5.4 )%
Subtract: Venezuelan currency devaluation charge —
— 346 166
Operating profit before depreciation and amortization 499 550 1,649
1,943 Subtract: Depreciation and amortization 310
292 1,207 1,167
Operating profit $ 189 $ 258
$ 442 $ 776 Operating
profit before depreciation and amortization margin excluding the
Venezuelan currency devaluation charge 28.8 %
31.1 % 28.3 %
30.8 %
Reconciliation of Adjusted
Operating Profit (excluding the Venezuelan currency devaluation
charge) to Operating Profit Three Months
EndedDecember 31, Years EndedDecember 31,
2014 2013 2014
2013 Revenues $ 1,731 $ 1,768 $ 7,061 $ 6,844
Operating profit excluding the Venezuelan currency
devaluation charge $ 189 $ 258 $ 788 $ 942 Operating Profit growth
excluding Venezuelan currency devaluation charge (26.7 )% (16.3 )%
Subtract: Venezuelan currency devaluation charge —
— 346 166
Operating profit $ 189 $ 258 $
442 $ 776 Operating profit
margin excluding the Venezuelan currency devaluation charge
10.9 % 14.6 %
11.2 % 13.8 %
DIRECTV Latin America Non-GAAP Financial Measure
Reconciliation Schedules(Dollars in
Millions)(Unaudited)
DIRECTV Latin America Reconciliation of Adjusted
Operating Profit Before Depreciation and Amortization (excluding
the Venezuelan currency devaluation charge and the ECAD settlement
gain) to Operating Profit Three Months
EndedDecember 31, Years
EndedDecember 31, 2014
2013 2014 2013 Revenues $
1,731 $ 1,768 $ 7,061 $
6,844 Operating profit before depreciation and amortization
excluding the Venezuelan currency devaluation charge and the ECAD
settlement gain $ 499 $ 550 $ 1,995 $ 2,039 OPBDA growth excluding
Venezuelan currency devaluation charge and the ECAD settlement gain
(9.3 )% (2.2 )% Subtract: Venezuelan currency devaluation charge —
— 346 166 Subtract: ECAD settlement gain —
— — (70 ) Operating
profit before depreciation and amortization 499 550 1,649 1,943
Subtract: Depreciation and amortization 310
292 1,207 1,167
Operating profit $ 189 $ 258 $
442 $ 776 Operating profit
before depreciation and amortization margin excluding the
Venezuelan currency devaluation charge and the ECAD settlement gain
28.8 % 31.1 %
28.3 % 29.8 %
Reconciliation of Adjusted Operating Profit (excluding the
Venezuelan currency devaluation charge and the ECAD settlement
gain) to Operating Profit Three Months EndedDecember
31, Years EndedDecember 31, 2014
2013 2014
2013 Revenues $ 1,731 $ 1,768 $ 7,061 $ 6,844
Operating profit excluding the Venezuelan currency devaluation
charge and the ECAD settlement gain $ 189 $ 258 $ 788 $ 872
Operating Profit growth excluding Venezuelan currency devaluation
charge and the ECAD settlement gain (26.7 )% (9.6 )% Subtract:
Venezuelan currency devaluation charge — — 346 166 Subtract: ECAD
settlement gain — — —
(70 ) Operating profit $ 189
$ 258 $ 442 $ 776
Operating profit margin excluding the Venezuelan currency
devaluation charge and the ECAD settlement gain
10.9 % 14.6 % 11.2
% 12.7 %
Sky Brasil Segment Non-GAAP Financial Measure Reconciliation
Schedules(Dollars in Millions)(Unaudited)
Sky Brasil Reconciliation of Operating Profit Before
Depreciation and Amortization (excluding the ECAD settlement gain)
to Operating Profit Three Months
EndedDecember 31, Years
EndedDecember 31, 2014
2013 2014 2013 Revenues $
923 $ 963 $ 3,887 $ 3,753
Operating profit before depreciation and amortization
excluding the ECAD settlement gain $ 268 $ 326 $ 1,175 $ 1,182
OPBDA growth excluding ECAD settlement gain (17.8 )% (0.6 )%
Subtract: ECAD settlement gain — —
— (70 ) Operating profit before
depreciation and amortization 268 326 1,175 1,252 Subtract:
Depreciation and amortization 160 176
687 723 Operating profit
$ 108 $ 150 $ 488
$ 529 Operating profit before depreciation and
amortization margin excluding the ECAD settlement gain
29.0 % 33.9 %
30.2 % 31.5 %
Reconciliation of Operating Profit (excluding the ECAD
settlement gain) to Operating Profit Three Months
EndedDecember 31, Years EndedDecember 31,
2014 2013 2014
2013 Revenues $ 923 $ 963 $ 3,887 $ 3,753
Operating profit excluding the ECAD settlement gain $ 108 $
150 $ 488 $ 459 Operating profit growth excluding ECAD settlement
gain (28.0 )% 6.3 % Subtract: ECAD settlement gain —
— — (70 )
Operating profit $ 108 $ 150 $
488 $ 529 Operating profit
margin excluding the ECAD settlement gain 11.7
% 15.6 % 12.6 %
12.2 %
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 EndedDecember 31,
Years EndedDecember 31,
2014 2013 2014
2013 Revenues $ 808 $ 805
$ 3,174 $ 3,091 Operating profit before
depreciation and amortization excluding the Venezuelan currency
devaluation charge $ 231 $ 224 $ 820 $ 857 OPBDA growth excluding
Venezuelan currency devaluation charge 3.1 % (4.3 )% Subtract:
Venezuelan currency devaluation charge —
— 346 166
Operating profit before depreciation and amortization 231 224 474
691 Subtract: Depreciation and amortization 150
116 520 444
Operating profit (loss) $ 81 $ 108
$ (46 ) $ 247 Operating profit
before depreciation and amortization margin excluding the
Venezuelan currency devaluation charge 28.6 %
27.8 % 25.8 %
27.7 %
Reconciliation of Adjusted
Operating Profit (excluding the Venezuelan currency devaluation
charge) to Operating Profit Three Months
EndedDecember 31, Years EndedDecember 31,
2014 2013 2014
2013 Revenues $ 808 $ 805 $ 3,174 $ 3,091
Operating profit excluding the Venezuelan currency
devaluation charge $ 81 $ 108 $ 300 $ 413 Operating profit growth
excluding Venezuelan currency devaluation charge (25.0 )% (27.4 )%
Subtract: Venezuelan currency devaluation charge —
— 346 166
Operating profit (loss) $ 81 $ 108
$ (46 ) $ 247 Operating profit
margin excluding the Venezuelan currency devaluation charge
10.0 % 13.4 %
9.5 % 13.4 %
DIRECTV U.S. Non-GAAP Financial Measure Reconciliation
Schedules(Dollars in Millions, Except Per Subscriber
Amounts)(Unaudited)
DIRECTV HOLDINGS LLC (DIRECTV U.S.) Reconciliation of
Pre-SAC Margin* to Operating Profit
Three Months EndedDecember 31,
Years EndedDecember 31, 2014
2013 2014
2013 Operating profit $ 1,074 $ 1,101 $
4,749 $ 4,444 Adjustments: Subscriber
acquisition costs (expensed) 768 663 2,853 2,642 Depreciation and
amortization 432 415 1,722 1,640 Cash paid for subscriber leased
equipment - upgrade and retention (103 ) (146
) (451 ) (538 ) Pre-SAC Margin $ 2,171
$ 2,033 $ 8,873
$ 8,188 Pre-SAC Margin as a percentage of revenue
30.4 % 30.0 %
34.1 % 33.2 % * 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.
Reconciliation of Cash Flow Before Interest and Taxes to Net
Cash Provided by Operating Activities Three Months
EndedDecember 31, Years EndedDecember 31,
2014 2013 2014
2013 Cash Flow Before Interest and Taxes $
1,203 $ 1,292 $ 4,808 $ 4,471 Adjustments: Cash paid for interest
(87 ) (49 ) (852 ) (782 ) Interest income 2 — 4 2 Income taxes paid
(324 ) (322 )
(1,251 ) (1,108 ) Add Cash Paid
For: Property and equipment 212 228 726 648 Subscriber leased
equipment - subscriber acquisitions 132 151 507 666 Subscriber
leased equipment - upgrade and retention 103 146 451 538 Satellites
21 44 73
198 Net Cash Provided by Operating Activities
$ 1,262 $ 1,490
$ 4,466 $ 4,633
SAC Calculation Three Months
EndedDecember 31, Years EndedDecember 31,
2014 2013 2014
2013 Subscriber acquisition costs (expensed) $
768 $ 663 $ 2,853 $ 2,642 Cash paid for subscriber leased equipment
- subscriber acquisitions 132 151
507 666 Total acquisition costs
$ 900 $ 814 $ 3,360
$ 3,308 Gross subscriber additions (000's) 982
949 3,804 3,790 Average subscriber acquisition costs - per
subscriber (SAC) $ 916
$ 858 $ 883
$ 873
DIRECTVMedia Contact:Darris Gringeri, (212) 205-0882orInvestor
Relations:Martin Sheehan, (310) 964-0808
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