DIRECTV Adds 279,000 Net New Subscribers in the
Quarter.
- PanAmericana surpasses 7 million
cumulative subscribers in the quarter by adding 178,000 net new
customers.
- DIRECTV U.S. adds 60,000 net new
customers in the quarter driven by the lowest first quarter average
monthly churn rate in six years of 1.37%.
DIRECTV U.S. Revenues Increase 6% in the Quarter Including a
5.5% Increase in ARPU.
DIRECTV Free Cash Flow Increases 5% to $927 million.
DIRECTV Generates Diluted EPS of $1.44.
Today DIRECTV (NASDAQ:DTV) reported first quarter 2015 results
highlighted by solid subscriber growth across the Americas and
strong revenue growth at DIRECTV U.S. resulting from improved ARPU
and churn performance.
“Our U.S. business generated another strong quarter of results,
further demonstrating our company's strong execution, as well as
product and brand leadership,” said Mike White, president and CEO
of DIRECTV. “In the quarter, our focus on high-quality new
customers combined with an improving economy to enable our lowest
first quarter churn rate in six years. Just as impressive was our
highest first quarter ARPU growth in five years, as we continue to
generate demand for higher-end services and packages, as well as
successfully pass through programming cost increases to our
customers." White added, "In Latin America, challenging foreign
exchange headwinds in Brazil weighed on our U.S. dollar results.
However, performance in PanAmericana, excluding Venezuela, is
exceeding our expectations as the unit grew revenues 19% and OPBDA
33% in U.S. dollar terms." White finished, "We remain confident
that our transaction with AT&T will close in the second
quarter, and we are excited to carry our strong operating momentum
forward to help create a unique new market leading company."
DIRECTV'S Operational Review
DIRECTV Consolidated Three Months
EndedMarch 31,
Dollars in Millions except Earnings per Common
Share 2015 2014 Revenues $ 8,143
$ 7,855 †Adjusted Operating Profit Before
Depreciation and Amortization(1) 2,117 2,222 Adjusted OPBDA
Margin(1) 26.0 % 28.3 % Adjusted Operating Profit
1,387 1,508 Adjusted Operating Profit Margin 17.0 %
19.2 % Adjusted Net Income Attributable to DIRECTV 730
842 Adjusted Diluted Earnings Per Common Share
$ 1.44 $ 1.63
Capital Expenditures
and Cash Flow Cash paid for
property and equipment 165 199 Cash
paid for subscriber leased equipment - subscriber acquisitions
304 245 Cash paid for subscriber leased
equipment - upgrade and retention 144 206
Cash paid for satellites 96 54
Cash Flow Before Interest and Taxes(2) 1,272
1,285 Free Cash Flow(3) 927 886
Venezuela Currency Charge Impact On(4):
Operating Profit Before Depreciation and
Amortization — 281 Operating Profit
— 281 Net Income Attributable to
DIRECTV — 281 Diluted Earnings Per
Common Share $ — $ 0.55
Reported
Financial Results Reported
Operating Profit Before Depreciation and Amortization(1) 2,117
1,941 Reported OPBDA Margin(1) 26.0 % 24.7 % Reported
Operating Profit 1,387 1,227 Reported Operating Profit Margin
17.0 % 15.6 % Reported Net Income Attributable to
DIRECTV 730 561 Reported Diluted
Earnings Per Common Share $ 1.44 $ 1.09
†"Adjusted" financial results exclude the impact of the charges
associated with the remeasurement of the net monetary assets of the
company's subsidiary in Venezuela in 2014 as detailed in the table
above. See footnote 4 for additional information.
First Quarter Review
DIRECTV's first quarter revenues of $8.14 billion increased 4%
principally due to strong ARPU growth at DIRECTV U.S. First quarter
2015 adjusted OPBDA and adjusted operating profit declined to $2.12
billion and $1.39 billion, respectively, while adjusted OPBDA
margin and adjusted operating profit margin declined to 26.0% and
17.0%, respectively. The decline in margin was primarily due to
lower margins at Sky Brasil mainly due to customer system migration
issues, higher programming and subscriber acquisition expenses at
DIRECTV U.S. and increased general and administrative expenses,
mainly at the Sports Networks, Eliminations and Other segment
primarily due to merger related costs of $26 million in 2015.
Reported OPBDA increased 9% to $2.12 billion and reported operating
profit decreased to $1.39 billion.
First quarter adjusted net income attributable to DIRECTV
declined to $730 million and adjusted diluted earnings per share
fell to $1.44 in the quarter mainly due to the lower adjusted
operating profit, as well as a $31 million pre-tax non-cash loss
associated with the revaluation of U.S. dollar denominated net
liabilities in Brazil compared to a $6 million gain in the prior
year period recorded in "Other, net" on the Consolidated Statements
of Operations. These declines were partially offset by the impact
of lower tax expense primarily due to the lower adjusted pre-tax
income.
Cash flow before interest and taxes2 declined slightly in the
quarter to $1.27 billion mainly due to spending on transaction
integration. Free cash flow3 increased 5% to $927 million compared
to the first quarter of 2014 primarily due to lower cash tax
payments and lower net interest payments compared to the year ago
period. Also during the quarter, but not included in free cash
flow, was a March 2015 debt redemption by DIRECTV U.S. of $1.20
billion principal amount of 3.550% senior notes due in 2015.
SEGMENT FINANCIAL REVIEW DIRECTV U.S.
Segment DIRECTV U.S. Three Months
EndedMarch 31,
Dollars in Millions except ARPU 2015
2014 Revenues $ 6,458 $ 6,087
Average Monthly Revenue per Subscriber (ARPU) ($) 105.62
100.16 ARPU Growth 5.5 % 4.3 %
Operating Profit Before Depreciation and Amortization(1) 1,687
1,669 OPBDA Margin(1) 26.1 % 27.4 % Operating
Profit 1,249 1,243 Operating Profit Margin 19.3 %
20.4 %
Capital Expenditures and Cash Flow
Cash paid for property and equipment 136
144 Cash paid for subscriber leased equipment
- subscriber acquisitions 115 117 Cash
paid for subscriber leased equipment - upgrade and retention
86 110 Cash paid for satellites 45
11 Cash Flow Before Interest and Taxes(2)
1,107 1,067
Subscriber Data (in
000's except Churn) Gross
Subscriber Additions 895 891 Average
Monthly Subscriber Churn 1.37 % 1.45 % Net Subscriber
Additions 60 12 Cumulative Subscribers
20,412 20,265
First Quarter Review
In the quarter, DIRECTV U.S. revenues increased 6% to $6.46
billion compared with the first quarter of 2014 primarily due to
strong ARPU growth along with a larger subscriber base. ARPU
increased 5.5% to $105.62 mostly due to price increases on
programming packages and regional sports networks, higher set-top
box lease fees, increased advanced receiver service fees, a
reduction in new customer credits, as well as increased commercial
business revenues, warranty program fees and ad sales. These
improvements were partially offset by increased promotional offers
to existing customers.
DIRECTV U.S. net subscriber additions of 60,000 were 48,000
higher than the first quarter of 2014 primarily due to a lower
average monthly churn rate. The churn rate in the quarter declined
8 basis points to 1.37% compared to the prior year period mainly
due to a continued focus on attracting higher quality new
subscribers and improved macroeconomic conditions which resulted in
higher customer pay rates, as well as successful winback offers.
Gross additions of 895,000 were relatively unchanged from the prior
year period. DIRECTV U.S. ended the quarter with 20.41 million
subscribers.
First quarter OPBDA and operating profit both increased 1% to
$1.69 billion and $1.25 billion, respectively. OPBDA margin and
operating profit margin declined to 26.1% and 19.3%, respectively.
The change in margins was principally due to higher programming
costs primarily related to programming supplier rate increases. The
margin decline was also impacted by higher subscriber acquisition
expenses driven by an increase in higher quality customers coming
from the consumer electronics distribution channel, higher
ancillary equipment costs, as well as higher retention and upgrade
costs mainly resulting from improved results from our customer
winback campaigns. Also impacting the comparison was a one time
favorable adjustment to programming costs resulting from the
resolution of a prior year programming dispute.
DIRECTV Latin America
DIRECTV Latin America Three Months
EndedMarch 31,
Dollars in Millions except ARPU 2015
2014 Revenues $ 1,635 $ 1,721
Average Monthly Revenue per Subscriber (ARPU) ($) 43.32
48.83 Adjusted Operating Profit Before
Depreciation and Amortization(1) 445 540 Adjusted OPBDA
Margin(1) 27.2 % 31.4 % Adjusted Operating Profit 156
255 Adjusted Operating Profit Margin 9.5 % 14.8 %
Capital Expenditures and Cash Flow
Cash paid for property and equipment 28
56 Cash paid for subscriber leased equipment - subscriber
acquisitions 189 128 Cash paid for
subscriber leased equipment - upgrade and retention 58
96 Cash paid for satellites 45
38 Cash Flow Before Interest and Taxes(2) 129
204
Subscriber Data(4) (in
000's except Churn) Gross
Subscriber Additions 1,103 1,111
Average Monthly Total Subscriber Churn(5) 2.34 % 2.13
% Average Monthly Post-paid Subscriber Churn(5) 2.15 %
1.85 % Net Subscriber Additions(5) 219
361 Cumulative Subscribers(5) 12,690
11,929
Reported Financial Results
Reported Operating Profit Before Depreciation and
Amortization(1) 445 259 Reported OPBDA Margin(1) 27.2 %
15.0 % Reported Operating Profit (Loss) 156 (26 ) Reported
Operating Profit Margin 9.5 % NM*
* Percentage not meaningful
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 6.77 million subscribers
as of March 31, 2015, bringing the total subscribers in the
region to 19.46 million.
Sky Brasil Segment Sky
Brasil Three Months EndedMarch 31,
Dollars in
Millions except ARPU 2015 2014 Revenues $
795 $ 939 Average Monthly Revenue per
Subscriber (ARPU) ($) 46.80 57.67
Operating Profit Before Depreciation and Amortization(1) 199
311 OPBDA Margin(1) 25.0 % 33.1 % Operating Profit 54
148 Operating Profit Margin 6.8 % 15.8 %
Other
data: Total Capital Expenditures
182 161 Net Subscriber Additions(4)(5)
(in 000's) 41 109 Cumulative
Subscribers(4)(5) (in 000's) 5,684 5,480
First Quarter Review
Excluding changes in foreign exchange rates, Sky Brasil's first
quarter revenues increased 2% versus the first quarter of 2014 as a
4% increase in the average number of subscribers was partially
offset by a 2% decline in local currency ARPU. System migration of
customers in the quarter impacted subscriber revenues resulting in
the lower ARPU. When factoring in unfavorable changes in foreign
exchange rates, Sky Brasil's ARPU declined 18.8% to $46.80 compared
to last year's first quarter and revenues decreased to $795
million.
First quarter net subscriber additions of 41,000 were lower than
the prior year as increased gross additions were more than offset
by higher total average monthly churn. The increase in gross
additions was driven by higher advanced product sales. Total churn
increased due to a combination of factors including issues related
to the migration of key systems that impacted existing subscribers,
a higher mix of mass market subscribers, particularly pre-paid
customers, and a challenging economic and competitive
environment.
Also in the first quarter, Sky Brasil OPBDA and operating profit
declined to $199 million and $54 million, respectively and OPBDA
margin and operating profit margin decreased to 25.0% and 6.8%,
respectively. The margin declines were primarily due to the issues
related to system migration of customers which impacted revenues as
well as customer service and general and administrative expenses.
Also impacting margins were higher subscriber acquisition costs
associated with advanced product sales, and the continued rollout
of a new broadband service.
PanAmericana and Other Segment
PanAmericana and Other Three Months
EndedMarch 31,
Dollars in Millions except ARPU 2015
2014 Revenues $ 840 $ 782
Average Monthly Revenue per Subscriber (ARPU) ($) 40.47
41.23 †Adjusted Operating Profit Before
Depreciation and Amortization(1) 246 229 Adjusted OPBDA
Margin(1) 29.3 % 29.3 % Adjusted Operating Profit 102
107 Adjusted Operating Profit Margin 12.1 % 13.7 %
Other data: Total Capital
Expenditures 138 157 Net Subscriber
Additions (in 000's) 178 252 Cumulative
Subscribers (in 000's) 7,006 6,449
Venezuela Currency Charge Impact On(4):
Operating Profit Before Depreciation and
Amortization — 281 Operating Profit
— 281
Reported Financial Results
Reported Operating Profit (Loss) Before
Depreciation and Amortization(1) 246 (52 ) Reported OPBDA Margin(1)
29.3 % NM* Reported Operating Profit (Loss) 102 (174
) Reported Operating Profit Margin 12.1 % NM*
†"Adjusted" financial results exclude the impact of the charges
associated with the remeasurement of the net monetary assets of the
company's subsidiary in Venezuela as detailed in the table above.
See footnote 4 for additional information.* Percentage not
meaningful
First Quarter Review
Excluding changes in foreign exchange rates, first quarter
revenues in the PanAmericana and Other Segment grew 42% versus the
prior year driven by a 9% increase in the average number of
subscribers and a 30% 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, revenues
increased 7% to $840 million, while ARPU declined 1.8% to $40.47
compared to the first quarter of 2014.
First quarter subscriber net additions of 178,000 were lower
than the prior year period mainly due to a decline in prepaid gross
additions mainly in Argentina and Peru, as well as an increase in
demand in the first quarter of 2014 in advance of the World Cup
soccer tournament. Also in the quarter, average monthly subscriber
churn rates improved in part driven by improved prepaid
reconnection rates.
Adjusted OPBDA increased 7% to $246 million in the current
quarter, while adjusted OPBDA margin was unchanged at 29.3%. OPBDA
margin improvements resulting from increased scale, reduced
subscriber acquisition costs mainly resulting from the lower gross
additions and a prior year performance rights settlement charge in
Argentina were offset by the timing of price increases and the
impact on average margins from currency depreciation in Venezuela.
In addition, adjusted operating profit decreased to $102 million
and adjusted operating profit margin declined to 12.1% due to the
impact of higher depreciation and amortization resulting from
increased leased equipment and infrastructure capital expenditures.
Reported OPBDA and reported operating profit increased to $246
million and $102 million, respectively.
CONFERENCE CALL INFORMATION
A live webcast of DIRECTV's first quarter 2015 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 May 5, 2015.
Access to the earnings call is also available in the United States
by dialing (888) 297-0353 and internationally by dialing (719)
457-2729. The conference ID number is 5928522. 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 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. Also 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 September 30, 2014, December 31,
2014 and March 31, 2015.
(5) DIRECTV Latin America subscriber data exclude subscribers of
the Sky Mexico service.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
NOTE: This presentation may include or incorporate by reference
certain statements that we believe are, or may be considered to be,
“forward-looking statements” within the meaning of various
provisions of the Securities Act of 1933 and the Securities
Exchange Act of 1934. These forward-looking statements generally
can be identified by use of statements that include phrases such as
“believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,”
“project” or other similar words or phrases. Similarly, statements
that describe our objectives, plans or goals also are
forward-looking statements. All of these forward-looking statements
are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or from
those expressed or implied by the relevant forward-looking
statement. Such risks and uncertainties include, but are not
limited to: increased competition; increasing programming costs and
our ability to renew programming contracts under favorable terms;
increased subscriber churn or subscriber upgrade and retention
costs; potential material increase in subscriber acquisition costs;
general economic conditions; risks associated with doing business
internationally, which for DIRECTV Latin America include political
and economic instability and foreign currency exchange rate
volatility and controls; pace of technological development;
potential intellectual property infringement; loss of key
personnel; satellite construction or launch delays; satellite
launch and operational risks; loss of a satellite; theft of
satellite programming signals; merger risks; 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
EndedMarch 31, 2015 2014
Revenues $ 8,143 $ 7,855
Operating costs and expenses Costs of revenues, exclusive of
depreciation and amortization expense Broadcast programming and
other 3,576 3,383 Subscriber service expenses 581 551 Broadcast
operations expenses 117 97 Selling, general and administrative
expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs 888 827 Upgrade and retention costs
350 321 General and administrative expenses 514 454 Venezuelan
currency devaluation charge — 281 Depreciation and amortization
expense 730 714
Total operating
costs and expenses 6,756 6,628
Operating profit 1,387 1,227 Interest income 22 13 Interest
expense (245 ) (232 ) Other, net 7 57
Income before income taxes 1,171 1,065 Income tax expense
(441 ) (496 ) Net income 730 569 Less: Net income
attributable to noncontrolling interest — (8 )
Net income attributable to DIRECTV $ 730
$ 561
Basic earnings attributable to DIRECTV per
common share $ 1.45 $ 1.10
Diluted earnings attributable to
DIRECTV per common share $ 1.44 $ 1.09 Weighted average number
of common shares outstanding (in millions): Basic 503 511 Diluted
507 515
DIRECTV CONSOLIDATED BALANCE
SHEETS (Dollars in Millions) (Unaudited)
ASSETS March 31, 2015 December 31,
2014 Current assets Cash and cash equivalents $ 4,284 $
4,635 Accounts receivable, net of allowances of $92 and $109 2,635
2,800 Inventories 334 299 Deferred income taxes 71 68 Prepaid
expenses and other 722 1,017
Total
current assets 8,046 8,819
Satellites, net 3,045 3,040
Property and equipment, net 6,455 6,721
Goodwill
3,877 3,929
Intangible assets, net 954 994
Investments
and other assets 1,924 1,956
Total assets $ 24,301 $ 25,459
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities Accounts payable and accrued
liabilities $ 4,639 $ 5,048 Unearned subscriber revenues and
deferred credits 570 584 Current debt 2,355
1,327
Total current liabilities 7,564 6,959
Long-term debt 17,058 19,485
Deferred income taxes
1,606 1,726
Other liabilities and deferred credits 2,353
2,117
Commitments and contingencies Total stockholders'
deficit (4,280 ) (4,828 )
Total liabilities
and stockholders' deficit $ 24,301 $
25,459
DIRECTV CONSOLIDATED
STATEMENTS OF CASH FLOWS (Dollars in Millions)
(Unaudited) Three Months EndedMarch 31,
2015 2014 Cash Flows From Operating
Activities Net income $ 730 $ 569 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization expense 730 714 Venezuelan currency devaluation
charge — 281 Amortization of deferred revenues and deferred credits
(11 ) (12 ) Share-based compensation expense 27 20 Equity in
earnings from unconsolidated affiliates (33 ) (44 ) Net foreign
currency transaction loss (gain) 31 (6 ) Dividends received 7 — Net
gains from sale of investments — (2 ) Deferred income taxes 44 84
Excess tax benefit from share-based compensation (31 ) (22 ) Other
6 15 Change in other operating assets and liabilities: Accounts
receivable 151 98 Inventories (37 ) (36 ) Prepaid expenses and
other 293 303 Accounts payable and accrued liabilities (358 ) (397
) Unearned subscriber revenue and deferred credits 3 43 Other, net
84 (18 ) Net cash provided by operating
activities 1,636 1,590
Cash Flows
From Investing Activities Cash paid for property and equipment
(613 ) (650 ) Cash paid for satellites (96 ) (54 ) Investment in
companies, net of cash acquired (10 ) (4 ) Proceeds from sale of
investments — 4 Other, net 3 (3 ) Net cash
used in investing activities (716 ) (707 )
DIRECTV CONSOLIDATED STATEMENTS OF CASH
FLOWS-(continued) (Dollars in Millions)
(Unaudited) Three Months
EndedMarch 31, 2015
2014 Cash Flows From Financing Activities Issuance of
commercial paper (maturity 90 days or less), net — 105 Proceeds
from short-term borrowings — 90 Repayment of short-term borrowings
— (200 ) Proceeds from long-term debt 17 1,260 Debt issuance costs
— (6 ) Repayment of long-term debt (1,226 ) (11 ) Repayment of
other long-term obligations (29 ) (15 ) Common shares repurchased
and retired — (895 ) Taxes paid in lieu of shares issued for
share-based compensation (64 ) (57 ) Excess tax benefit from
share-based compensation 31 22 Other, net —
(26 ) Net cash provided by (used in) in financing activities
(1,271 ) 267 Effect of exchange rate changes on
Venezuelan cash and cash equivalents — (316 )
Net increase (decrease) in cash and cash equivalents (351 ) 834
Cash and cash equivalents at beginning of the period 4,635
2,180 Cash and cash equivalents at end of the
period $ 4,284 $ 3,014
Supplemental
Cash Flow Information Cash paid for interest $ 318 $ 328 Cash
paid for income taxes 49 84
DIRECTV
SELECTED SEGMENT DATA (Dollars in Millions)
(Unaudited) Three Months EndedMarch 31,
2015 2014 DIRECTV
U.S. Revenues $ 6,458 $ 6,087 Operating profit before
depreciation and amortization (1) 1,687 1,669 Operating profit
before depreciation and amortization margin (1) 26.1 % 27.4 %
Operating profit $ 1,249 $ 1,243 Operating profit margin 19.3 %
20.4 % Depreciation and amortization $ 438 $
426
SKY BRASIL Revenues $ 795 $ 939 Operating
profit before depreciation and amortization (1) 199 311 Operating
profit before depreciation and amortization margin (1) 25.0 % 33.1
% Operating profit $ 54 $ 148 Operating profit margin 6.8 % 15.8 %
Depreciation and amortization $ 145 $ 163
PANAMERICANA AND OTHER Revenues $ 840 $ 782
Operating profit (loss) before depreciation and amortization (1)
246 (52 ) Operating profit before depreciation and amortization
margin (1) 29.3 % NM* Operating profit (loss) $ 102 $ (174 )
Depreciation and amortization $ 144 $ 122
SPORTS NETWORKS, ELIMINATIONS AND OTHER
Revenues $ 50 $ 47
Operating profit (loss) before
depreciation and amortization (1)
(15 ) 13
Operating profit (loss)
(18 ) 10 Depreciation and amortization 3 3
TOTAL Revenues $ 8,143 $ 7,855 Operating
profit before depreciation and amortization (1) 2,117 1,941
Operating profit before depreciation and amortization margin (1)
26.0 % 24.7 % Operating profit $ 1,387 $ 1,227 Operating profit
margin 17.0 % 15.6 % Depreciation and amortization $ 730
$ 714 * Percentage not meaningful (1) See
footnote 1 above
DIRECTV HOLDINGS LLC (DIRECTV
U.S.) CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars
in Millions) (Unaudited) Three
Months EndedMarch 31, 2015 2014
Revenues $ 6,458 $ 6,087
Operating costs and expenses Costs of revenues, exclusive of
depreciation and amortization expense Broadcast programming and
other 2,998 2,768 Subscriber service expenses 385 359 Broadcast
operations expenses 81 72 Selling, general and administrative
expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs 703 648 Upgrade and retention costs
308 281 General and administrative expenses 296 290 Depreciation
and amortization expense 438 426
Total operating costs and expenses 5,209
4,844
Operating profit 1,249 1,243 Interest
income 3 1 Interest expense (231 ) (223 ) Other, net 8
5
Income before income taxes 1,029
1,026 Income tax expense (379 ) (381 )
Net
income $ 650 $ 645
DIRECTV HOLDINGS LLC (DIRECTV U.S.) CONSOLIDATED
BALANCE SHEETS (Dollars in Millions) (Unaudited)
ASSETS March 31, 2015
December 31, 2014 Current assets Cash and cash
equivalents $ 2,825 $ 3,211 Accounts receivable, net of allowances
of $58 and $66 2,229 2,354 Inventories 308 270 Prepaid expenses and
other 528 804
Total current
assets 5,890 6,639
Satellites, net 1,713 1,717
Property and equipment, net 3,841 3,891
Goodwill
3,191 3,191
Intangible assets, net 509 512
Other
assets 720 769
Total assets
$ 15,864 $ 16,719
LIABILITIES AND
OWNER'S DEFICIT Current
liabilities Accounts payable and accrued liabilities $ 3,657 $
4,048 Unearned subscriber revenues and deferred credits 397 398
Current debt 2,249 1,200
Total
current liabilities 6,303 5,646
Long-term debt 16,936
19,327
Deferred income taxes 1,748 1,769
Other
liabilities and deferred credits 920 687
Commitments and
contingencies Owner's deficit (10,043 )
(10,710 )
Total liabilities and owner's deficit $
15,864 $ 16,719
DIRECTV HOLDINGS LLC (DIRECTV U.S.) CONSOLIDATED
STATEMENTS OF CASH FLOWS (Dollars in Millions)
(Unaudited) Three Months EndedMarch 31,
2015 2014 Cash Flows From Operating
Activities Net income $ 650 $ 645 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization expense 438 426 Amortization of deferred revenues
and deferred credits (11 ) (12 ) Share-based compensation expense
20 15 Deferred income taxes 59 29 Excess tax benefit from
share-based compensation (23 ) (18 ) Other (6 ) 2 Change in other
operating assets and liabilities: Accounts receivable 151 111
Inventories (38 ) (34 ) Prepaid expenses and other 289 279 Accounts
payable and accrued liabilities (409 ) (360 ) Unearned subscriber
revenue and deferred credits (1 ) 33 Other, net 69
13 Net cash provided by operating activities
1,188 1,129
Cash Flows From Investing
Activities Cash paid for property and equipment (136 ) (144 )
Cash paid for subscriber leased equipment - subscriber acquisitions
(115 ) (117 ) Cash paid for subscriber leased equipment - upgrade
and retention (86 ) (110 ) Cash paid for satellites (45 ) (11 )
Investment in companies, net of cash acquired (8 ) (1 ) Proceeds
from sale of investments — 4 Net cash
used in investing activities (390 ) (379 )
Cash
Flows From Financing Activities Issuance of commercial paper
(maturity 90 days or less), net — 105 Proceeds from short-term
borrowings — 90 Repayment of short-term borrowings — (200 )
Proceeds from issuance of long-term debt — 1,245 Debt issuance
costs — (6 ) Repayment of long-term debt (1,200 ) — Repayment of
other long-term obligations (7 ) (6 ) Cash dividends paid to Parent
— (1,000 ) Excess tax benefit from share-based compensation 23 18
Other, net — (26 ) Net cash provided by (used
in) financing activities (1,184 ) 220 Net
increase (decrease) in cash and cash equivalents (386 ) 970 Cash
and cash equivalents at beginning of the period 3,211
797 Cash and cash equivalents at end of the period
$ 2,825 $ 1,767
Supplemental Cash
Flow Information Cash paid for interest $ 305 $ 320
Cash paid (refunded) for income taxes
(1 ) 1
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 EndedMarch 31, 2015
2014 Cash Flow Before Interest and Taxes $ 1,272 $ 1,285
Adjustments: Cash paid for interest (318 ) (328 ) Interest income
22 13 Income taxes paid (49 ) (84 ) Subtotal - Free
Cash Flow 927 886 Add Cash Paid For: Property and equipment 613 650
Satellites 96 54 Net Cash Provided by
Operating Activities $ 1,636 $ 1,590 (2) and
(3) - See footnotes above
Reconciliation of Reported Operating
Profit Before Depreciation and Amortization to Operating
Profit* Three Months EndedMarch 31, 2015
2014 Operating profit before depreciation and amortization $
2,117 $ 1,941 Subtract: Depreciation and amortization 730
714 Operating profit $ 1,387 $ 1,227
* For a reconciliation of
this non-GAAP financial measure for each of our segments, please
see the Notes to the Consolidated Financial Statements which will
be included in DIRECTV's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2015, which is expected to be filed with
the SEC in May 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 EndedMarch 31,
2015 2014 Revenues $ 8,143 $ 7,855 Operating
profit before depreciation and amortization excluding the
Venezuelan currency devaluation charge $ 2,117 $ 2,222 OPBDA growth
excluding Venezuelan currency devaluation charge (4.7 )% Subtract:
Venezuelan currency devaluation charge — 281
Operating profit before depreciation and amortization 2,117 1,941
Subtract: Depreciation and amortization 730 714
Operating profit $ 1,387 $ 1,227
Operating profit before depreciation and amortization margin
excluding the Venezuelan currency devaluation charge 26.0 %
28.3 %
Reconciliation of Adjusted Operating Profit (excluding
the Venezuelan currency devaluation charge) to Operating Profit
Three Months EndedMarch 31, 2015 2014
Revenues $ 8,143 $ 7,855 Operating profit excluding the
Venezuelan currency devaluation charge $ 1,387 $ 1,508 Operating
profit growth excluding Venezuelan currency devaluation charge (8.0
)% Subtract: Venezuelan currency devaluation charge —
281 Operating profit $ 1,387 $ 1,227
Operating profit margin excluding the Venezuelan currency
devaluation charge 17.0 % 19.2 %
Reconciliation of Adjusted
Net Income (excluding the Venezuelan currency devaluation charge)
to Net Income Three Months EndedMarch 31,
2015 2014 Net income attributable to DIRECTV
excluding the Venezuelan currency devaluation charge $ 730 $ 842
Subtract: Venezuelan after-tax currency devaluation charge —
281 Net income attributable to DIRECTV $ 730 $
561 Net Income growth excluding Venezuelan currency devaluation
charge (13.3 )% Diluted Weighted Average Shares 507 515 Adjusted
Diluted Earnings Per Common Share $ 1.44 $ 1.63 Adjusted Diluted
Earnings Per Common Share growth excluding Venezuelan currency
devaluation charge (11.7 )%
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 EndedMarch 31, 2015
2014 Cash Flow Before Interest and Taxes $ 129 $ 204
Adjustments: Cash paid for interest (19 ) (13 ) Interest income 19
13 Income taxes paid (47 ) (89 ) Add Cash Paid For: Property and
equipment 28 56 Subscriber leased equipment - subscriber
acquisitions 189 128 Subscriber leased equipment - upgrade and
retention 58 96 Satellites 45 38 Net Cash
Provided by Operating Activities $ 402 $ 433
(2) and (3) - See footnotes above
Reconciliation of
Adjusted Operating Profit Before Depreciation and Amortization
(excluding the Venezuelan currency devaluation charge) to Operating
Profit Three Months EndedMarch 31, 2015
2014 Revenues $ 1,635 $ 1,721 Operating profit before
depreciation and amortization excluding the Venezuelan currency
devaluation charge $ 445 $ 540 OPBDA growth excluding Venezuelan
currency devaluation charge (17.6 )% Subtract: Venezuelan currency
devaluation charge — 281 Operating profit
before depreciation and amortization 445 259 Subtract: Depreciation
and amortization 289 285 Operating profit
(loss) $ 156 $ (26 ) Operating profit before
depreciation and amortization margin excluding the Venezuelan
currency devaluation charge 27.2 % 31.4 %
Reconciliation
of Adjusted Operating Profit (excluding the Venezuelan currency
devaluation charge) to Operating Profit Three Months
EndedMarch 31, 2015 2014 Revenues $ 1,635
$ 1,721 Operating profit excluding the Venezuelan currency
devaluation charge $ 156 $ 255 Operating Profit growth excluding
Venezuelan currency devaluation charge (38.8 )% Subtract:
Venezuelan currency devaluation charge — 281
Operating profit (loss) $ 156 $ (26 ) Operating
profit margin excluding the Venezuelan currency devaluation charge
9.5 % 14.8 %
PanAmericana and Other Segment
Non-GAAP Financial Measure Reconciliation Schedules (Dollars
in Millions)
(Unaudited)
PanAmericana and Other Segment
Reconciliation of Adjusted Operating Profit Before Depreciation
and Amortization (excluding the Venezuelan currency devaluation
charge) to Operating Profit Three Months
EndedMarch 31, 2015 2014 Revenues $ 840 $
782 Operating profit before depreciation and amortization
excluding the Venezuelan currency devaluation charge $ 246 $ 229
OPBDA growth excluding Venezuelan currency devaluation charge 7.4 %
Subtract: Venezuelan currency devaluation charge —
281 Operating profit (loss) before depreciation and
amortization 246 (52 ) Subtract: Depreciation and amortization 144
122 Operating profit (loss) $ 102
$ (174 ) Operating profit before depreciation and
amortization margin excluding the Venezuelan currency devaluation
charge 29.3 % 29.3 %
Reconciliation of Adjusted Operating
Profit (excluding the Venezuelan currency devaluation charge) to
Operating Profit Three Months EndedMarch 31,
2015 2014 Revenues $ 840 $ 782 Operating
profit excluding the Venezuelan currency devaluation charge $ 102 $
107 Operating Profit growth excluding Venezuelan currency
devaluation charge (4.7 )% Subtract: Venezuelan currency
devaluation charge — 281 Operating profit
(loss) $ 102 $ (174 ) Operating profit margin
excluding the Venezuelan currency devaluation charge 12.1 %
13.7 %
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 EndedMarch 31, 2015 2014 Operating
profit $ 1,249 $ 1,243 Adjustments: Subscriber acquisition costs
(expensed) 703 648 Depreciation and amortization 438 426 Cash paid
for subscriber leased equipment - upgrade and retention (86 )
(110 ) Pre-SAC Margin $ 2,304 $ 2,207
Pre-SAC Margin as a percentage of revenue 35.7 % 36.3
%
Reconciliation of Cash Flow
Before Interest and Taxes2 to
Net Cash Provided by Operating
Activities
Three Months EndedMarch 31, 2015 2014
Cash Flow Before Interest and Taxes $ 1,107 $ 1,067 Adjustments:
Cash paid for interest (305 ) (320 ) Interest income 3 1 Income
taxes paid 1 (1 ) Add Cash Paid For: Property and equipment 136 144
Subscriber leased equipment - subscriber acquisitions 115 117
Subscriber leased equipment - upgrade and retention 86 110
Satellites 45 11 Net Cash Provided by
Operating Activities $ 1,188 $ 1,129
(2) and (3) - See footnotes above *
Pre-SAC Margin, which is a financial measure that is not determined
in accordance with accounting principles generally accepted in the
United States of America, or GAAP, is calculated for DIRECTV U.S.
by adding amounts under the captions “Subscriber acquisition costs”
and “Depreciation and amortization expense” to “Operating Profit”
from the Consolidated Statements of Operations and subtracting
"Cash paid for subscriber leased equipment - upgrade and retention"
from the Consolidated Statements of Cash Flows. This financial
measure should be used in conjunction with GAAP financial measures
and is not presented as an alternative measure of operating
results, as determined in accordance with GAAP. DIRECTV management
use Pre-SAC Margin to evaluate the profitability of DIRECTV U.S.'
current subscriber base for the purpose of allocating resources to
discretionary activities such as adding new subscribers, upgrading
and retaining existing subscribers and for capital expenditures. To
compensate for the exclusion of “Subscriber acquisition costs,”
management also uses operating profit and operating profit before
depreciation and amortization expense to measure profitability.
DIRECTV believes this measure is useful to investors, along
with GAAP measures (such as revenues, operating profit and net
income), to compare DIRECTV U.S.’ operating performance to other
communications, entertainment and media companies. DIRECTV believes
that investors also use current and projected Pre-SAC Margin to
determine the ability of DIRECTV U.S.’ current and projected
subscriber base to fund discretionary spending and to determine the
financial returns for subscriber additions.
DIRECTV U.S. Non-GAAP Financial Measure SAC Calculations
(Dollars in Millions, Except Per Subscriber Amounts)
(Unaudited)
DIRECTV HOLDINGS LLC (DIRECTV
U.S.) SAC Calculation Three Months
EndedMarch 31, 2015 2014 Subscriber
acquisition costs (expensed) $ 703 $ 648 Cash paid for subscriber
leased equipment - subscriber acquisitions 115 117
Total acquisition costs $ 818 $ 765 Gross subscriber
additions (000's) 895 891 Average subscriber acquisition costs -
per subscriber (SAC) $ 914 $ 859
DIRECTVMedia Contact: Darris Gringeri, (212) 205-0882Investor
Relations: (310) 964-0808
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