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Press release from Business Wire

DIRECTV Announces Second Quarter 2011 Results

<p> <i><b>DIRECTV Revenues Grow 13% to $6.60 Billion</b></i> </p> <ul> <li class='bwlistitemmargb'> <i>Increase driven by DIRECTV Latin America's record subscriber growth and 13% higher Average Revenue per Subscriber, as well as 7% revenue growth at DIRECTV U.S.</i> </li> <li class='bwlistitemmargb'> <i>DIRECTV Latin America adds all-time high 823,000 gross and 472,000 net subscribers in the quarter</i> </li> </ul> <p> <i><b>Operating Profit before Depreciation and Amortization Increases 13% to $1.85 Billion and Operating Profit Grows 22% to $1.23 Billion</b></i> </p> <ul> <li class='bwlistitemmargb'> <i>Growth fueled by DIRECTV Latin America's 60% increase in operating profit before depreciation and amortization to $423 million and 72% increase in operating profit to $241 million.</i> </li> </ul> <p> <i><b>DIRECTV Adjusted Diluted Earnings per Share Up 52% to $0.91</b></i> </p> <ul> <li class='bwlistitemmargb'> <i>Results driven primarily by operating profit growth and share repurchases of $5.8 billion over the last twelve months, including $1.5 billion in the second quarter</i> </li> </ul>

Thursday, August 04, 2011

DIRECTV Announces Second Quarter 2011 Results07:30 EDT Thursday, August 04, 2011 EL SEGUNDO, Calif. (Business Wire) -- DIRECTV (NASDAQ:DTV) today reported increases in second quarter 2011 revenues of 13% to $6.60 billion, operating profit before depreciation and amortization1 (OPBDA) of 13% to $1.85 billion and operating profit of 22% to $1.23 billion compared to last year's second quarter. DIRECTV also reported that second quarter net income increased 29% to $701 million and diluted earnings per share grew 52% to $0.91 compared with the same period last year, excluding the $0.18 per Class A common share impact from the Malone transaction2 in the second quarter of 2010. “Consolidated revenue accelerated to 13% exceeding both last year and first quarter growth rates as DIRECTV Latin America's continued record subscriber additions coupled with strong ARPU growth propelled a 46% increase in DTVLA revenues while DIRECTV U.S. delivered another solid quarter of industry leading revenue growth of 7%,” said Mike White, President and CEO of DIRECTV. “Importantly, the significant subscriber performance in Latin America did not come at the expense of profitability as DTVLA's OPBDA grew 60% fueling our consolidated OPBDA growth to 13%.” White added, “While a challenging economic and competitive landscape continues to impact DIRECTV U.S., the substantial and growing contributions from DTVLA combined with our share repurchase program drove strong EPS growth of 52% in the quarter.” DIRECTV'S OPERATIONAL REVIEWSecond Quarter Review DIRECTV's second quarter revenues of $6.60 billion increased 13% over the same period last year principally due to subscriber and average revenue per subscriber (ARPU) growth at DIRECTV Latin America (DTVLA) and DIRECTV U.S. Operating profit before depreciation and amortization increased 13% to $1.85 billion and operating profit grew 22% to $1.23 billion primarily due to the gross profit associated with higher revenues partially offset by higher subscriber acquisition and upgrade and retention costs at DIRECTV U.S. and DTVLA. Operating profit was also favorably impacted by lower depreciation and amortization expense at DIRECTV U.S.   DIRECTV Consolidated   Three Months   Six Months Dollars in Millions except Earnings Ended June 30,   Ended June 30, per Class A Common Share   2011   2010   2011   2010 Revenues   $ 6,600   $ 5,848   $ 12,919   $ 11,456 Operating Profit Before Depreciation and Amortization(1)     1,846     1,635     3,612     3,210 Operating Profit     1,230     1,010     2,385     1,966 Net Income Attributable to DIRECTV     701     543     1,375     1,101 Diluted Earnings Per Class A Common Share     0.91     0.42     1.76     1.02 Adjusted Diluted Earnings Per Share(2)     0.91     0.60     1.76     1.19 Capital Expenditures and Cash Flow                 Cash Paid for DIRECTV U.S. Subscriber Leased Equipment - Acquisitions, Upgrade and Retention     226     202     469     398 Cash Paid for Property, Equipment and Satellites     474     405     875     682 Cash Flow Before Interest and Taxes(3)     998     910     1,897     1,984 Free Cash Flow(4)     395     383     1,060     1,414   Net income attributable to DIRECTV increased 29% to $701 million compared with the second quarter of last year primarily due to higher operating profit as well as a $57 million increase in other income, including a $37 million pre-tax gain resulting from the sale of an equity investment recorded in “Other, net” on the Consolidated Statements of Operations. These increases were partially offset by higher interest expense principally resulting from an increase in long-term debt as well as higher income tax expense resulting from the increase in pre-tax income. Diluted earnings per share improved 52% to $0.91 in the quarter, excluding the impact from the Malone transaction2 in the second quarter of 2010. The increase was due to the higher net income as well as a lower average share count resulting from stock repurchases made over the last twelve months. Cash flow before interest and taxes3 increased 10% to $998 million and free cash flow4 increased 3% to $395 million compared to the second quarter of 2010 due to the higher OPBDA and $32 million in dividends received, primarily from Game Show Network, partially offset by increased capital expenditures mostly driven by the higher gross additions and demand for advanced set-top boxes at both DTVLA and DIRECTV U.S. Free cash flow was also negatively impacted by greater cash tax payments primarily resulting from the higher pre-tax income and prior-year one-time tax deductions. Also during the quarter but not included in free cash flow, were cash paid for share repurchases of $1.51 billion and proceeds from the sale of an equity investment of $55 million. In addition, in June 2011 DIRECTV U.S. redeemed the remaining $659 million of its 6.375% Senior Notes due 2015. Year-to-Date Review DIRECTV's first half revenues of $12.92 billion increased 13% over the same period last year principally due to subscriber and ARPU growth at both DIRECTV Latin America and DIRECTV U.S. Operating profit before depreciation and amortization increased 13% to $3.61 billion and operating profit increased 21% to $2.39 billion primarily due to gross profit associated with higher revenues partially offset by increased subscriber acquisition costs associated with the higher gross additions at both DTVLA and DIRECTV U.S. Operating profit was also favorably impacted by lower depreciation and amortization expense at DIRECTV U.S. In the first six months of 2011, net income attributable to DIRECTV increased 25% to $1.38 billion driven by the higher operating profit as well as a $93 million increase in other income, including a $60 million increase in pre-tax gains resulting from the sale of investments recorded in “Other, net” on the Consolidated Statements of Operations. These increases were partially offset by higher interest expense principally resulting from an increase in long-term debt as well as greater income tax expense resulting from the higher pre-tax income. Also impacting the comparison was a $67 million gain from the final settlement of the equity collars assumed in the Liberty transaction in the first quarter of 2010. Diluted earnings per share improved to $1.76, a 48% increase excluding the impact of the Malone transaction2 from the first half results of 2010. The increase was due to the higher net income as well as a lower average share count resulting from stock repurchases made over the last twelve months. Cash flow before interest and taxes and free cash flow declined 4% to $1.90 billion and 25% to $1.06 billion, respectively, compared to the first six months of 2010 as the higher OPBDA and $77 million in dividends received, primarily from Sky Mexico and Game Show Network, were more than offset by higher capital expenditures primarily associated with increased gross additions and demand for advanced set-top boxes at both DIRECTV U.S. and DTVLA. In addition, free cash flow was negatively impacted by higher cash interest payments related to an increase in long-term debt, as well as higher cash tax payments primarily resulting from the increase in pre-tax income and prior-year one-time tax deductions. During the first six months of 2011 but not included in free cash flow, were cash paid for share repurchases of $2.91 billion and proceeds from the sale of investments of $116 million. In addition, in March 2011 DIRECTV U.S. completed a $4.0 billion debt financing and DIRECTV redeemed $1.0 billion of 6.375% Senior Notes due 2015 during the first half of 2011. SEGMENT FINANCIAL REVIEWDIRECTV U.S. SegmentSecond Quarter Review     Three Months   Six Months DIRECTV U.S. Ended June 30,   Ended June 30, Dollars in Millions except ARPU   2011   2010   2011   2010 Revenue   $ 5,277     $ 4,934     $ 10,422     $ 9,706   Average Monthly Revenue per Subscriber(ARPU) ($)     90.58       87.90       89.75       86.69   Operating Profit Before Depreciation and Amortization(1)     1,446       1,394       2,809       2,700   Operating Profit     1,016       899       1,937       1,707   Cash Flow Before Interest and Taxes(3)     896       873       1,613       1,857   Free Cash Flow(4)     320       285       888       1,252   Subscriber Data (in 000's except Churn)                 Gross Subscriber Additions     954       946       2,006       1,871   Average Monthly Subscriber Churn     1.59 %     1.51 %     1.55 %     1.49 % Net Subscriber Additions     26       100       210       200   Cumulative Subscribers     19,433       18,760       19,433       18,760     In the quarter, DIRECTV U.S. revenues increased 7% to $5.28 billion primarily due to the larger subscriber base and ARPU growth of 3.0%. The ARPU increase to $90.58 was driven by price increases on programming packages and leased set-top boxes, as well as higher advanced service fees partially offset by more promotional offers to new and existing customers. Net additions declined to 26,000 as the increase in gross additions was more than offset by a higher average monthly churn rate of 1.59% principally resulting from a more competitive environment coupled with ongoing economic weakness. DIRECTV U.S. ended the quarter with 19.43 million subscribers, an increase of 4% over the 18.76 million subscribers reported for the quarter ended June 30, 2010. Second quarter OPBDA increased 4% to $1.45 billion and operating profit increased 13% to $1.02 billion primarily due to gross profit associated with higher revenue partially offset by an increase in upgrade and retention costs and higher demand for advanced service equipment. Operating profit was also favorably impacted by the completion of amortization for a subscriber-related intangible asset as well as lower depreciation expense associated with a reduction in set-top box capital expenditures over the last several years. DIRECTV Latin America Segment DIRECTV Latin America owns approximately 93% of Sky Brazil, 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 3.59 million subscribers as of June 30, 2011 bringing the total subscribers in the region to 10.29 million at the end of the second quarter of 2011. Second Quarter Review     Three Months   Six Months DIRECTV Latin America Ended June 30,   Ended June 30, Dollars in Millions except ARPU   2011   2010   2011   2010 Revenue   $ 1,254     $ 857     $ 2,368     $ 1,636   Average Monthly Revenue per Subscriber(ARPU) ($)     64.56       56.98       63.14       55.95   Operating Profit Before Depreciation and Amortization(1)     423       265       807       509   Operating Profit     241       140       460       266   Cash Flow Before Interest and Taxes(3)     141       69       297       135   Free Cash Flow(4)     71       4       147       48   Subscriber Data(5) (in 000's except Churn)                 Gross Subscriber Additions     823       660       1,588       1,153   Average Monthly Total Subscriber Churn     1.81 %     1.63 %     1.84 %     1.77 % Average Monthly Post-paid Subscriber Churn     1.44 %     1.45 %     1.44 %     1.50 % Net Subscriber Additions     472       415       899       636   Cumulative Subscribers     6,707       5,224       6,707       5,224     DIRECTV Latin America gross additions increased 25% to an all-time record of 823,000 in the quarter largely due to increased demand from the middle market segment in Brazil. The increase in gross additions and a slight decline in post-paid churn to 1.44% driven by lower churn in Brazil and Venezuela, resulted in record net additions of 472,000, representing a 14% increase over last year's second quarter results which benefited from the 2010 World Cup soccer tournament. Revenues for DTVLA increased 46% to $1.25 billion in the quarter principally due to the strong subscriber growth and a 13.3% increase in ARPU. The increase in ARPU to $64.56 was mostly due to price increases, higher sales of HD and DVR services as well as favorable exchange rates, primarily in Brazil. Excluding the impact of exchange rates, DTVLA ARPU increased 7.9%. DIRECTV Latin America's second quarter 2011 OPBDA increased 60% to $423 million and operating profit increased 72% to $241 million primarily due to the gross profit associated with higher revenue. These increases were partially offset by higher subscriber acquisition costs associated with the record gross additions as well as increased upgrade and retention spending driven by demand for advanced equipment. Also impacting operating profit were higher depreciation expenses mostly due to the increase in set-top boxes deployed related to the higher gross subscriber additions attained over the last year. CONFERENCE CALL INFORMATION A live webcast of DIRECTV's second quarter 2011 earnings call will be available on the company's website at www.directv.com/investor. The webcast will begin at 2:00 p.m. ET, today August 4, 2011. Access to the earnings call is also available in the United States by dialing (800) 946-0708 and internationally by dialing (719) 457-2573. The conference ID number is 2814438. A replay of the call can be accessed by dialing 888-203-1112 in the U.S. and 719-457-0820 internationally. The replay pass code is 2814438. The replay will be available from 5:30 p.m. ET Thursday, August 4 through 12:59 a.m. ET Friday, August 12 and will also be archived on our website at www.directv.com/investor. FOOTNOTES (1) Operating profit before depreciation and amortization, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of operating results, as determined in accordance with GAAP. Please see each of DIRECTV and DIRECTV Holdings LLC's Annual Reports on Form 10-K for the year ended December 31, 2010 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) In the second quarter of 2010, DIRECTV resolved an FCC issue regarding our Puerto Rico operations by consummating a transaction with Dr. John C. Malone and members of his family. Under the terms of the agreement, the Malones exchanged 21.8 million shares of DIRECTV Class B common stock, which was all of the outstanding Class B shares, for 26.5 million shares of DIRECTV Class A common stock. The additional 4.7 million shares, valued at approximately $160 million reduced the diluted earnings per share attributable to Class A shareholders to $0.42 in the second quarter of 2010. See reconciliation of adjusted diluted earnings per share to diluted earnings per share at the end of this release. (3) 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 and DIRECTV U.S. management use 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. DIRECTV and DIRECTV U.S. 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. (4) 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 and DIRECTV U.S. management use 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. DIRECTV and DIRECTV U.S. 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. (5) DIRECTV Latin America subscriber data exclude subscribers of the Sky Mexico service. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS NOTE: This release 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 of 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: economic conditions; product demand and market acceptance; ability to simplify aspects of our business model, improve customer service, create new and desirable programming content and interactive features, and achieve anticipated economies of scale; government and regulatory action; local political or economic developments in or affecting countries where we have operations, including political, economic and social uncertainties in many Latin American countries in which DTVLA operates; foreign currency exchange rates; currency exchange controls; ability to obtain export licenses; competition; the outcome of legal proceedings; reliance on key executives and the loss thereof; indemnification obligations; ability to achieve cost reductions; increasing subscriber acquisition costs and subscriber churn; ability of third parties to timely perform material contracts; ability to renew programming contracts under favorable terms; technological risk; potential intellectual property infringement; limitations on access to distribution channels; natural disasters; the success and timeliness of satellite launches; in-orbit performance of satellites, including technical anomalies; loss of uninsured satellites; theft of satellite programming signals; significant debt; and our ability to access capital to maintain our financial flexibility. These factors are also described in Item 1A of DIRECTV's Form 10-K, quarterly reports filed on Form 10-Q and other SEC filings. We urge you to consider these factors carefully in evaluating the forward-looking statements. DIRECTV (NASDAQ:DTV) is one of the world's leading providers of digital television entertainment services. Through its subsidiaries and affiliated companies in the United States, Brazil, Mexico and other countries in Latin America, DIRECTV provides digital television service to more than 19.4 million customers in the United States and over 10 million customers in Latin America. DIRECTV sports and entertainment properties include three regional sports networks (Northwest, Rocky Mountain and Pittsburgh) as well as a 60 percent ownership interest in Game Show Network. For more information on DIRECTV, visit directv.com.   DIRECTVCONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in Millions, Except Per Share Amounts)(Unaudited)   Three Months Ended   Six Months Ended June 30, June 30, 2011   2010 2011   2010     Revenues   $6,600     $5,848     $12,919     $11,456     Operating costs and expenses Costs of revenues, exclusive of depreciation and amortization expense Broadcast programming and other 2,693 2,366 5,286 4,680 Subscriber service expenses 466 407 915 802 Broadcast operations expenses 96 85 190 173 Selling, general and administrative expenses, exclusive of depreciation and amortization expense Subscriber acquisition costs 766 709 1,562 1,381 Upgrade and retention costs 327 272 608 532 General and administrative expenses 406 374 746 678 Depreciation and amortization expense     616       625       1,227       1,244   Total operating costs and expenses     5,370       4,838       10,534       9,490     Operating profit1,2301,0102,3851,966   Interest income 9 8 16 19 Interest expense (203 ) (134 ) (375 ) (249 ) Liberty transaction and related gains - - - 67 Other, net     70       13       112       19     Income before income taxes1,1068972,1381,822   Income tax expense     (397 )     (343 )     (746 )     (693 )   Net income 709 554 1,392 1,129   Less: Net income attributable to noncontrolling interest (8 ) (11 ) (17 ) (28 )                   Net income attributable to DIRECTV   $701     $543     $1,375     $1,101     Net income attributable to DIRECTV Class A common stockholders $ 701 $ 372 $ 1,375 $ 917   Net income attributable to DIRECTV Class B common stockholders, including $160 million exchange inducement value for the Malone Transaction     -       171       -       184   Net income attributable to DIRECTV   $701     $543     $1,375     $1,101         Basic earnings attributable to DIRECTV Class A stockholders per common share $ 0.92 $ 0.42 $ 1.77 $ 1.02     Diluted earnings attributable to DIRECTV Class A stockholders per common share 0.91 0.42 1.76 1.02     Basic and diluted earnings attributable to DIRECTV Class B stockholders per common share, including $160 million exchange inducement value for the Malone Transaction - 7.84 - 8.44   Weighted average number of Class A common shares outstanding (in millions) Basic 763 883 778 896 Diluted 767 889 782 903   Weighted average number of Class B common shares outstanding, through June 16, 2010 (in millions) Basic - 22 - 22 Diluted - 22 - 22   Weighted average number of total common shares outstanding (in millions) Basic 763 901 778 916 Diluted 767 907 782 923     DIRECTVCONSOLIDATED BALANCE SHEETS(Dollars in Millions)(Unaudited)     June 30,   December 31, ASSETS   2011   2010 Current assets Cash and cash equivalents $ 2,528 $ 1,502 Accounts receivable, net of allowances of $98 and $76 2,003 2,001 Inventories 321 247 Deferred income taxes 61 53 Prepaid expenses and other     405       450     Total current assets 5,318 4,253 Satellites, net 2,173 2,235 Property and equipment, net 4,789 4,444 Goodwill 4,181 4,148 Intangible assets, net 1,014 1,074 Investments and other assets     1,702       1,755     Total assets   $ 19,177     $ 17,909     LIABILITIES AND STOCKHOLDERS' DEFICIT         Current liabilities Accounts payable and accrued liabilities $ 3,539 $ 3,926 Unearned subscriber revenues and deferred credits 509 486 Short-term borrowings     -       38     Total current liabilities 4,048 4,450 Long-term debt 13,462 10,472 Deferred income taxes 1,784 1,670 Other liabilities and deferred credits 1,282 1,287 Commitments and contingenciesRedeemable noncontrolling interest 224 224 Stockholders' deficit     (1,623 )     (194 )   Total liabilities and stockholders' deficit   $ 19,177     $ 17,909       DIRECTVCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in Millions)(Unaudited)     Six Months Ended June 30,     2011   2010 Cash Flows From Operating Activities   Net income $ 1,392 $ 1,129 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,227 1,244 Amortization of deferred revenues and deferred credits (18 ) (17 ) Share-based compensation expense 53 38 Equity in earnings from unconsolidated affiliates (55 ) (38 ) Net foreign currency transaction (gain) loss (26 ) 11 Dividends received 77 47 Gain from sale of investments (63 ) (3 ) Liberty transaction and related gains - (67 ) Deferred income taxes 180 135 Other 26 30 Change in other operating assets and liabilities: Accounts receivable 17 (30 ) Inventories (74 ) 29 Prepaid expenses and other 9 61 Accounts payable and accrued liabilities (259 ) (15 ) Unearned subscriber revenue and deferred credits 23 (8 ) Other, net     (105 )     (52 ) Net cash provided by operating activities     2,404       2,494   Cash Flows From Investing Activities Cash paid for property and equipment (1,296 ) (1,011 ) Cash paid for satellites (48 ) (69 ) Investment in companies, net of cash acquired (11 ) (1 ) Proceeds from sale of investments 116 5 Other, net     39       (41 ) Net cash used in investing activities     (1,200 )     (1,117 ) Cash Flows From Financing Activities Cash proceeds from debt issuance 3,990 2,996 Debt issuance costs (30 ) (16 ) Repayment of long-term debt (1,000 ) (1,103 ) Repayment of short-term borrowings (39 ) - Repayment of collar loan and equity collars - (1,537 ) Repayment of other long-term obligations (156 ) (62 ) Common shares repurchased and retired (2,913 ) (2,189 ) Stock options exercised - 2 Taxes paid in lieu of shares issued for share-based compensation (55 ) (82 ) Excess tax benefit from share-based compensation     25       9   Net cash used in financing activities     (178 )     (1,982 ) Net increase (decrease) in cash and cash equivalents 1,026 (605 ) Cash and cash equivalents at beginning of the period     1,502       2,605   Cash and cash equivalents at the end of the period   $ 2,528     $ 2,000     Supplemental Cash Flow Information Cash paid for interest $ 310 $ 207 Cash paid for income taxes 543 382     DIRECTVSELECTED SEGMENT DATA(Dollars in Millions)(Unaudited)   Three Months Ended   Six Months Ended June 30, June 30,     2011   2010   2011   2010 DIRECTV U.S.     Revenues $ 5,277 $ 4,934 $ 10,422 $ 9,706 Operating profit before depreciation and amortization (1) 1,446 1,394 2,809 2,700 Operating profit before depreciation and amortization margin (1) 27.4 % 28.3 % 27.0 % 27.8 % Operating profit $ 1,016 $ 899 $ 1,937 $ 1,707 Operating profit margin 19.3 % 18.2 % 18.6 % 17.6 % Depreciation and amortization $ 430 $ 495 $ 872 $ 993 Capital expenditures 386 376 762 689                   DIRECTV LATIN AMERICA Revenues $ 1,254 $ 857 $ 2,368 $ 1,636 Operating profit before depreciation and amortization (1) 423 265 807 509 Operating profit before depreciation and amortization margin (1) 33.7 % 30.9 % 34.1 % 31.1 % Operating profit $ 241 $ 140 $ 460 $ 266 Operating profit margin 19.2 % 16.3 % 19.4 % 16.3 % Depreciation and amortization $ 182 $ 125 $ 347 $ 243 Capital expenditures 311 231 577 390                   SPORTS NETWORKS, ELIMINATIONS and OTHER Revenues $ 69 $ 57 $ 129 $ 114 Operating profit (loss) before depreciation and amortization (1) (23 ) (24 ) (4 ) 1 Operating loss (27 ) (29 ) (12 ) (7 ) Depreciation and amortization 4 5 8 8 Capital expenditures 3 - 5 1                   TOTAL Revenues $ 6,600 $ 5,848 $ 12,919 $ 11,456 Operating profit before depreciation and amortization (1) 1,846 1,635 3,612 3,210 Operating profit before depreciation and amortization margin (1) 28.0 % 28.0 % 28.0 % 28.0 % Operating profit $ 1,230 $ 1,010 $ 2,385 $ 1,966 Operating profit margin 18.6 % 17.3 % 18.5 % 17.2 % Depreciation and amortization $ 616 $ 625 $ 1,227 $ 1,244 Capital expenditures 700 607 1,344 1,080                       (1) See footnote 1     DIRECTV HOLDINGS LLC (DIRECTV U.S.)CONSOLIDATED STATEMENTS OF OPERATIONS(Dollars in Millions)(Unaudited)     Three Months Ended   Six Months Ended June 30, June 30, 2011   2010 2011   2010     Revenues   $5,277     $4,934     $10,422     $9,706     Operating costs and expenses Costs of revenues, exclusive of depreciation and amortization expense Broadcast programming and other 2,207 2,019 4,407 4,033 Subscriber service expenses 355 325 706 648 Broadcast operations expenses 75 66 149 135 Selling, general and administrative expenses, exclusive of depreciation and amortization expense Subscriber acquisition costs 626 610 1,308 1,205 Upgrade and retention costs 298 259 557 509 General and administrative expenses 270 261 486 476 Depreciation and amortization expense     430       495       872       993   Total operating costs and expenses     4,261       4,035       8,485       7,999     Operating profit1,0168991,9371,707   Interest income 1 1 1 4 Interest expense (186 ) (116 ) (342 ) (213 ) Other, net     29       5       23       -     Income before income taxes8607891,6191,498   Income tax expense     (323 )     (307 )     (611 )     (583 )   Net income   $537     $482     $1,008     $915       DIRECTV HOLDINGS LLC (DIRECTV U.S.)CONSOLIDATED BALANCE SHEETS(Dollars in Millions)(Unaudited)     June 30,   December 31, ASSETS   2011   2010 Current assets Cash and cash equivalents $ 1,296 $ 687 Accounts receivable, net of allowances of $66 and $46 1,673 1,735 Inventories 298 227 Prepaid expenses and other     188       187     Total current assets 3,455 2,836 Satellites, net 1,737 1,794 Property and equipment, net 2,801 2,832 Goodwill 3,177 3,176 Intangible assets, net 466 495 Other assets     252       267     Total assets   $ 11,888     $ 11,400     LIABILITIES AND OWNER'S DEFICIT         Current liabilities Accounts payable and accrued liabilities $ 2,571 $ 2,977 Unearned subscriber revenues and deferred credits     372       378     Total current liabilities 2,943 3,355 Long-term debt 13,462 10,472 Deferred income taxes 1,035 906 Other liabilities and deferred credits 249 288 Commitments and contingenciesOwner's deficit     (5,801 )     (3,621 )   Total liabilities and owner's deficit   $ 11,888     $ 11,400       DIRECTV HOLDINGS LLC (DIRECTV U.S.)CONSOLIDATED STATEMENTS OF CASH FLOWS(Dollars in Millions)(Unaudited)     Six Months Ended June 30,     2011   2010 Cash Flows From Operating Activities   Net income $ 1,008 $ 915 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 872 993 Amortization of deferred revenues and deferred credits (18 ) (17 ) Share-based compensation expense 43 31 Deferred income taxes 119 58 Other (31 ) 13 Change in other operating assets and liabilities: Accounts receivable 81 9 Inventories (71 ) 34 Prepaid expenses and other 2 3 Accounts payable and accrued liabilities (337 ) (55 ) Unearned subscriber revenue and deferred credits (6 ) (6 ) Other, net     (12 )     (37 ) Net cash provided by operating activities     1,650       1,941   Cash Flows From Investing Activities Cash paid for property and equipment (245 ) (222 ) Cash paid for subscriber leased equipment - subscriber acquisitions (324 ) (246 ) Cash paid for subscriber leased equipment - upgrade and retention (145 ) (152 ) Cash paid for satellites (48 ) (69 ) Investment in companies, net of cash acquired (11 ) (1 ) Proceeds from sale of investments     55       -   Net cash used in investing activities     (718 )     (690 ) Cash Flows From Financing Activities Cash proceeds from debt issuance 3,990 2,996 Debt issuance costs (30 ) (16 ) Repayment of long-term debt (1,000 ) (1,103 ) Repayment of other long-term obligations (54 ) (48 ) Cash dividends to Parent (3,250 ) (4,000 ) Excess tax benefit from share-based compensation     21       8   Net cash used in financing activities     (323 )     (2,163 ) Net increase (decrease) in cash and cash equivalents 609 (912 ) Cash and cash equivalents at beginning of the period     687       1,716   Cash and cash equivalents at end of the period   $ 1,296     $ 804     Supplemental Cash Flow Information Cash paid for interest $ 277 $ 171 Cash paid for income taxes 449 438     Non-GAAP Financial Measure Reconciliation Schedules(Unaudited)   DIRECTVReconciliation of Operating Profit Before Depreciation and Amortization to Operating Profit*   Three Months Ended   Six Months EndedJune 30,June 30,2011   20102011   2010(Dollars in Millions) Operating Profit Before Depreciation and Amortization $ 1,846 $ 1,635 $ 3,612 $ 3,210 Subtract: Depreciation and amortization expense   616       625     1,227       1,244   Operating Profit $ 1,230     $ 1,010   $ 2,385     $ 1,966       *For a reconciliation of this non-GAAP financial measure for each of our segments, please see the Notes to the Consolidated Financial Statements which will be included in DIRECTV's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, which is expected to be filed with the SEC in August 2011.   DIRECTVReconciliation of Cash Flow Before Interest and Taxes3 and Free Cash Flow4 to Net Cash Provided by Operating ActivitiesThree Months EndedSix Months EndedJune 30,June 30,2011201020112010(Dollars in Millions) Cash Flow Before Interest and Taxes $ 998 $ 910 $ 1,897 $ 1,984 Adjustments: Cash paid for interest (146 ) (171 ) (310 ) (207 ) Interest income 9 8 16 19 Income taxes paid   (466 )     (364 )   (543 )     (382 ) Subtotal - Free Cash Flow 395 383 1,060 1,414 Add Cash Paid For: Property and equipment 683 546 1,296 1,011 Satellites   17       61     48       69   Net Cash Provided by Operating Activities $ 1,095     $ 990   $ 2,404     $ 2,494       DIRECTVReconciliation of Consolidated DIRECTV Adjusted Diluted EPS to Diluted EPSThree Months EndedSix Months EndedJune 30,June 30,2011201020112010   Adjusted Diluted EPS $ 0.91 $ 0.60 $ 1.76 $ 1.19 Impact of Malone Transaction   -       (0.18 )   -       (0.17 ) Diluted EPS $ 0.91     $ 0.42   $ 1.76     $ 1.02       DIRECTV Latin AmericaReconciliation of Cash Flow Before Interest and Taxes3 and Free Cash Flow4 to Net Cash Provided by Operating ActivitiesThree Months EndedSix Months EndedJune 30,June 30,2011201020112010(Dollars in Millions) Cash Flow Before Interest and Taxes $ 141 $ 69 $ 297 $ 135 Adjustments: Cash paid for interest (14 ) (15 ) (28 ) (30 ) Interest income 7 7 14 14 Income taxes paid     (63 )     (57 )   (136 )     (71 ) Subtotal - Free Cash Flow 71 4 147 48 Add Cash Paid For: Property and equipment   311       231     577       390   Net Cash Provided by Operating Activities $ 382     $ 235   $ 724     $ 438       (3) and (4) - See footnotes     DIRECTV HOLDINGS LLC (DIRECTV U.S.)Non-GAAP Financial Measure Reconciliation and SAC Calculation(Unaudited)   Reconciliation of Pre-SAC Margin* to Operating Profit   Three Months Ended   Six Months EndedJune 30,June 30,2011   20102011   2010(Dollars in Millions) Operating Profit $ 1,016 $ 899 $ 1,937 $ 1,707 Adjustments: Subscriber acquisition costs (expensed) 626 610 1,308 1,205 Depreciation and amortization expense 430 495 872 993 Cash paid for subscriber leased equipment - upgrade and retention   (76 )     (71 )     (145 )     (152 ) Pre-SAC margin* $ 1,996     $ 1,933     $ 3,972     $ 3,753   Pre-SAC margin as a percentage of revenue* 37.8 % 39.2 % 38.1 % 38.7 %   Reconciliation of Cash Flow Before Interest and Taxes3 and Free Cash Flow4 to Net Cash Provided by Operating ActivitiesThree Months EndedSix Months EndedJune 30,June 30,2011201020112010(Dollars in Millions) Cash Flow Before Interest and Taxes $ 896 $ 873 $ 1,613 $ 1,857 Adjustments: Cash paid for interest (129 ) (152 ) (277 ) (171 ) Interest income 1 1 1 4 Income taxes paid     (448 )     (437 )   (449 )     (438 ) Subtotal - Free Cash Flow 320 285 888 1,252 Add Cash Paid For: Property and equipment 143 113 245 222 Subscriber leased equipment - subscriber acquisitions 150 131 324 246 Subscriber leased equipment - upgrade and retention 76 71 145 152 Satellites   17       61     48       69   Net Cash Provided by Operating Activities $ 706     $ 661   $ 1,650     $ 1,941     (3) and (4) - See footnotes on page 5 of this earnings release.   * 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 and DIRECTV U.S. 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 and DIRECTV U.S. believe 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 and DIRECTV U.S. believe that investors also use current and projected Pre-SAC Margin to determine the ability of DIRECTV U.S.' current and projected subscriber base to fund discretionary spending and to determine the financial returns for subscriber additions.   SAC CalculationThree Months EndedSix Months EndedJune 30,June 30,2011201020112010(Dollars in Millions, Except SAC Amounts)   Subscriber acquisition costs (expensed) $ 626 $ 610 $ 1,308 $ 1,205 Cash paid for subscriber leased equipment - subscriber acquisitions   150       131       324       246   Total acquisition costs $ 776     $ 741     $ 1,632     $ 1,451   Gross subscriber additions (000's) 954 946 2,006 1,871 Average subscriber acquisition costs-per subscriber (SAC) $ 813 $ 783 $ 814 $ 776   DIRECTVMedia Contact: Darris Gringeri, 212-205-0882Investor Relations: 310-964-0808