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Press release from Business Wire

DIRECTV Announces First Quarter 2013 Results

<p> <i><b>DIRECTV Adds 604,000</b></i> <i><b>Net Subscriber Additions in the First Quarter.</b></i> </p> <ul> <li class='bwlistitemmargb'> <i>DIRECTV Latin America adds 583,000 in the quarter surpassing 16 million total subscribers - including Sky Mexico - extending its lead as the largest Pay-TV provider in Latin America.</i> </li> </ul> <p> <i><b>DIRECTV Revenues Grow 8% to $7.6 Billion.</b></i> </p> <ul> <li class='bwlistitemmargb'> <i>Revenue driven by DIRECTV U.S. ARPU growth of 4.4% along with strong DIRECTV Latin America subscriber growth.</i> </li> </ul> <p> <i><b>DIRECTV Adjusted OPBDA Increases 10% to $2.1 Billion; Reported OPBDA Increases 1% to $1.9 Billion.</b></i> </p> <ul> <li class='bwlistitemmargb'> <i>Adjusted OPBDA results driven by 17% increase in adjusted OPBDA at DIRECTV Latin America and 8% OPBDA growth at DIRECTV U.S.</i> </li> </ul> <p> <i><b>DIRECTV's Adjusted Diluted EPS Improves 34% to $1.43; Reported Diluted EPS Increases 12% to $1.20.</b></i> </p> <ul> <li class='bwlistitemmargb'> <i>EPS fueled by adjusted net income growth of 13% and stock repurchases of $1.38 billion in the first quarter.</i> </li> </ul>

Tuesday, May 07, 2013

DIRECTV Announces First Quarter 2013 Results

07:30 EDT Tuesday, May 07, 2013

EL SEGUNDO, Calif. (Business Wire) -- DIRECTV (NASDAQ:DTV) today announced an increase in first quarter 2013 revenues of 8% to $7.58 billion, adjusted operating profit before depreciation and amortization1 (OPBDA) of 10% to $2.09 billion, adjusted operating profit of 8% to $1.4 billion, and adjusted earnings per share of 34% to $1.43 compared to last year's first quarter. Adjusted financial results exclude a $166 million pre-tax charge ($136 million after-tax) associated with the revaluation of the net monetary assets of the company's subsidiary in Venezuela at the time of the Bolivar's devaluation in February. Reported OPBDA increased 1% to $1.92 billion, reported operating profit decreased 5% to $1.24 billion, and reported diluted earnings per share increased 12% to $1.20 compared with the same period last year.

“Building on the momentum of one of the largest transitional years in our history, DIRECTV delivered another strong quarter of operating and financial results,” said Mike White, president and CEO of DIRECTV. “Our industry leading revenue growth of 8% continues to be driven by the strength of our premier brands and popularity of our differentiated product and service offerings across the Americas, as well as our ability to profitably grow ARPU in a challenging U.S. operating environment." White added, "At the same time, our adjusted OPBDA margin grew as we remain focused on achieving operational excellence through disciplined expense management and productivity initiatives, while we continue to return cash to shareholders through stock repurchases at an industry leading clip."

DIRECTV's Operational Review

First Quarter Review

DIRECTV's first quarter revenues of $7.58 billion increased 8% principally due to subscriber growth at DIRECTV Latin America (DTVLA) and DIRECTV U.S., as well as higher ARPU at DIRECTV U.S. In the quarter, DTVLA recorded a $166 million pre-tax charge ($136 million after-tax) associated with the revaluation of the net monetary assets of the company's subsidiary in Venezuela at the time of the Bolivar's devaluation in February. Adjusted OPBDA increased 10% and adjusted operating profit increased 8% in the quarter while adjusted OPBDA margin increased to 27.5% and adjusted operating profit margin was unchanged at 18.6%. Adjusted OPBDA margin improved primarily due to lower subscriber acquisition costs at DIRECTV U.S. and Sky Brasil, as well as the absence of an NFL Sunday Ticket game in the first quarter of 2013. Adjusted operating profit margin was also impacted by higher depreciation and amortization at both DTVLA and DIRECTV U.S. resulting from higher leased equipment and infrastructure capital expenditures. Reported OPBDA increased 1% to $1.9 billion and reported operating profit declined 5% to $1.2 billion in the quarter.

     
DIRECTV Consolidated

Three Months Ended

March 31,

Dollars in Millions except Earnings per Common Share       2013                   2012
Revenues       $ 7,580                     $ 7,046  
Adjusted Operating Profit Before Depreciation and Amortization(1) 2,086                   1,903
Adjusted OPBDA Margin (1)       27.5 %                   27.0 %
Adjusted Operating Profit 1,408 1,308
Adjusted Operating Profit Margin       18.6 %                   18.6 %
Adjusted Net Income Attributable to DIRECTV       826                     731  
Adjusted Diluted Earnings Per Common Share       1.43                     1.07  
Capital Expenditures and Cash Flow                            
Cash paid for property and equipment       152                     153  
Cash paid for subscriber leased equipment - subscriber acquisitions       369                     412  
Cash paid for subscriber leased equipment - upgrade and retention       227                     188  
Cash paid for satellites       78                     58  
Cash Flow Before Interest and Taxes(2)       1,107                     1,308  
Free Cash Flow(3)       710                     952  
                             
Reported Operating Profit Before Depreciation and Amortization(1) 1,920 1,903
Reported OPBDA Margin (1)       25.3 %                   27.0 %
Reported Operating Profit 1,242 1,308
Reported Operating Profit Margin       16.4 %                   18.6 %
Reported Net Income Attributable to DIRECTV       690                     731  
Reported Diluted Earnings Per Common Share       1.20                     1.07  
 

Adjusted net income attributable to DIRECTV increased 13% to $826 million and adjusted diluted earnings per share grew 34% to $1.43 primarily due to the higher adjusted operating profit. Adjusted diluted earnings per share were also impacted by share repurchases made over the last twelve months. Reported net income attributable to DIRECTV declined 6% to $690 million while reported diluted earnings per share grew 12% to $1.20 compared with the first quarter of last year.

Cash flow before interest and taxes2 decreased to $1.11 billion and free cash flow3 decreased to $710 million compared to the first quarter of 2012 primarily due to lower cash generated from working capital mostly due to the timing of receivables and higher capital expenditures at DIRECTV U.S. Free cash flow was also impacted by higher net interest payments primarily due to an increase in average net debt balances. Also during the quarter but not included in free cash flow was cash paid for share repurchases of $1.38 billion, as well as a January 2013 issuance by DIRECTV U.S. of $750 million principal amount of 1.75% senior notes due 2018 and a $121 million net increase in commercial paper, resulting in $480 million outstanding as of March 31, 2013. In addition, Sky Brasil entered into a financing facility with BNDES, a government owned Brazilian bank, from which Sky Brasil may borrow funds for the purchase of set-top receivers. Our Board of Directors has approved borrowings of up to 500 million Brazilian Reals (approximately $250 million at the then current exchange rate) under this facility. As of March 31, 2013, there was approximately $49 million outstanding on the BNDES facility bearing interest at an annual rate of 2.5%.

SEGMENT FINANCIAL REVIEW

DIRECTV U.S. Segment

First Quarter Review

     
DIRECTV U.S.

Three Months Ended

March 31,

Dollars in Millions except ARPU       2013                   2012
Revenues       $ 5,790                     $ 5,499  
Average Monthly Revenue per Subscriber (ARPU) ($)       96.05                     91.99  
Operating Profit Before Depreciation and Amortization(1) 1,521                   1,410
OPBDA Margin (1)       26.3 %                   25.6 %
Operating Profit 1,115 1,038
Operating Profit Margin       19.3 %                   18.9 %
Capital Expenditures and Cash Flow                            
Cash paid for property and equipment       111                     109  
Cash paid for subscriber leased equipment - subscriber acquisitions       174                     160  
Cash paid for subscriber leased equipment - upgrade and retention       111                     85  
Cash paid for satellites       53                     34  
Cash Flow Before Interest and Taxes(2)       992                     1,211  
Free Cash Flow(3)       682                     971  
Subscriber Data (in 000's except Churn)                            
Gross Subscriber Additions       893                     941  
Average Monthly Subscriber Churn       1.45 %                   1.44 %
Net Subscriber Additions       21                     81  
Cumulative Subscribers       20,105                     19,966  
 

In the quarter, DIRECTV U.S. revenues increased 5% to $5.79 billion compared with the first quarter of 2012 primarily due to strong ARPU growth along with a larger subscriber base. DIRECTV U.S. added 21,000 net new subscribers in the quarter, a decrease from the prior year period principally due to lower gross subscriber additions. Gross additions declined mainly due to a greater focus on higher quality subscribers, stricter credit policies and the competitive environment. The average monthly churn rate in the quarter was relatively unchanged at 1.45%. ARPU increased 4.4% to $96.05 mostly due to higher advanced service fees, price increases on programming packages, and increased movie and event buys, partially offset by the absence of one NFL Sunday Ticket game in the quarter and increased promotional offers to new and existing customers. DIRECTV U.S. ended the quarter with 20.11 million subscribers compared with 19.97 million subscribers reported for the quarter ended March 31, 2012.

First quarter OPBDA increased 8% to $1.52 billion and OPBDA margin improved to 26.3% principally due to lower subscriber acquisition costs related to the reduction in gross additions, relatively unchanged subscriber services costs, and the absence of NFL Sunday Ticket costs in the quarter. These improvements were partially offset by higher programming costs mostly related to programming supplier rate increases. Operating profit increased 7% to $1.12 billion and operating profit margin increased to 19.3% in the first quarter mainly due to the OPBDA and OPBDA margin improvements, partially offset by higher depreciation and amortization resulting from increased leased equipment and infrastructure capital expenditures.

DIRECTV Latin America

DIRECTV Latin America owns approximately 93% of Sky Brasil, 41% of Sky Mexico and 100% of PanAmericana, which covers most of the remaining countries in the region. Sky Mexico, whose results are accounted for as an equity method investment and therefore are not consolidated by DTVLA, had approximately 5.41 million subscribers as of March 31, 2013, bringing the total subscribers in the region to 16.32 million.

     
DIRECTV Latin America

Three Months Ended

March 31,

Dollars in Millions except ARPU       2013                   2012
Revenues       $ 1,728                     $ 1,485  
Average Monthly Revenue per Subscriber (ARPU) ($)       54.23                     60.59  
Adjusted Operating Profit Before Depreciation and Amortization(1) 546                   468
Adjusted OPBDA Margin (1)       31.6 %                   31.5 %
Adjusted Operating Profit 283 249
Adjusted Operating Profit Margin       16.4 %                   16.8 %
Capital Expenditures and Cash Flow                            
Cash paid for property and equipment       41                     44  
Cash paid for subscriber leased equipment - subscriber acquisitions       195                     252  
Cash paid for subscriber leased equipment - upgrade and retention       116                     103  
Cash paid for satellites       22                     22  
Cash Flow Before Interest and Taxes(2)       102                     68  
Free Cash Flow(3)       10                     (34 )
Subscriber Data (4) (in 000's except Churn)                            
Gross Subscriber Additions       1,181                     1,034  
Average Monthly Total Subscriber Churn       1.88 %                   1.80 %
Average Monthly Post-paid Subscriber Churn       1.74 %                   1.47 %
Net Subscriber Additions       583                     593  
Cumulative Subscribers       10,912                     8,464  
                             
Reported Operating Profit Before Depreciation and Amortization(1) 380 468
Reported OPBDA Margin (1)       22.0 %                   31.5 %
Reported Operating Profit 117 249
Reported Operating Profit Margin       6.8 %                   16.8 %
 

First Quarter Review

In the first quarter, DTVLA revenues increased 16% to $1.73 billion compared to the same period last year principally due to strong subscriber growth partially offset by a 10.5% decline in ARPU. Net additions of 583,000 were slightly lower than the year ago period as the increase in gross additions was offset by higher churn. Gross additions increased 14% to a first quarter record of 1.18 million principally due to greater middle market demand across the region, most notably in Argentina, Brazil and Colombia. Total average monthly churn increased to 1.88% and average monthly post-paid churn increased to 1.74% mainly due to higher churn in Brazil related to middle market subscribers and increased competition. The decline in ARPU to $54.23 was mainly due to the devaluation in Venezuela and unfavorable foreign exchange comparisons in Brazil and Argentina. Excluding the impact of exchange rates, ARPU increased 1.5% in the quarter principally due to price increases and more upgrades including advanced services, partially offset by the higher penetration of lower ARPU middle market subscribers, particularly in Brazil.

In the quarter, DTVLA recorded a $166 million charge associated with the revaluation of the net monetary assets of the company's subsidiary in Venezuela at the time of the Bolivar's devaluation in February. Excluding this charge, adjusted OPBDA increased 17% and adjusted OPBDA margin was relatively unchanged at 31.6% as higher subscriber service expenses in Brazil were offset by lower subscriber acquisition costs in Brazil and lower general and administrative expenses in PanAmericana. First quarter adjusted operating profit increased 14% while adjusted operating profit margin declined to 16.4% reflecting higher depreciation and amortization resulting from increased leased equipment and infrastructure capital expenditures. Reported OPBDA declined 19% to $380 million while reported operating profit declined 53% to $117 million.

CONFERENCE CALL INFORMATION

A live webcast of DIRECTV's first quarter 2013 earnings call will be available on the company's website at www.directv.com/investor. The webcast will begin at 2:00 p.m. ET, today, May 7, 2013. Access to the earnings call is also available in the United States by dialing (888) 263-2905 and internationally by dialing (913) 312-1500. The conference ID number is 4240084. 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 4240084. The replay will be available from 3:00 p.m. PT, Tuesday, May 7, through 3:00 p.m. PT, Tuesday, May 14, and will also be archived on our website at www.directv.com/investor.

FOOTNOTES

(1) Operating profit before depreciation and amortization, which is a financial measure that is not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of operating results, as determined in accordance with GAAP. Please see DIRECTV's Annual Report on Form 10-K for the year ended December 31, 2012 for further discussion of operating profit before depreciation and amortization. Operating profit before depreciation and amortization margin is calculated by dividing operating profit before depreciation and amortization by total revenues.

(2) Cash flow before interest and taxes, which is a financial measure that is not determined in accordance with GAAP, is calculated by deducting amounts under the captions “Cash paid for property and equipment”, “Cash paid for satellites”, “Cash paid for subscriber leased equipment - subscriber acquisitions” and “Cash paid for subscriber leased equipment - upgrade and retention” from “Net cash provided by operating activities” from the Consolidated Statements of Cash Flows and adding back net interest paid and “Cash paid for income taxes”. This financial measure should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. DIRECTV management uses cash flow before interest and taxes to evaluate the cash generated by our current subscriber base, net of capital expenditures, and excluding the impact of interest and taxes, for the purpose of allocating resources to activities such as adding new subscribers, retaining and upgrading existing subscribers, for additional capital expenditures and as a measure of performance for incentive compensation purposes. We believe this measure is useful to investors, along with other GAAP measures (such as cash flows from operating and investing activities), to compare our operating performance to other communications, entertainment and media companies. We believe that investors also use current and projected cash flow before interest and taxes to determine the ability of our current and projected subscriber base to fund required and discretionary spending and to help determine the financial value of the company.

(3) Free cash flow, which is a financial measure that is not determined in accordance with GAAP, is calculated by deducting amounts under the captions “Cash paid for property and equipment”, “Cash paid for satellites”, “Cash paid for subscriber leased equipment - subscriber acquisitions”, and “Cash paid for subscriber leased equipment - upgrade and retention” from “Net cash provided by operating activities” from the Consolidated Statements of Cash Flows. This financial measure should be used in conjunction with other GAAP financial measures and is not presented as an alternative measure of cash flows from operating activities, as determined in accordance with GAAP. DIRECTV management uses free cash flow to evaluate the cash generated by our current subscriber base, net of capital expenditures, for the purpose of allocating resources to activities such as adding new subscribers, retaining and upgrading existing subscribers, for additional capital expenditures and as a measure of performance for incentive compensation purposes. We believe this measure is useful to investors, along with other GAAP measures (such as cash flows from operating and investing activities), to compare our operating performance to other communications, entertainment and media companies. We believe that investors also use current and projected free cash flow to determine the ability of our current and projected subscriber base to fund required and discretionary spending and to help determine the financial value of the company.

(4) DIRECTV Latin America subscriber data exclude subscribers of the Sky Mexico service. In addition, DTVLA gross and net additions exclude 1,000 video subscribers acquired in the first quarter, 2013. DTVLA cumulative subscriber counts include these acquired customers.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

NOTE: This presentation may include or incorporate by reference certain statements that we believe are, or may be considered to be, “forward-looking statements” within the meaning of various provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “project” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or from those expressed or implied by the relevant forward-looking statement. Such risks and uncertainties include, but are not limited to: increased competition; increasing programming costs and our ability to renew programming contracts under favorable terms; increased subscriber churn or subscriber upgrade and retention costs; potential material increase in subscriber acquisition costs; general economic conditions; risks associated with doing business internationally, which for DIRECTV Latin America include political and economic instability and foreign currency exchange rate volatility and controls; pace of technological development; potential intellectual property infringement; loss of key personnel; satellite construction or launch delays; satellite launch and operational risks; loss of a satellite; theft of satellite programming signals; U.S. and foreign governmental and regulatory action; ability to maintain licenses and regulatory approvals; significant debt; indemnification obligations; reliance on network and information systems; and the outcome of legal proceedings. We may face other risks described from time to time in periodic reports filed by us with the U.S. Securities and Exchange Commission.

DIRECTV (NASDAQ:DTV) is one of the world's leading providers of digital television entertainment services. Through its subsidiaries and affiliated companies in the United States, Brazil, Mexico and other countries in Latin America, DIRECTV provides digital television service to over 20.1 million customers in the United States and over 16.3 million customers in Latin America. DIRECTV sports and entertainment properties include two regional sports networks (Rocky Mountain and Pittsburgh) and minority ownership interests in Root Sports Northwest and Game Show Network. For more information on DIRECTV, visit directv.com.

                       
DIRECTV
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)
 

Three Months Ended

March 31,

2013                   2012
Revenues       $ 7,580                     $ 7,046  
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other 3,196 2,964
Subscriber service expenses 537 499
Broadcast operations expenses 110 104
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs 814 816
Upgrade and retention costs 368 343
General and administrative expenses 469 417
Venezuelan currency devaluation charge 166
Depreciation and amortization expense       678                     595  
Total operating costs and expenses       6,338                     5,738  
Operating profit 1,242 1,308
Interest income 22 12
Interest expense (217 ) (204 )
Other, net       38                     41  
Income before income taxes 1,085 1,157
Income tax expense       (387 )                   (416 )
Net income 698 741
Less: Net income attributable to noncontrolling interest       (8 )                   (10 )
Net income attributable to DIRECTV       $ 690                     $ 731  
Basic earnings attributable to DIRECTV per common share $ 1.21 $ 1.08
Diluted earnings attributable to DIRECTV per common share $ 1.20 $ 1.07
Weighted average number of common shares outstanding (in millions):
Basic 572 678
Diluted 577 681
 
 

                       
DIRECTV
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
 
ASSETS       March 31, 2013                   December 31, 2012
Current assets
Cash and cash equivalents $ 1,679 $ 1,902
Accounts receivable, net of allowances of $94 and $81 2,649 2,696
Inventories 418 412
Deferred income taxes 63 73
Prepaid expenses and other 622 471
Assets held for sale       185                      
Total current assets 5,616 5,554
Satellites, net 2,375 2,357
Property and equipment, net 6,212 6,038
Goodwill 3,997 4,063
Intangible assets, net 767 832
Investments and other assets       1,683                     1,711  
Total assets       $ 20,650                     $ 20,555  
 
LIABILITIES AND STOCKHOLDERS' DEFICIT                            
Current liabilities
Accounts payable and accrued liabilities $ 4,422 $ 4,618
Unearned subscriber revenues and deferred credits 604 565
Current debt 499 358
Liabilities held for sale       22                      
Total current liabilities 5,547 5,541
Long-term debt 17,866 17,170
Deferred income taxes 1,679 1,672
Other liabilities and deferred credits 1,306 1,203
Commitments and contingencies
Redeemable noncontrolling interest 400 400
Total stockholders' deficit       (6,148 )                   (5,431 )
Total liabilities and stockholders' deficit       $ 20,650                     $ 20,555  
 
 

                       
DIRECTV
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
 

Three Months Ended

March 31,

        2013                   2012
Cash Flows From Operating Activities
Net income $ 698 $ 741
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 678 595
Venezuelan currency devaluation charge 166
Amortization of deferred revenues and deferred credits (13 ) (12 )
Share-based compensation expense 34 27
Equity in earnings from unconsolidated affiliates (32 ) (33 )
Net foreign currency transaction gain (6 ) (13 )
Net gains from sale of investments (7 )
Deferred income taxes 95 58
Excess tax benefit from share-based compensation (24 ) (28 )
Other 5 22
Change in other operating assets and liabilities:
Accounts receivable 51 312
Inventories (10 ) (5 )
Prepaid expenses and other 43 161
Accounts payable and accrued liabilities (167 ) (77 )
Unearned subscriber revenue and deferred credits 41 16
Other, net       (16 )                   (1 )
Net cash provided by operating activities       1,536                     1,763  
Cash Flows From Investing Activities
Cash paid for property and equipment (748 ) (753 )
Cash paid for satellites (78 ) (58 )
Investment in companies, net of cash acquired (3 )
Proceeds from sale of investments 16
Other, net       (5 )                   25  
Net cash used in investing activities       (818 )                   (786 )
Cash Flows From Financing Activities
Issuance of commercial paper (maturity 90 days or less), net 190
Proceeds from short-term borrowings 84
Repayment of short-term borrowings (153 )
Proceeds from borrowings under revolving credit facility 400
Repayment of borrowings under revolving credit facility (400 )
Proceeds from long-term debt 792 3,996
Debt issuance costs (4 ) (23 )
Repayment of other long-term obligations (18 ) (13 )
Common shares repurchased and retired (1,378 ) (1,260 )
Prepayment of accelerated share repurchase (230 )
Taxes paid in lieu of shares issued for share-based compensation (61 ) (52 )
Excess tax benefit from share-based compensation       24                     28  
Net cash provided by (used in) financing activities       (754 )                   2,676  
Effect of exchange rate changes on Venezuelan cash and cash equivalents       (187 )                    
Net increase (decrease) in cash and cash equivalents (223 ) 3,653
Cash and cash equivalents at beginning of the period       1,902                     873  
Cash and cash equivalents at end of the period       $ 1,679                     $ 4,526  
Supplemental Cash Flow Information
Cash paid for interest $ 325 $ 255
Cash paid for income taxes 94 113
 
 

                       
DIRECTV
SELECTED SEGMENT DATA
(Dollars in Millions)
(Unaudited)
 

Three Months Ended

March 31,

        2013                   2012
DIRECTV U.S.
Revenues $ 5,790 $ 5,499

Operating profit before depreciation and amortization(1)

1,521 1,410

Operating profit before depreciation and amortization margin(1)

26.3 % 25.6 %
Operating profit $ 1,115 $ 1,038
Operating profit margin 19.3 % 18.9 %
Depreciation and amortization       $ 406                     $ 372  
 
SKY BRASIL
Revenues $ 965 $ 881

Operating profit before depreciation and amortization(1)

311 287

Operating profit before depreciation and amortization margin(1)

32.2 % 32.6 %
Operating profit $ 154 $ 151
Operating profit margin 16.0 % 17.1 %
Depreciation and amortization       $ 157                     $ 136  
 
PANAMERICANA
Revenues $ 763 $ 604

Operating profit before depreciation and amortization(1)

69 181

Operating profit before depreciation and amortization margin(1)

9.0 % 30.0 %
Operating profit (loss) $ (37 ) $ 98
Operating profit margin (4.8 )% 16.2 %
Depreciation and amortization       $ 106                     $ 83  
 
SPORTS NETWORKS, ELIMINATIONS and OTHER
Revenues $ 62 $ 62

Operating profit (loss) before depreciation and amortization(1)

19 25
Operating profit 10 21
Depreciation and amortization       9                     4  
 
TOTAL
Revenues $ 7,580 $ 7,046

Operating profit before depreciation and amortization(1)

1,920 1,903

Operating profit before depreciation and amortization margin(1)

25.3 % 27.0 %
Operating profit $ 1,242 $ 1,308
Operating profit margin 16.4 % 18.6 %
Depreciation and amortization       $ 678                     $ 595  
 
(1) See footnote 1 above
 
 

                       
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Millions)
(Unaudited)
 

Three Months Ended

March 31,

2013                   2012
Revenues       $ 5,790                     $ 5,499  
Operating costs and expenses
Costs of revenues, exclusive of depreciation and amortization expense
Broadcast programming and other 2,601 2,441
Subscriber service expenses 351 349
Broadcast operations expenses 81 78
Selling, general and administrative expenses, exclusive of depreciation and amortization expense
Subscriber acquisition costs 629 646
Upgrade and retention costs 319 305
General and administrative expenses 288 270
Depreciation and amortization expense       406                     372  
Total operating costs and expenses       4,675                     4,461  
Operating profit 1,115 1,038
Interest expense (202 ) (188 )
Other, net       12                     1  
Income before income taxes 925 851
Income tax expense       (335 )                   (315 )
Net income       $ 590                     $ 536  
 
 

                       
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED BALANCE SHEETS
(Dollars in Millions)
(Unaudited)
 
ASSETS       March 31, 2013                   December 31, 2012
Current assets
Cash and cash equivalents $ 359 $ 739
Accounts receivable, net of allowances of $52 and $42 2,019 2,096
Inventories 371 372
Prepaid expenses and other       177                     247  
Total current assets 2,926 3,454
Satellites, net 1,804 1,795
Property and equipment, net 3,337 3,290
Goodwill 3,177 3,177
Intangible assets, net 450 453
Other assets       291                     321  
Total assets       $ 11,985                     $ 12,490  
 
LIABILITIES AND OWNER'S DEFICIT                            
Current liabilities
Accounts payable and accrued liabilities $ 3,273 $ 3,391
Unearned subscriber revenues and deferred credits 408 367
Current debt       480                     358  
Total current liabilities 4,161 4,116
Long-term debt 17,836 17,170
Deferred income taxes 1,399 1,386
Other liabilities and deferred credits 399 326
Commitments and contingencies
Owner's deficit       (11,810 )                   (10,508 )
Total liabilities and owner's deficit       $ 11,985                     $ 12,490  
 
 

                       
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Millions)
(Unaudited)
 

Three Months Ended

March 31,

        2013                   2012
Cash Flows From Operating Activities
Net income $ 590 $ 536
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 406 372
Amortization of deferred revenues and deferred credits (13 ) (12 )
Share-based compensation expense 25 21
Deferred income taxes 45 35
Excess tax benefit from share-based compensation (20 ) (23 )
Other (8 ) 2
Change in other operating assets and liabilities:
Accounts receivable 103 344
Inventories 1 (7 )
Prepaid expenses and other 71 224
Accounts payable and accrued liabilities (134 ) (167 )
Unearned subscriber revenue and deferred credits 43 2
Other, net       22                     32  
Net cash provided by operating activities       1,131                     1,359  
Cash Flows From Investing Activities
Cash paid for property and equipment (111 ) (109 )
Cash paid for subscriber leased equipment - subscriber acquisitions (174 ) (160 )
Cash paid for subscriber leased equipment - upgrade and retention (111 ) (85 )
Cash paid for satellites (53 ) (34 )
Proceeds from sale of investments 12
Other, net       2                      
Net cash used in investing activities       (435 )                   (388 )
Cash Flows From Financing Activities
Issuance of commercial paper (maturity 90 days or less), net 190
Proceeds from short-term borrowings 84
Repayment of short-term borrowings (153 )
Proceeds from borrowings under revolving credit facility 400
Repayment of borrowings under revolving credit facility (400 )
Proceeds from issuance of long-term debt 743 3,996
Debt issuance costs (4 ) (23 )
Repayment of other long-term obligations (6 ) (5 )
Cash dividends paid to Parent (1,950 ) (2,450 )
Excess tax benefit from share-based compensation       20                     23  
Net cash provided by (used in) financing activities       (1,076 )                   1,541  
Net increase (decrease) in cash and cash equivalents (380 ) 2,512
Cash and cash equivalents at beginning of the period       739                     232  
Cash and cash equivalents at end of the period       $ 359                     $ 2,744  
Supplemental Cash Flow Information
Cash paid for interest $ 310 $ 239
Cash paid for income taxes 1
 
 

 
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 Ended

March 31,

2013                   2012
Cash Flow Before Interest and Taxes $ 1,107 $ 1,308
Adjustments:
Cash paid for interest (325 ) (255 )
Interest income 22 12
Income taxes paid       (94 )                   (113 )
Subtotal - Free Cash Flow 710 952
Add Cash Paid For:
Property and equipment 748 753
Satellites 78                     58  
Net Cash Provided by Operating Activities $ 1,536                     $ 1,763  
(2) and (3) - See footnotes above                            
 
Reconciliation of Reported Operating Profit Before Depreciation and Amortization to Operating Profit*

Three Months Ended

March 31,

2013                   2012
Operating profit before depreciation and amortization $ 1,920 $ 1,903
Subtract: Depreciation and amortization 678                     595  
Operating profit $ 1,242                     $ 1,308  
 
* 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, 2013, which is expected to be filed with the SEC in May 2013.
 
 

 
DIRECTV Consolidated Non-GAAP Financial Measure Reconciliation Schedules
(Dollars in Millions)
(Unaudited)
 
DIRECTV
Reconciliation of Adjusted Operating Profit Before Depreciation and Amortization (excluding the Venezuelan currency devaluation charge) to Operating Profit
     

Three Months Ended

March 31,

2013                   2012
Revenues $ 7,580                   $ 7,046
 
Operating profit before depreciation and amortization excluding the Venezuelan currency devaluation charge $ 2,086 $ 1,903

OPBDA growth excluding Venezuelan currency devaluation charge

9.6

%

Subtract: Venezuelan currency devaluation charge 166                      
Operating profit before depreciation and amortization 1,920 1,903
Subtract: Depreciation and amortization 678                     595  
Operating profit $ 1,242                     $ 1,308  
Operating profit before depreciation and amortization margin excluding the Venezuelan currency devaluation charge       27.5 %                   27.0 %
 
Reconciliation of Adjusted Operating Profit (excluding the Venezuelan currency devaluation charge) to Operating Profit

Three Months Ended

March 31,

2013                   2012
Revenues $ 7,580 $ 7,046
 
Operating profit excluding the Venezuelan currency devaluation charge $ 1,408 $ 1,308
Operating Profit growth excluding Venezuelan currency devaluation charge 7.6 %
Subtract: Venezuelan currency devaluation charge 166                      
Operating profit $ 1,242                     $ 1,308  
Operating profit margin excluding the Venezuelan currency devaluation charge       18.6 %                   18.6 %
 
Reconciliation of Adjusted Net Income (excluding the Venezuelan currency devaluation charge) to Net Income

Three Months Ended

March 31,

2013                   2012
Net income attributable to DIRECTV excluding the Venezuelan currency devaluation charge $ 826 $ 731
Subtract: Venezuelan after-tax currency devaluation charge 136                    
Net income attributable to DIRECTV $ 690                     $ 731
Net Income growth excluding Venezuelan currency devaluation charge 13.0 %
Diluted Weighted Average Shares 577 681
Adjusted Diluted Earnings Per Common Share $ 1.43 $ 1.07
Adjusted Diluted Earnings Per Common Share growth excluding Venezuelan currency devaluation charge       33.6 %                    
 
 

 
DIRECTV Latin America Non-GAAP Financial Measure Reconciliation Schedules
(Dollars in Millions)

(Unaudited)

                       
DIRECTV Latin America
Reconciliation of Cash Flow Before Interest and Taxes 2 and Free Cash Flow 3 to

Net Cash Provided by Operating Activities

Three Months Ended

March 31,

2013                   2012
Cash Flow Before Interest and Taxes $ 102 $ 68
Adjustments:
Cash paid for interest (17 ) (14 )
Interest income 15 12
Income taxes paid       (90 )                   (100 )
Subtotal - Free Cash Flow 10 (34 )
Add Cash Paid For:
Property and equipment 41 44
Subscriber leased equipment - subscriber acquisitions 195 252
Subscriber leased equipment - upgrade and retention 116 103
Satellites 22                     22  
Net Cash Provided by Operating Activities $ 384                     $ 387  
(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 Ended

March 31,

2013                   2012
Revenues $ 1,728 $ 1,485
 
Operating profit before depreciation and amortization excluding the Venezuelan currency devaluation charge $ 546 $ 468
OPBDA growth excluding Venezuelan currency devaluation charge 16.7 %
Subtract: Venezuelan currency devaluation charge 166                      
Operating profit before depreciation and amortization 380 468
Subtract: Depreciation and amortization 263                     219  
Operating profit $ 117                     $ 249  
Operating profit before depreciation and amortization margin excluding the Venezuelan currency devaluation charge       31.6 %                   31.5 %
 
Reconciliation of Adjusted Operating Profit (excluding the Venezuelan currency devaluation charge) to Operating Profit

Three Months Ended

March 31,

2013                   2012
Revenues $ 1,728 $ 1,485
 
Operating profit excluding the Venezuelan currency devaluation charge $ 283 $ 249
Operating Profit growth excluding Venezuelan currency devaluation charge 13.7 %
Subtract: Venezuelan currency devaluation charge 166                      
Operating profit $ 117                     $ 249  
Operating profit margin excluding the Venezuelan currency devaluation charge       16.4 %                   16.8 %
 
 

 
DIRECTV U.S. Non-GAAP Financial Measure Reconciliation Schedules and SAC Calculations
(Dollars in Millions)
(Unaudited)
                       
DIRECTV HOLDINGS LLC (DIRECTV U.S.)
Reconciliation of Pre-SAC Margin * to Operating Profit

Three Months Ended

March 31,

2013                   2012
Operating profit $ 1,115 $ 1,038
Adjustments:
Subscriber acquisition costs (expensed) 629 646
Depreciation and amortization 406 372
Cash paid for subscriber leased equipment - upgrade and retention (111 )                   (85 )
Pre-SAC Margin $ 2,039                     $ 1,971  
Pre-SAC Margin as a percentage of revenue       35.2 %                   35.8 %
 
Reconciliation of Cash Flow Before Interest and Taxes 2 and Free Cash Flow 3 to

Net Cash Provided by Operating Activities

Three Months Ended

March 31,

2013                   2012
Cash Flow Before Interest and Taxes $ 992 $ 1,211
Adjustments:
Cash paid for interest (310 ) (239 )
Income taxes paid                           (1 )
Subtotal - Free Cash Flow 682 971
Add Cash Paid For:
Property and equipment 111 109
Subscriber leased equipment - subscriber acquisitions 174 160
Subscriber leased equipment - upgrade and retention 111 85
Satellites 53                     34  
Net Cash Provided by Operating Activities $ 1,131                     $ 1,359  
 
(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.
 
SAC Calculation

Three Months Ended

March 31,

2013                   2012
Subscriber acquisition costs (expensed) $ 629 $ 646
Cash paid for subscriber leased equipment - subscriber acquisitions 174                     160  
Total acquisition costs $ 803                     $ 806  
Gross subscriber additions (000's) 893 941
Average subscriber acquisition costs - per subscriber (SAC)       $ 899                     $ 857  

DIRECTV
Media Contact:
Darris Gringeri, (212) 205-0882
or
Investor Relations:
(310) 964-0808

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